Biden Imposes Levy on Methane Despite Trump's Election

Oil and gas producers in the US will for the first time be required to pay for some of their methane emissions under a regulation the Biden administration finalized Tuesday.

The congressionally mandated rule is the final piece of a three-part package of methane regulations that levies penalties of $900 per metric ton for “excess” methane emissions that are above a government threshold. That fee is set to rise to $1,500 per metric ton in 2026.

US officials are set to tout the new regulation as evidence of the country’s resolve to combat methane during a meeting focused on the potent greenhouse gas at the COP29 climate summit in Azerbaijan. 

Yet the effort’s future is in question with the election of Donald Trump as president. He pulled out of Paris climate agreement during his last term, has vowed to unleash American energy production and has promised to ease some greenhouse gas regulations. Oil companies also have lobbied against the new methane levy, casting it as a tax on gas production and prodding lawmakers to undo it next year.

Cutting methane emissions is one of the most immediate steps that can be taken to slow the rate of climate change. Methane is estimated to have some 80 times the warming power of carbon dioxide during the first 25 years after it is released into the atmosphere.

Although the fee was mandated by the Inflation Reduction Act, Congress left some details to Environmental Protection Agency, giving the agency discretion that the Trump administration could use to justify changes. Oil industry leaders plan to push for a rewrite.

“We will work with the new administration to fix the unworkable, infeasible or legally dubious aspects of the last administration’s policy to ensure a durable methane framework moving forward,” said Anne Bradbury, head of the American Exploration and Production Council. 

Slow Progress  

The Environmental Protection Agency made some changes to the final fee regulation that respond to oil industry concerns, including a shift that allows energy companies to more quickly seek exemptions on a state-by-state basis if they replace leak-prone equipment and meet other regulatory requirements.

The industry also secured a change that allows gives them more opportunity to reduce fees with calculations that cover emissions across a company’s entire portfolio.

The measure strives “to reduce methane emissions so that natural gas ultimately makes it to consumers as usable fuel instead of as a harmful greenhouse gas,” EPA Administrator Michael S. Regan said in a news release.

The fee measure adds to a regulatory architecture built up in the US over the last few years. Some of those requirements are just coming into force.

Separate federal mandates for finding and plugging leaks – unveiled with much fanfare at last year’s UN-organized COP28 — are still years from forcing changes at existing wells and oilfield equipment. The requirements effectively kick in only after the EPA approves state regulatory plans, which is potentially two years away.

A separate government program that grants private organizations authority to track down large emission releases from oil and gas sites also hasn’t got a single approved third-party participant yet, six months into its operation.

The delays are connected to reviews ordered by the US EPA for organizations reporting large methane events and the technology that will be employed to detect them. The process was meant to inspire trust in the program, helping ensure reports have credibility and inspire swift action by the responsible oil companies. The EPA has said it will vet applications expeditiously.

The methane regulations also have implications for the energy market. Any full-throated effort to roll back regulations could threaten future American LNG exports, especially to the European Union, which has forthcoming regulations limiting the methane intensity of fossil fuel imports. 

“We are rapidly entering a world where the ability to trade gas globally is going to hinge on environmental attributes, and methane is going to be the environmental attribute that will dictate whether you get unfettered access to markets,” said Jonathan Banks, global director of methane pollution prevention at the Clean Air Task Force. “The EU import standard is the poster child of this but it’s not the only one.”