Congress Repeals Biden’s Natural Gas Tax
The House of Representatives and the Senate voted to overturn a Biden-era rule imposing progressively higher fees on oil and natural gas companies for excess methane emissions, advancing the bill to President Trump for his signature. The House vote was 220-206 and the Senate vote was 52-47. The measure was part of Biden’s climate law, the 2022 Inflation Reduction Act. However, because the Environmental Protection Agency (EPA) did not formally set rules until late last year, Congress could use the Congressional Review Act (CRA) to repeal it. The CRA allows Congress to pass a resolution to undo rules finalized towards the end of a president’s term. If those resolutions pass and the president signs them, the rule is terminated, and agencies cannot issue a similar rule again.
The methane fee was to start at $900 per metric ton of methane released above the government’s threshold amount in 2024 and to be paid this year, increasing to $1,200 per metric ton based on 2025 emissions, and $1,500 per metric ton based on 2026 emissions and for each year thereafter. The rule applies to oil and gas facilities reporting annual methane emissions greater than 25,000 metric tons of carbon dioxide equivalent. According to EPA projections, the fees could amount to $560 million in fines this year. Opponents believe the overall cost of complying with the regulation will likely be much higher.
According to the American Petroleum Institute, the fee is a “duplicative, punitive tax on American energy production that stifles innovation.” Fees incurred by the industry will be passed on to consumers, who will pay more for energy through this backdoor tax.
Besides the fee, the Biden administration’s EPA and Interior Department have other regulations affecting emissions of methane from oil and gas operations that will remain in place even if the methane fee is repealed. Biden’s Bureau of Land Management implemented a rule to cut gas leakage from oil and gas production on federal lands by tightening limits on gas flaring on federal land and requiring energy companies to detect methane leaks better. The rule imposes monthly limits on flaring and charges fees for flaring that exceeds those limits. Flaring sometimes occurs because of inadequate pipeline take-away capacity due to pipelines awaiting government permits.
Biden’s EPA implemented a methane reduction plan that includes emissions from existing oil and gas wells nationwide, rather than focusing only on new wells, as previous EPA regulations have done. It also regulates smaller wells, which emit less than 3 tons of methane per year, that are now required to find and plug methane leaks.
The methane fee is punitive as the oil and gas industry has already been making progress on reducing methane emissions. Between 2015 and 2022, the industry reduced methane emissions by 37% across onshore production regions, according to EPA data. One hundred companies representing nearly 70% of U.S. onshore oil and natural gas production participated in a partnership that achieved 6.6% in reduced flare intensity and a 10% reduction in total flare volumes in 2023. By implementing robust leak detection and repair programs, companies reduced their occurrence rate from a reported 0.16% in 2018 to 0.06% in 2023.
The industry would prefer to capture and sell its excess methane, but infrastructure limitations, such as insufficient pipeline capacity, often hinder them. This shortage is primarily due to the challenges of securing federal permits, which forces companies to flare the methane. If the necessary permits were granted and pipelines built, the issue could be resolved, potentially preventing any increase in consumer costs.
Other Measures to be Repealed by the CRA
There are roughly 40 resolutions targeting Biden-era rules that Congress hopes to rescind using the CRA. Rules finalized in August or later are subject to repeal using the CRA with a deadline to act by mid-May. These resolutions include a measure rolling back Energy Department efficiency standards for gas-fired tankless hot water heaters that recently passed the House of Representatives at a vote of 221 to 198 and a resolution rescinding an Interior Department rule requiring offshore oil and gas leaseholders to submit archaeological reports before production, which recently passed the Senate. The water heater ban would increase the cost of a water heater by about $400 to $800 and put thousands of Americans out of work since the heaters are made in the United States.
Other rules being targeted for repeal include regulations on electric vehicles. EPA Administrator Lee Zeldin has requested Congress use the CRA to reject Biden’s EPA’s approval of a California Clean Air Act rule that would encourage the use of more electric vehicles. Several other states follow California’s auto emission standards.
There are also plans to cut the Energy Conservation-Appliance Standards for certification and labeling, by which appliances must meet specific standards to receive a label informing consumers that they are energy-efficient. The standards slow the introduction of products to market, limit consumer options, and affect the supply chain. Companies can also advertise their products’ energy-saving benefits to consumers, if they choose to focus on that as part of their marketing.
Other climate-related rules being considered include the Oil and Gas and Sulfur Operations in the Outer Continental Shelf, which is a list of strict regulations on offshore oil drilling in high-pressure and temperature environments, which increase burdens on energy operations and raise costs for consumers. The Commodity Futures Trading Commission’s Guidance Regarding the Listing of Voluntary Carbon Credit Derivative Contracts that establishes standards to buy and sell carbon credits to offset emissions is also being considered as the rule prioritizes environmental, social, and governance (ESG) goals, which most American firms are abandoning as a passing fad inconsistent with their fiduciary responsibilities.
Conclusion
The House and Senate have passed a bill to eliminate the methane fee on oil and gas operations, which is contained in the Democrat-passed Inflation Reduction Act (IRA), using the Congressional Review Act. Although the IRA was passed in 2022, the Biden administration did not set the rule until the end of last year, allowing the CRA to be used. Congress is expected to use the CRA to rescind about 40 resolutions stemming from the Biden administration that were primarily part of his climate plan to transition the U.S. energy system to net-zero, raising consumer costs. The CRA is a valuable and expeditious way to reverse oftentimes expensive and injurious regulations foisted upon consumers at the very end of an administration leaving office, and Congress is putting it to good use.
*This article was adapted from content originally published by the Institute for Energy Research.
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