August 29, 2022

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The Methane Emission Reduction Program of the Inflation Reduction Act

A Summary for Oil and Gas Operators

On August 16, President Biden signed the Inflation Reduction Act (IRA) into law. This comprehensive climate-change-focused energy policy is likely to bring lasting change to the energy and transportation markets. One section within it, the Methane Emission Reduction Program (Sec. 60113), aims to cut methane emissions through incentives and penalty fees.

The legislation allocates $850 billion in incentives until 2028 for methane mitigation and monitoring, including methane mitigation from conventional wells. The largest portion of this will help decommission oil and gas wells across the country. The program also includes notable investments in continuous monitoring and emissions reduction technologies.

The legislation introduces a methane waste emissions fee for owners and operators of applicable facilities (annual GHG emissions greater than 25,000 metric tons of CO2 equivalent) if their methane emissions exceed a threshold set by industry segment. The fee schedule is $900 per excess metric ton for 2024, $1,200 per excess metric ton for 2025, and $1,500 per excess metric ton for 2026 and beyond.

Affected facilities include the following:

  • 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
  • Onshore natural gas transmission pipeline.

Operations with emissions above the following thresholds will likely be affected:

  • 0.2% of the natural gas sent to sale or emissions over 10 metric tons per million barrels of oil sent to sale from such facility if no natural gas is sold for petroleum and natural gas producers
  • 0.05% of the natural gas sent to sale for nonproducing owners of gas system assets, including processing and gathering systems and liquified natural gas (LNG) terminal operators
  • 0.11% of the natural gas sent to sale for natural gas transmission system and storage operators

Now is the time for oil and gas operators across the value chain to clearly understand their methane footprints and understand how the measure could affect their operations. Before the 2024 implementation, operators should choose and begin pursuing a plan to reduce emissions—one that includes a consistent framework for deploying advanced technologies, engineering solutions, and process improvements to address methane emissions and compliance costs.

Geosyntec offers the following options to help operators comply with Section 60113:

  • Marginal Cost Abatement Curves prioritize emissions reductions projects on a cost/benefit basis using the externally established price of carbon emissions as the break-even point. This tool helps people make informed choices about which projects to pursue and in what order.
  • Emissions Management and Reduction Strategies are based on accurate measurements of greenhouse gas emissions and can be used to develop effective and comprehensive energy transition plans.
  • Fuels Switching Strategies help operators choose renewable energy sources most suited to their operations and successfully transition toward them. These strategies are based on accurate and nuanced understandings of energy consumption and on feasibility studies.

Learn more about how Geosyntec can help: https://geosyntec.com/markets/energy-transition
Get in touch: Amy Mifflin This email address is being protected from spambots. You need JavaScript enabled to view it., Lynn McGuire This email address is being protected from spambots. You need JavaScript enabled to view it., Rebecca Denney This email address is being protected from spambots. You need JavaScript enabled to view it.,  Hong Jin This email address is being protected from spambots. You need JavaScript enabled to view it.