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Methane flare

The U.S. takes a big step forward in oil and gas methane reductions with the passage of the Inflation Reduction Act

August 22, 2022 Work Area: Methane

Deep inside the over 700 pages of text of the recently passed Inflation Reduction Act of 2022 (IRA) is a revolutionary provision to slash the waste of natural gas through methane pollution pricing. Known as the Methane Emissions Reduction Program (MERP), this program will establish a charge on natural gas that is wastefully polluted.   

The oil and natural gas industry is the leading industrial emitter of methane in the U.S., accounting for almost a third of emissions in 2020. Methane is responsible for about half of the current warming to date, but because of its short-lived nature, reducing it is the fastest way to slow global warming and avoid passing irreversible impacts like collapsing ice sheets. Quick reductions of methane are essential if we’re to stave off the worst impacts of climate change, and the MERP takes an important step forward in that regard in a way that complements forthcoming standards and guidelines from EPA (expected to be finished next spring) that will further reduce this harmful pollutant. 

What does the MERP do? At its core, the MERP requires EPA to impose a charge on oil and gas sources that are already required to report to EPA’s Greenhouse Gas Reporting Program (GHGRP), for any emissions those sources report above a threshold set by the bill. This charge begins with emissions reported in 2024 at $900/ton, increasing in 2025 to $1,200/ton before settling at $1,500/ton for emissions in 2026 and beyond. This is fantastic news for timely methane reductions because it incentivizes operators to clean up emissions in 2024, years before the earliest likely date the EPA rules would be fully implemented in the states. That is years of methane emissions from the nation’s largest emitters that we can significantly reduce. 

It also requires EPA to revise the GHGRP within two years to ensure that the reporting requirements, and thus the charge, are based on empirical data and accurately represent the methane emissions from the applicable facilities. Empirical data is important to account for all of the industry’s emissions – including the large emissions episodes that are frequently observed, but not accounted for in emission inventories or current GHGRP reports. This is an important step forward. 

Finally, the MERP complements the EPA methane rulemakings because it goes beyond the sources that will be covered by the EPA rule. For example, MERP applies to emissions from offshore production, which we do not believe will be covered by the standards for methane emissions EPA will issue next year. 

The ultimate result is that the MERP incentivizes methane reductions across a broad range of sources that, collectively, represent the highest sectoral methane emissions in the country, achieving deeper reductions than an EPA rule alone would achieve. Just as important, however, are the incentives the MERP establishes for operators to adopt controls at least two years earlier than they would otherwise be required, and the requirement that reported emissions will soon be based on empirical data. 

There is still room for improvement, and an urgent need for it. Regardless of how good these steps are, they do not do everything. EPA’s anticipated supplemental proposal must strengthen the leak detection and repair requirement by ensuring all facilities perform regular inspections. The Agency must also prohibit the wasteful act of routine flaring of associated gas.  

But today we should celebrate the groundbreaking achievement for methane abatement that the MERP represents and look forward to EPA’s supplemental proposal soon.  

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