WASHINGTON — Oil and natural gas companies will have to pay federal compensation for the first time if they emit dangerous methane above certain levels, under a rule made permanent by the Biden administration.
The Environmental Protection Agency’s rule follows a Congressional directive contained in the climate law of 2022. The new fee is intended to encourage the industry to implement best practices that reduce emissions of methane – the main component of natural gas – and therefore do not have to pay for it.
Methane is a climate “super pollutant” that is far more potent than carbon dioxide in the short term and is responsible for about a third of greenhouse gas emissions. The oil and natural gas sector is the largest industrial source of methane emissions in the United States, and advocates say reducing methane emissions is a crucial way to slow climate change.
The rule will be announced on Tuesday at noon international climate conference in Azerbaijan, comes hours after newly elected President Donald Trump named former New York Congressman Lee Zeldin to lead the agency during Trump’s second term. If confirmed by the Senate, Zeldin is expected to move to undo or relax dozens of environmental regulations passed under President Joe Biden as Trump seeks to establish US “energy dominance” globally.
Trump is likely to target the methane tax amid a wave of expected actions he has promised to deregulate the oil and gas industry.
As outlined by the EPA, excess methane production could result in a $900 per ton fee by 2024, while fees could rise to $1,200 per ton by 2025 and $1,500 per ton by 2026. Industry groups are likely to challenge the rule, including any efforts to charge a fee retroactively.
The rule won’t become final until early next year, after publication in the Federal Register.
EPA Administrator Michael Regan said in a statement that the rule will work in conjunction with a new EPA rule on methane emissions imposed this year. The rule targets the US oil and natural gas industry for its role in global warming, as Biden seeks to secure his legacy in the fight against climate change.
The fee, formally known as the Waste emission taxwill encourage early deployment of available technologies to reduce emissions of methane gas and other harmful air pollutants, Regan said. The compensation “is the latest in a series of actions under President Biden’s methane strategy to improve efficiency in the oil and gas sector, support American jobs, protect clean air and strengthen American leadership on the global stage.” , he said.
Industry groups and Republican-led states challenged the previous methane rule in court, but lost a bid for the Supreme Court to block the rule while the case continues before lower level judges.
Opponents argue that the EPA has overstepped its authority and set unattainable standards with the new regulations. However, the EPA said the rules were fully within its legal responsibilities and would protect the public.
Many major oil and gas companies already meet or exceed the methane performance levels set by Congress under the climate law, meaning they are unlikely to be forced to pay the new fee, Regan and other officials said.
Still, EPA estimates that the rule will result in a cumulative emissions reduction of 1.2 million metric tons of methane (34 million metric tons of carbon dioxide equivalent) through 2035. That figure is comparable to the clean air gain from taking in almost 8 million tons of gas. cars off the road for a year, the EPA said. Cumulative climate benefits could amount to as much as $2 billion, the agency said.
Like the previous methane rule, the new fee faces an almost certain legal challenge from industry groups. The American Petroleum Institute, the oil and gas industry’s largest lobbying group, called a fee proposed earlier this year a “punitive tax increase” that “undermines America’s energy advantage.”
API said it looks forward to working with Congress to repeal the “misguided new tax on American energy.”
Environmental groups, in turn, have cheered the upcoming methane tax, saying oil and gas companies should be held responsible for the pollution that contributes to global warming. Oil and gas companies routinely calculate that it is cheaper to waste methane through flaring and other techniques than to make the necessary upgrades to prevent leaks, they said.
The EPA said it expects that over time, fewer oil and gas companies will be charged for excess methane as they reduce emissions in accordance with the rule.