Methane fee proposal returns in newest budget reconciliation bill

The methane fee that found its way into a stalled bill last fall has reappeared in the new budget reconciliation bill called the Inflation Reduction Act of 2022, which cleared the Senate on a party-line vote Sunday. The 725-page document starts with a minimum corporate tax of 15% and ends with a methane fee surprise.

The new fee will be imposed on midstream methane emissions greater than 0.05% of the total processed or transported for sale. The fee starts at $900 per metric ton in 2024, jumps to $1,200 the following year and tops out at $1,500 beginning in 2026.

GPA Midstream Association had advocated for a threshold of 0.20%, the same as that applied in the measure for emissions from natural gas producers.

The surprise came from a compromise between Sen. Joe Manchin, D-W.Va. and Senate Majority Leader Chuck Schumer, D-NY. Manchin had previously been a holdout in the Democrat-controlled Senate because of his defense of the coal, oil and gas industries.

While there are some “off-ramps” for midstream companies, those may be too little, too late. Companies can avoid paying the fees by meeting some standards under methane rules that will be handed down by the U.S. Environmental Protection Agency and obtaining a compliance exemption. The long arc of the rulemaking process and putting final versions in place means there could be several years of paying stiff fees before being able to obtain an exemption.

The Senate passed the bill by a 51-50 margin, with Vice President Kamala Harris casting the tie-breaking vote. The Inflation Reduction Act now moves to the House of Representatives, which is expected to approve it for President Joe Biden’s signature this week.

For nearly a year, GPA Midstream has been actively working to bring some sensibility to the measure. Our efforts date back to the methane fee’s first appearance as part of the Build Back Better Act last year. We maintain that it should not be implemented without being put to the test of public hearings, which would provide an opportunity to examine of lack of scientific support for its premise.

Last September, we sent grave cautions to congressional leaders and the heads of U.S. House and Senate energy, environmental and budget committees about the repercussions of the tax on affordable energy, the manufacturing sector and the economy as a whole.

The new version of the bill allocates grants totaling about $1.55 billion to help companies mitigate methane emissions. Nearly half is aimed at conventional well production.