Democrats’ latest version of their climate and social spending bill includes a fee on emissions of methane, a potent greenhouse gas, imposed on oil and gas operators.
It was unclear if the methane fee would make it into the package, given skepticism from centrist Democrats representing oil and gas states in both the House and Senate who argue that it’s a bad time to raise costs on fossil fuel producers when energy prices are surging across the world.
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But Democrats have modified the methane fee to accommodate concerns by providing $775 million in grants, rebates, and loans to help oil and gas operators comply with the fee, which would only be assessed on companies that waste a certain threshold of methane.
The fee would start at $900 a ton in 2023 and rise to $1,500 a ton in 2025. It would apply to methane emissions that exceeded 0.20% of gas sold.
The methane fee was included in the legislative text released by House Democrats on Thursday for the Build Back Better Act.
The legislation is supposed to be consistent with a $1.75 trillion framework of a reconciliation spending bill that President Joe Biden announced in the morning, which could provide the basis for an agreement among Democrats.
But the Biden framework did not mention a methane fee among a record $555 billion in provisions devoted to addressing climate change, mostly credits and incentives to boost clean energy.
It’s unclear if the Senate is on board with it.
Proponents of a methane fee say it’s the only measure remaining in the package targeting fossil fuels as opposed to just boosting clean energy as the rest of the bill does.
“It’s a very important part of our emission reduction commitment,” Rep. Jared Huffman of California previously told the Washington Examiner, referring to Biden’s pledge to cut U.S. emissions in half by 2030.
Methane, the main component in natural gas, traps more heat and has a more immediate effect on warming than carbon, although its emissions are relatively short lived in the atmosphere.
Environmental groups say methane leaks, which can happen purposely or accidentally during the production and transmission of gas through a pipeline, belie the industry’s attempt to advertise gas as a clean energy source that can help transition the grid off fossil fuels over time.
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But natural gas industry groups have called on Democrats to withdraw the methane fee, arguing it would be duplicative with new regulations on the pollutant expected to be proposed by the Environmental Protection Agency as soon as this week. It’s unclear if they will support the modification providing them hundreds of billions in subsidies to encourage compliance.
Liberal climate activists derided the new proposal as a handout to the fossil fuel industry.
