Build Back Better Act Methane Emissions Charge: In Brief
Congressional research reportDec 14, 2021
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Build Back Better Act Methane Emissions
Charge: In Brief
December 14, 2021
Congressional Research Service
https://crsreports.congress.gov
R46988
Build Back Better Act Methane Emissions Charge: In Brief
Contents
Introduction ..................................................................................................................................... 1
U.S. Methane Emissions and Sources ............................................................................................. 2
Build Back Better Act Methane Charge .......................................................................................... 3
Scope and Applicability ............................................................................................................ 3
Rate of Charge........................................................................................................................... 9
Selected Factors Affecting the Scope and Impact of the Methane Charge .................................... 10
Figures
Figure 1. U.S. Total GHG Emissions by Gas and Sources of Methane Emissions ......................... 3
Figure 2. Petroleum and Gas Entities Subject to EPA’s GHG Emission Reporting
Program ........................................................................................................................................ 5
Tables
Table 1. Number of Reporting Facilities and Methane Emissions from Petroleum and
Natural Gas System Categories Initially Subject to the Methane Charge in H.R. 5376 .............. 6
Table 2. EPA GHG Emission Inventory Estimates of Methane Emissions from Petroleum
and Natural Gas and Systems (2019) ........................................................................................... 7
Table 3. Estimate of Methane Emissions Subject to Charge After Applying Emissions
Thresholds (Based on 2019 Data) ................................................................................................ 8
Table 4. Estimate of Methane Emissions Subject to the Charge Based on CBO’s Cost
Estimate Analysis ......................................................................................................................... 9
Table 5. Methane Charge Rates ..................................................................................................... 10
Contacts
Author Information......................................................................................................................... 11
Build Back Better Act Methane Emissions Charge: In Brief
Introduction
On November 19, 2021, the House passed the Build Back Better Act (H.R. 5376, also referred to
as the budget reconciliation bill). Among other provisions, the bill includes a charge on methane
emissions from selected entities in the oil and gas industry.1 The charge would apply only to
methane emissions from specific types of facilities that are required to report their greenhouse gas
(GHG) emissions to the Environmental Protection Agency’s (EPA’s) Greenhouse Gas Emissions
Reporting Program (GHGRP). The charge would start at $900 per metric ton of methane,
increasing to $1,500 after two years, which equates to $36 and $60 per metric ton of carbon
dioxide equivalent, respectively. If enacted, this charge would be the first time the federal
government would directly impose a charge, fee, or tax on GHG emissions.2
In recent months, the methane charge proposal has received considerable attention from Members
and a range of stakeholders. According to some analyses, the methane charge would account for a
considerable percentage of the estimated GHG reductions that could be achieved by the Build
Back Better Act.3 Some groups have raised concerns about economic impacts resulting from the
methane charge, including impacts on natural gas prices.4 Some policymakers are concerned
about the charge in the context of EPA’s proposed regulations to address methane emissions from
the same categories of new and existing facilities that would be subject to the methane charge.5
This report discusses the scope and applicability of the Build Back Better Act methane charge.
The first section of this report provides background about methane emissions in the United States.
The second section discusses the scope and applicability of the methane charge and its rate
structure. The last section includes selected factors that may play a role in affecting the scope of
the charge and its potential impacts.
1 In earlier versions of the bill, this methane charge was called a methane “fee.”
2 For almost 20 years, some Members have put forth various legislative proposals which would attach a price to GHG
emissions through carbon taxes, emission fees, or cap-and-trade programs. For more information, see CRS Report
R45472, Market-Based Greenhouse Gas Emission Reduction Legislation: 108th Through 117th Congresses, by
Jonathan L. Ramseur.
3 See, for example, Megan Mahajan and Robbie Orvis, Modeling the Infrastructure Bills Using the Energy Policy
Simulator, Energy Innovation: Policy and Technology LLC, October 2021, https://energyinnovation.org/publication/
modeling-the-infrastructure-bills-using-the-energy-policy-simulator/; Jeffrey Rissman, “Benefits of the Build Back
Better Act’s Methane Fee,” Energy Innovation: Policy and Technology LLC, October 2021,
https://energyinnovation.org/wp-content/uploads/2021/10/Benefits-of-the-Build-Back-Better-Act-Methane-Fee.pdf;
Princeton University, Rapid Energy Policy Evaluation and Analysis Toolkit (REPEAT), “Addendum to Preliminary
Report: The Climate Impact of Congressional Infrastructure and Budget Bills,” November 2021,
https://repeatproject.org/.
4 See, for example, American Gas Association et al., Letter to Congressional Leaders, September 2021,
https://www.aga.org/globalassets/letter-to-congress-on-methane-fees-090721_final.pdf; Eweline Czapla, “Methane
Fees for Petroleum and Natural Gas Systems,” American Action Forum, November 2021,
https://www.americanactionforum.org/insight/methane-fees-for-petroleum-and-natural-gas-systems/; Americans for
Tax Reform, “Dem Reconciliation Bill Contains $8 Billion Home Heating Tax,” November 2021, https://www.atr.org/
dem-reconciliation-bill-contains-8-billion-home-heating-tax.
5 EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for
Existing Sources: Oil and Natural Gas Sector Climate Review,” 86 Federal Register 63110, November 15, 2021. For
more background on these issues, see CRS Report R42986, Methane and Other Air Pollution Issues in Natural Gas
Systems, by Richard K. Lattanzio.
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Build Back Better Act Methane Emissions Charge: In Brief
U.S. Methane Emissions and Sources
Methane (or CH4) is the primary component of natural gas, which can be used as either a fuel or
as a feedstock for the chemical industry.6 Natural gas is generally produced from geologic
formations in the ground through drilling and extraction activities by the oil and gas industry. As
natural gas travels through the interconnected systems of exploration, production, processing,
storage (sometimes), and transmission, that deliver natural gas from the wellhead to the
consumer, methane emissions are released into the atmosphere in a variety of ways, including
intentional venting from equipment (e.g., pneumatic devices);7
unintentional equipment leaks, worker error, or malfunctions;
routine maintenance of equipment; and
flaring (burning) of excess natural gas at a petroleum production site, which can
result in both uncombusted methane and carbon dioxide (CO2) emissions.
Methane is a potent GHG. When averaged over a 100-year time period—the time period often
used in annual GHG inventories—methane’s global warming potential (GWP) is 25 times greater
than that of an equivalent mass of CO2.8 Over a 20-year time period, methane’s GWP is 72 times
greater than that of CO2.9 Due to methane’s shorter-term climate impacts, scientists contend that
“methane mitigation [is] one of the best opportunities for reducing near term [global] warming.”10
As illustrated in Figure 1, methane emissions in the United States accounted for 10% of total
GHG emissions in 2019 (the most recent year of comprehensive GHG data).11 The figure
identifies the range of sources that produced these methane emissions. Methane emissions from
enteric fermentation (e.g., in livestock)12 accounted for the largest amount, followed by emissions
from natural gas systems. If EPA’s estimates of methane emissions from natural gas and
petroleum systems were grouped together, they would account for the largest source of methane
emissions, approximately 3% of total U.S. GHG emissions in EPA’s inventory.
6 For more information, see CRS In Focus IF10752, Methane Emissions: A Primer, by Richard K. Lattanzio.
7 Methane emissions from pneumatic devices have been one of the largest sources of vented methane emissions from
the industry. See EPA, Options For Reducing Methane Emissions From Pneumatic Devices In The Natural Gas
Industry, 2006, https://www.epa.gov/sites/default/files/2016-06/documents/ll_pneumatics.pdf.
8 Global warming potential (GWP) is an index that allows comparisons of the heat-trapping ability of different gases
over a period of time, typically 100 years. Consistent with international GHG reporting protocols, EPA’s most recent
GHG inventory (April 2021) uses the GWP values presented in the Intergovernmental Panel on Climate Change
(IPCC) 2007 Fourth Assessment Report. In this report and EPA’s inventories, a metric ton of methane equates to 25
metric tons of CO2 when averaged over a 100-year time frame. The IPCC has since updated the 100-year GWP
estimates, with some increasing and some decreasing. For example, the IPCC 2013 Fifth Assessment Report reported
the 100-year GWP for methane as ranging from 28 to 36.
9 EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019, 2021, Annex 6, Table A-238,
https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2019.
10 EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for
Existing Sources: Oil and Natural Gas Sector Climate Review,” 86 Federal Register 63110, November 15, 2021. To
support this argument, EPA cites statements from the Intergovernmental Panel on Climate Change (IPCC), Sixth
Assessment Report, 2021, https://www.ipcc.ch/report/ar6/wg1/#SPM.
11 EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019, 2021, Table ES-2, https://www.epa.gov/
ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2019.
12 Enteric fermentation refers to the normal digestive process in ruminant animals, such as cattle, during metabolism
and digestion, resulting in methane emissions. For more information, see CRS In Focus IF11404, Greenhouse Gas
Emissions and Sinks in U.S. Agriculture, by Genevieve K. Croft.
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Build Back Better Act Methane Emissions Charge: In Brief
Figure 1. U.S. Total GHG Emissions by Gas and Sources of Methane Emissions
2019 Emission Estimates from EPA Inventory
Source: Prepared by CRS; emissions data from EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–
2019, 2021, Table ES-2, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks1990-2019.
EPA produces the GHG emissions estimates in its annual inventories using commonly accepted
emission factors and activity levels to calculate aggregate estimates for all source categories. In
recent years, the emission estimates for the natural gas and petroleum system categories have
received scrutiny from a range of stakeholders. Some have put forth competing—and sometimes
conflicting—estimates.13
Build Back Better Act Methane Charge
Scope and Applicability
The Build Back Better Act methane charge would apply to methane emissions from specific types
of facilities in the petroleum and natural gas industry that, under current regulations, are required
to report their GHG emissions, including methane, to EPA’s GHGRP. Since 2011, EPA’s GHGRP
has collected annual emissions data from nearly 8,000 large industrial facilities and other sources
in the United States.14 The GHGRP requirements are codified in 40 C.F.R. Part 98. Subpart W
includes the detailed requirements for petroleum and natural gas facilities.
13 See, for example, Jeffrey S. Rutherford et al., “Closing the Methane Gap in US Oil and Natural Gas Production
Emissions Inventories,” Nature Communications, 2021; and Ramon Alvarez et al., “Assessment of Methane Emissions
from the U.S. Oil and Gas Supply Chain,” Science, June 2018. For more discussion, see CRS Report R42986, Methane
and Other Air Pollution Issues in Natural Gas Systems, by Richard K. Lattanzio.
14 For more information about the GHGRP, see CRS In Focus IF11754, EPA’s Greenhouse Gas Reporting Program,
by Angela C. Jones.
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Build Back Better Act Methane Emissions Charge: In Brief
The act’s methane charge would apply only to a subset of the petroleum and natural gas system
facilities that are required to report GHG emissions in Part 98, Subpart W. The facilities that
would be subject to the charge include the following industry operations:
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;15 and
onshore natural gas transmission pipelines.
Figure 2 illustrates the petroleum and natural gas system entities that are required to report their
GHG emissions in EPA’s GHGRP. The entities with red labels are subject to Subpart W reporting
requirements. Not all of the entities that report emissions under Subpart W are subject to the
methane charge. Two facility categories that report emissions under Subpart W would not be
subject to the methane charge: (1) natural gas distribution facilities and (2) facilities EPA
describes as “other oil and gas combustion facilities.”16
15 According to EPA, “gathering and boosting stations receive natural gas from production sites and transfer it, via
gathering pipelines, to transmission pipelines or processing facilities…. Boosting processes include compression,
dehydration, and transport of gas to a processing facility or pipeline.” EPA, Inventory of U.S. Greenhouse Gas
Emissions and Sinks: 1990–2019, p. 3-90, 2021.
16 EPA states these are “stationary fuel combustion emissions from facilities that are associated with the petroleum and
natural gas industry, but that do not report process emissions from any of the above source categories.” EPA, 20112020 Greenhouse Gas Reporting Program Sector Profile: Petroleum and Natural Gas Systems, 2020,
https://www.epa.gov/ghgreporting/ghgrp-petroleum-and-natural-gas-systems-sector-profile.
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Build Back Better Act Methane Emissions Charge: In Brief
Figure 2. Petroleum and Gas Entities
Subject to EPA’s GHG Emission Reporting Program
Source: Reproduced from EPA, “GHGRP and the Oil and Gas Industry,” https://www.epa.gov/ghgreporting/
ghgrp-and-oil-and-gas-industry.
Note: RY refers to reporting year for EPA’s GHGRP.
The reporting requirements in Subpart W apply to facilities that emit 25,000 metric tons of CO2
equivalent (mtCO2e) or more per year.17 H.R. 5376 would direct EPA to revise that threshold
(within two years) to 10,000 mtCO2e. This change would increase the number of facilities subject
to EPA’s reporting requirements and thus the number of facilities (and emissions) subject to the
methane charge.
Table 1 identifies the number of petroleum and natural gas facilities by category that reported
their GHG emissions to EPA in 2019 pursuant to the regulations in 40 C.F.R. Part 98, Subpart
17 Typically, GHG emissions are measured in mtCO e because GHGs vary by global warming potential.
2
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Build Back Better Act Methane Emissions Charge: In Brief
W.18 The table also indicates the total methane emissions for each facility category. In 2019,
reported methane emissions from facilities that would be subject to the methane charge totaled 78
million mtCO2e (MMTCO2e). In 2019, onshore production (44.2 MMTCO2e) and onshore
gathering and boosting (21.9 MMTCO2e) accounted for 84% of these reported emissions.
As discussed above, natural gas distribution facilities, which report emissions under Subpart W,
would not be subject to the charge. According to EPA reporting data, 162 natural gas distribution
facilities emitted approximately 13 MMTCO2e of methane in 2019.19 As indicated in Table 1, if
these facilities were subject to the charge, this group would rank third in methane emissions.20
Table 1. Number of Reporting Facilities and Methane Emissions from Petroleum and
Natural Gas System Categories Initially Subject to the Methane Charge in H.R. 5376
Data for 2019; emissions in million metric tons of CO2 equivalent (MMTCO2e)
Facility Type
Number of Reporting
Facilities
Reported Methane
Emissions
(MMTCO2e)
Onshore petroleum and natural gas production
485
44.2
Onshore petroleum and natural gas gathering and boosting
361
21.9
Onshore natural gas transmission compression
624
4.2
Onshore natural gas transmission pipeline
39
2.9
Natural gas processing
457
2.9
Offshore petroleum and natural gas production
141
1.5
Underground natural gas storage
50
0.6
Liquefied natural gas import and export equipment
10
0.1
Liquefied natural gas storage
5
0.001
Total
2,172
78.3
Source: Prepared by CRS; data from EPA Greenhouse Gas Reporting Program, Facility Level Information on
Greenhouse Gases Tool (FLIGHT), https://ghgdata.epa.gov.
Notes: The methane charge applies to facilities required to report under 40 C.F.R. Part 98, Subpart W. The
reporting requirements apply to facilities that emit 25,000 metric tons of CO2 equivalent (mtCO2e) or more per
year. Typically, GHG emissions are measured in mtCO2e because GHGs vary by global warming potential
(GWP). GWP is an index that allows comparisons of the heat-trapping ability of different gases over a period of
time, typically 100 years. H.R. 5376 would direct EPA (not later than two years after enactment) to issue a
rulemaking to lower the reporting threshold to 10,000 mtCO2e. This change would increase the number of
facilities subject to EPA’s reporting requirements and thus the number subject to the methane charge in H.R.
5376. A number of other facilities reported methane emissions (and other GHG emissions) under Subpart W
during these years, but these facilities would not be subject to the methane charge. These include 163 natural gas
distribution facilities: 162 facilities emitted 13 MMTCO2e of methane in 2019.
18 Although reported emissions are available for 2020, the 2019 emissions data arguably provide a more useful
indication of the magnitude of emissions than 2020 data due to impacts associated with the Coronavirus Disease 2019
(COVID-19) pandemic. In 2020, the reported emissions comparable to those in Table 1 were 69.4 MMTCO2e, 11%
lower than those in 2019.
19 EPA Greenhouse Gas Reporting Program, Facility Level Information on Greenhouse Gases Tool (FLIGHT),
https://ghgdata.epa.gov.
20 In addition, the methane fee would not apply to emissions from facilities EPA describes as “other oil and gas
combustion facilities.” In 2019, 55 such facilities reported approximately 5,000 mtCO2e of methane.
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Build Back Better Act Methane Emissions Charge: In Brief
EPA’s GHGRP covers a subset of U.S. methane emissions from petroleum and natural gas
systems. It is uncertain what percentage of total emissions from this sector the reporting program
covers. When EPA issued its final rule promulgating the Subpart W reporting regulations in
2010,21 the agency estimated that the 25,000 mtCO2e reporting threshold would cover 85% of the
methane emissions from the reporting categories. In the 2010 rule, EPA also estimated that
decreasing the reporting threshold to 10,000 mtCO2e would increase the emissions coverage to
91%.22 These estimates appear to be out of date. EPA stated in 2019 that the agency “does not
have an exact estimate of what percent of U.S. emissions are covered under petroleum and natural
gas systems at this time.… EPA will continue to analyze the emissions from reports as well as
linking the information to the US GHG Inventory to identify what fraction of emissions from
petroleum and natural gas systems are covered by the GHGRP.”23
As a point of reference, Table 2 lists the methane emission estimates for the petroleum and
natural gas system activities that would match the applicability of the methane charge.24As the
inventory estimates are intended to capture all of the methane emission in petroleum and natural
gas systems, the inventory estimates are higher. As mentioned above, some have argued that
EPA’s inventory estimates of methane emissions from these systems have underestimated the
magnitude of emissions. For example, a 2018 study estimated that methane emissions in these
sectors are 60% higher than the estimates in EPA’s inventory.25
Table 2. EPA GHG Emission Inventory Estimates of Methane Emissions from
Petroleum and Natural Gas and Systems (2019)
Million Metric Tons CO2e
Activity
Methane Emissions
Total onshore petroleum and natural gas production
84.7
-Onshore natural gas production
52.0
-Onshore petroleum production
32.7
Total offshore petroleum and natural gas production
5.8
-Offshore natural gas production
0.8
-Offshore petroleum production
5.0
Natural gas gathering and boosting
40.9
Natural gas processing
12.4
Natural gas transmission and storage
37.0
Total of above activities
180.8
21 EPA, “Mandatory Reporting of Greenhouse Gases: Petroleum and Natural Gas Systems,” Final Rule, 75 Federal
Register 74458, November 30, 2010 (hereinafter, 2010 Final Rule).
22 See Table 7B in 2010 Final Rule.
23 EPA, Frequently Asked Questions, GHGRP, Subpart W, “What percentage of emissions from petroleum and natural
gas systems are reported under the GHGRP?” September 25, 2019, https://ccdsupport.com/confluence/pages/
viewpage.action?pageId=189038686.
24 For example, methane emissions from natural gas distribution are not included in the table, as they would not be
subject to the fee.
25 Ramon Alvarez et al., “Assessment of Methane Emissions from the U.S. Oil and Gas Supply Chain,”
Science, June 2018.
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Build Back Better Act Methane Emissions Charge: In Brief
Source: Prepared by CRS; data from EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019, 2021,
Table 3-38 and Table 3-63, https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks1990-2019.
In the Build Back Better Act, the scope of emissions subject to the charge would be based on (1)
the facility’s reported emissions under EPA’s GHGRP, as described above, and (2) an emissions
threshold that varies by facility type.
For petroleum and natural gas production facilities, the charge would apply only
to the number of reported tons of methane that exceed 0.2% of the natural gas
sent to sale from such a facility.
For nonproduction facilities, such as gathering and boosting facilities, the charge
would apply to methane emissions that exceed 0.05% of the natural gas sent for
sale from the facility.
For natural gas transmission facilities, the charge would apply to methane
emissions that exceed 0.11% of the natural gas sent for sale from the facility.
These thresholds effectively allow for some amount of methane to be released from these
facilities without being subject to the charge, thus decreasing the amount of emissions reported
under the GHGRP that would be subject to the charge. Table 3 compares the actual reported
emissions (in 2019) for onshore petroleum and natural gas production facilities and onshore
petroleum and natural gas gathering and boosting facilities (the two facility types that account for
most of the methane emissions) with the emissions that would be subject to the methane charge at
these facilities. As the table indicates, when the thresholds are applied, the methane emissions
subject to the charge decrease by about 35%.
Table 3. Estimate of Methane Emissions Subject to Charge After Applying Emissions
Thresholds (Based on 2019 Data)
Million Metric Tons CO2e
Facility Type
Reported Methane Emissions
Reported Methane Emissions
Subject to Charge After
Applying Emissions Threshold
Onshore petroleum and natural gas
production
44.2
27.2
Onshore petroleum and natural gas
gathering and boosting
21.9
15.6
Total
66.1
42.8
Source: Prepared by CRS; emissions data from EPA Greenhouse Gas Reporting Program Facility Level
Information on Greenhouse Gases Tool (FLIGHT), https://ghgdata.epa.gov; facility data (sales of natural gas and
barrels of oil) from EPA Envirofacts database, customized search of petroleum and natural gas systems, using
“facility overview” dataset.
Notes: To estimate the methane emissions potentially subject to the charge, CRS applied the relevant emissions
threshold (e.g., 0.2% for production facilities) to the natural gas or petroleum sales at each facility. This value was
then subtracted from the reported methane emissions. The remaining emissions would be subject to the charge.
For some facilities, the threshold application resulted in these facilities not having any methane emissions subject
to the charge.
In its cost estimate (“score”) of H.R. 5376, the Congressional Budget Office (CBO) provided
another estimate that may be informative. CBO estimated the revenue that the methane charge
would generate over time. CBO’s estimated revenue by fiscal year is provided in the first row of
Table 4. CBO’s analysis does not provide an estimate of methane emissions subject to the charge,
but Table 4 provides these estimates by applying CBO’s revenue estimate and the rate of the
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Build Back Better Act Methane Emissions Charge: In Brief
charge in the legislation. As CBO’s revenue estimates are net revenue estimates, the second row
includes an estimate of gross revenue from the methane charge.26 The annual gross revenue is
divided by the rate of the methane charge ($1,500) to produce annual estimates of methane
emissions (in metric tons of methane). The last row converts metric tons of methane into metric
tons of CO2e for comparison purposes.
Table 4. Estimate of Methane Emissions Subject to the Charge Based on CBO’s Cost
Estimate Analysis
FY2025
FY2026
FY2027
FY2028
FY2029
FY2030
FY2031
CBO Revenue
Estimate (Net)
$1.2 billion
$1.3 billion
$1.4 billion
$1.2 billion
$1.1 billion
$1.0 billion
$0.9 billion
Estimate of Gross
Revenue from
Methane Charge
$1.6 billion
$1.7 billion
$1.9 billion
$1.6 billion
$1.4 billion
$1.3 billion
$1.1 billion
Methane Charge
(dollars per metric
ton of methane)
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
$1,500
Estimated Methane
Emissions Subject to
the Charge (million
metric tons methane)
1.1
1.2
1.2
1.1
0.9
0.8
0.8
Estimated Methane
Emissions Subject to
the Charge (million
metric tons CO2e)
27
29
31
27
23
21
19
Source: Prepared by CRS; the data in the first row, “CBO Revenue Estimate (Net),” are from CBO, Summary of
Cost Estimate for H.R. 5376, the Build Back Better Act, November 18, 2021, https://www.cbo.gov/publication/57627.
Rate of Charge
The Build Back Better Act methane charge would start in 2023 at $900 per metric ton of methane,
increase to $1,200 in 2024, and increase to $1,500 in 2025. The charge would remain at $1,500 in
subsequent years.27 Table 5 indicates the value of the methane charge rates in mtCO2e, the
measure commonly used in carbon tax and emission charge proposals. The methane charge rates
below are comparable to the carbon tax and emission charge rates in recent legislative
proposals.28
26 CBO explains, “When excise taxes, customs duties, and other types of ‘indirect’ taxes are imposed on goods and
services, they tend to reduce income for workers or business owners in the taxed industry and for others throughout the
economy. Consequently, revenue derived from existing ‘direct’ tax sources—such as individual and corporate income
taxes and payroll taxes—will also be reduced. To approximate that effect, the Congressional Budget Office (CBO), the
Joint Committee on Taxation (JCT), and the Treasury Department’s Office of Tax Analysis (OTA) apply a 25 percent
offset when estimating the net revenue that legislation imposing some form of indirect tax is expected to generate.”
CBO, The Role of the 25 Percent Revenue Offset in Estimating the Budgetary Effects of Legislation, 2009,
https://www.cbo.gov/publication/20110.
27 Although the legislative text is not explicit, presumably the fees are per metric tons, as metric tons are the measure
used in EPA’s reporting program. Metric tons (tonnes) are the common unit of measure for GHG emissions. One
metric ton equals 1.1 short ton.
28 For more information, see CRS Report R45472, Market-Based Greenhouse Gas Emission Reduction Legislation:
108th Through 117th Congresses, by Jonathan L. Ramseur.
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Build Back Better Act Methane Emissions Charge: In Brief
Table 5. Methane Charge Rates
Methane Charge Measure
2023
2024
2025
After 2025
Dollars per metric ton of CH4 emissions
$900
$1200
$1500
$1500
Dollars per metric ton of CO2 equivalent
$36
$48
$60
$60
Source: Prepared by CRS; dollars per metric ton of CO2 equivalent calculated using a global warming potential of 25.
Selected Factors Affecting the Scope and Impact of
the Methane Charge
A range of factors could play a role in determining the scope of emissions subject to the methane
charge and its ultimate impacts on GHG emission levels and economic measures, such as natural
gas prices. A comprehensive analysis of these factors is beyond the scope of this report. Selected
factors include the following:
EPA Regulation of Petroleum and Natural Gas Systems. On November 15,
2021, EPA proposed regulations to address methane emissions from the same
categories of new and existing facilities that would be subject to the methane
charge.29 If finalized, these requirements would likely reduce methane emissions
from these facilities, thus affecting the scope and impact of the methane charge.
The degree to which the regulations would overlap with or complement the
methane charge would depend on the scope and applicability of the final
regulations.
Changes to Equipment or Operations. A charge on methane emissions from
petroleum and natural gas systems would provide an economic incentive for
facilities to modify their equipment and operations in order to avoid paying the
charge. Economic theory suggests facilities would likely find ways to reduce
onsite methane emissions until the costs associated with these changes reach the
level of the charge. At that point, facilities would pay the charge for the
remaining emissions. The degree to which facilities make such changes would
likely be based on site-specific economic conditions.
Funding for Technological Improvements. The Build Back Better Act would
include supplemental appropriations of $775 million to EPA to provide grants to
facilities subject to the methane charge for a range of objectives, including
“improving and deploying industrial equipment and processes” that reduce
methane emission. The funds could lead to methane reductions at oil and natural
gas facilities, thus affecting the impact of the charge.
29 EPA, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for
Existing Sources: Oil and Natural Gas Sector Climate Review,” 86 Federal Register 63110, November 15, 2021. For
more background on these issues, see CRS Report R42986, Methane and Other Air Pollution Issues in Natural Gas
Systems, by Richard K. Lattanzio.
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Build Back Better Act Methane Emissions Charge: In Brief
Changes to the Subpart W Reporting Requirements. The Build Back Better
Act would direct EPA to lower the reporting threshold from 25,000 mtCO2e to
10,000 mtCO2e. It is uncertain what percentage of facilities are currently covered
by the existing threshold and what percentage of additional facilities would be
covered by the lower threshold. In addition, the legislation directs EPA “to ensure
the reporting [is] based on empirical data and accurately reflect the total methane
emissions and waste emissions from the applicable facilities.” It is uncertain how
EPA would implement this directive and how it would affect reporting.
Author Information
Jonathan L. Ramseur
Specialist in Environmental Policy
Acknowledgments
Amber Wilhelm, CRS Visual Information Specialist, helped prepare the figures in this report.
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Congressional Research Service
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