Administration acts with Congress to reverse methane fee

On Friday, March 14, the President signed a resolution reversing the implementation of the fee on excess methane gas emissions by the oil and gas industry. In late February, lawmakers acted under the Congressional Review Act, a law aimed at newly issued regulations and passed the overturning of the regulation establishing the methane fee.

While the fee is still technically part of the Inflation Reduction Act of 2022, in practical terms, it is now certain that no methane fee will be operationalized by the current administration.

Why it matters: Methane is a greenhouse gas that is significantly more potent than CO2. In fact, methane emissions since the Industrial Revolution are responsible for roughly 30 percent of all global warming today. While anthropogenic methane emissions also result from cattle, agriculture, and waste management, the oil and gas sectors contribute roughly one-fourth of these emissions through leaks at pipelines, storage tanks, or natural gas wells. Because of its highly potent nature as a greenhouse gas, even small leakage rates of 2 or 3% throughout the supply chain can make burning natural gas to generate electricity as environmentally impactful as burning coal.

The TCB take: Eliminating the fee on excess methane emissions will likely result in greater releases of methane because of the lack of a financial disincentive. However, reducing methane emissions can create significant positive effects for businesses, households, and society overall:

• Methane is a marketable gas, and capping leaks would essentially pay for itself. While the total global costs to eliminate most leaks would amount to up to $100 billion, the annual revenues generated may be between $25 and $50 billion, according to The Conference Board estimates.
• Unlike CO2, which stays in the atmosphere for hundreds of years, methane breaks down within 7 to 12 years, making near term efforts to reduce emissions particularly effective. In other words, reducing methane emissions in the next few years would pay large dividends when it comes to avoiding warming in the future.