Emission management

Uncertainty, Confusion Continue To Grow Around Methane Tax

With the methane emissions tax contained in the Inflation Reduction Act looming, confusion reigns over just how to calculate emissions and concerns grow the tax will hit smaller and mid-size companies hardest.

Gas plant flaring
Source: Alexisaj/Getty Images

Confusion and uncertainty reign when it comes to the pending methane emissions tax included in last year’s Inflation Reduction Act.

There is concern that the tax will most heavily affect mid-size independent producers, as Grant Swartzwelder, president of OTA Environmental Solutions said.

“Anyone below 25,000 tons, it won’t affect you. The large companies, because of their size and lobbying efforts, won’t be affected. It seems those in the middle ground are the ones to get impacted the most and possibly the most negatively,” he told Lee Fuller, officer, environment and general strategy, with the Independent Petroleum Association of America during a monthly Oilfield Strong webinar.

“That is an accurate characterization of the dynamics,” Fuller responded.

A look at the history of the regulatory dynamics with the oil and gas industry shows rural areas, largely comprised of sites with one or two wells, weren’t as aggressively regulated as more urban sites with, for example steel plants, Fuller said. In recent years, regulatory changes and growing concerns about climate change and methane emissions has brought a move toward regulators targeting the industry more aggressively, he said.

“Regulators are not well versed in understanding the nature of oil and gas, and that leads to challenges. Then you get into the dynamics of the industry—the range of very large, publicly traded companies down to the mom-and-pop companies,” he said.

Another concern is how the tax was enacted, Fuller continued. “If you look at this methane tax, it’s a very different animal, something that’s never been done before. The history of it is troubling—it was written in secret with no hearings, no reports written in committee or conference to explain how it will work. You have raw legislative language handed to the Environmental Protection Agency to implement. There are elements in it that are intended to try to limit the impact on smaller operations” like the 25,0000-tons-per-year threshold.

The legislation tasked the EPA with improving the Subpart W greenhouse gas reporting program, but Fuller said the timeline for EPA to accomplish that task is too unrealistic: The tax will take effect in 2024 with tax collections beginning in 2025.

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