New Fee for Methane Waste

The oil and gas sector is urging the federal government to provide more flexibility on a new fee for methane waste. The methane waste fee is part of a broader effort by the Biden administration to combat climate change and reduce greenhouse gas emissions.

According to the IEA Global Methane Tracker, methane is responsible for around 30% of the rise in global temperatures. The agency reports that the energy sector, including oil, natural gas, coal, and bioenergy – is responsible for around 40% of emissions.

Industry authorities argue that the fee will increase costs for companies; as of January 2024, large oil and gas facilities will start paying $900 for each metric ton of methane emitted above a minimum emissions intensity set by the Inflation Reduction Act. The fee value is planned to increase in 2024 and again in 2025.

The US Environmental Protection Agency (EPA) will be figuring out how to collect the “waste emission charge” through regulations to be proposed by March. Oil industry officials have already raised some questions regarding how the charge will work, how agents will calculate the emissions threshold (as natural gas is sold by volume and not weight), and whether they will provide exemptions for companies that have already implemented measures to reduce their methane leakage.

One option would be to provide incentives for companies taking steps to reduce emissions rather than just implementing a fee as a punishment for those that still need to take action. How the Biden administration will approach this issue remains to be seen, but the oil and gas sector will closely monitor the situation. Ultimately, the goal should be to reduce methane emissions reasonably, efficiently, and effectively for all stakeholders.