November 15, 2024
This week, the current United States administration finalized a methane fee intended for big oil and gas producers to slash emissions. Industry groups will likely continue challenging the rule, including any effort to impose a retroactive fee. The rule wouldn't become final until early next year.
Operators It Applies To
The rule only applies to operators that emit more than 25k of GHG, only operators that exceed a certain methane intensity pay the fee. It also only applies to certain industry segments and not others. The policy allows a certain netting procedure for operators operating in different regions with varying GHG performance. These items need to be included at a high level.
The outgoing administration aims to mitigate leaks from drill sites, gas pipelines, and other O&G equipment. The US Environmental Protection Agency (EPA) estimates that the rule will result in cumulative emissions reductions of 1.2 million metric tons of methane (the equivalent of 34 million metric tons of carbon dioxide) through 2035.
The EPA estimated that this rule alone would lower cumulative emissions by 1.2 million metric tons of methane through 2035 — the equivalent of taking nearly 8 million gasoline-powered cars off the road for a year.
The Emission Charges
The WEC fee will start at $900 per metric ton of methane emitted in 2024, up to $1,200 in 2025, and $1,500 for 2026 and beyond.
The oil and natural gas sector is the greatest industrial source of methane emissions in the United States. The WEC applies to methane from certain oil and gas facilities that report emissions of more than 25,000 metric tons of C02e per year to the Greenhouse Gas Reporting Program, beginning with methane emissions reported in calendar year 2024.
American Petroleum Institute Opposition
The American Petroleum Institute (API) called on the US Congress to repeal the fee. According to the EPA, the U.S. is leading the world in energy production and emissions reductions, and due to industry action, methane emissions have fallen by 37 percent between 2015 and 2022.
The rule could prove tricky for the incoming administration to overturn because the program was included in Biden’s climate law, which passed Congress in 2022. Undoing it would require another act of Congress.
What To Do About It
The Envana Software Solutions team invites you to reach out to gain a clear understanding of your emission sources. Contact us to discuss how you can establish a long-term efficient solution with a solid company that understands your needs, leveraging over a century of oilfield expertise.
