The Biden administration launches historic methane tax on oil and gas drillers

The Biden administration is finalizing a new rule that would require oil and natural gas companies to pay a federal fee if they exceed certain levels of methane emissions.

The move, which the Environmental Protection Agency (EPA) will announce on Tuesday at the COP29 international climate conference in Azerbaijan, is aimed at reducing one of the most powerful greenhouse gases.

It follows the advertisementdirective from Congress included in the Climate Act of 2022, which is expected to be finalized early next year after publication in the Federal Register.

Methane, a major component of natural gas, is known as a potent climate “superpollutant,” with a near-term warming effect much stronger than that of carbon dioxide.

The oil and gas sector is the largest industrial source of methane emissions in the US.

How much will the methane tax cost?

The fee, which could start at $900 per tonne in 2024 and rise to $1,500 per tonne by 2026, is expected to face opposition from industry groups, which could challenge the rule in court, especially any retroactive charges.

EPA Administrator Michael Regan said in a statement that the new fee, officially called the Waste Emissions Charge, would complement other recent EPA efforts to reduce methane emissions.

He emphasized that this would encourage the adoption of emissions-reducing technologies while supporting jobs and U.S. leadership on climate action.

The oil and gas industry, along with some Republican-led states, have already challenged the Biden administration’s previous methane rule in court.

How methane contributes to global warming

The EPA has defended its authority to regulate methane emissions, saying the rules are within its legal authority and are necessary for public health.

According to the EPA, major oil and gas companies that already meet methane reduction targets are unlikely to be affected by the fee.

The agency estimates the rule will reduce methane emissions by 1.2 million metric tons by 2035 — the equivalent of taking nearly eight million gas-powered cars off the road for a year.

The cumulative climate benefits could amount to $2 billion, the EPA said.

Should the industry be held responsible?

Despite industry opposition, environmental groups have praised the rule, arguing that the oil and gas sector should be held accountable for its contributions to global warming.

Methane is often flared or vented during oil extraction, which many companies find cheaper than making necessary upgrades to prevent leaks.

The EPA expects that the number of companies required to pay the fee will decrease over time as more and more companies embrace emissions-reducing technologies.

This article contains additional reporting from The Associated Press