The Environmental Protection Agency (EPA) recently finalized its ruling aimed at reducing methane emissions within the oil and gas industry.
The Waste Emissions Charge (WEC) seeks to incentivize reductions in air pollution that arise from oil and natural gas production by imposing a charge on applicable oil and gas facilities that emit greater than 25,000 metric tons of carbon dioxide equivalent (CO2e) each year. An applicable facility, under the Clean Air Act (CAA) Section 136(d), is defined as a facility with the following industry segments:
- Onshore or offshore petroleum and natural gas production
- Onshore natural gas processing
- Onshore petroleum and natural gas gathering and boosting
- Onshore gas transmission compression
- Onshore natural gas transmission pipeline
- Underground natural gas storage
- Liquefied natural gas (LNG) import and export equipment and LNG storage
The WEC is required to apply to emissions occurring in 2024 at $900 per metric ton of methane, increasing to $1,200 per metric ton in 2025, and increasing further to $1,500 per metric ton in 2026 and the years after. The ruling, laid out in Section 60013 of the Inflation Reduction Act of 2022 (IRA), provides EPA with the authority to assess, collect and enforce all regulatory compliance and penalties associated with the WEC. Any related penalties incurred by companies will be due by September 2, 2025, for the 2024 reporting period.
EPA is also working to finalize three exemptions laid out by Congress with the goal of lowering a facility’s WEC or allowing the facility to be entirely exempt from the charge:
- Unreasonable Delay: Applies to methane emissions that were caused by an unreasonable delay in environmental permitting or transmission infrastructure necessary for the removal of volume to mitigate methane emissions
- Plugged Wells: Applies to methane emissions from wells that have been permanently closed off from further production
- Regulatory Compliance: Applies to facilities that are subject to and in compliance with emissions requirements laid out in Section 60013 of the IRA
EPA has plans to finalize an approach that would allow the netting of emissions across facilities under common ownership or control. This would mean that emissions from facilities that are below the emissions threshold can be used to reduce those from other facilities held under common ownership or control that might be exceeding the threshold.
EPA estimates that the WEC alone will result in cumulative emissions reductions of 1.2 million metric tons of methane through 2035, producing roughly $2 billion in cumulative climate benefits. This ruling not only aims to curb the volume of harmful air pollutants but also ensures that the oil and gas industry remains competitive in overseas markets that require a minimum level of emissions standards.
Improved emissions standards and the adoption of innovative technologies will assist companies in capturing more of their product to be sold in the market while reducing the long-term impact of methane emissions on our environment. As we look to the future, companies should be proactive in assessing their emissions reduction capabilities and take steps to avoid the potential impact of WEC penalties.
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