American Oil and Gas Reporter - December 2024 - 74

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EPA Finalizes Methane Tax
One Week After Election Day
WASHINGTON-In keeping with
Inflation Reduction Act requirements,
the U.S. Environmental Protection
Agency announced a final rule to reduce
methane emissions from the oil and gas
sector on Nov. 12. The agency says the
rule facilitates implementation of Congress's
directive to collect a Waste Emissions
Charge (WEC) to better ensure
natural gas reaches the market. However,
some industry advocates warn, the socalled
methane tax is a poor instrument
by which to minimize waste or protect
air quality.
A provision in the IRA establishes a
charge on operators for methane emissions
that exceed specific performance levels
and directs EPA to collect the charge and
implement other features of the program,
including providing appropriate exemptions
for actions that reduce methane releases,
the agency observes.
According to Independent Petroleum
Association of America President and
Chief Executive Officer Jeff Eshelman,
IPAA opposed the methane tax from the
moment it appeared in the IRA. " The tax
seriously complicates industry efforts to
plan and comply with EPA and state regulations
that address emissions from oil
and natural gas production, " he warns.
" The tax was passed without appropriate
understanding of its impact or safeguards.
It exemplifies the worst in legislation-
no hearings, no committee reports, no
conference report, no statements during
floor debate.
" Now, EPA is using its regulatory
authority to interpret the statute to consistently
increase the taxable entities,
to increase emissions calculations and
to increase waste emissions thresholds
while limiting the availability of the
exemption, " he adds. " IPAA maintains
that EPA should reverse course, withdraw
this proposal and the Subpart W proposal,
and limit the adverse effects of the
methane tax. "
Congressional Correction?
EPA estimates the rule will cut cumuwww.aogr.com
74
THE AMERICAN OIL & GAS REPORTER
lative methane emissions by 1.2 million
metric tons of methane (34 million metric
tons carbon dioxide equivalent) through
2035-which it equates to removing
nearly 8 million gasoline-powered cars
from the road for a year-and predicts it
will have cumulative climate benefits as
great as $2 billion.
The agency notes that the IRA applies
the methane tax to oil and gas facilities
that report emissions exceeding 25,000
metric tons of CO2e a year to the Greenhouse
Gas Reporting Program, beginning
with methane emissions reported in calendar
year 2024. EPA mentions that the
WEC starts at $900 a metric ton of
fugitive emissions in calendar year 2024,
increases to $1,200 for 2025, and reaches
$1,500 for 2026 and beyond.
" EPA's final rule details how the
charge will be implemented, including
the calculation of the charge and how
exemptions from the charge will be applied, "
the agency relates. " Facilities in
compliance with the recently finalized
Clean Air Act standards for oil and gas
operations would be exempt from the
charge after certain criteria set by Congress
are met. The agency expects that
over time, fewer facilities will face the
charge as they reduce their emissions
and become eligible for this regulatory
compliance exemption. "
The Texas Alliance of Energy Producers
says the WEC " exhibits a complete
lack of understanding as to how oil and
gas companies operate, doesn't line up
well with methane rules developed on a
parallel path and recently implemented,
stands to disproportionately burden smaller
to medium-size independent operators,
and needlessly jeopardizes tens of thousands
of wells in Texas, and hundreds of
thousands of wells nationally. "
Fortunately, the group continues, its
initial assessment of the rule suggests
the 2025 deadline for tax payments has
been postponed from March to September,
offering Congress an opportunity to intervene.
The Alliance indicates that Congress
may repeal the tax legislatively or
unwind the rule through the Congressional
Review Act.
Regarding a legislative repeal, the Alliance
acknowledges, " This path has its
challenges, even in a Republican Congress
and White House, having to do with what
can and cannot be included in a budget
reconciliation bill, which is the only way
that this is likely to get done. "
As for a CRA, the group notes, " The
CRA can be used by an incoming Congress
for rules finalized in the latter
days of the previous Congress, and the
finalizing of this rule falls in that window.
Again, however, the legislation requiring
the implementation of the tax would
still be in place, unless it is repealed by
the Congress. "
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American Oil and Gas Reporter - December 2024

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