New Methane Fee Targets Emissions: A Game Changer for Oil and Gas?

Oil pumps operating at sunset in a desert

The Biden administration has announced a first-of-its-kind methane fee, challenging oil and gas companies in their emission controls.

At a Glance

  • The EPA will impose fines on oil and gas firms exceeding methane emission limits.
  • The fee starts at $900 per ton in 2024, escalating to $1,500 by 2026.
  • The rule targets facilities surpassing 25,000 metric tons of emissions annually.
  • Legal challenges from industry groups and Republican-led states are anticipated.

Historic Methane Fee Launched

The Biden administration’s new methane fee represents a significant step in environmental policy, targeting oil and gas companies. Clinics that emit methane, a superpollutant that traps significantly more heat than carbon dioxide, will face charges if they exceed new federal emission limits. This initiative aims to stimulate a global reduction in methane emissions and was introduced by John Podesta at a climate summit in Baku, Azerbaijan.

The fee structure, under the Inflation Reduction Act, begins at $900 per ton in 2024, with plans to increase to $1,500 by 2026. It applies to facilities emitting more than 25,000 metric tons of carbon dioxide equivalent per year. In response, major trade bodies like the American Exploration and Production Council have expressed disapproval, fearing energy costs will rise.

Challenges Ahead

The EPA anticipates the regulation could be met with opposition, including probable legal actions from industry groups and Republican states. The Congressional Review Act poses a potential risk, allowing future congressional control to revoke the regulation. However, the Biden administration remains resolute in pushing forward this aspect of its climate strategy.

“Slashing these superpollutants is the fastest and often, I would add, the cheapest way to slow down warming in the coming decades,” said Podesta.

Despite anticipated hurdles, the rule has garnered support from environmental groups that view it as a necessary step for holding polluters accountable. The EPA expects this initiative to cut methane emissions by 1.2 million metric tons by 2035, equivalent to taking nearly 8 million gas-powered cars off the road.

Global Cooperation and Expectations

The U.S. and China have agreed to cooperate on reducing methane emissions, with Chinese officials insisting that they are also looking for ways to curb methane pollution. The Biden administration’s rule sends a strong message internationally, but may ultimately fall flat as the rule is expected to be scrapped by the incoming Trump administration.

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