Biden Administration Launches Historic Methane Fee for Oil, Gas Drillers

The Biden administration is finalizing a new rule that will require oil and natural gas companies to pay a federal fee if they exceed certain levels of methane emissions.
The move, which the Environmental Protection Agency (EPA) will announce on Tuesday at the COP29 international climate conference in Azerbaijan, is aimed at reducing one of the most potent greenhouse gases.
It follows through on a directive from Congress included in the 2022 climate law, which is expected to be finalized by early next year after publication in the Federal Register.
Methane, a major component of natural gas, is known to be a powerful climate ‘super pollutant’ with a warming affect far stronger than carbon dioxide in the short term.
The oil and gas sector is the largest U.S. industrial source of methane emissions.
The fee, which could begin at $900 per ton in 2024 and rise to $1,500 per ton by 2026, is expected to face opposition from industry groups, which may challenge the rule in court, particularly any retroactive charges.
EPA Administrator Michael Regan said in a statement that the new fee, officially called the Waste Emissions Charge, would complement other recent EPA efforts to curb methane emissions.
He emphasized that it would encourage the adoption of emission-reducing technologies while supporting jobs and U.S. leadership on climate action.
The oil and gas industry, along with some Republican-led states, have already challenged the Biden administration’s previous methane rule in court.
The EPA has defended its authority to regulate methane emissions, stating that the rules are within its legal purview and necessary for public health.
According to the EPA, large oil and gas companies that already meet methane reduction targets are unlikely to be impacted by the fee.
The agency estimates the rule will cut methane emissions by 1.2 million metric tons by 2035—equivalent to removing nearly eight million gas-powered cars from the road for a year.
The cumulative climate benefits could reach up to $2 billion, the EPA added.
Despite industry opposition, environmental groups have praised the rule, arguing that the oil and gas sector should be held accountable for its contributions to global warming.
Methane is often flared or vented during oil extraction, which many companies find cheaper than making necessary upgrades to prevent leaks.
Over time, the EPA expects the number of companies subject to the fee to decrease while more adopt emission-reducing technologies.
This article contains additional reporting from The Associated Press