Inflation Reduction Act 2022: Sec. 60113 and Sec. 50263 on Methane Emissions Reductions
On 7 August 2022, the U.S. Senate approved the Inflation Reduction Act (IRA) of 2022, combining the twin objective of reducing the inflationary effects of the global energy crisis whilst tackling the climate change crisis.
Amongst the objectives set out in the energy sector, the Bill aims to lower energy costs and increase investments in climate to reduce carbon emissions by 40% by 2030. A total of 369 billion USD will be disbursed, dedicated to improving energy security and achieving climate change goals.
With regards to methane mitigation, the IRA includes a Methane Emissions Reduction Program (Sec. 60113) that introduces a charge on methane emitted by oil and gas companies who report emissions under the Clean Air Act. The charge applies to facilities that emit over 25,000 metric tons of carbon dioxide equivalent per year and exceed applicable waste emissions thresholds. It will start at USD 900 per metric ton of methane reported for calendar year 2024, increasing to USD 1 500 for 2026 and thereafter. The charge does not apply to wells permanently plugged in the previous year nor to emissions caused by an unreasonable delay in environmental permitting of transmission pipelines. The Program further provides USD 1 550 million for the Environmental Protection Agency to fund and provide technical assistance for methane abatement in the oil and gas sector (USD 700 million earmarked for activities at marginal conventional wells).
The IRA also introduces Royalties for Produced Methane on Federal Lands and Waters (Sec. 50263). Royalties will be assessed on all gas produced, including gas that is consumed or lost by venting, flaring or negligent releases during upstream operations. Exceptions include gas vented or flared for not longer than 48 hours in emergencies; gas used within the area of the lease; and gas that is unavoidably lost.
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