Biden Administration Finalizes Waste Emission Charge Rule

Details

On November 12, 2024, less than one week after the most recent presidential election which will likely result in substantial changes to energy policy in the United States, the United States Environmental Protection Agency (USEPA) announced that it had finalized its rules implementing the Waste Emissions Charge (WEC) which was part of the Inflation Reduction Act (IRA) passed by Congress in 2022. Congress included this requirement in the IRA to encourage the oil and gas industry to better capture methane emissions from its operations. Smaller oil and gas operators who operate typically smaller, conventional production oil and gas wells fear the fee will make their wells unprofitable and force them to close these wells at substantial cost.

The IRA established the charge on emitters of methane if emissions exceed specific performance levels and directed USEPA to collect the charge and implement other features of the program, including providing appropriate exemptions for actions that reduce methane releases. USEPA will now collect WEC from entities “wasting” methane by flaring or venting it into the atmosphere rather than capturing it.

USEPA claims that these emission charges will prevent 1.2 million metric tons of methane from entering the atmosphere by the year 2035. The rule applies to oil and gas facilities emitting more than 25,000 metric tons of carbon dioxide per year, as self-reported to the Greenhouse Gas Reporting Program. However, distribution facilities are generally exempt. In addition to creating the WEC, the IRA does provide funding to states and other groups to help monitor, measure, quantify, and reduce methane emissions from the oil and gas sector. Through the Methane Emissions Reduction Program, USEPA and the Department of Energy are expected to provide financial and technical assistance to promote the adoption of available and innovative technologies — including funds to mitigate emissions at low-producing conventional wells and other oil and gas infrastructure.

The WEC rule follows USEPA’s issuance of final standards regarding methane emissions from new and existing oil and gas operations adopted in March 2024. The Supreme Court of the United States recently denied requests by industry groups and energy producing states to stay the new rule while substantive challenges move forward. The WEC rule details how the charge will be implemented, including the calculation of the charge and how exemptions from the charge will be applied. The WEC starts at $900 per metric tons of emissions above thresholds for calendar year 2024 and then increases to $1,200 per metric tons for excess emissions in calendar year 2025 and $1,500 per metric tons for excess emissions in calendar year 2026 and beyond. One significant change between the proposal and the final rule is that the payment deadline was delayed from March 31 until August 31. Given the Labor Day holiday in 2025, the first reporting and payment deadline is September 2, 2025.

The fate of the WEC is in question given the substantial changes which are coming to Congress and the White House in January 2025, but because the WEC is mandated by the IRA, Congress will be required to pass legislation in order to repeal or amend the requirement for USEPA to develop the rules implementing the charge. In a joint press release following the issuance of the final rule, United States Senator Shelly Moore Capito (R-WV), Senator John Hoeven (R-ND) and Congressman August Pfluger (R-TX) slammed the actions taken by USEPA. Senator Capito stated, “I look forward to working with my colleagues and President Trump to repeal this misguided tax early in the next Congress.”