Inflation Reduction Act Methane Emissions Charge: In Brief
Inflation Reduction Act Methane Emissions
August 29, 2022
Charge: In Brief
Jonathan L. Ramseur
On August 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 emissions that is nearly identical to the methane
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, 2021. Methane (or CH
4) is the primary
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.
The emissions charge applies 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
Program (GHGRP). The charge starts at $900 per metric ton of methane, increasing to $1,500 after two years. This emissions
charge is the first time the federal government has directly imposed 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
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
context of EPA’s proposed regulations to address methane emissions from the same categories of new and existing facilities
that are 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
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
regulations to address methane emissions from the same categories of new and existing facilities that are
subject to the methane charge. The degree to which the regulations will affect the methane emissions
charge depends on the scope and applicability of the final regulations. In particular, IRA allows for an
exemption from the emissions charge if EPA regulations addressing methane emissions (1) are in effect in
all states, and (2) will “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 meet
these conditions.
Changes to Equipment or Operations. A charge on methane emissions from petroleum and natural gas
systems provides 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 will likely be based on site-
specific economic conditions.
Funding for Technological Improvements. IRA includes supplemental appropriations of $850 million to
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. 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 affecting the
impact of the charge.
Other IRA Climate and Energy Provisions. IRA includes a range of climate and energy-related
provisions that will likely affect the portfolio of fuels and sources of energy that are used in various
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
Congressional Research Service
Inflation Reduction Act Methane Emissions Charge: In Brief
Introduction
On August 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 includes a charge on methane emissions from selected entities in the oil and gas
industry. This emissions charge is nearly identical to the methane emissions charge1 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 methane emissions charge applies 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 Program (GHGRP). The charge starts 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. This charge is the first time the
federal government has directly imposed a charge, fee, or tax on GHG emissions.2
Since its inclusion in the House-passed H.R. 5376, the methane charge has received considerable
attention from Members and a range of stakeholders.3 For example, some groups have raised
concerns about economic impacts resulting from the methane charge, including impacts on
natural gas prices.4 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 that are subject to the methane charge.5
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.”
2 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
R45472, Market-Based Greenhouse Gas Emission Reduction Legislation: 108th Through 117th Congresses, by
Jonathan L. Ramseur.
3 According to some analyses, the methane charge accounts 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,
Modeling the Infrastructure Bills Using the Energy Policy Simulator, Energy Innovation: Policy and Technology LLC,
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
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
(REPEAT), “Addendum to Preliminary Report: The Climate Impact of Congressional Infrastructure and Budget Bills,”
November 2021, https://repeatproject.org/.
4 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
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
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.
5 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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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
as a feedstock for the chemical industry.6 Natural gas is generally produced from geologic
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,
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
intentional venting from equipment (e.g., pneumatic devices);7
unintentional equipment leaks, worker error, or malfunctions;
routine maintenance of equipment; and
flaring (burning) of excess natural gas at a petroleum production site, which can
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
used in annual GHG inventories—methane’s global warming potential (GWP) is 25 times greater
than that of an equivalent mass of CO2.8 Over a 20-year time period, methane’s GWP is 72 times
greater than that of CO2.9 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.”10
As illustrated in Figure 1, methane emissions in the United States accounted for 10% of total
GHG emissions in 2019 (the most recent year of comprehensive GHG data).11 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, Methane Emissions: A Primer, by Richard K. Lattanzio.
7 Methane emissions from pneumatic devices have been one of the largest sources of vented methane emissions from
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.
8 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
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 will be required to use the 2013 GWP values for GHGs
beginning with their 2024 emission inventories.
9 EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019, 2021, Annex 6, Table A-238,
https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2019.
10 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. To
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.
11 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-1990-2019.
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.
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Inflation Reduction Act Methane Emissions Charge: In Brief
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.
Figure 1. U.S. Total GHG Emissions by Gas and Sources of Methane Emissions
2019 Emission Estimates from EPA Inventory
Source: 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-
1990-2019.
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
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
conflicting—estimates.13
Inflation Reduction Act Methane Emissions Charge
Scope and Applicability
The IRA methane charge applies to methane emissions from specific types of facilities in 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
annual emissions data from nearly 8,000 large industrial facilities and other sources in the United
States.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
Emissions Inventories,” Nature Communications, 2021; and Ramon Alvarez et al., “Assessment of Methane Emissions
from the U.S. Oil and Gas Supply Chain,” Science, June 2018. For more discussion, see CRS Report R42986, Methane
and Other Air Pollution Issues in Natural Gas Systems, by Richard K. Lattanzio.
14 For more information about the GHGRP, see CRS In Focus IF11754, EPA’s Greenhouse Gas Reporting Program,
by Angela C. Jones.
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The IRA methane charge applies 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 subject to
the charge include the following industry operations:
offshore petroleum and natural gas production;
onshore petroleum and natural gas production;
onshore natural gas processing;
onshore natural gas transmission compression;
underground natural gas storage;
liquefied natural gas storage;
liquefied natural gas import and export equipment;
onshore petroleum and natural gas gathering and boosting;15 and
onshore natural gas transmission pipelines.
Figure 2 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
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 are not subject to
the methane charge: (1) natural gas distribution facilities and (2) facilities EPA describes as “other
oil and gas combustion facilities.”16
15 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,
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.
16 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, 2011-
2020 Greenhouse Gas Reporting Program Sector Profile: Petroleum and Natural Gas Systems, 2020,
https://www.epa.gov/ghgreporting/ghgrp-petroleum-and-natural-gas-systems-sector-profile.
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Inflation Reduction Act Methane Emissions Charge: In Brief
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/
ghgrp-and-oil-and-gas-industry.
Note: 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
equivalent (mtCO2e) or more per year.17 The House-passed Build Back Better Act would have
directed EPA to revise that threshold (within two years) to 10,000 mtCO2e. This change would
have increased the number of facilities subject to EPA’s reporting requirements. The methane
emissions charge in IRA only applies to facilities that emit 25,000 mtCO2e or more per year,
regardless of any subsequent changes to the scope of EPA’s reporting requirements.
17 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
their GHG emissions to EPA in 2019 pursuant to the regulations in 40 C.F.R. Part 98, Subpart
W.18 The table also indicates the total methane emissions for each facility category. In 2019,
reported methane emissions from facilities that are subject to the methane charge totaled 78
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.
As discussed above, natural gas distribution facilities, which report emissions under Subpart W,
are not subject to the charge. According to EPA reporting data, 162 natural gas distribution
facilities emitted approximately 13 MMTCO2e of methane in 2019.19 As indicated in Table 1, if
these facilities were subject to the charge, this group would rank third in methane emissions.20
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)
Reported Methane
Number of Reporting
Emissions
Facility Type
Facilities
(MMTCO2e)
Onshore petroleum and natural gas production
485
44.2
Onshore petroleum and natural gas gathering and boosting
361
21.9
Onshore natural gas transmission compression
624
4.2
Onshore natural gas transmission pipeline
39
2.9
Natural gas processing
457
2.9
Offshore petroleum and natural gas production
141
1.5
Underground natural gas storage
50
0.6
Liquefied natural gas import and export equipment
10
0.1
Liquefied natural gas storage
5
0.001
Total
2,172
78.3
Source: Prepared by CRS; data from EPA Greenhouse Gas Reporting Program, Facility Level Information on
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
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
(GWP). GWP is an index that allows comparisons of the heat-trapping ability of different gases over a period of
time, typically 100 years. A 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.
18 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
(COVID-19) pandemic. In 2020, the reported emissions comparable to those in Table 1 were 69.4 MMTCO2e, 11%
lower than those in 2019.
19 EPA Greenhouse Gas Reporting Program, Facility Level Information on Greenhouse Gases Tool (FLIGHT),
https://ghgdata.epa.gov.
20 In addition, the methane fee does 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.
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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
covers. When EPA issued its final rule promulgating the Subpart W reporting regulations in
2010,21 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
decreasing the reporting threshold to 10,000 mtCO2e would increase the emissions coverage to
91%.22 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
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
petroleum and natural gas systems are covered by the GHGRP.”23
As a point of reference, Table 2 lists the methane emission estimates from EPA’s emission
inventory for the petroleum and natural gas system activities that match the applicability of the
IRA methane charge.24 As 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
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
that methane emissions in these sectors are 60% higher than the estimates in EPA’s inventory.25
Table 2. EPA GHG Emission Inventory Estimates of Methane Emissions from
Petroleum and Natural Gas and Systems (2019)
Million Metric Tons CO2e
Activity
Methane Emissions
Total onshore petroleum and natural gas production
84.7
Onshore natural gas production
52.0
Onshore petroleum production
32.7
Total offshore petroleum and natural gas production
5.8
Offshore natural gas production
0.8
Offshore petroleum production
5.0
Natural gas gathering and boosting
40.9
Natural gas processing
12.4
Natural gas transmission and storage
37.0
Total of above activities
180.8
21 EPA, “Mandatory Reporting of Greenhouse Gases: Petroleum and Natural Gas Systems,” Final Rule, 75 Federal
Register 74458, November 30, 2010 (hereinafter, 2010 Final Rule).
22 See Table 7B in 2010 Final Rule.
23 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/
viewpage.action?pageId=189038686.
24 For example, methane emissions from natural gas distribution are not included in the table, as they are not subject to
the fee.
25 Ramon Alvarez et al., “Assessment of Methane Emissions from the U.S. Oil and Gas Supply Chain,”
Science, June 2018.
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Source: Prepared by CRS; data from EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019, 2021,
Table 3-38 and Table 3-63, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-
1990-2019.
In IRA, the scope of emissions subject to the charge is based on (1) the facility’s reported
emissions under EPA’s GHGRP, as described above, and (2) an emissions threshold that varies by
facility type.
For petroleum and natural gas production facilities, the charge applies only to the
number of reported tons of methane that exceed 0.2% of the natural gas sent to
sale from such a facility.
For nonproduction facilities, such as gathering and boosting facilities, the charge
applies to methane emissions that exceed 0.05% of the natural gas sent for sale
from the facility.
For natural gas transmission facilities, the charge applies to methane emissions
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
facilities without being subject to the charge, thus decreasing the amount of emissions reported
under the GHGRP that are subject to the charge. Table 3 compares the actual reported 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 most of the
methane emissions) with the emissions that are subject to the methane charge at these facilities.
As the table indicates, when the thresholds are applied, the methane emissions 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
Reported Methane Emissions
Subject to Charge After
Facility Type
Reported Methane Emissions
Applying Emissions Threshold
Onshore petroleum and natural gas
44.2
27.2
production
Onshore petroleum and natural gas
21.9
15.6
gathering and boosting
Total
66.1
42.8
Source: 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
barrels of oil) from EPA Envirofacts database, customized search of petroleum and natural gas systems, using
“facility overview” dataset.
Notes: 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
then subtracted from the reported methane emissions. The remaining emissions are subject to the charge. For
some facilities, the threshold application resulted in these facilities not having any methane emissions subject to
the charge.
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
revenue that the methane charge will generate over time. CBO’s estimated revenue by fiscal year
is provided in the first row of Table 4. CBO’s analysis does not provide an estimate of methane
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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 net revenue
estimates, the second row includes an estimate of gross revenue from the methane charge.26 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). 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
$850 mil ion
$1,350 mil ion
$1,400 mil ion
$1,200 mil ion
$1,050 mil ion
$500 mil ion
Estimate (Net)
Estimate of Gross
$1,133 mil ion
$1,800 mil ion
$1,867 mil ion
$1,600 mil ion
$1,400 mil ion
$667 mil ion
Revenue from
Methane Charge
Methane Charge
$900
$1,200
$1,500
$1,500
$1,500
$1,500
(dol ars per metric
ton of methane)
Estimated Methane
1.3
1.5
1.2
1.1
0.9
0.4
Emissions Subject to
the Charge (mil ion
metric tons methane)
Estimated Methane
31
38
31
27
23
11
Emissions Subject to
the Charge (mil ion
metric tons CO2e)
Source: 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/
58366. Gross revenues are net revenues multiplied by 1.25. In the above estimates, the revenue col ected in
FY2026 accounts for methane emissions in calendar year 2024, during which the methane charge is $900 per
metric ton of methane; the revenue col ected in FY2027 accounts for methane emissions in calendar year 2025,
during which the methane charge is $1,200 per metric ton of methane. Subsequent fiscal year col ections involve
a methane charge of $1,500 per metric ton of methane.
Rate of Charge
The methane emissions charge in IRA starts in calendar year 2024 at $900 per metric ton of
methane, increases to $1,200 in 2025, and increases to $1,500 in 2026. The charge remains at
$1,500 in subsequent years. Table 5 indicates the value of the methane charge rates in mtCO2e,
the measure commonly used in carbon tax and emission charge proposals. The methane charge
26 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
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
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.”
CBO, The Role of the 25 Percent Revenue Offset in Estimating the Budgetary Effects of Legislation, 2009,
https://www.cbo.gov/publication/20110.
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Inflation Reduction Act Methane Emissions Charge: In Brief
rates below are comparable to the carbon tax and emission charge rates in recent legislative
proposals.27
Table 5. Methane Charge Rates
Methane Charge Measure
2024
2025
2026
After 2026
Dol ars per metric ton of CH4 emissions
$900
$1200
$1500
$1500
Dol ars per metric ton of CO2 equivalent
$36
$48
$60
$60
Source: Prepared by CRS; dol ars per metric ton of CO2 equivalent calculated using a global warming potential
(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
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
methane emissions from the same categories of new and existing facilities that are subject to the
IRA methane charge.28 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) will “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 will 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
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.
Selected factors include the following:
27 For more information, see CRS Report R45472, Market-Based Greenhouse Gas Emission Reduction Legislation:
108th Through 117th Congresses, by Jonathan L. Ramseur.
28 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
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
petroleum and natural gas systems provides an economic incentive for facilities
to modify their equipment and operations in order to avoid paying the charge.
Economic theory suggests facilities will likely find ways to reduce onsite
methane emissions until the costs associated with these changes reach the level of
the charge. At that point, facilities will pay the charge for the remaining
emissions. The degree to which facilities make such changes will likely be based
on site-specific economic conditions.
Funding for Technological Improvements. The Inflation Reduction Act
includes supplemental appropriations of $850 million to 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. The act also includes supplemental appropriations of $700
million for “marginal conventional wells” for the same purposes. These funds
may lead to methane reductions at oil and natural gas facilities, thus affecting the
impact of the charge.
Other IRA Climate and Energy Provisions. IRA includes a range of climate
and energy-related provisions that will likely affect the portfolio of fuels and
sources of energy that are used in various economic sectors: electricity,
transportation, and industry.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/.
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Inflation Reduction Act Methane Emissions Charge: In Brief
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.
Congressional Research Service
R47206 · VERSION 3 · UPDATED
12
August 29, 2022
Charge: In Brief
Jonathan L. Ramseur
On August 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 emissions that is nearly identical to the methane
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, 2021. Methane (or CH
4) is the primary
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.
The emissions charge applies 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
Program (GHGRP). The charge starts at $900 per metric ton of methane, increasing to $1,500 after two years. This emissions
charge is the first time the federal government has directly imposed 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
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
context of EPA’s proposed regulations to address methane emissions from the same categories of new and existing facilities
that are 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
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
regulations to address methane emissions from the same categories of new and existing facilities that are
subject to the methane charge. The degree to which the regulations will affect the methane emissions
charge depends on the scope and applicability of the final regulations. In particular, IRA allows for an
exemption from the emissions charge if EPA regulations addressing methane emissions (1) are in effect in
all states, and (2) will “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 meet
these conditions.
Changes to Equipment or Operations. A charge on methane emissions from petroleum and natural gas
systems provides 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 will likely be based on site-
specific economic conditions.
Funding for Technological Improvements. IRA includes supplemental appropriations of $850 million to
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. 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 affecting the
impact of the charge.
Other IRA Climate and Energy Provisions. IRA includes a range of climate and energy-related
provisions that will likely affect the portfolio of fuels and sources of energy that are used in various
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
Congressional Research Service
Inflation Reduction Act Methane Emissions Charge: In Brief
Introduction
On August 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 includes a charge on methane emissions from selected entities in the oil and gas
industry. This emissions charge is nearly identical to the methane emissions charge1 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 methane emissions charge applies 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 Program (GHGRP). The charge starts 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. This charge is the first time the
federal government has directly imposed a charge, fee, or tax on GHG emissions.2
Since its inclusion in the House-passed H.R. 5376, the methane charge has received considerable
attention from Members and a range of stakeholders.3 For example, some groups have raised
concerns about economic impacts resulting from the methane charge, including impacts on
natural gas prices.4 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 that are subject to the methane charge.5
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.”
2 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
R45472, Market-Based Greenhouse Gas Emission Reduction Legislation: 108th Through 117th Congresses, by
Jonathan L. Ramseur.
3 According to some analyses, the methane charge accounts 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,
Modeling the Infrastructure Bills Using the Energy Policy Simulator, Energy Innovation: Policy and Technology LLC,
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
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
(REPEAT), “Addendum to Preliminary Report: The Climate Impact of Congressional Infrastructure and Budget Bills,”
November 2021, https://repeatproject.org/.
4 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
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
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.
5 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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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
as a feedstock for the chemical industry.6 Natural gas is generally produced from geologic
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,
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
intentional venting from equipment (e.g., pneumatic devices);7
unintentional equipment leaks, worker error, or malfunctions;
routine maintenance of equipment; and
flaring (burning) of excess natural gas at a petroleum production site, which can
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
used in annual GHG inventories—methane’s global warming potential (GWP) is 25 times greater
than that of an equivalent mass of CO2.8 Over a 20-year time period, methane’s GWP is 72 times
greater than that of CO2.9 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.”10
As illustrated in Figure 1, methane emissions in the United States accounted for 10% of total
GHG emissions in 2019 (the most recent year of comprehensive GHG data).11 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, Methane Emissions: A Primer, by Richard K. Lattanzio.
7 Methane emissions from pneumatic devices have been one of the largest sources of vented methane emissions from
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.
8 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
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 will be required to use the 2013 GWP values for GHGs
beginning with their 2024 emission inventories.
9 EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019, 2021, Annex 6, Table A-238,
https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2019.
10 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. To
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.
11 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-1990-2019.
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.
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Inflation Reduction Act Methane Emissions Charge: In Brief
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.
Figure 1. U.S. Total GHG Emissions by Gas and Sources of Methane Emissions
2019 Emission Estimates from EPA Inventory
Source: 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-
1990-2019.
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
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
conflicting—estimates.13
Inflation Reduction Act Methane Emissions Charge
Scope and Applicability
The IRA methane charge applies to methane emissions from specific types of facilities in 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
annual emissions data from nearly 8,000 large industrial facilities and other sources in the United
States.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
Emissions Inventories,” Nature Communications, 2021; and Ramon Alvarez et al., “Assessment of Methane Emissions
from the U.S. Oil and Gas Supply Chain,” Science, June 2018. For more discussion, see CRS Report R42986, Methane
and Other Air Pollution Issues in Natural Gas Systems, by Richard K. Lattanzio.
14 For more information about the GHGRP, see CRS In Focus IF11754, EPA’s Greenhouse Gas Reporting Program,
by Angela C. Jones.
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The IRA methane charge applies 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 subject to
the charge include the following industry operations:
offshore petroleum and natural gas production;
onshore petroleum and natural gas production;
onshore natural gas processing;
onshore natural gas transmission compression;
underground natural gas storage;
liquefied natural gas storage;
liquefied natural gas import and export equipment;
onshore petroleum and natural gas gathering and boosting;15 and
onshore natural gas transmission pipelines.
Figure 2 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
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 are not subject to
the methane charge: (1) natural gas distribution facilities and (2) facilities EPA describes as “other
oil and gas combustion facilities.”16
15 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,
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.
16 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, 2011-
2020 Greenhouse Gas Reporting Program Sector Profile: Petroleum and Natural Gas Systems, 2020,
https://www.epa.gov/ghgreporting/ghgrp-petroleum-and-natural-gas-systems-sector-profile.
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Inflation Reduction Act Methane Emissions Charge: In Brief
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/
ghgrp-and-oil-and-gas-industry.
Note: 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
equivalent (mtCO2e) or more per year.17 The House-passed Build Back Better Act would have
directed EPA to revise that threshold (within two years) to 10,000 mtCO2e. This change would
have increased the number of facilities subject to EPA’s reporting requirements. The methane
emissions charge in IRA only applies to facilities that emit 25,000 mtCO2e or more per year,
regardless of any subsequent changes to the scope of EPA’s reporting requirements.
17 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
their GHG emissions to EPA in 2019 pursuant to the regulations in 40 C.F.R. Part 98, Subpart
W.18 The table also indicates the total methane emissions for each facility category. In 2019,
reported methane emissions from facilities that are subject to the methane charge totaled 78
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.
As discussed above, natural gas distribution facilities, which report emissions under Subpart W,
are not subject to the charge. According to EPA reporting data, 162 natural gas distribution
facilities emitted approximately 13 MMTCO2e of methane in 2019.19 As indicated in Table 1, if
these facilities were subject to the charge, this group would rank third in methane emissions.20
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)
Reported Methane
Number of Reporting
Emissions
Facility Type
Facilities
(MMTCO2e)
Onshore petroleum and natural gas production
485
44.2
Onshore petroleum and natural gas gathering and boosting
361
21.9
Onshore natural gas transmission compression
624
4.2
Onshore natural gas transmission pipeline
39
2.9
Natural gas processing
457
2.9
Offshore petroleum and natural gas production
141
1.5
Underground natural gas storage
50
0.6
Liquefied natural gas import and export equipment
10
0.1
Liquefied natural gas storage
5
0.001
Total
2,172
78.3
Source: Prepared by CRS; data from EPA Greenhouse Gas Reporting Program, Facility Level Information on
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
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
(GWP). GWP is an index that allows comparisons of the heat-trapping ability of different gases over a period of
time, typically 100 years. A 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.
18 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
(COVID-19) pandemic. In 2020, the reported emissions comparable to those in Table 1 were 69.4 MMTCO2e, 11%
lower than those in 2019.
19 EPA Greenhouse Gas Reporting Program, Facility Level Information on Greenhouse Gases Tool (FLIGHT),
https://ghgdata.epa.gov.
20 In addition, the methane fee does 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.
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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
covers. When EPA issued its final rule promulgating the Subpart W reporting regulations in
2010,21 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
decreasing the reporting threshold to 10,000 mtCO2e would increase the emissions coverage to
91%.22 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
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
petroleum and natural gas systems are covered by the GHGRP.”23
As a point of reference, Table 2 lists the methane emission estimates from EPA’s emission
inventory for the petroleum and natural gas system activities that match the applicability of the
IRA methane charge.24 As 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
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
that methane emissions in these sectors are 60% higher than the estimates in EPA’s inventory.25
Table 2. EPA GHG Emission Inventory Estimates of Methane Emissions from
Petroleum and Natural Gas and Systems (2019)
Million Metric Tons CO2e
Activity
Methane Emissions
Total onshore petroleum and natural gas production
84.7
Onshore natural gas production
52.0
Onshore petroleum production
32.7
Total offshore petroleum and natural gas production
5.8
Offshore natural gas production
0.8
Offshore petroleum production
5.0
Natural gas gathering and boosting
40.9
Natural gas processing
12.4
Natural gas transmission and storage
37.0
Total of above activities
180.8
21 EPA, “Mandatory Reporting of Greenhouse Gases: Petroleum and Natural Gas Systems,” Final Rule, 75 Federal
Register 74458, November 30, 2010 (hereinafter, 2010 Final Rule).
22 See Table 7B in 2010 Final Rule.
23 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/
viewpage.action?pageId=189038686.
24 For example, methane emissions from natural gas distribution are not included in the table, as they are not subject to
the fee.
25 Ramon Alvarez et al., “Assessment of Methane Emissions from the U.S. Oil and Gas Supply Chain,”
Science, June 2018.
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Source: Prepared by CRS; data from EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019, 2021,
Table 3-38 and Table 3-63, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-
1990-2019.
In IRA, the scope of emissions subject to the charge is based on (1) the facility’s reported
emissions under EPA’s GHGRP, as described above, and (2) an emissions threshold that varies by
facility type.
For petroleum and natural gas production facilities, the charge applies only to the
number of reported tons of methane that exceed 0.2% of the natural gas sent to
sale from such a facility.
For nonproduction facilities, such as gathering and boosting facilities, the charge
applies to methane emissions that exceed 0.05% of the natural gas sent for sale
from the facility.
For natural gas transmission facilities, the charge applies to methane emissions
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
facilities without being subject to the charge, thus decreasing the amount of emissions reported
under the GHGRP that are subject to the charge. Table 3 compares the actual reported 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 most of the
methane emissions) with the emissions that are subject to the methane charge at these facilities.
As the table indicates, when the thresholds are applied, the methane emissions 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
Reported Methane Emissions
Subject to Charge After
Facility Type
Reported Methane Emissions
Applying Emissions Threshold
Onshore petroleum and natural gas
44.2
27.2
production
Onshore petroleum and natural gas
21.9
15.6
gathering and boosting
Total
66.1
42.8
Source: 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
barrels of oil) from EPA Envirofacts database, customized search of petroleum and natural gas systems, using
“facility overview” dataset.
Notes: 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
then subtracted from the reported methane emissions. The remaining emissions are subject to the charge. For
some facilities, the threshold application resulted in these facilities not having any methane emissions subject to
the charge.
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
revenue that the methane charge will generate over time. CBO’s estimated revenue by fiscal year
is provided in the first row of Table 4. CBO’s analysis does not provide an estimate of methane
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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 net revenue
estimates, the second row includes an estimate of gross revenue from the methane charge.26 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). 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
$850 mil ion
$1,350 mil ion
$1,400 mil ion
$1,200 mil ion
$1,050 mil ion
$500 mil ion
Estimate (Net)
Estimate of Gross
$1,133 mil ion
$1,800 mil ion
$1,867 mil ion
$1,600 mil ion
$1,400 mil ion
$667 mil ion
Revenue from
Methane Charge
Methane Charge
$900
$1,200
$1,500
$1,500
$1,500
$1,500
(dol ars per metric
ton of methane)
Estimated Methane
1.3
1.5
1.2
1.1
0.9
0.4
Emissions Subject to
the Charge (mil ion
metric tons methane)
Estimated Methane
31
38
31
27
23
11
Emissions Subject to
the Charge (mil ion
metric tons CO2e)
Source: 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/
58366. Gross revenues are net revenues multiplied by 1.25. In the above estimates, the revenue col ected in
FY2026 accounts for methane emissions in calendar year 2024, during which the methane charge is $900 per
metric ton of methane; the revenue col ected in FY2027 accounts for methane emissions in calendar year 2025,
during which the methane charge is $1,200 per metric ton of methane. Subsequent fiscal year col ections involve
a methane charge of $1,500 per metric ton of methane.
Rate of Charge
The methane emissions charge in IRA starts in calendar year 2024 at $900 per metric ton of
methane, increases to $1,200 in 2025, and increases to $1,500 in 2026. The charge remains at
$1,500 in subsequent years. Table 5 indicates the value of the methane charge rates in mtCO2e,
the measure commonly used in carbon tax and emission charge proposals. The methane charge
26 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
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
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.”
CBO, The Role of the 25 Percent Revenue Offset in Estimating the Budgetary Effects of Legislation, 2009,
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
proposals.27
Table 5. Methane Charge Rates
Methane Charge Measure
2024
2025
2026
After 2026
Dol ars per metric ton of CH4 emissions
$900
$1200
$1500
$1500
Dol ars per metric ton of CO2 equivalent
$36
$48
$60
$60
Source: Prepared by CRS; dol ars per metric ton of CO2 equivalent calculated using a global warming potential
(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
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
methane emissions from the same categories of new and existing facilities that are subject to the
IRA methane charge.28 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) will “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 will 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
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.
Selected factors include the following:
27 For more information, see CRS Report R45472, Market-Based Greenhouse Gas Emission Reduction Legislation:
108th Through 117th Congresses, by Jonathan L. Ramseur.
28 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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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
petroleum and natural gas systems provides an economic incentive for facilities
to modify their equipment and operations in order to avoid paying the charge.
Economic theory suggests facilities will likely find ways to reduce onsite
methane emissions until the costs associated with these changes reach the level of
the charge. At that point, facilities will pay the charge for the remaining
emissions. The degree to which facilities make such changes will likely be based
on site-specific economic conditions.
Funding for Technological Improvements. The Inflation Reduction Act
includes supplemental appropriations of $850 million to 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. The act also includes supplemental appropriations of $700
million for “marginal conventional wells” for the same purposes. These funds
may lead to methane reductions at oil and natural gas facilities, thus affecting the
impact of the charge.
Other IRA Climate and Energy Provisions. IRA includes a range of climate
and energy-related provisions that will likely affect the portfolio of fuels and
sources of energy that are used in various economic sectors: electricity,
transportation, and industry.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/.
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Disclaimer
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under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
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Congressional Research Service
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