White House Proposes Fines for Oil and Gas Companies Over Methane Emissions — OPIS

The Biden administration on Friday released its proposal for determining how oil and natural gas companies will be fined for methane emissions, part of its ongoing effort to reduce release of the potent greenhouse gas.

The fees, which start at $900/metric ton this year and rise to $1,500/mt in 2026, were authorized under the 2022 Inflation Reduction Act, which left it to the administration to establish the mechanism for imposing the penalties.

The administration said the proposed rule would impose charges on companies whose emissions exceed specified levels.

The administration said the fines are intended to prod companies to replace leaky equipment and take other steps to reduce emissions ahead of new environmental rules that will go into effect in coming years to crack down on methane leaks.

The proposed rule and accompanying fines will "incentivize industry innovation and prompt action," EPA Administrator Michael Regan said in a news release. "We are laser-focused on working collectively with companies, states, and communities to ensure that America leads in deploying technologies and innovations that aid in the development of a clean energy economy."

Oil and natural gas operations are the largest industrial source of methane in the U.S., according to the EPA, and the administration has targeted the industry in an attempt to reduce leaks of the gas.

The White House in December issued a final rule banning routine flaring of natural gas that is produced by new oil wells, requiring monitoring of methane leaks from well sites and compressor stations and establishing standards that require reductions in emissions from high-emitting equipment.

The administration also said it is implementing a program to employ third-party remote sensing to detect large methane leaks known as "super emitters" that studies have shown account for almost half of methane emissions from the oil and natural gas sector.

Facilities in compliance with those rules would be exempt from the methane fines "after certain criteria set by Congress are met," the EPA said.

The agency said it expects the number of industry facilities facing the fine will fall over time as more companies comply with EPA rules. EPA also said it expects the new rule will have little impact on oil and gas output.

The administration in June said it would provide $1 billion to help reduce methane emissions from the sector, with the bulk of the money going toward cutting well emissions.

Environmental groups welcomed Friday's announcement. Environmental Defense Fund President Fred Krupp said it is "common sense to hold oil and gas companies accountable for this pollution."

"Proven solutions to cut oil and gas methane and to avoid the fee are being used by leading companies in states across the country," he said.

But the American Petroleum Institute, an oil industry trade group, said the rule "creates an incoherent, confusing regulatory regime that will only stifle innovation and undermine our ability to meet rising energy demand."

API called on Congress to repeal the methane fee.

"As the world looks to U.S. energy producers to provide stability in an increasingly unstable world, this punitive tax increase is a serious misstep that undermines America's energy advantage," Dustin Meyer, API senior vice president of Policy, Economics and Regulatory Affairs, said.

API said oil and gas companies are already working to reduce emissions and that its efforts have led to a nearly 66% decline in average methane emissions intensity from 2011 to 2021.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

--Reporting by Steve Cronin, scronin@opisnet.com; Editing by Jeff Barber, jbarber@opisnet.com

(END) Dow Jones Newswires

January 12, 2024 16:42 ET (21:42 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.