On November 12, 2024, the Environmental Protection Agency (EPA) released the final “Waste Emissions Charge for Petroleum and Natural Gas Systems” rule, which applies to methane, the primary component of natural gas and a significant source of pollution when leaked, vented, or flared during oil and gas production. The oil and gas industry wastes approximately 220 million metric tons CO2e of methane annually, making it the third-largest industrial source of methane emissions in the U.S.­ Methane waste undermines our energy security, reduces federal revenue, deprives consumers of a valuable energy resource, and contributes to weather events like severe flooding or drought that impact communities nationwide.

Oil and gas operators in the U.S. vent (release) and flare (burn) billions of cubic feet of methane into the air every year, despite the availability of technologies that can capture this valuable resource. This rule requires the oil and gas industry to account for some of the costs associated with this waste, creating incentives to reduce methane emissions and capture more of this energy source.

Statement by Autumn Hanna, vice president of Taxpayers for Common Sense

“For too long, the oil and gas industry has been allowed to vent, flare, and leak methane during operations, wasting billions of dollars in valuable resources that could have been delivered to consumers. Methane, the largest component of natural gas, is an important energy source and one taxpayers can’t afford to see wasted. The methane emissions charge will help bring more natural gas to market, generate much needed revenue, and protect taxpayers and local communities from the long-term liabilities associated with methane emissions.”

Background

Oil and gas operators regularly flare, vent, and leak billions of cubic feet of natural gas. The oil and gas industry is the largest industrial source of methane emissions in the United States, with natural gas and petroleum systems responsible for one-third of all U.S. methane emissions.

On federal and tribal lands, TCS and Environmental Defense Fund estimated that approximately 163 billion cubic feet of natural gas was lost in 2019 alone, significantly exceeding the volumes operators self-reported. This wasted gas, valued at roughly $509 million, could have powered 2.2 million households for a year. This waste also translated to a combined $64 million shortfall in federal, tribal, and state royalty revenues.

Methane waste is not unique to federal and tribal lands and is particularly egregious in major oil and gas producing states like Texas and North Dakota. Around 1.7 billion dollars’ worth of gas was wasted in Texas in 2019, enough to meet the annual residential needs of the entire state twice over. North Dakota saw 680 million dollars’ worth of gas wasted in 2019, more than enough to power the entire state for a year.

To curb methane waste in the oil and gas industry, Congress created the Methane Emissions Reduction Program (MERP) in 2022. The MERP has three primary components: the waste emissions charge, over $1 billion in incentives for methane mitigation and monitoring, and updates to EPA greenhouse gas reporting requirements.

The waste emissions charge, also known as the WEC, imposes a fee of $900/ton of methane (rising to $1,500/ton in 2026) emitted above a set threshold. The fee only applies to facilities emitting over 25,000 metric tons of carbon dioxide equivalent (CO2e) annually, exempting small businesses. The fee is a modest step, affecting less than 15 percent of current methane waste and impacting fewer than 500 oil and gas facilities.

In our comments, TCS called on the Administration to increase program transparency and reduce the abuse of exemptions. This includes mandating detailed reporting, making this data publicly accessible, minimizing flaring under exemptions for “unreasonable delays,” and limiting abuse of exemptions for regulatory compliance.

As taxpayer advocates, we strongly support the waste emissions charge. Methane waste costs taxpayers and threatens fiscal responsibility. This rule will help protect taxpayers from both financial and environmental liabilities while generating much needed revenue.

Additional Resources

• The Methane Emissions Reduction Program (MERP): TCS factsheet on MERP, an initiative to reduce methane emissions in the petroleum and natural gas sectors.
• TCS Comments on Waste Emissions Charge: TCS comments on the proposed rule, “Waste Emissions Charge for Petroleum and Natural Gas System”.
• The Carrot and Stick Approach: TCS Weekly Wastebasket on the methane waste emissions charge and taxpayer costs of methane waste.
• Gas Giveaways II: Methane Waste on Federal Lands is Business as Usual: TCS report on the routine venting, flaring, and leaking of methane by oil and gas operators on federal lands.
• Paying the Price of Climate Change: TCS report on the taxpayer costs of climate change.