The Environmental Protection Agency on Friday proposed steep new fees on methane emissions from oil and gas facilities, escalating a crackdown on the fossil fuel industry’s planet-warming pollution.
The exception is the Methane Emissions Reduction Program, which levies a fee on wasteful methane emissions from large oil and gas facilities. The fee starts at $900 per metric ton of emissions in 2024, increasing to $1,200 in 2025 and $1,500 in 2026 and thereafter.
The EPA proposal lays out how the fee will be implemented, including how the charge will be calculated. It comes as the United States sees record oil production, and as policymakers around the world increasingly focus on curbing methane, a climate super-pollutant.
Methane does not linger in the atmosphere as long as carbon dioxide, but it is far more effective at trapping heat — roughly 80 times more potent in its first decade. It is responsible for roughly a third of global warming today, and the oil and gas industry accounts for about 14 percent of the world’s annual methane emissions, according to estimates from the International Energy Agency. Other large methane sources include livestock, landfills and coal mines.
At the U.N. Climate Change Conference in Dubai in December, EPA Administrator Michael Regan announced final standards to limit methane emissions from U.S. oil and gas operations. Fossil fuel companies that comply with these standards will be exempt from the new fee.
“Under President Biden’s leadership, EPA is delivering on a comprehensive strategy to reduce wasteful methane emissions that endanger communities and fuel the climate crisis,” Regan said in a statement. “Today’s proposal, when finalized, will support a complementary set of technology standards and historic resources from the Inflation Reduction Act, to incentivize industry innovation and prompt action.”
Fred Krupp, president of the Environmental Defense Fund, said the fee will encourage fossil fuel firms to deploy innovative technologies that detect methane leaks. Such cutting-edge technologies range from ground-based sensors to satellites in space.
“Proven solutions to cut oil and gas methane and to avoid the fee are being used by leading companies in states across the country,” Krupp said in a statement.
But the American Petroleum Institute, the top lobbying arm of the U.S. oil and gas industry, has raised concerns about supply chain bottlenecks, which it says could delay the adoption of methane detection technologies. On Friday, the institute slammed the EPA proposal as a “punitive tax” that could choke domestic energy production.
“As the world looks to U.S. energy producers to provide stability in an increasingly unstable world, this punitive tax increase is a serious misstep that undermines America’s energy advantage,” Dustin Meyer, the institute’s senior vice president of policy, economics and regulatory affairs, said in a statement. “While we support smart federal methane regulation, this proposal creates an incoherent, confusing regulatory regime that will only stifle innovation and undermine our ability to meet rising energy demand.”
Meyer also called on Congress to pass legislation to repeal the EPA proposal. Rep. August Pfluger (R-Tex.), whose state is home to the vast oil-producing Permian Basin, has introduced a bill to scrap what he calls the “natural gas tax.” But the measure is unlikely to advance unless Republicans regain control of the Senate in the November elections.
Asked about industry concerns, an EPA official noted that the Inflation Reduction Act provided nearly $1 billion to help fossil fuel companies comply with the agency’s suite of methane regulations.
“We are administering over $1 billion in financial and technical assistance,” said the official, who spoke on the condition of anonymity because they were not authorized to comment publicly. “That really helps position the industry better for the waste emissions charge.”
In addition to methane, the EPA proposal could slash emissions of hazardous air pollutants, including smog-forming volatile organic compounds and cancer-causing benzene, the official added.
The United States has never implemented a carbon tax, which would impose a parallel fee on each ton of carbon dioxide that companies pump into the atmosphere. While many economists consider a carbon tax one of the most effective ways of reducing emissions, the idea is considered political kryptonite on Capitol Hill.
During early negotiations over the Inflation Reduction Act, some Democrats pushed for the bill to include a carbon tax that started at $15 to $18 per ton. But they ultimately abandoned the proposal amid intense pushback from the fossil fuel industry and other polluting sectors.
That means it is still free to emit carbon dioxide anywhere in the United States, despite the climate impacts. If and when the EPA rule is finalized, U.S. firms, for the first time ever, will have to pay to emit the second-most-prevalent greenhouse gas.
Such a step is common sense and long-overdue, said Jonathan Banks, global director of methane pollution prevention at Clean Air Task Force, an environmental group.
“By putting a price on wasted methane, EPA can help companies choose to do the right thing and mitigate methane pollution now — and for those who choose to pollute, they will pay,” he said.