POLICY
The Inflation Reduction Act Tackles Methane Emissions
T
here’s a lot of talk about tackling climate change these days. If you listen to the media, you’d think that the solution is to electrify everything, but that’s meaningless if you do not have access to a clean, efficient, sustainable, low-cost way of generating electricity. However, not everywhere has adequate wind or sun resources, and with over 315 wind project rejections since 2015, and neither of those two being “available on demand”, natural gas is the only viable option for the foreseeable future. The goal, then, is to produce natural gas as cleanly as possible. One long-proposed solution for reducing CO2 emissions in the United States is setting a price on carbon. But efforts to create a national carbon cap-and-trade or tax regime have proved fruitless, although there is a vocal and powerful activist movement intended to force coal plants to close, and many have. Of course, the actors most responsible for discharging CO2 are easily identified and widely known: planes, trains, and automobiles; power plants; heavy industry; commercial and light industrial operations; and agriculture, in that order, using US EPA 2020
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figures. There’s truth here; recent estimates from the US EPA are that CO2 accounts for up to 80% of all greenhouse gas emissions. But, there’s a vastly more potent greenhouse gas contributing to climate change that gets much less notice or discussion: methane. Methane, in fact, has a Global Warming Potential (GWP) of up to ~25x that of CO2 over 100 years according to the EPA, and 86x over 20 years. And while there’s some disagreement over which sector is the larger methane contributor—many databases claim agriculture is the worst, followed by emissions from the oil and gas sectors—there’s no avoiding that methane is an issue. Ironically, though, while the White House is ostensibly “laserfocused” on curbing rampant inflation, and President Biden recently signed into law the Inflation Reduction Act (IRA), many large provisions and considerable funding within the bill are directed solely toward fighting climate change. One such provision is the first-ever federal fee on “excess” methane emissions. This fee will take place on or after January 1, 2024, based on certain baseline calculations and allowable exemptions. Within the oil and gas sector, using 2019 figures, EPA lists the
largest methane emitters as gas production at 41%; oil production at 19%; transmission and storage at 19%; distribution at 7%; processing at 6%; post-meter emissions at 5%; and abandoned wells, 3%. As for the fees themselves, the IRA methane emissions charge starts at $900 per metric ton of methane, increasing to $1,200 in 2025, and to $1,500 in 2026 and beyond. Notably, the IRA also “fixes” difficulties arising from the Supreme Court’s June 30 ruling that nullified the Obama-era Clean Power Plan, and codifies greenhouse gasses as “pollutants.” These excess emission fees will apply only to methane emissions from specific types of oil and gas facilities required to report their emissions under EPA’s Greenhouse Gas Emissions Reporting Program (GHGRP). And fees would apply specifically to petroleum and natural gas system facilities required to report GHG emissions under 40 CFR Part 98, Subpart W, or facilities emitting 25,000 metric tons of CO2 equivalent or more each year. Among others, facility types will include off- and onshore petroleum and natural gas production and compression for transmission; LNG storage as well as import and export
NORDRODEN, WLADIMIR1804/STOCK.ADOBE.COM
By: Robert Ward
