The following blog is part two of a two part series authored by Sean Gordon, BlueGreen Alliance Associate Policy Advisor
In part one of this blog series, we explored the U.S. Environmental Protection Agency’s (EPA) 2022 proposed rule for methane pollution from the oil and gas industry and the Methane Emissions Reduction Program (MERP) established by the Inflation Reduction Act. This blog will examine how the policies work together to strengthen our economy and protect our planet.
While both the forthcoming EPA rule and the MERP work to scale back emissions from the oil and gas sector, it is important to understand how they function together. In drafting the Inflation Reduction Act, policymakers intentionally designed MERP to be complementary to the EPA Rule, and not redundant. Notably, the MERP’s $1.5 billion in investments in methane mitigation—including monitoring and upgrading facilities with cleaner technologies—will aid the industry in coming into compliance with new standards placed on emissions.
Yet the charge placed on excess methane emissions from facilities also plays a complementary role to the EPA standards on waste. Two dynamics for seeing how these policies complement one another include scope and the timetable for implementation.
There is considerable overlap in the types of facilities covered by the charge on excess methane emissions and those subject to standards under the EPA rule. However, the charge on excess methane emissions provides some additional functionality in its scope. Perhaps most notably, the language of the Inflation Reduction Act exempts any facility that is in compliance with the EPA standards from being subject to the waste emissions charge. By exempting EPA compliant facilities from the waste emissions charge, the MERP program creates an incentive that reinforces the EPA’s methane rule. In addition, as noted in Table 1, there are certain facilities that may be subject to the charge on excess methane emissions but not covered by the EPA’s new standards. Furthermore, the charge on excess methane emissions is only applicable to facilities beyond a certain size, while no such considerations are made by the EPA in creating new standards. One of the more substantive changes made by the 2022 supplemental proposed rule was to create monitoring requirements at all well sites, including small leak prone sites not covered by the waste emissions charge in MERP. MERP is therefore placed into a complementary role to the EPA’s methane rule, focusing on the largest facilities in the industry, including sources such as offshore natural gas production and liquified natural gas (LNG) export terminals that are outside the purview of the supplemental rule. Together, MERP and the EPA rule reinforce each other by filling in gaps left by the scope of the other.
While both sets of policies seek to reduce methane mitigation in the oil and gas industry, they maintain different timelines for implementation. Under the Inflation Reduction Act, the charge on excess methane emissions has a delayed implementation and takes several years to ramp up. Starting in fiscal year 2024, the methane charge will start at a rate of $900 per ton of excess methane emissions rising to $1,200 per ton in 2025, and finally $1,500 per ton in 2026.1 The delayed implementation with a gradual phase-in gives firms within the industry time to implement needed changes, with the potential assistance of grants within the MERP program to deploy cutting-edge emissions reduction technologies.
The 2022 EPA rule, as it applies to new, modified, and reconstructed sources, will take effect immediately following the finalization of the rule, which will be expected later this year. Emissions from existing facilities represent a new category of sources for EPA standards and, as such, the EPA is required to issue emissions guidance (EG) to reduce emissions. This EG does not represent binding requirements directly on sources but rather serves more as a “model rule” to provide states with a starting point for formulating their own plans. The process for states to establish their own plans and submit them to the EPA will likely take time, and thus the creation of a pool of funds to support emission-reduction technology and practices, coupled with a charge on wasted emissions, will help provide incentives for methane reduction while new regulatory standards are being created.
When the US takes action to mitigate methane by eliminating wasteful emissions leaked from oil and gas facilities, it creates a win-win-win situation. Updating industry practices and equipment to meet the standards will not just make workers and communities around the facilities safer and healthier, but will also generate and support quality, family-sustaining jobs. Together, the EPA’s methane regulation and the MERP in the IRA support and reinforce each other to reduce pollution by investing in technological deployment, increasing monitoring and reporting, and creating industry accountability.
- The Waste Emissions Charge will be applied to methane emitted above the EPA’s established Waste Emissions Threshold.