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EPA Proposes Charges on Methane Emissions

In a move that could impact oil and gas companies, the U.S. Environmental Protection Agency (EPA) has proposed a rule imposing charges on methane emissions, potentially costing up to $1,500 per metric ton (MT). Republicans caution that this might elevate production costs, increasing Americans’ energy expenses.

Regulatory Background

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Established under the Inflation Reduction Act of 2022, the Waste Emissions Charge targets oil and gas facilities emitting more than 25,000 MT of CO2 equivalent annually. The EPA’s proposed rule outlines financial penalties, starting at $900 per MT in 2024 and escalating to $1,500 in 2026 and beyond.

EPA’s Environmental Goals

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EPA Administrator Michael S. Regan emphasizes President Biden’s commitment to reducing methane emission. Regan frames the proposed rule as part of a comprehensive strategy to combat climate change and incentivize industry innovation.

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Recent Regulatory Actions

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The proposed charges delve into the implementation details following a December final rule aimed at reducing methane emissions and harmful air pollution. The EPA sets standards for emissions reduction and provides guidelines for states, focusing on eliminating routine natural gas flaring from new oil wells.

Democrats’ Support

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Democrats, including Rep. Frank Pallone, applaud the EPA’s proposal, citing the need to curb wasted methane emissions and ensure that the associated costs do not burden consumers. The proposed rule is seen as a step towards aligning economic incentives with environmental responsibility.

Republican Opposition

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Republicans, such as Sen. Kevin Cramer, criticize the methane emission charges as burdensome regulations, warning of potential negative impacts on domestic energy production. This fee may disproportionately affect working-class Americans who rely on affordable and reliable energy.

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Senate Republicans’ Concerns

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U.S. Senate Committee on Environment & Public Works members, primarily Republicans, express concerns about the methane emission charges targeting American energy producers. They foresee increased costs for employers and higher energy bills for millions of Americans.

Industry Opposition

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Oil and gas industry groups, including the American Petroleum Institute (API) and the Independent Petroleum Association of America (IPAA), strongly oppose the EPA’s proposed charges. API calls for the repeal of the methane fee, citing the industry’s ongoing efforts to reduce methane emissions.

API’s Position

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API indicates that the oil and gas sector significantly reduced methane emissions between 2011 and 2021. They argue that the proposed change needs to be revised, creating an incoherent regulatory regime that stifles innovation.

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IPAA’s Critique

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The IPAA criticizes the finalized methane emission rules, expressing concern about potential good shutdowns and the federal government using regulations to eliminate vital energy sources. They stress the importance of developing appropriate techniques reflective of industry segments.

Criticisms by Experts

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Experts, like William Happer, a professor emeritus at Princeton University, criticize the Biden administration’s focus on methane emissions. Happer argues that methane regulation has limited relevance to climate change, emphasizing the minimal impact of doubling methane concentration on global temperature.

Balance Between Finances and Climate Goals

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The proposed EPA rule on methane emission charges signifies a significant policy shift with potential economic consequences. The debate between environmental responsibility and the impact on the energy industry remains contentious, highlighting the challenges of balancing climate goals with financial considerations.

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