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U.S. moves ahead with tax on methane emissions from oil an dgas wells

A Democratic plan to impose a fee on methane emissions from oil and gas wells has cleared a key hurdle, but it faces strong opposition from the oil and gas industry and criticism by centrist Sen. Joe Manchin.

The proposed fee on methane — a powerful pollutant that contributes to global warming — was included in a huge social and environmental policy bill passed by House Democrats on Nov. 19.

As the bill moves to the Senate, attention again will focus on Manchin, a West Virginia moderate who has already forced fellow Democrats to abandon one of their biggest climate proposals: a clean-electricity program that would boost wind and solar power while phasing out coal- and gas-fired power plants.

Manchin, whose state is a leading producer of coal and natural gas, has said he worries a methane tax could be used to drive energy companies out of business. He said before the House vote that he wants to make sure the fee is structured to incentivize innovation and not just “punish” energy companies “for the sake of punishing” them.

A spokeswoman for Manchin declined to comment after the House vote, but Democrats in the House and Senate said they are confident the fee will remain in the Senate bill, despite a 50-50 split in the chamber that gives every Democrat veto power. Republicans unanimously oppose the bill.

Language approved by the House represents a compromise that would slap a rising fee on excess emissions at oil and gas facilities, reaching $1,500 per ton in 2025, along with $775 million in subsidies for companies that take steps to reduce emissions.

The proposed methane tax comes as President Joe Biden launches a wide-ranging plan to reduce methane emissions, which pack a stronger short-term punch on climate than even carbon dioxide.

Biden pledged at a U.N. climate summit in Glasgow, Scotland, earlier this month to work with the European Union and dozens of other nations to reduce global methane emissions by 30% by 2030.

The centerpiece of U.S. actions is a long-awaited rule by the Environmental Protection Agency to tighten methane regulations for the oil and gas sector. The proposed rule would for the first time target reductions from existing oil and gas wells nationwide, rather than focus only on new wells as previous regulations have done.

Once finalized, the proposed requirements should reduce methane emissions from U.S. drilling operations and equipment by approximately 75% by 2030, compared with 2005 levels, the White House said.