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Democrats pinning climate hopes on revised methane fee

Advocates look to cut methane emissions from oil and gas industry

Senate Environment and Public Works Chairman Tom Carper says he's seeking a 'middle ground' on a new methane fee.
Senate Environment and Public Works Chairman Tom Carper says he's seeking a 'middle ground' on a new methane fee. (Tom Williams/CQ Roll Call file photo)

House Democrats are hoping their latest version of a methane fee in the budget reconciliation package reflects enough concessions to win over skeptical members within their own ranks and garner the critical support of Sen. Joe Manchin III, D-W.Va.

As part of the policy’s new look, proponents were referring to the tweaked provisions as a “penalty” for companies that fail to address methane waste rather than a “fee.” The legislation itself was changed to replace “fee” in many places with “charge,” one that would be levied in the context of a now front-loaded $775 million “Methane Emissions Reduction Program” that includes technical and financial assistance to help the industry comply.

Nomenclature aside, the new language still would require oil and gas companies to pay a per-ton amount for the methane that escapes from their operations and enters the atmosphere.

Advocates of climate action are hoping the proposal can survive as a key way of reducing greenhouse gas emissions, particularly after they lost a proposed $150 billion Clean Electricity Performance Program that would have paid power companies to switch to renewable energy sources and fined utilities that moved too slowly away from fossil fuels.

Because methane is a super powerful greenhouse gas that also dissipates rapidly, cutting the amount of it entering the atmosphere is one way to achieve rapid progress on climate change. And preventing methane from escaping via leaks, venting and flaring is seen as particularly low-hanging fruit given that it’s in operators’ interests to capture that wasted product.

Energy and Commerce Chairman Frank Pallone Jr., D-N.J., testified before the House Rules Committee last week that he listened to concerns about the committee-approved language that in many cases companies would like to capture and use the excess gas that’s being vented, but that they’ve had trouble acquiring permits for the pipes that would be required to do so.

“So we’ve said we’re not going to impose any penalty until the EPA permits those pipes that would correct the situation,” Pallone said.

He was referring to an exemption that’s been added to the legislation stating the charges “shall not be imposed with respect to emissions caused by unreasonable delay in environmental permitting of gathering infrastructure.”

In another compromise, the new version modifies the fees that originally would have started at $1,500 per ton. The revised version would peg them at $900 per ton in 2023, $1,200 in 2024 and $1,500 in 2025 and beyond.

The House revisions are in line with behind-the-scenes discussions on the other side of the Capitol, according to a Senate Democratic aide.

Talking to Manchin

Sen. Thomas R. Carper, D-Del., said in an interview last week that he’s been making progress in finding middle ground with Manchin on a methane fee.

The chairman of the Senate Environment and Public Works Committee, Carper cited a report from Energy Innovation: Policy and Technology, a nonpartisan energy and environment policy firm, that found the initial methane fee would account for 65 percent of the legislation’s reduction of industrial greenhouse gas emissions from 2023 to 2050. The report also found that it would avoid 172 million metric tons of carbon dioxide emissions annually — equal to annual emissions from more than 36 million gasoline-powered passenger vehicles.

Whether the phase-in, exemption and financial support for industry will shore up internal House Democratic support and win over Manchin remains to be seen. The West Virginian’s office did not respond to a request for comment Friday.

But opposition from the oil and gas industry seems unlikely to change based on a statement Friday by Frank Macchiarola, the American Petroleum institute’s senior vice president of policy, economics and regulatory affairs.

“We support the direct regulation of methane by the EPA as the most impactful way to build on the downward trend of methane emission rates in key producing regions rather than a duplicative and punitive natural gas tax that would only hurt American consumers and undermine the economic recovery.” Macchiarola said.

The American Gas Association said in its own statement that it was still reviewing the proposal’s impact on American businesses and consumers who rely on natural gas, but offered a word of warning.

“If it raises their bills, an unconscionable move amidst rising energy prices, we will oppose it,” according to the statement.

Republicans have cited the proposal as yet another example of what they characterize as Democrats’ attacks on U.S. energy production.

Rep. Cathy McMorris Rodgers, R-Wash., the Energy and Commerce ranking member, said during last week’s Rules Committee hearing that the revised version didn’t change the fundamental nature of the proposal.

“They changed the name of the ‘heat-your-home tax’ but it’s still a tax on natural gas that’s going to increase heating costs as we’re heading into winter,” she said. “It really hurts those that are on a fixed income, those that are low-income, the hardest because they’re spending a higher percentage of their income on home heating and trying just to pay their energy bill.”

EPA regulations

The legislative wrangling comes as the EPA is expected to release new methane regulations any day. Those rules could take some wind out of the sails of those pushing for a methane fee, but the two would actually complement one another, according to Julie McNamara, deputy policy director with the Climate & Energy program at the Union of Concerned Scientists.

She said those new EPA regulations should have broad application, cover low and marginal producers and include frequent monitoring. The fee would then function as an important backstop to those rules, she said.

“Having a policy that continues to put a spotlight on methane emissions from oil and gas operations is just so critically important to enforce the monitoring, the reporting and the accountability for methane emissions that should not still be happening,” McNamara said. “This puts the onus on operators to take action and we need that.”

She said getting methane emissions under control as quickly as possible will produce significant progress in tackling climate change, and addressing methane waste is something companies should be able to accomplish.

“We’ve seen a few that have shown that it can be done and yet we’ve seen the overwhelming majority of the industry fail to act,” she said.

McNamara rejected the idea that it’s a tax on the American people.

“This is not about the gas that’s flowing through the pipeline,” she said. “This is the gas that’s not making it to the end of the line.”

David McCabe, an atmospheric scientist with the environmental group Clean Air Task Force, said in a statement that he didn’t expect changes such as the exemption for delays in permitting to significantly undermine the effectiveness of the policy.

As for the slower ramp-up of the fee level, he said the $1,500 level reached in 2025 and beyond is appropriate because methane is so harmful to the climate and air quality.

“But we do think many companies will rapidly reduce emissions even when the full charge is a few years away, since there are many ways they can quickly reduce emission so they won’t even have to pay the reduced fee in 2023,” McCabe said.

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