Thanks to Manchin, IRA’s Methane Fee on Big Oil Is Riddled With Massive Holes

Yves here. It was pretty obvious that Manchin was not signing up to the IRA out of the goodness of his heart. Now we have more detail about the dirty-energy-favoring fine print, here on methane penalty fakery.

By Jake Johnson. Originally published at Common Dreams

The newly enacted Inflation Reduction Act contains the world’s first-ever fee on methane, a powerful greenhouse gas believed to be responsible for roughly 30% of global temperature rise since the Industrial Revolution.

But analysts and climate advocates fear that the fee, which is aimed at incentivizing U.S. fossil fuel companies to stop deliberately spewing the gas into the atmosphere, will have a muted impact on rapidly rising methane emissions given that 60% of the oil and gas industry is exempt from the penalty.

Reuters reported earlier this month that thanks to carveouts won by Sen. Joe Manchin (D-W.Va.)—the fossil fuel industry’s top ally in the Senate Democratic caucus and the chamber’s leading recipient of oil and gas donations—the fee “only applies to companies that emit 25,000 metric tons of CO2 equivalent per year,” including “a small number of the largest oil companies and independent producers.”

“In another concession made to Manchin, oil and gas companies that comply with the Environmental Protection Agency’s forthcoming methane rules due later this year would also be exempted from the fee. The rules require companies to upgrade equipment, monitor leaks, and clean them up,” the outlet noted. “The bill would also exempt distribution facilities that bring natural gas to homes and businesses, offer exemptions to some pipelines and gathering facilities that sell volumes of gas below a certain threshold, and give industry nearly $1.5 billion in financial incentives to clean up their methane.”

Responding to the slew of exemptions in the law, Peter Hart of Food and Water Watch tweeted that “a certain type of climate wonk gets really excited about things like a ‘methane fee.'”

“The one in the IRA was weakened so that it applies to basically no one,” he observed.

E&E News pointed specifically to Cheniere Energy’s Sabine Pass facility, the largest liquefied natural gas (LNG) terminal in the U.S. by volume, as an example of the IRA’s shortcomings on methane.

“Sabine Pass reported methane emissions equivalent of nearly 30,000 tons of carbon dioxide in 2020,” E&E Newsnoted. “At first glance, the Southwestern Louisiana terminal would appear to be subject to the fee, which would only apply to facilities with annual emissions in excess of 25,000 tons.”

“But a second provision could potentially allow the Sabine Pass to avoid paying a penalty,” the publication added. “Only LNG facilities with a leakage rate in excess of .05 percent of total gas sales are subject to the fee.”

Methane is more than 80 times more potent at heating the planet than carbon dioxide over a 20-year period, and experts have characterized reining in emissions of the gas as “the biggest opportunity to slow warming between now and 2040.”

But it’s an opportunity that world leaders, particularly those of the rich nations most responsible for the climate crisis, have yet to seize. According to figures released by the National Oceanic and Atmospheric Administration (NOAA) in April, 2021 saw a record annual increase in atmospheric methane levels—beating the previous record set just a year earlier.

“Our data show that global emissions continue to move in the wrong direction at a rapid pace,” NOAA Administrator Rick Spinrad said at the time. “We can no longer afford to delay urgent and effective action needed to address the cause of the problem—greenhouse gas pollution.”

Because of its severe limitations, the IRA’s methane fee is unlikely to put a serious dent in U.S. methane emissions, which are fueled primarily by pipelines and other oil and gas industry operations.

The fee begins in 2024 at $900 per metric ton of methane and rises to $1,500 by 2026.

Writing for The American Prospect last week, Robert Hitt noted that the fee “only covers 40% of the methane emissions produced by the oil and gas industry, and the companies that are covered report their own emissions.”

“Many firms already undercount their emissions to greenwash their operations; the fee gives them another reason to fudge numbers,” Hitt warned.

Hitt went on to emphasize that “an IRA provision requiring revision of EPA emission reporting requirements, and new EPA rules already in the works, may be able to address these shortcomings to give the fee real teeth.”

“But as things stand, many smaller players in the oil and gas industry won’t have to pay any excess methane fee,” Hitt wrote. “It will only apply to facilities that self-report more than the equivalent of 25,000 metric tons of carbon dioxide, leaving the majority of methane emissions untouched.”

Print Friendly, PDF & Email


  1. Solarjay

    It’s not just Manchins holes, it’s Schumer, Biden and all the Dems.

    When you dump a last minute bill, the holes are on purpose

    And these are just the holes now, over time it’s going to get watered down more and more. Thinking the Dodd/frank bill.

    1. BeliTsari

      This, in addition to, and cherry-picked away from an exponential “up-tick” in fracking, cracking, transportation, export & locking new customers into quick-to-kick/re-re-frack SURE to leak, eventually FAIL & impossible to plug lethal new wells (I’ve mentioned, Manhattan’s UWS laterals/ tie-ins REQUIRED to move DNC superdelegate owners’ carbon footprint 140mi west into Pennsylvania?)

  2. digi_owl

    Not bringing anything to the discussion, but i can’t stop reading that acronym as being about the Irish Republican Army.

  3. lincoln

    Mancin agreed to support the Inflation Reduction Act exactly one day before the Bureau of Economic Analysis released its second quarter 2022 GDP numbers. These numbers showed the U.S. economy declined for two quarters in a row, which is a common indicator of recession. Part of this GDP data showed a third quarterly decline in a row of government consumption and investment at the federal, state, and local levels.

    My guess is that congress received advanced notice a week or so earlier, and decided to pump up government spending ASAP to try and avert a third consecutive quarterly GDP decline. Once the political will to get this done materialized, then pork and earmarks and horse trading soon followed.

  4. Karl

    One commenter here suggests that this provision will just get watered down in the future. I suspect the opposite will occur because the climate problem is getting worse. If so, perhaps the greatest benefit of this fee is to serve as a strong signal to the industry that methane leaks are on the radar and bigger fees are coming.

    I suspect that the leaks from traditional oil and gas production are a relatively small portion of the total within the U.S. (due to such big contributors as fracking, agriculture, etc.).

    Most associated gas from primary production isn’t leaked but flared, which produces a huge amount of CO2. So, when this is added to the carbon load, is oil or gas that much less impactful than coal per net BTU?

    All in all, it’s clear that the public (and hence their representatives) don’t know what to do besides cosmetic measures. Probably our pols’ greatest fear is breaking the economy if fees are as high as they need to be (given the “social cost of carbon”). Sadly, they are willing to break the economy over Ukraine. What a mess we’re in!

    1. Telee

      Your suspicion that leaks from oil and gas production is small is not necessarily true. Leaks have been detected at production sites and a collection facilities. The estimate is that 2 to 3 percentage of the methane produced are leaks. In addition, over relatively short periods of time over 30% of capped wells leak in spite of industry claims. The question is that after companies cap wells where are they. Climate change itself is causing methane leaks from natural sources.

  5. Susan the Other

    From the graft to the undetected leaks (nothing to see here) this is probably the best reason to nationalize gas and oil. The energy companies cannot afford to cleanup their methane and other pollution – so they are socializing costs all the way. So just nationalize them. If nationalizing them is really too big a political hurdle for now (it shouldn’t be because the writing is all over the wall) then it would probably be cheaper to simply pay for the methane cleanup and monitoring and then there will be no question. Just charter a permanent government project to upgrade the equipment to detect leaks and even fund the fixes. And put a cap on their profits. The natgas pipes leak the entire length. I’ve been wondering if all those thousands of hidden leaks ( think Porterville) might not be part of the exponentiation of wildfires.

  6. Lodger

    Energy czar John Kerry has said US efforts are useless with India and China opening new coal plants every couple of weeks or so. Of course he wants to plunge ahead anyway, spending hundreds of billion he knows will go to waste. So this is not really about climate change, it is to promote elitist globalism. Note how eager they are to destroy the. US with open borders.
    China, India etc. will continue to build coal plants because they need them. Climate change will be dealt with like problems through the centuries.That is, with human adaptation and technological innovation.
    There have been many predictions of climate disaster over the years, including global cooling AND global warming. None have come true.

    1. John Steinbach

      “Note how eager they are to destroy the. US with open borders.” The Monroe Doctrine, support of death squads, NAFTA/CAFTA, coups, School of the Americas… these are the drivers of cross border migration, One of the ironies of the “immigration crisis” is that for most of the 20th century the US agricultural economy was dependent on migrant labor. (My first job back in 1963 was working on a truck farm with Braceros in southern Michigan.) When the US began criminalizing cross border migration in the 80s, it became more and more difficult and dangerous for migrants to return home each winter, thus precipitating the “crisis.”

      “There have been many predictions of climate disaster over the years, including global cooling AND global warming. None have come true.” Seriously…

Comments are closed.