Dems Confident on Methane Fee as Budget Bill Moves to Senate

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 last Friday.

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.

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.

The oil and natural gas industry, the nation’s largest industrial source of methane emissions, supports methane regulation but opposes the congressional fee as an unnecessary tax that could drive up energy costs and result in the loss of thousands of jobs.

Environmental groups call methane reduction the fastest and most cost-effective action to slow the rate of global warming. Current rules for methane emissions from U.S. oil and gas wells only apply to sources that were built or modified after 2015, leaving more than 90% of the nation’s nearly 900,000 well sites unregulated. Many of those sites are smaller, low-producing wells.