Inflation Reduction Act Methane Emissions Charge: In Brief

Inflation Reduction Act Methane Emissions
August August 429, 2022 , 2022
Charge: In Brief
Jonathan L. Ramseur
On On July 27, 2022, the Senate Majority Leader announced and released a draft proposal of the
Specialist in Environmental
Inflation Reduction Act (IRA; H.R. 5376), stating that legislative text would be included in the
Policy
budget reconciliation bill. Among other provisions, IRA would includeAugust 16, 2022, President Biden signed H.R. 5376 (P.L. 117-169), a budget reconciliation Specialist in Environmental measure commonly referred to as the “Inflation Reduction Act of 2022” (IRA). Among other Policy provisions, IRA includes a charge on methane a charge on methane

emissions that is nearly identical to the methane emissions that is nearly identical to the methane emissions charge in the House version of H.R. emissions charge in the House version of H.R.
5376, often referred to as the Build Back Better Act, which passed the House on November 19, 5376, often referred to as the Build Back Better Act, which passed the House on November 19,

2021. Methane (or 2021. Methane (or CH4CH 4) is the primary ) is the primary component of natural gas. When extracted from geologic component of natural gas. When extracted from geologic
formations or captured by other means, it can be used as either a fuel or as a feedstock for the chemical industry. formations or captured by other means, it can be used as either a fuel or as a feedstock for the chemical industry.
The emissions charge The emissions charge would applyapplies only to methane emissions from specific types of facilities that are required to report their only to methane emissions from specific types of facilities that are required to report their
greenhouse gas (GHG) emissions to the Environmental Protection Agency’s (EPA’s) Greenhouse Gas Emissions Reporting greenhouse gas (GHG) emissions to the Environmental Protection Agency’s (EPA’s) Greenhouse Gas Emissions Reporting
Program (GHGRP). The charge Program (GHGRP). The charge would startstarts at $900 per metric ton of methane, increasing to $1,500 after two years. at $900 per metric ton of methane, increasing to $1,500 after two years. If
enacted, this would beThis emissions charge is the first time the federal government the first time the federal government wouldhas directly directly imposeimposed a charge, fee, or tax on GHG emissions. a charge, fee, or tax on GHG emissions.
Since its inclusion in the House-passed H.R. 5376, the methane charge proposal has received considerable attention from Since its inclusion in the House-passed H.R. 5376, the methane charge proposal has received considerable attention from
Members and a range of stakeholders. For example, some groups have raised concerns about economic impacts resulting Members and a range of stakeholders. For example, some groups have raised concerns about economic impacts resulting
from the methane charge, including impacts on natural gas prices. Some policymakers are concerned about the charge in the from the methane charge, including impacts on natural gas prices. Some policymakers are concerned about the charge in the
context of EPA’s proposed regulations to address methane emissions from the same categories of new and existing facilities context of EPA’s proposed regulations to address methane emissions from the same categories of new and existing facilities
that that would beare subject to the methane charge. subject to the methane charge.
A range of factors could play a role in determining the scope of emissions subject to the methane charge and its ultimate A range of factors could play a role in determining the scope of emissions subject to the methane charge and its ultimate
impacts on GHG emission levels and economic measures, such as natural gas prices. Selected factors include the following: impacts on GHG emission levels and economic measures, such as natural gas prices. Selected factors include the following:
  EPA Regulations of Petroleum and Natural Gas Systems. On November 15, 2021, EPA proposed On November 15, 2021, EPA proposed
regulations to address methane emissions from the same categories of new and existing facilities that regulations to address methane emissions from the same categories of new and existing facilities that would
be are subject to the methane charge. The degree to which the regulations subject to the methane charge. The degree to which the regulations wouldwill affect the methane emissions affect the methane emissions
charge charge would dependdepends on the scope and applicability of the final regulations. In particular, IRA on the scope and applicability of the final regulations. In particular, IRA would allow
allows for an exemption from the emissions charge if EPA regulations addressing methane emissions (1) are in for an exemption from the emissions charge if EPA regulations addressing methane emissions (1) are in
effect in all states, and (2) effect in all states, and (2) wouldwill “result in equivalent or greater emissions reductions as would be “result in equivalent or greater emissions reductions as would be
achieved” by the November 2021 proposed rule. IRA achieved” by the November 2021 proposed rule. IRA would directdirects EPA to determine whether future EPA to determine whether future
methane regulations methane regulations would meet these conditions. meet these conditions.
  Changes to Equipment or Operations. A charge on methane emissions from petroleum and natural gas A charge on methane emissions from petroleum and natural gas
systems systems would provideprovides an economic incentive for facilities to modify their equipment and operations in an economic incentive for facilities to modify their equipment and operations in
order to avoid paying the charge. The degree to which facilities make such changes order to avoid paying the charge. The degree to which facilities make such changes wouldwill likely be based likely be based
on site-specific economic conditions. on site-specific economic conditions.
  Funding for Technological Improvements. IRA IRA would includeincludes supplemental appropriations of $850 supplemental appropriations of $850
million to million to EPA to provide grants to facilities subject to the methane charge for a range of objectives, EPA to provide grants to facilities subject to the methane charge for a range of objectives,
including “improving and deploying industrial equipment and processes” that reduce methane emission. including “improving and deploying industrial equipment and processes” that reduce methane emission.
The act also includes supplemental appropriations of $700 million for “marginal conventional wells” for The act also includes supplemental appropriations of $700 million for “marginal conventional wells” for
the same purposes. These funds could lead to methane reductions at oil and natural gas facilities, thus the same purposes. These funds could lead to methane reductions at oil and natural gas facilities, thus
affecting the impact of the charge. affecting the impact of the charge.
  Other IRA Climate and Energy Provisions. IRA includes a range of climate and energy-related IRA includes a range of climate and energy-related
provisions that provisions that wouldwill likely affect the portfolio of fuels and sources of energy that are used in various likely affect the portfolio of fuels and sources of energy that are used in various
economic sectors: electricity, transportation, and industry. economic sectors: electricity, transportation, and industry.
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Contents
Introduction ..................................................................................................................................... 1
U.S. Methane Emissions and Sources ............................................................................................. 2
Inflation Reduction Act Methane Emissions Charge....................................................................... 3
Scope and Applicability ............................................................................................................ 3
Rate of Charge ........................................................................................................................... 9
Potential Exemption from Charge ........................................................................................... 10
Selected Factors Affecting the Scope and Impact of the Methane Charge .................................... 10

Figures
Figure 1. U.S. Total GHG Emissions by Gas and Sources of Methane Emissions ......................... 3
Figure 2. Petroleum and Gas Entities Subject to EPA’s GHG Emission Reporting
Program ........................................................................................................................................ 5

Tables
Table 1. Number of Reporting Facilities and Methane Emissions from Petroleum and
Natural Gas System Categories Subject to the IRA Methane Charge .......................................... 6
Table 2. EPA GHG Emission Inventory Estimates of Methane Emissions from Petroleum
and Natural Gas and Systems (2019) ........................................................................................... 7
Table 3. Estimate of Methane Emissions Subject to Charge After Applying Emissions
Thresholds (Based on 2019 Data) ................................................................................................ 8
Table 4. Estimate of Methane Emissions Subject to the Charge Based on CBO’s August
2022 Cost Estimate Analysis of the Inflation Reduction Act ....................................................... 9
Table 5. Methane Charge Rates ..................................................................................................... 10

Contacts
Author Information ......................................................................................................................... 11

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Inflation Reduction Act Methane Emissions Charge: In Brief

Introduction
On On July 27, 2022, the Senate Majority Leader announced and released a draft proposal of the
Inflation Reduction Act (IRA; H.R. 5376), stating that legislative text would be included in the
budget reconciliation bill.1August 16, 2022, President Biden signed H.R. 5376 (P.L. 117-169), a budget reconciliation measure commonly referred to as the “Inflation Reduction Act of 2022” (IRA). Among other provisions, IRA Among other provisions, IRA would includeincludes a charge on methane a charge on methane
emissions from selected entities in the oil and gas industry. This emissions charge is nearly emissions from selected entities in the oil and gas industry. This emissions charge is nearly
identical to the methane emissions identical to the methane emissions charge2charge1 in the House version of H.R. 5376, often referred to as in the House version of H.R. 5376, often referred to as
the Build Back Better Act, which passed the House on November 19, 2021. the Build Back Better Act, which passed the House on November 19, 2021.
The methane emissions charge The methane emissions charge would applyapplies only to methane emissions from specific types of only to methane emissions from specific types of
facilities that are required to report their greenhouse gas (GHG) emissions to the Environmental facilities that are required to report their greenhouse gas (GHG) emissions to the Environmental
Protection Agency’s (EPA’s) Greenhouse Gas Emissions Reporting Program (GHGRP). The Protection Agency’s (EPA’s) Greenhouse Gas Emissions Reporting Program (GHGRP). The
charge charge would startstarts at $900 per metric ton of methane, increasing to $1,500 after two years, which at $900 per metric ton of methane, increasing to $1,500 after two years, which
equates to $36 and $60 per metric ton of carbon dioxide equivalent, respectively. equates to $36 and $60 per metric ton of carbon dioxide equivalent, respectively. If enacted, this
charge would beThis charge is the first time the federal government the first time the federal government wouldhas directly directly imposeimposed a charge, fee, or tax a charge, fee, or tax
on GHG emissions.on GHG emissions.32
Since its inclusion in the House-passed H.R. 5376, the methane charge has received considerable Since its inclusion in the House-passed H.R. 5376, the methane charge has received considerable
attention from Members and a range of stakeholders.attention from Members and a range of stakeholders.43 For example, some groups have raised For example, some groups have raised
concerns about economic impacts resulting from the methane charge, including impacts on concerns about economic impacts resulting from the methane charge, including impacts on
natural gas prices.natural gas prices.54 Some policymakers are concerned about the charge in the context of EPA’s Some policymakers are concerned about the charge in the context of EPA’s
proposed regulations to address methane emissions from the same categories of new and existing proposed regulations to address methane emissions from the same categories of new and existing
facilities that facilities that would beare subject to the methane charge. subject to the methane charge.6

1 As of the date of this report, the IRA text is not available on Congress.gov. The IRA text examined in this report
comes from the Senate Democratic Leadership website. See Senate Democratic Leadership, “Joint Statement From
Leader Schumer And Senator Manchin Announcing Agreement To Add The Inflation Reduction Act Of 2022 To The
FY2022 Budget Reconciliation Bill And Vote In Senate Next Week,” press release, July 27, 2022,
https://www.democrats.senate.gov/newsroom/press-releases/senate-majority-leader-chuck-schumer-d-ny-and-sen-joe-
manchin-d-wv-on-wednesday-announced-that-they-have-struck-a-long-awaited-deal-on-legislation-that-aims-to-
reform-the-tax-code-fight-climate-change-and-cut-health-care-costs.
25 This report discusses the scope and applicability of the IRA methane charge. The first section of this report provides background about methane emissions in the United States. The second section discusses the scope and applicability of the methane charge and its rate structure. The last section includes selected factors that may play a role in affecting the scope of the charge and its potential impacts. 1 In earlier versions of the bill, this methane charge was called a methane “fee.” In earlier versions of the bill, this methane charge was called a methane “fee.”
32 For almost 20 years, some Members have put forth various legislative proposals that would attach a price to GHG For almost 20 years, some Members have put forth various legislative proposals that would attach a price to GHG
emissions through carbon taxes, emission fees, or cap-and-trade programs. For more information, see CRS Report emissions through carbon taxes, emission fees, or cap-and-trade programs. For more information, see CRS Report
R45472, R45472, Market-Based Greenhouse Gas Emission Reduction Legislation: 108th Through 117th Congresses, by , by
Jonathan L. Ramseur. Jonathan L. Ramseur.
43 According to some analyses, the methane charge According to some analyses, the methane charge would accountaccounts for a considerable percentage of the estimated GHG for a considerable percentage of the estimated GHG
reductions that could be achieved by the Build Back Better Act. See, for example, Megan Mahajan and Robbie Orvis, reductions that could be achieved by the Build Back Better Act. See, for example, Megan Mahajan and Robbie Orvis,
Modeling the Infrastructure Bills Using the Energy Policy Simulator, Energy Innovation: Policy and Technology LLC, , Energy Innovation: Policy and Technology LLC,
October 2021, https://energyinnovation.org/publication/modeling-the-infrastructure-bills-using-the-energy-policy-October 2021, https://energyinnovation.org/publication/modeling-the-infrastructure-bills-using-the-energy-policy-
simulator/; Jeffrey Rissman, “Benefits of the Build Back Better Act’s Methane Fee,” Energy Innovation: Policy and simulator/; Jeffrey Rissman, “Benefits of the Build Back Better Act’s Methane Fee,” Energy Innovation: Policy and
Technology LLC, October 2021, https://energyinnovation.org/wp-content/uploads/2021/10/Benefits-of-the-Build-Technology LLC, October 2021, https://energyinnovation.org/wp-content/uploads/2021/10/Benefits-of-the-Build-
Back-Better-Act-Methane-Fee.pdf; Princeton University, Rapid Energy Policy Evaluation and Analysis Toolkit Back-Better-Act-Methane-Fee.pdf; Princeton University, Rapid Energy Policy Evaluation and Analysis Toolkit
(REPEAT), “Addendum to Preliminary Report: The Climate Impact of Congressional Infrastructure and Budget Bills,” (REPEAT), “Addendum to Preliminary Report: The Climate Impact of Congressional Infrastructure and Budget Bills,”
November 2021, https://repeatproject.org/. November 2021, https://repeatproject.org/.
54 See, for example, American Gas Association et al., Letter to Congressional Leaders, September 2021, See, for example, American Gas Association et al., Letter to Congressional Leaders, September 2021,
https://www.aga.org/globalassets/letter-to-congress-on-methane-fees-090721_final.pdf; Eweline Czapla, “Methane https://www.aga.org/globalassets/letter-to-congress-on-methane-fees-090721_final.pdf; Eweline Czapla, “Methane
Fees for Petroleum and Natural Gas Systems,” American Action Forum, November 2021, Fees for Petroleum and Natural Gas Systems,” American Action Forum, November 2021,
https://www.americanactionforum.org/insight/methane-fees-for-petroleum-and-natural-gas-systems/; Americans for https://www.americanactionforum.org/insight/methane-fees-for-petroleum-and-natural-gas-systems/; Americans for
Tax Reform, “Dem Reconciliation Bill Contains $8 Billion Home Heating Tax,” November 2021, https://www.atr.org/Tax Reform, “Dem Reconciliation Bill Contains $8 Billion Home Heating Tax,” November 2021, https://www.atr.org/
dem-reconciliation-bill-contains-8-billion-home-heating-tax. dem-reconciliation-bill-contains-8-billion-home-heating-tax.
65 EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for
Existing Sources: Oil and Natural Gas Sector Climate Review,” 86Existing Sources: Oil and Natural Gas Sector Climate Review,” 86 Federal Register 63110, November 15, 2021. For 63110, November 15, 2021. For
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This report discusses the scope and applicability of the IRA methane charge. The first section of
this report provides background about methane emissions in the United States. The second
section discusses the scope and applicability of the methane charge and its rate structure. The last
section includes selected factors that may play a role in affecting the scope of the charge and its
potential impacts.more background on these issues, see CRS Report R42986, Methane and Other Air Pollution Issues in Natural Gas Systems, by Richard K. Lattanzio. Congressional Research Service 1 link to page 6 Inflation Reduction Act Methane Emissions Charge: In Brief
U.S. Methane Emissions and Sources
Methane (or CH4) is the primary component of natural gas, which can be used as either a fuel or Methane (or CH4) is the primary component of natural gas, which can be used as either a fuel or
as a feedstock for the chemical industry.as a feedstock for the chemical industry.76 Natural gas is generally produced from geologic Natural gas is generally produced from geologic
formations in the ground through drilling and extraction activities by the oil and gas industry. As formations in the ground through drilling and extraction activities by the oil and gas industry. As
natural gas travels through the interconnected systems of exploration, production, processing, natural gas travels through the interconnected systems of exploration, production, processing,
storage (sometimes), and transmission, that deliver natural gas from the wellhead to the storage (sometimes), and transmission, that deliver natural gas from the wellhead to the
consumer, methane emissions are released into the atmosphere in a variety of ways, including consumer, methane emissions are released into the atmosphere in a variety of ways, including
 intentional venting from equipment (e.g., pneumatic devices);  intentional venting from equipment (e.g., pneumatic devices);87
 unintentional equipment leaks, worker error, or malfunctions;  unintentional equipment leaks, worker error, or malfunctions;
 routine maintenance of equipment; and  routine maintenance of equipment; and
 flaring (burning) of excess natural gas at a petroleum production site, which can  flaring (burning) of excess natural gas at a petroleum production site, which can
result in both uncombusted methane and carbon dioxide (CO2) emissions. result in both uncombusted methane and carbon dioxide (CO2) emissions.
Methane is a potent GHG. When averaged over a 100-year time period—the time period often Methane is a potent GHG. When averaged over a 100-year time period—the time period often
used in annual GHG inventories—methane’s global warming potential (GWP) is 25 times greater used in annual GHG inventories—methane’s global warming potential (GWP) is 25 times greater
than that of an equivalent mass of CO2.than that of an equivalent mass of CO2.98 Over a 20-year time period, methane’s GWP is 72 times Over a 20-year time period, methane’s GWP is 72 times
greater than that of CO2.greater than that of CO2.109 Due to methane’s shorter-term climate impacts, scientists contend that Due to methane’s shorter-term climate impacts, scientists contend that
“methane mitigation [is] one of the best opportunities for reducing near term [global] warming.”“methane mitigation [is] one of the best opportunities for reducing near term [global] warming.”1110
As illustrated i As illustrated in Figure 1, methane emissions in the United States accounted for 10% of total methane emissions in the United States accounted for 10% of total
GHG emissions in 2019 (the most recent year of comprehensive GHG data).GHG emissions in 2019 (the most recent year of comprehensive GHG data).12 The figure

more background on these issues, see CRS Report R42986, Methane and Other Air Pollution Issues in Natural Gas
Systems, by Richard K. Lattanzio.
711 The figure identifies the range of sources that produced these methane emissions. Methane emissions from enteric fermentation (e.g., in livestock)12 accounted for the largest amount, followed by emissions from natural gas systems. If EPA’s estimates of methane emissions from natural gas and 6 For more information, see CRS In Focus IF10752, For more information, see CRS In Focus IF10752, Methane Emissions: A Primer, by Richard K. Lattanzio. , by Richard K. Lattanzio.
87 Methane emissions from pneumatic devices have been one of the largest sources of vented methane emissions from Methane emissions from pneumatic devices have been one of the largest sources of vented methane emissions from
the industry. See EPA, the industry. See EPA, Options For Reducing Methane Emissions From Pneumatic Devices In The Natural Gas
Industry, 2006, https://www.epa.gov/sites/default/files/2016-06/documents/ll_pneumatics.pdf. , 2006, https://www.epa.gov/sites/default/files/2016-06/documents/ll_pneumatics.pdf.
98 Global warming potential (GWP) is an index that allows comparisons of the heat-trapping ability of different gases Global warming potential (GWP) is an index that allows comparisons of the heat-trapping ability of different gases
over a period of time, typically 100 years. Consistent with international GHG reporting protocols, EPA’s most recent over a period of time, typically 100 years. Consistent with international GHG reporting protocols, EPA’s most recent
GHG inventory (April GHG inventory (April 20212022) uses the GWP values presented in the Intergovernmental Panel on Climate Change ) uses the GWP values presented in the Intergovernmental Panel on Climate Change
(IPCC) 2007 (IPCC) 2007 Fourth Assessment Report. In . In this report and EPA’s inventoriesEPA’s inventories and in this report, a metric ton of methane equates to 25 , a metric ton of methane equates to 25
metric tons of CO2 when averaged over a 100-year time frame. The IPCC has since updated the 100-year GWP metric tons of CO2 when averaged over a 100-year time frame. The IPCC has since updated the 100-year GWP
estimates, with some increasing and some decreasing. For example, the IPCC 2013 estimates, with some increasing and some decreasing. For example, the IPCC 2013 Fifth Assessment Report reported reported
the 100-year GWP for methane as ranging from 28 to 36.the 100-year GWP for methane as ranging from 28 to 36.
10 Pursuant to the United Nations Framework Convention on Climate Change, the United States and other countries will be required to use the 2013 GWP values for GHGs beginning with their 2024 emission inventories. 9 EPA, EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019, 2021, Annex 6, Table A-238, , 2021, Annex 6, Table A-238,
https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2019. https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2019.
1110 EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for
Existing Sources: Oil and Natural Gas Sector Climate Review,” 86Existing Sources: Oil and Natural Gas Sector Climate Review,” 86 Federal Register 63110, November 15, 2021. To 63110, November 15, 2021. To
support this argument, EPA cites statements from the Intergovernmental Panel on Climate Change (IPCC), support this argument, EPA cites statements from the Intergovernmental Panel on Climate Change (IPCC), Sixth
Assessment Report, 2021, https://www.ipcc.ch/report/ar6/wg1/#SPM. 2021, https://www.ipcc.ch/report/ar6/wg1/#SPM.
1211 EPA, EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019, 2021, Table ES-2, https://www.epa.gov/, 2021, Table ES-2, https://www.epa.gov/
ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2019. ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2019.
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Inflation Reduction Act Methane Emissions Charge: In Brief

identifies the range of sources that produced these methane emissions. Methane emissions from
enteric fermentation (e.g., in livestock)13 accounted for the largest amount, followed by emissions
from natural gas systems. If EPA’s estimates of methane emissions from natural gas and
12 Enteric fermentation refers to the normal digestive process in ruminant animals, such as cattle, during metabolism and digestion, resulting in methane emissions. For more information, see CRS In Focus IF11404, Greenhouse Gas Emissions and Sinks in U.S. Agriculture, by Genevieve K. Croft. Congressional Research Service 2 Inflation Reduction Act Methane Emissions Charge: In Brief petroleum systems were grouped together, they would account for the largest source of methane petroleum systems were grouped together, they would account for the largest source of methane
emissions, approximately 3% of total U.S. GHG emissions in EPA’s inventory. emissions, approximately 3% of total U.S. GHG emissions in EPA’s inventory.
Figure 1. U.S. Total GHG Emissions by Gas and Sources of Methane Emissions
2019 Emission Estimates from EPA Inventory 2019 Emission Estimates from EPA Inventory

Source: Prepared by CRS; emissions data from EPA, Prepared by CRS; emissions data from EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–
2019, 2021, Table ES-2, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-, 2021, Table ES-2, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-
1990-2019. 1990-2019.
EPA produces the GHG emissions estimates in its annual inventories using commonly accepted EPA produces the GHG emissions estimates in its annual inventories using commonly accepted
emission factors and activity levels to calculate aggregate estimates for all source categories. In emission factors and activity levels to calculate aggregate estimates for all source categories. In
recent years, the emission estimates for the natural gas and petroleum system categories have recent years, the emission estimates for the natural gas and petroleum system categories have
received scrutiny from a range of stakeholders. Some have put forth competing—and sometimes received scrutiny from a range of stakeholders. Some have put forth competing—and sometimes
conflicting—estimates.conflicting—estimates.1413
Inflation Reduction Act Methane Emissions Charge
Scope and Applicability
The IRA methane charge The IRA methane charge would applyapplies to methane emissions from specific types of facilities in to methane emissions from specific types of facilities in
the petroleum and natural gas industry that, under current regulations, are required to report their the petroleum and natural gas industry that, under current regulations, are required to report their
GHG emissions, including methane, to EPA’s GHGRP. Since 2011, EPA’s GHGRP has collected GHG emissions, including methane, to EPA’s GHGRP. Since 2011, EPA’s GHGRP has collected
annual emissions data from nearly 8,000 large industrial facilities and other sources in the United annual emissions data from nearly 8,000 large industrial facilities and other sources in the United

13 Enteric fermentation refers to the normal digestive process in ruminant animals, such as cattle, during metabolism
and digestion, resulting in methane emissions. For more information, see CRS In Focus IF11404, Greenhouse Gas
Emissions and Sinks in U.S. Agriculture, by Genevieve K. Croft.
14States.14 The GHGRP requirements are codified in 40 C.F.R. Part 98. Subpart W includes the detailed requirements for petroleum and natural gas facilities. 13 See, for example, Jeffrey S. Rutherford et al., “Closing the Methane Gap in US Oil and Natural Gas Production See, for example, Jeffrey S. Rutherford et al., “Closing the Methane Gap in US Oil and Natural Gas Production
Emissions Inventories,” Emissions Inventories,” Nature Communications, 2021; and Ramon Alvarez et al., “Assessment of Methane Emissions , 2021; and Ramon Alvarez et al., “Assessment of Methane Emissions
from the U.S. Oil and Gas Supply Chain,” from the U.S. Oil and Gas Supply Chain,” Science, June 2018. For more discussion, see CRS Report R42986, , June 2018. For more discussion, see CRS Report R42986, Methane
and Other Air Pollution Issues in Natural Gas Systems, by Richard K. Lattanzio. , by Richard K. Lattanzio.
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States.15 The GHGRP requirements are codified in 40 C.F.R. Part 98. Subpart W includes the
detailed requirements for petroleum and natural gas facilities.
The IRA methane charge would apply14 For more information about the GHGRP, see CRS In Focus IF11754, EPA’s Greenhouse Gas Reporting Program, by Angela C. Jones. Congressional Research Service 3 link to page 8 Inflation Reduction Act Methane Emissions Charge: In Brief The IRA methane charge applies only to a subset of the petroleum and natural gas system only to a subset of the petroleum and natural gas system
facilities that are required to report GHG emissions in Part 98, Subpart W. The facilities facilities that are required to report GHG emissions in Part 98, Subpart W. The facilities that
would be subject to the charge include the following industry operations: subject to the charge include the following industry operations:
 offshore petroleum and natural gas production;  offshore petroleum and natural gas production;
 onshore petroleum and natural gas production;  onshore petroleum and natural gas production;
 onshore natural gas processing;  onshore natural gas processing;
 onshore natural gas transmission compression;  onshore natural gas transmission compression;
 underground natural gas storage;  underground natural gas storage;
 liquefied natural gas storage;  liquefied natural gas storage;
 liquefied natural gas import and export equipment;  liquefied natural gas import and export equipment;
 onshore petroleum and natural gas gathering and boosting; onshore petroleum and natural gas gathering and boosting;1615 and and
 onshore natural gas transmission pipelines.  onshore natural gas transmission pipelines.
Figure 2 illustrates the petroleum and natural gas system entities that are required to report their illustrates the petroleum and natural gas system entities that are required to report their
GHG emissions in EPA’s GHGRP. The entities with red labels are subject to Subpart W reporting GHG emissions in EPA’s GHGRP. The entities with red labels are subject to Subpart W reporting
requirements. Not all of the entities that report emissions under Subpart W are subject to the requirements. Not all of the entities that report emissions under Subpart W are subject to the
methane charge. Two facility categories that report emissions under Subpart W methane charge. Two facility categories that report emissions under Subpart W wouldare not not be
subject to the methane charge: (1) natural gas distribution facilities and (2) facilities EPA subject to the methane charge: (1) natural gas distribution facilities and (2) facilities EPA
describes as “other oil and gas combustion facilities.”describes as “other oil and gas combustion facilities.”1716

15 15 For more information about the GHGRP, see CRS In Focus IF11754, EPA’s Greenhouse Gas Reporting Program,
by Angela C. Jones.
16 According to EPA, “gathering and boosting stations receive natural gas from production sites and transfer it, via According to EPA, “gathering and boosting stations receive natural gas from production sites and transfer it, via
gathering pipelines, to transmission pipelines or processing facilities…. Boosting processes include compression, gathering pipelines, to transmission pipelines or processing facilities…. Boosting processes include compression,
dehydration, and transport of gas to a processing facility or pipeline.” EPA, Inventory of U.S. Greenhouse Gas dehydration, and transport of gas to a processing facility or pipeline.” EPA, Inventory of U.S. Greenhouse Gas
Emissions and Sinks: 1990–2019, p. 3-90, 2021. Emissions and Sinks: 1990–2019, p. 3-90, 2021.
1716 EPA states these are “stationary fuel combustion emissions from facilities that are associated with the petroleum and EPA states these are “stationary fuel combustion emissions from facilities that are associated with the petroleum and
natural gas industry, but that do not report process emissions from any of the above source categories.” EPA,natural gas industry, but that do not report process emissions from any of the above source categories.” EPA, 2011-
2020 Greenhouse Gas Reporting Program Sector Profile: Petroleum and Natural Gas Systems, 2020, , 2020,
https://www.epa.gov/ghgreporting/ghgrp-petroleum-and-natural-gas-systems-sector-profile. https://www.epa.gov/ghgreporting/ghgrp-petroleum-and-natural-gas-systems-sector-profile.
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Figure 2. Petroleum and Gas Entities
Subject to EPA’s GHG Emission Reporting Program

Source: Reproduced from EPA, “GHGRP and the Oil and Gas Industry,” https://www.epa.gov/ghgreporting/Reproduced from EPA, “GHGRP and the Oil and Gas Industry,” https://www.epa.gov/ghgreporting/
ghgrp-and-oil-and-gas-industry. ghgrp-and-oil-and-gas-industry.
Note: RY refers to reporting year for EPA’s GHGRP. RY refers to reporting year for EPA’s GHGRP.
The reporting requirements in Subpart W apply to facilities that emit 25,000 metric tons of CO2 The reporting requirements in Subpart W apply to facilities that emit 25,000 metric tons of CO2
equivalent (mtCO2e) or more per year.equivalent (mtCO2e) or more per year.1817 The House-passed Build Back Better Act would The House-passed Build Back Better Act would direct
have directed EPA to revise that threshold (within two years) to 10,000 mtCO2e. This change would EPA to revise that threshold (within two years) to 10,000 mtCO2e. This change would increase
have increased the number of facilities subject to EPA’s reporting requirements. The methane emissions charge the number of facilities subject to EPA’s reporting requirements. The methane emissions charge
in IRA in IRA would only applyonly applies to facilities that emit 25,000 to facilities that emit 25,000 metric tons of CO2 equivalent (mtCO2e)mtCO2e or or
more per year, regardless of more per year, regardless of any subsequent changes to the scope of EPA’s reporting requirements. subsequent changes to the scope of EPA’s reporting requirements.

1817 Typically, GHG emissions are measured in mtCO2e because GHGs vary by global warming potential. Typically, GHG emissions are measured in mtCO2e because GHGs vary by global warming potential.
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Table 1 identifies the number of petroleum and natural gas facilities by category that reported identifies the number of petroleum and natural gas facilities by category that reported
their GHG emissions to EPA in 2019 pursuant to the regulations in 40 C.F.R. Part 98, Subpart their GHG emissions to EPA in 2019 pursuant to the regulations in 40 C.F.R. Part 98, Subpart
W.W.1918 The table also indicates the total methane emissions for each facility category. In 2019, The table also indicates the total methane emissions for each facility category. In 2019,
reported methane emissions from facilities that reported methane emissions from facilities that would beare subject to the methane charge totaled 78 subject to the methane charge totaled 78
million mtCO2e (MMTCO2e). In 2019, onshore production (44.2 MMTCO2e) and onshore million mtCO2e (MMTCO2e). In 2019, onshore production (44.2 MMTCO2e) and onshore
gathering and boosting (21.9 MMTCO2e) accounted for 84% of these reported emissions. gathering and boosting (21.9 MMTCO2e) accounted for 84% of these reported emissions.
As discussed above, natural gas distribution facilities, which report emissions under Subpart W, As discussed above, natural gas distribution facilities, which report emissions under Subpart W,
wouldare not not be subject to the charge. According to EPA reporting data, 162 natural gas distribution subject to the charge. According to EPA reporting data, 162 natural gas distribution
facilities emitted approximately 13 MMTCO2e of methane in 2019.facilities emitted approximately 13 MMTCO2e of methane in 2019.2019 As indicated i As indicated in Table 1, if f
these facilities were subject to the charge, this group would rank third in methane emissions.these facilities were subject to the charge, this group would rank third in methane emissions.2120
Table 1. Number of Reporting Facilities and Methane Emissions from Petroleum and
Natural Gas System Categories Subject to the IRA Methane Charge
Data for 2019; emissions in million metric tons of CO2 equivalent (MMTCO2e) Data for 2019; emissions in million metric tons of CO2 equivalent (MMTCO2e)
Reported Methane
Number of Reporting
Emissions
Facility Type
Facilities
(MMTCO2e)
Onshore petroleum and natural gas production Onshore petroleum and natural gas production
485 485
44.2 44.2
Onshore petroleum and natural gas gathering and boosting Onshore petroleum and natural gas gathering and boosting
361 361
21.9 21.9
Onshore natural gas transmission compression Onshore natural gas transmission compression
624 624
4.2 4.2
Onshore natural gas transmission pipeline Onshore natural gas transmission pipeline
39 39
2.9 2.9
Natural gas processing Natural gas processing
457 457
2.9 2.9
Offshore petroleum and natural gas production Offshore petroleum and natural gas production
141 141
1.5 1.5
Underground natural gas storage Underground natural gas storage
50 50
0.6 0.6
Liquefied natural gas import and export equipment Liquefied natural gas import and export equipment
10 10
0.1 0.1
Liquefied natural gas storage Liquefied natural gas storage
5 5
0.001 0.001
Total
2,172
78.3
Source: Prepared by CRS; data from EPA Greenhouse Gas Reporting Program, Facility Level Information on Prepared by CRS; data from EPA Greenhouse Gas Reporting Program, Facility Level Information on
Greenhouse Gases Tool (FLIGHT), https://ghgdata.epa.gov. Greenhouse Gases Tool (FLIGHT), https://ghgdata.epa.gov.
Notes: The methane charge applies to facilities required to report under 40 C.F.R. Part 98, Subpart W. The The methane charge applies to facilities required to report under 40 C.F.R. Part 98, Subpart W. The
reporting requirements apply to facilities that emit 25,000 metric tons of CO2 equivalent (mtCO2e) or more per reporting requirements apply to facilities that emit 25,000 metric tons of CO2 equivalent (mtCO2e) or more per
year. Typically, GHG emissions are measured in mtCO2e because GHGs vary by global warming potential year. Typically, GHG emissions are measured in mtCO2e because GHGs vary by global warming potential
(GWP). GWP is an index that allows comparisons of the heat-trapping ability of different gases over a period of (GWP). GWP is an index that allows comparisons of the heat-trapping ability of different gases over a period of
time, typically 100 years. time, typically 100 years. H.R. 5376 would direct EPA (not later than two years after enactment) to issue a
rulemaking to lower the reporting threshold to 10,000 mtCO2e. This change would increase the number of
facilities subject to EPA’s reporting requirements and thus the number subject to the methane charge in H.R.
5376. A number of other facilities reported methane emissions (and other GHG emissions) under Subpart WA number of other facilities reported methane emissions (and other GHG emissions) under Subpart W during these years, but these facilities are not subject to the methane charge. These include 162 natural gas distribution facilities, which reported 13 MMTCO2e of methane in 2019.

1918 Although reported emissions are available for 2020, the 2019 emissions data arguably provide a more useful Although reported emissions are available for 2020, the 2019 emissions data arguably provide a more useful
indication of the magnitude of emissions than 2020 data due to impacts associated with the Coronavirus Disease 2019 indication of the magnitude of emissions than 2020 data due to impacts associated with the Coronavirus Disease 2019
(COVID-19) pandemic. In 2020, the reported emissions comparable to those in(COVID-19) pandemic. In 2020, the reported emissions comparable to those in Table 1 were 69.4 MMTCO2e, 11% were 69.4 MMTCO2e, 11%
lower than those in 2019. lower than those in 2019.
2019 EPA Greenhouse Gas Reporting Program, Facility Level Information on Greenhouse Gases Tool (FLIGHT), EPA Greenhouse Gas Reporting Program, Facility Level Information on Greenhouse Gases Tool (FLIGHT),
https://ghgdata.epa.gov. https://ghgdata.epa.gov.
2120 In addition, the methane fee In addition, the methane fee woulddoes not apply to emissions from facilities EPA describes as “other oil and gas not apply to emissions from facilities EPA describes as “other oil and gas
combustion facilities.” In 2019, 55 such facilities reported approximately 5,000 mtCO2e of methane. combustion facilities.” In 2019, 55 such facilities reported approximately 5,000 mtCO2e of methane.
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during these years, but these facilities would not be subject to the methane charge. These include 163 natural gas
distribution facilities: 162 facilities emitted 13 MMTCO2e of methane in 2019.
EPA’s GHGRP covers a subset of U.S. methane emissions from petroleum and natural gas EPA’s GHGRP covers a subset of U.S. methane emissions from petroleum and natural gas
systems. It is uncertain what percentage of total emissions from this sector the reporting program systems. It is uncertain what percentage of total emissions from this sector the reporting program
covers. When EPA issued its final rule promulgating the Subpart W reporting regulations in covers. When EPA issued its final rule promulgating the Subpart W reporting regulations in
2010,2010,2221 the agency estimated that the 25,000 mtCO2e reporting threshold would cover 85% of the the agency estimated that the 25,000 mtCO2e reporting threshold would cover 85% of the
methane emissions from the reporting categories. In the 2010 rule, EPA also estimated that methane emissions from the reporting categories. In the 2010 rule, EPA also estimated that
decreasing the reporting threshold to 10,000 mtCO2e would increase the emissions coverage to decreasing the reporting threshold to 10,000 mtCO2e would increase the emissions coverage to
91%.91%.2322 These estimates appear to be out of date. EPA stated in 2019 that the agency “does not These estimates appear to be out of date. EPA stated in 2019 that the agency “does not
have an exact estimate of what percent of U.S. emissions are covered under petroleum and natural have an exact estimate of what percent of U.S. emissions are covered under petroleum and natural
gas systems at this time.… EPA will continue to analyze the emissions from reports as well as gas systems at this time.… EPA will continue to analyze the emissions from reports as well as
linking the information to the US GHG Inventory to identify what fraction of emissions from linking the information to the US GHG Inventory to identify what fraction of emissions from
petroleum and natural gas systems are covered by the GHGRP.”petroleum and natural gas systems are covered by the GHGRP.”2423
As a point of reference As a point of reference, Table 2 lists the methane emission estimates from EPA’s emission lists the methane emission estimates from EPA’s emission
inventory for the petroleum and natural gas system activities that inventory for the petroleum and natural gas system activities that would match the applicability of match the applicability of
the IRA methane charge.the IRA methane charge.25As24 As the inventory estimates are intended to capture all of the methane the inventory estimates are intended to capture all of the methane
emission in petroleum and natural gas systems, the inventory estimates are higher. As mentioned emission in petroleum and natural gas systems, the inventory estimates are higher. As mentioned
above, some have argued that EPA’s inventory estimates of methane emissions from these above, some have argued that EPA’s inventory estimates of methane emissions from these
systems have underestimated the magnitude of emissions. For example, a 2018 study estimated systems have underestimated the magnitude of emissions. For example, a 2018 study estimated
that methane emissions in these sectors are 60% higher than the estimates in EPA’s inventory.that methane emissions in these sectors are 60% higher than the estimates in EPA’s inventory.2625
Table 2. EPA GHG Emission Inventory Estimates of Methane Emissions from
Petroleum and Natural Gas and Systems (2019)
Million Metric Tons CO2e Million Metric Tons CO2e
Activity
Methane Emissions
Total onshore petroleum and natural gas production Total onshore petroleum and natural gas production
84.7 84.7
Onshore natural gas production
52.0
Onshore petroleum production
32.7
Total offshore petroleum and natural gas production Total offshore petroleum and natural gas production
5.8 5.8
Offshore natural gas production
0.8
Offshore petroleum production
5.0
Natural gas gathering and boosting Natural gas gathering and boosting
40.9 40.9
Natural gas processing Natural gas processing
12.4 12.4
Natural gas transmission and storage Natural gas transmission and storage
37.0 37.0
Total of above activities
180.8

2221 EPA, “Mandatory Reporting of Greenhouse Gases: Petroleum and Natural Gas Systems,” Final Rule, 75 EPA, “Mandatory Reporting of Greenhouse Gases: Petroleum and Natural Gas Systems,” Final Rule, 75 Federal
Register 74458, November 30, 2010 (hereinafter, 2010 Final Rule). 74458, November 30, 2010 (hereinafter, 2010 Final Rule).
2322 See Table 7B in 2010 Final Rule. See Table 7B in 2010 Final Rule.
2423 EPA, Frequently Asked Questions, GHGRP, Subpart W, “What percentage of emissions from petroleum and natural EPA, Frequently Asked Questions, GHGRP, Subpart W, “What percentage of emissions from petroleum and natural
gas systems are reported under the GHGRP?” September 25, 2019, https://ccdsupport.com/confluence/pages/gas systems are reported under the GHGRP?” September 25, 2019, https://ccdsupport.com/confluence/pages/
viewpage.action?pageId=189038686. viewpage.action?pageId=189038686.
2524 For example, methane emissions from natural gas distribution are not included in the table, as they For example, methane emissions from natural gas distribution are not included in the table, as they wouldare not not be
subject to the fee. subject to the fee.
2625 Ramon Alvarez et al., “Assessment of Methane Emissions from the U.S. Oil and Gas Supply Chain,” Ramon Alvarez et al., “Assessment of Methane Emissions from the U.S. Oil and Gas Supply Chain,”
Science, June 2018. , June 2018.
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Source: Prepared by CRS; data from EPA, Prepared by CRS; data from EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019, 2021, , 2021,
Table 3-38 and Table 3-63, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-Table 3-38 and Table 3-63, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-
1990-2019. 1990-2019.
In IRA, the scope of emissions subject to the charge In IRA, the scope of emissions subject to the charge would beis based on (1) the facility’s reported based on (1) the facility’s reported
emissions under EPA’s GHGRP, as described above, and (2) an emissions threshold that varies by emissions under EPA’s GHGRP, as described above, and (2) an emissions threshold that varies by
facility type. facility type.
 For petroleum and natural gas production facilities, the charge  For petroleum and natural gas production facilities, the charge would applyapplies only only
to the to the number of reported tons of methane that exceed 0.2% of the natural gas number of reported tons of methane that exceed 0.2% of the natural gas
sent to sale from such a facility. sent to sale from such a facility.
 For nonproduction facilities, such as gathering and boosting facilities, the charge  For nonproduction facilities, such as gathering and boosting facilities, the charge
would applyapplies to methane emissions that exceed 0.05% of the natural gas sent for to methane emissions that exceed 0.05% of the natural gas sent for
sale from the facility. sale from the facility.
 For natural gas transmission facilities, the charge  For natural gas transmission facilities, the charge would applyapplies to methane to methane
emissions emissions that exceed 0.11% of the natural gas sent for sale from the facility. that exceed 0.11% of the natural gas sent for sale from the facility.
These thresholds effectively allow for some amount of methane to be released from these These thresholds effectively allow for some amount of methane to be released from these
facilities without being subject to the charge, thus decreasing the amount of emissions reported facilities without being subject to the charge, thus decreasing the amount of emissions reported
under the GHGRP that under the GHGRP that would beare subject to the charg subject to the charge. Table 3 compares the actual reported compares the actual reported
emissions (in 2019) for onshore petroleum and natural gas production facilities and onshore emissions (in 2019) for onshore petroleum and natural gas production facilities and onshore
petroleum and natural gas gathering and boosting facilities (the two facility types that account for petroleum and natural gas gathering and boosting facilities (the two facility types that account for
most of the methane emissions) with the emissions that most of the methane emissions) with the emissions that would beare subject to the methane charge at subject to the methane charge at
these facilities. As the table indicates, when the thresholds are applied, the methane emissions these facilities. As the table indicates, when the thresholds are applied, the methane emissions
subject to the charge decrease by about 35%. subject to the charge decrease by about 35%.
Table 3. Estimate of Methane Emissions Subject to Charge After Applying Emissions
Thresholds (Based on 2019 Data)
Million Metric Tons CO2e Million Metric Tons CO2e
Reported Methane Emissions
Subject to Charge After
Facility Type
Reported Methane Emissions
Applying Emissions Threshold
Onshore petroleum and natural gas Onshore petroleum and natural gas
44.2 44.2
27.2 27.2
production production
Onshore petroleum and natural gas Onshore petroleum and natural gas
21.9 21.9
15.6 15.6
gathering and boosting gathering and boosting
Total Total
66.1 66.1
42.8 42.8
Source: Prepared by CRS; emissions data from EPA Greenhouse Gas Reporting Program Facility Level Prepared by CRS; emissions data from EPA Greenhouse Gas Reporting Program Facility Level
Information on Greenhouse Gases Tool (FLIGHT), https://ghgdata.epa.gov; facility data (sales of natural gas and Information on Greenhouse Gases Tool (FLIGHT), https://ghgdata.epa.gov; facility data (sales of natural gas and
barrels of oil) from EPA Envirofacts database, customized search of petroleum and natural gas systems, using barrels of oil) from EPA Envirofacts database, customized search of petroleum and natural gas systems, using
“facility overview” dataset. “facility overview” dataset.
Notes: To estimate the methane emissions potentially subject to the charge, CRS applied the relevant emissions To estimate the methane emissions potentially subject to the charge, CRS applied the relevant emissions
threshold (e.g., 0.2% for production facilities) to the natural gas or petroleum sales at each facility. This value was threshold (e.g., 0.2% for production facilities) to the natural gas or petroleum sales at each facility. This value was
then subtracted from the reported methane emissions. The remaining emissions then subtracted from the reported methane emissions. The remaining emissions would beare subject to the charge. subject to the charge.
For some facilities, the threshold application resulted in these facilities not having any methane emissions subject For some facilities, the threshold application resulted in these facilities not having any methane emissions subject
to the charge. to the charge.
In its August 3, 2022, cost estimate (“score”) of the Inflation Reduction Act, the Congressional In its August 3, 2022, cost estimate (“score”) of the Inflation Reduction Act, the Congressional
Budget Office (CBO) provided another resource that may be informative. CBO estimated the Budget Office (CBO) provided another resource that may be informative. CBO estimated the
revenue that the methane charge revenue that the methane charge wouldwill generate over time. CBO’s estimated revenue by fiscal generate over time. CBO’s estimated revenue by fiscal
year is provided in the first row ofyear is provided in the first row of Table 4. CBO’s analysis does not provide an estimate of BO’s analysis does not provide an estimate of
methane emissions subject to the charge, but Table 4 provides these estimates by applying CBO’s
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emissions subject to the charge, but Table 4 provides these estimates by applying CBO’s revenue estimate and the rate of the charge in the act. As CBO’s revenue estimates are revenue estimate and the rate of the charge in the act. As CBO’s revenue estimates are net
revenue estimates, the second row includes an estimate of revenue estimates, the second row includes an estimate of gross revenue from the methane revenue from the methane
charge.charge.2726 The annual gross revenue is divided by the rate of the methane charge (ranging from The annual gross revenue is divided by the rate of the methane charge (ranging from
$900 to $1,500) to produce annual estimates of methane emissions (in metric tons of methane). $900 to $1,500) to produce annual estimates of methane emissions (in metric tons of methane).
The last row converts metric tons of methane into metric tons of CO2e for comparison purposes. The last row converts metric tons of methane into metric tons of CO2e for comparison purposes.
Table 4. Estimate of Methane Emissions Subject to the Charge Based on CBO’s
August 2022 Cost Estimate Analysis of the Inflation Reduction Act

FY2026
FY2027
FY2028
FY2029
FY2030
FY2031
CBO Revenue CBO Revenue
$850 mil ion $850 mil ion
$1,350 mil ion $1,350 mil ion
$1,400 mil ion $1,400 mil ion
$1,200 mil ion $1,200 mil ion
$1,050 mil ion $1,050 mil ion
$500 mil ion $500 mil ion
Estimate (Net) Estimate (Net)
Estimate of Gross Estimate of Gross
$1,133 mil ion $1,133 mil ion
$1,800 mil ion $1,800 mil ion
$1,867 mil ion $1,867 mil ion
$1,600 mil ion $1,600 mil ion
$1,400 mil ion $1,400 mil ion
$667 mil ion $667 mil ion
Revenue from Revenue from
Methane Charge Methane Charge
Methane Charge Methane Charge
$900 $900
$1,200 $1,200
$1,500 $1,500
$1,500 $1,500
$1,500 $1,500
$1,500 $1,500
(dol ars per metric (dol ars per metric
ton of methane) ton of methane)
Estimated Methane Estimated Methane
1.3 1.3
1.5 1.5
1.2 1.2
1.1 1.1
0.9 0.9
0.4 0.4
Emissions Subject to Emissions Subject to
the Charge (mil ion the Charge (mil ion
metric tons methane) metric tons methane)
Estimated Methane Estimated Methane
31 31
38 38
31 31
27 27
23 23
11 11
Emissions Subject to Emissions Subject to
the Charge (mil ion the Charge (mil ion
metric tons CO2e) metric tons CO2e)
Source: Prepared by CRS; the data in the first row, “CBO Revenue Estimate (Net),” are from CBO, Prepared by CRS; the data in the first row, “CBO Revenue Estimate (Net),” are from CBO, Estimated
Budgetary Effects of H.R. 5376, the Inflation Reduction Act of 2022, August 3, 2022, https://www.cbo.gov/publication/August 3, 2022, https://www.cbo.gov/publication/
58366. Gross revenues are net revenues multiplied by 1.25. In the above estimates, the revenue col ected in 58366. Gross revenues are net revenues multiplied by 1.25. In the above estimates, the revenue col ected in
FY2026 FY2026 would accountaccounts for methane emissions in calendar year 2024, during which the methane charge for methane emissions in calendar year 2024, during which the methane charge would be
is $900 per metric ton of methane; the revenue col ected in FY2027 $900 per metric ton of methane; the revenue col ected in FY2027 would accountaccounts for methane emissions in for methane emissions in
calendar year 2025, during which the methane charge calendar year 2025, during which the methane charge would beis $1,200 per metric ton of methane. Subsequent $1,200 per metric ton of methane. Subsequent
fiscal year col ections fiscal year col ections would involve a methane charge of $1,500 per metric ton of methane. involve a methane charge of $1,500 per metric ton of methane.
Rate of Charge
The methane emissions charge in IRA The methane emissions charge in IRA would startstarts in calendar year 2024 at $900 per metric ton of in calendar year 2024 at $900 per metric ton of
methane, methane, increaseincreases to $1,200 in 2025, and to $1,200 in 2025, and increaseincreases to $1,500 in 2026. The charge to $1,500 in 2026. The charge would remainremains at at
$1,500 in subsequent years.$1,500 in subsequent years. Table 5 indicates the value of the methane charge rates in mtCO2e, indicates the value of the methane charge rates in mtCO2e,
the measure commonly used in carbon tax and emission charge proposals. The methane charge the measure commonly used in carbon tax and emission charge proposals. The methane charge

2726 CBO explains, “When excise taxes, customs duties, and other types of ‘indirect’ taxes are imposed on goods and CBO explains, “When excise taxes, customs duties, and other types of ‘indirect’ taxes are imposed on goods and
services, they tend to reduce income for workers or business owners in the taxed industry and for others throughout the services, they tend to reduce income for workers or business owners in the taxed industry and for others throughout the
economy. Consequently, revenue derived from existing ‘direct’ tax sources—such as individual and corporate income economy. Consequently, revenue derived from existing ‘direct’ tax sources—such as individual and corporate income
taxes and payroll taxes—will also be reduced. To approximate that effect, the Congressional Budget Office (CBO), the taxes and payroll taxes—will also be reduced. To approximate that effect, the Congressional Budget Office (CBO), the
Joint Committee on Taxation (JCT), and the Treasury Department’s Office of Tax Analysis (OTA) apply a 25 percent Joint Committee on Taxation (JCT), and the Treasury Department’s Office of Tax Analysis (OTA) apply a 25 percent
offset when estimating the net revenue that legislation imposing some form of indirect tax is expected to generate.” offset when estimating the net revenue that legislation imposing some form of indirect tax is expected to generate.”
CBO, CBO, The Role of the 25 Percent Revenue Offset in Estimating the Budgetary Effects of Legislation, 2009, , 2009,
https://www.cbo.gov/publication/20110. https://www.cbo.gov/publication/20110.
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rates below are comparable to the carbon tax and emission charge rates in recent legislative rates below are comparable to the carbon tax and emission charge rates in recent legislative
proposals.proposals.2827
Table 5. Methane Charge Rates
Methane Charge Measure
2024
2025
2026
After 2026
Dol ars per metric ton of CH4 emissions Dol ars per metric ton of CH4 emissions
$900 $900
$1200 $1200
$1500 $1500
$1500 $1500
Dol ars per metric ton of CO2 equivalent Dol ars per metric ton of CO2 equivalent
$36 $36
$48 $48
$60 $60
$60 $60
Source: Prepared by CRS; dol ars per metric ton of CO2 equivalent calculated using a global warming potential Prepared by CRS; dol ars per metric ton of CO2 equivalent calculated using a global warming potential of 25(GWP) of 25. GWP is an index that allows comparisons of the heat-trapping ability of different gases over a period of time, typically 100 years. Consistent with international GHG reporting protocols, EPA’s most recent GHG inventory (April 2022) uses the GWP values presented in the Intergovernmental Panel on Climate Change (IPCC) 2007 Fourth Assessment Report. In EPA’s inventories and in this report, a metric ton of methane equates to 25 metric tons of CO2 when averaged over a 100-year time frame. The IPCC has since updated the 100-year GWP estimates, with some increasing and some decreasing. For example, the IPCC 2013 Fifth Assessment Report reported the 100-year GWP for methane as ranging from 28 to 36. Pursuant to the United Nations Framework Convention on Climate Change, the United States and other countries wil be required to use the 2013 GWP values for GHGs beginning with their 2024 emission inventories. A GWP for methane of 28 would lower the dol ars per metric ton of CO2 equivalent from $36 to $32. .
Potential Exemption from Charge
IRA provides for a conditional exemption from the methane emissions charge if facilities are IRA provides for a conditional exemption from the methane emissions charge if facilities are
subject to and in compliance with subsequent Clean Air Act methane regulations. To date, such subject to and in compliance with subsequent Clean Air Act methane regulations. To date, such
regulations have not been finalized. On November 15, 2021, EPA proposed regulations to address regulations have not been finalized. On November 15, 2021, EPA proposed regulations to address
methane emissions from the same categories of new and existing facilities that methane emissions from the same categories of new and existing facilities that would beare subject subject
to the IRA methane charge.to the IRA methane charge.2928 IRA allows for an exemption from the emissions charge if future, IRA allows for an exemption from the emissions charge if future,
final EPA regulations addressing methane emissions (1) are in effect in all states, and (2) final EPA regulations addressing methane emissions (1) are in effect in all states, and (2) would
will “result in equivalent or greater emissions reductions as would be achieved” by the November “result in equivalent or greater emissions reductions as would be achieved” by the November
2021 proposed rule. IRA directs EPA to determine whether future methane regulations 2021 proposed rule. IRA directs EPA to determine whether future methane regulations would
will meet these conditions. meet these conditions.
Selected Factors Affecting the Scope and Impact of
the Methane Charge
A range of factors could play a role in determining the scope of emissions subject to the IRA A range of factors could play a role in determining the scope of emissions subject to the IRA
methane charge and its ultimate impacts on GHG emission levels and economic measures, such methane charge and its ultimate impacts on GHG emission levels and economic measures, such
as natural gas prices. A comprehensive analysis of these factors is beyond the scope of this report. as natural gas prices. A comprehensive analysis of these factors is beyond the scope of this report.
Selected factors include the following: Selected factors include the following:
 EPA Regulation of Petroleum and Natural Gas Systems. On November 15,
2021, EPA proposed regulations to address methane emissions from the same
categories of new and existing facilities that would be subject to the methane
charge.30 As discussed above, if EPA finalizes these requirements, they may
provide for an exemption from the methane emissions charge. The degree to
which the regulations would affect the methane emissions charge would depend
on the scope and applicability of the final regulations.

28 27 For more information, see CRS Report R45472, For more information, see CRS Report R45472, Market-Based Greenhouse Gas Emission Reduction Legislation:
108th Through 117th Congresses, by Jonathan L. Ramseur. , by Jonathan L. Ramseur.
2928 EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for
Existing Sources: Oil and Natural Gas Sector Climate Review,” 86Existing Sources: Oil and Natural Gas Sector Climate Review,” 86 Federal Register 63110, November 15, 2021. For 63110, November 15, 2021. For
more background on these issues, see CRS Report R42986, more background on these issues, see CRS Report R42986, Methane and Other Air Pollution Issues in Natural Gas
Systems, by Richard K. Lattanzio. , by Richard K. Lattanzio.
30 EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for
Existing Sources: Oil and Natural Gas Sector Climate Review,” 86 Federal Register 63110, November 15, 2021. For
more background on these issues, see CRS Report R42986, Methane and Other Air Pollution Issues in Natural Gas
Systems, by Richard K. Lattanzio.
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Inflation Reduction Act Methane Emissions Charge: In Brief
Congressional Research Service 10 Inflation Reduction Act Methane Emissions Charge: In Brief  EPA Regulation of Petroleum and Natural Gas Systems. On November 15, 2021, EPA proposed regulations to address methane emissions from the same categories of new and existing facilities that are subject to the methane charge.29 As discussed above, if EPA finalizes these requirements, they may provide for an exemption from the methane emissions charge. The degree to which the regulations will affect the methane emissions charge depends on the scope and applicability of the final regulations.
  Changes to Equipment or Operations. A charge on methane emissions from A charge on methane emissions from
petroleum and natural gas systems petroleum and natural gas systems would provideprovides an economic incentive for an economic incentive for
facilities to modify their equipment and operations in order to avoid paying the facilities to modify their equipment and operations in order to avoid paying the
charge. Economic theory suggests facilities charge. Economic theory suggests facilities wouldwill likely find ways to reduce likely find ways to reduce
onsite methane emissions until the costs associated with these changes reach the onsite methane emissions until the costs associated with these changes reach the
level of the charge. At that point, facilities level of the charge. At that point, facilities wouldwill pay the charge for the pay the charge for the
remaining emissions. The degree to which facilities make such changes remaining emissions. The degree to which facilities make such changes would
will likely be based on site-specific economic conditions. likely be based on site-specific economic conditions.
  Funding for Technological Improvements. The Inflation Reduction Act The Inflation Reduction Act would
include includes supplemental appropriations of $850 million to EPA to provide grants to supplemental appropriations of $850 million to EPA to provide grants to
facilities subject to the methane charge for a range of objectives, including facilities subject to the methane charge for a range of objectives, including
“improving and deploying industrial equipment and processes” that reduce “improving and deploying industrial equipment and processes” that reduce
methane emission. The act also includes supplemental appropriations of $700 methane emission. The act also includes supplemental appropriations of $700
million for “marginal conventional wells” for the same purposes. These funds million for “marginal conventional wells” for the same purposes. These funds
couldmay lead to methane reductions at oil and natural gas facilities, thus affecting lead to methane reductions at oil and natural gas facilities, thus affecting
the impact of the charge. the impact of the charge.
  Other IRA Climate and Energy Provisions. IRA includes a range of climate IRA includes a range of climate
and energy-related provisions that and energy-related provisions that wouldwill likely affect the portfolio of fuels and likely affect the portfolio of fuels and
sources of energy that are used in various economic sectors: electricity, sources of energy that are used in various economic sectors: electricity,
transportation, and industry.transportation, and industry.31
30 Author Information Jonathan L. Ramseur Specialist in Environmental Policy 29 EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review,” 86 Federal Register 63110, November 15, 2021. For more background on these issues, see CRS Report R42986, Methane and Other Air Pollution Issues in Natural Gas Systems, by Richard K. Lattanzio. 30 For example, see Rhodium Group, “A Congressional Climate Breakthrough,” July 28, 2022, https://rhg.com/research/inflation-reduction-act/; and Princeton University Rapid Energy Policy Evaluation and Analysis Toolkit (“REPEAT Project”), Preliminary Report: The Climate and Energy Impacts of the Inflation Reduction Act of 2022, accessed August 4, 2022, https://repeatproject.org/. Congressional Research Service 11 Inflation Reduction Act Methane Emissions Charge: In Brief
Author Information

Jonathan L. Ramseur

Specialist in Environmental Policy



Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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31 For example, see Rhodium Group, “A Congressional Climate Breakthrough,” July 28, 2022, https://rhg.com/
research/inflation-reduction-act/; and Princeton University Rapid Energy Policy Evaluation and Analysis Toolkit
(“REPEAT Project”), Preliminary Report: The Climate and Energy Impacts of the Inflation Reduction Act of 2022,
Accessed August 4, 2022, https://repeatproject.org/.
Congressional Research Service
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11 Congressional Research Service R47206 · VERSION 3 · UPDATED 12

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