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As Democrats Advance Methane Fee Plan, EPA Readies Oil & Gas Rules

September 15, 2021

Biden EPA officials and Democrats on Capitol Hill are advancing separate policies to curb emissions of the potent greenhouse gas methane from the oil and gas sector, prompting industry officials to cite the administration’s regulatory efforts to argue that congressional action is unnecessary.

Environmental groups are pressing for “protective” EPA standards that take advantage of new leak detection technology, while top Democrats are slightly softening their proposed fees on emissions from the sector in order to accommodate some lawmakers who represent districts with a heavy oil industry presence:

House Panel Backs Revised EPA Oil & Gas Methane Fee, Amid GOP Attack

The House Energy & Commerce Committee is advancing a slightly revised version of its EPA-administered fee on methane emissions from oil and gas companies as part of Democrats’ sweeping budget “reconciliation” bill, but Republicans are seeking to brand the policy and other provisions as an inflationary tax on the public.

During a Sept. 13 markup, the House Energy & Commerce Committee voted 31-26 to approve the air pollution-related subtitle of its broader budget reconciliation package, after easing some provisions of the methane fee policy but otherwise making few changes to the committee’s proposed funding for over $37 billion for climate and air work at EPA.

Changes include a delay in the plan’s implementation date from 2022 to 2023; a higher methane emissions intensity threshold for covered natural gas transmission facilities -- exceeding 0.11 percent of sales rather than 0.05 percent; and pegging the fee at $1,500 per ton of methane rather than $60 per ton of carbon dioxide equivalent.

The prior formula -- pegged to CO2e -- suggested that even if the rate were to remain static, the monetary effect on companies still could change based on revised calculations of methane’s global warming potential compared to CO2.

As such, the fee’s specific tie to methane emissions could lock in the fee level against higher rates, stemming from possible updated calculations of methane’s warming potential.

The methane fee tweaks won provisional support from Rep. Lizzie Fletcher (D-TX), who during the markup positively cited the implementation delay and the higher methane intensity threshold for gas transmission.

She also praised the House plan, focused on “actual measurable individualized emissions,” as superior to a pending Senate methane fee bill focused on a “basin-wide” approach. But she added that “our work is not done” and cited concerns about an omission of methane controls on other sectors such as agriculture and waste management.

The committee released the proposal late last week, though the idea was already getting pushback from the oil and gas industry:

House Energy Panel Seeks Billions For EPA To Cut GHGs, Air Pollution

The House Energy & Commerce Committee is poised to mark up budget reconciliation measures Sept. 13 that would appropriate billions of dollars for EPA to cut greenhouse gases and conventional air pollution, while also imposing a controversial methane emissions fee on oil and gas producers that the sector strongly opposes.

Oil & Gas Groups Cite EPA Rules As Reason To Oppose Hill Methane Fee Plan

A coalition of national and local oil and gas groups and fuel users is citing EPA’s current and planned methane emissions rules for the sector to oppose congressional Democrats’ plan to enact a fee on such emissions in their pending budget “reconciliation” package, calling the Capitol Hill proposal “duplicative and unnecessary.”

“A tax on methane is unnecessary,” says a Sept. 7 letter to key senators and signed by more than 100 industry groups led by the American Petroleum Institute (API).

“EPA is best suited to address the challenges in reducing methane emissions because regulation stipulates the installation of cost-effective control technologies -- as well as leak detection and repair requirements -- that prevent and reduce methane emissions at oil and natural gas facilities,” the oil sector letter argues.

The letter marked a rare case when industry is backing EPA regulation over other alternatives, just as the agency is poised to propose tougher oil and gas methane standards as soon as this month.

API and others in the coalition have previously endorsed the notion of a carbon price as preferable to EPA GHG rules. The industry coalition draws a distinction between carbon “pricing,” which some of the groups have embraced as an alternative to regulation, and a methane fee the groups argue would be hard to equitably implement.

“CO2 emissions result primarily from combustion, whose point sources make it cost-effective to estimate, measure, and verify for the purpose of carbon pricing; in contrast, methane emissions often result from fugitive and intermittent sources that are challenging to quantify,” the letter says.

Meanwhile, White House and EPA officials are readying their proposal to strengthen the agency’s methane standards for oil and gas equipment, after Congress earlier this summer reinstated Obama-era rules for new sources:

White House Begins Review Of Draft EPA Oil & Gas Methane Proposal

The White House has begun formal interagency review of EPA’s draft proposal to strengthen methane controls for the oil and gas sector, signaling that Biden administration officials could publicly release the closely watched proposal in the coming weeks.

White House regulatory officials began reviewing EPA’s draft proposal Sept. 13. The agency’s latest Unified Agenda of planned regulations says the proposal could be released in October, though President Joe Biden’s January climate executive order gave the agency a September deadline to float stronger methane rules for oil and gas equipment.

Biden officials have also suggested that the final rule could be issued in October 2022.

EPA is expected to float both stronger limits for new sources, as well as first-time “emission guidelines” for existing sources that would be implemented through state compliance strategies.

The milestone comes shortly after environmental groups detailed a series of requests for the upcoming rulemaking:

Environmentalists Seek ‘Protective’ EPA Methane Rules For Oil & Gas

Environmentalists are detailing a series of requests for EPA’s upcoming proposal to strengthen methane requirements for oil and gas equipment, pressing for “protective” standards without “carveouts” for low-producing wells that the advocates say are a significant contributor to emissions of the potent greenhouse gas.

“Protective EPA rules that capitalize on readily available means to reduce methane and other pollution are common-sense and required to avoid the worst impacts of climate change and protect frontline communities,” 72 national and local environmental groups said in a Sept. 8 letter to Administrator Michael Regan.

A chief ask is for the agency to impose “rigorous” and more frequent leak detection and repair requirements for new and existing facilities, compared with the recently reinstated Obama rules.

“EPA should build on its current standards by requiring more frequent monitoring, enabling operators to quickly identify and fix these large sources of pollution,” the letter says, arguing that advanced leak detection technology can cheaply spot major leaks, while “ground-based monitoring” is also needed to find smaller but more pervasive leaks.

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