The U.S. on Friday proposed a fee on emissions of methane from big oil and gas producers as required under the 2022 climate law and as a backstop to wider regulations on the greenhouse gas from energy operations.
The fee, proposed by the Environmental Protection Agency, applies to large oil and gas facilities that report methane emissions of more than 25,000 metric tons of carbon dioxide equivalent per year.
As directed by the Inflation Reduction Act (IRA), the fee starts at $900 per ton in 2024, increases to $1,200 for 2025 and $1,500 for 2026 and beyond, the EPA said. It only applies to the emissions that exceed the specified levels.
Over time, fewer facilities will face the charge as they reduce their emissions and become eligible for compliance exemptions, the EPA said.
"Today's proposal, when finalized, will support a complementary set of technology standards and historic resources from the Inflation Reduction Act, to incentivize industry innovation and prompt action," EPA Administrator Michael Regan said in a release.
Methane tends to leak into the atmosphere undetected from drill sites, gas pipelines and other oil and gas equipment. It has more warming potential than carbon dioxide and breaks down in the atmosphere faster, so curbing methane emissions can have a more immediate impact on limiting climate change.
In December, the EPA finalized a wider rule on methane from oil and gas operations at the COP28 climate talks in Dubai.
It bans routine flaring of natural gas produced by newly drilled oil wells, requires oil companies to monitor for leaks from well sites and compressor stations and establishes a program to use third party remote sensing to detect large methane releases from so-called "super emitters."
The methane fee was watered down in the IRA, which was passed in 2022, to cover less than half of the sector's release of methane, as a result of concessions made to win over Senator Joe Manchin, a conservative Democrat from gas producing West Virginia.
(Reuters - Reporting by Timothy Gardner; editing by Barbara Lewis)