The Environmental Protection Agency released a draft rule Friday outlining its plans to tax oil and gas companies for their excess methane emissions, the latest in a series of steps the Biden administration has taken to crack down on emissions of the potent greenhouse gas from U.S. oil and gas producers.
The new proposal details how and when the EPA will begin taxing U.S. oil and gas operators for excess methane emissions, something it was tasked with doing under the 2022 Inflation Reduction Act.
According to the text of the EPA draft rule, excess methane produced by U.S. onshore oil and gas producers this year will result in a charge of $900 per ton. That amount increases to $1,200 per ton in 2025 and $1,500 per ton beginning in 2026 and beyond.
The new proposal also covers what companies might be eligible for exemptions to the rule and how they might be applied.
The guidance builds on EPA’s final methane rule, which was announced at the COP28 summit in December.
That rule requires U.S. oil and gas operators to perform comprehensive monitoring, establish new emissions reduction standards for certain equipment, and eliminate routine methane flaring over the next two years.
“EPA is delivering on a comprehensive strategy to reduce wasteful methane emissions that endanger communities and fuel the climate crisis,” EPA Administrator Michael Regan said in a statement Friday.
Upon being finalized, Regan said EPA’s proposed methane fee will also set new technology standards to “incentivize industry innovation and prompt action” to reduce methane pollution.
Methane is a potent greenhouse gas that has roughly 80 times as much heat-trapping power as carbon dioxide and is estimated to be responsible for roughly 30% of global warming.
The U.S. oil and gas sector is also the nation’s largest source of industrial methane emissions, prompting the Biden administration’s crackdown in this sector. Administration officials have estimated that the new rule will prevent up to 58 million tons of methane emissions from escaping into the air through 2038 — or the equivalent of the combined CO2 emitted from all U.S. coal-fired power plants in a single year.
Democrats cheered the news of the EPA’s announcement Friday, with Senate Environment and Public Works Committee Chairman Tom Carper (D-DE) describing it as an effort that will “incentivize producers to cut wasteful and excessive methane emissions during oil and gas production.”
Environmental groups also praised the EPA’s move, which they described as a “commonsense” step to hold oil and gas companies accountable.
“The Methane Emissions Reduction Program’s waste charge creates important incentives for operators to take near-term actions to reduce their methane pollution,” Environmental Defense Fund attorney Grace Smith said in a statement.
Still, the methane tax and performance standards are certain to be met with fierce opposition from oil and gas producers and Republicans, who have argued EPA’s final rule threatens an “unworkable regulatory structure” to many small- and medium-sized U.S. oil and gas operators.
The Independent Petroleum Association of America, a trade group that represents thousands of independent and small U.S. producers nationwide, estimated last month that the new EPA rule could cause as many as 300,000 of the nation’s 750,000 low-production wells to shut down.
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“These companies are not ‘Big Oil,’ as is so often described,” Rep. Bill Johnson (R-OH) said earlier this week at a House Energy and Commerce subcommittee hearing. “On average, they employ just 12 people.”
“This fleet of methane regulations would crush them,” he added of the EPA’s new rule.
