Inflation Reduction Act Methane Emissions Charge: In Brief

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Inflation Reduction Act Methane Emissions

Charge: In Brief

Updated August 29, 2022

Congressional Research Service

https://crsreports.congress.gov

R47206

SUMMARY

Inflation Reduction Act Methane Emissions

Charge: In Brief

On August 16, 2022, President Biden signed H.R. 5376 (P.L. 117-169), a budget reconciliation

measure commonly referred to as the “Inflation Reduction Act of 2022” (IRA). Among other

provisions, IRA includes a charge on methane emissions that is nearly identical to the methane

emissions charge in the House version of H.R. 5376, often referred to as the Build Back Better

Act, which passed the House on November 19, 2021. Methane (or CH4) is the primary

component of natural gas. When extracted from geologic formations or captured by other means,

it can be used as either a fuel or as a feedstock for the chemical industry.

R47206

August 29, 2022

Jonathan L. Ramseur

Specialist in Environmental

Policy

The emissions charge applies 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 starts at $900 per metric ton of methane, increasing to $1,500 after two years. This emissions

charge is the first time the federal government has directly imposed a charge, fee, or tax on GHG emissions.

Since its inclusion in the House-passed H.R. 5376, the methane charge proposal has received considerable attention from

Members and a range of stakeholders. For example, some groups have raised concerns about economic impacts resulting

from the methane charge, including impacts on natural gas prices. 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 are subject to 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. Selected factors include the following:



EPA Regulations 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 are

subject to the methane charge. The degree to which the regulations will affect the methane emissions

charge depends on the scope and applicability of the final regulations. In particular, IRA allows for an

exemption from the emissions charge if EPA regulations addressing methane emissions (1) are in effect in

all states, and (2) will “result in equivalent or greater emissions reductions as would be achieved” by the

November 2021 proposed rule. IRA directs EPA to determine whether future methane regulations meet

these conditions.



Changes to Equipment or Operations. A charge on methane emissions from petroleum and natural gas

systems provides an economic incentive for facilities to modify their equipment and operations in order to

avoid paying the charge. The degree to which facilities make such changes will likely be based on sitespecific economic conditions.



Funding for Technological Improvements. IRA includes supplemental appropriations of $850 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 act also

includes supplemental appropriations of $700 million for “marginal conventional wells” for the same

purposes. These funds could lead to methane reductions at oil and natural gas facilities, thus affecting the

impact of the charge.



Other IRA Climate and Energy Provisions. IRA includes a range of climate and energy-related

provisions that will likely affect the portfolio of fuels and sources of energy that are used in various

economic sectors: electricity, transportation, and industry.

Congressional Research Service

Inflation Reduction Act Methane Emissions Charge: In Brief

Contents

Introduction ..................................................................................................................................... 1

U.S. Methane Emissions and Sources ............................................................................................. 2

Inflation Reduction Act Methane Emissions Charge....................................................................... 3

Scope and Applicability ............................................................................................................ 3

Rate of Charge........................................................................................................................... 9

Potential Exemption from Charge ........................................................................................... 10

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 Subject to the IRA Methane Charge .......................................... 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 August

2022 Cost Estimate Analysis of the Inflation Reduction Act ....................................................... 9

Table 5. Methane Charge Rates ..................................................................................................... 10

Contacts

Author Information......................................................................................................................... 11

Congressional Research Service

Inflation Reduction Act Methane Emissions Charge: In Brief

Introduction

On August 16, 2022, President Biden signed H.R. 5376 (P.L. 117-169), a budget reconciliation

measure commonly referred to as the “Inflation Reduction Act of 2022” (IRA). Among other

provisions, IRA includes a charge on methane emissions from selected entities in the oil and gas

industry. This emissions charge is nearly identical to the methane emissions charge1 in the House

version of H.R. 5376, often referred to as the Build Back Better Act, which passed the House on

November 19, 2021.

The methane emissions charge applies 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 starts 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. This charge is the first time the

federal government has directly imposed a charge, fee, or tax on GHG emissions.2

Since its inclusion in the House-passed H.R. 5376, the methane charge has received considerable

attention from Members and a range of stakeholders.3 For example, 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 are subject to the methane charge.5

This report discusses the scope and applicability of the IRA 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 that 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 According to some analyses, the methane charge accounts for a considerable percentage of the estimated GHG

reductions that could be achieved by the Build Back Better Act. 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-policysimulator/; 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-BuildBack-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.

Congressional Research Service

Inflation Reduction 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

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 2022) uses the GWP values presented in the Intergovernmental Panel on Climate Change

(IPCC) 2007 Fourth Assessment Report. In EPA’s inventories and in this report, 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. Pursuant to the United Nations Framework Convention on

Climate Change, the United States and other countries will be required to use the 2013 GWP values for GHGs

beginning with their 2024 emission inventories.

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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Inflation Reduction Act Methane Emissions Charge: In Brief

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.

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

Inflation Reduction Act Methane Emissions Charge

Scope and Applicability

The IRA methane charge applies 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.

Congressional Research Service

Inflation Reduction Act Methane Emissions Charge: In Brief

The IRA methane charge applies 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 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 are not 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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Inflation Reduction 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 The House-passed Build Back Better Act would have

directed EPA to revise that threshold (within two years) to 10,000 mtCO2e. This change would

have increased the number of facilities subject to EPA’s reporting requirements. The methane

emissions charge in IRA only applies to facilities that emit 25,000 mtCO2e or more per year,

regardless of any subsequent changes to the scope of EPA’s reporting requirements.

17 Typically, GHG emissions are measured in mtCO e because GHGs vary by global warming potential.

Congressional Research Service

Inflation Reduction Act Methane Emissions Charge: In Brief

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

W.18 The table also indicates the total methane emissions for each facility category. In 2019,

reported methane emissions from facilities that are 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,

are not 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 Subject to the IRA Methane Charge

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

2.9

Natural gas processing

457

2.9

Offshore petroleum and natural gas production

141

1.5

Underground natural gas storage

0.6

Liquefied natural gas import and export equipment

0.1

Liquefied natural gas storage

0.001

2,172

78.3

Total

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 CO 2 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. A number of other facilities reported methane emissions (and other GHG emissions)

under Subpart W during these years, but these facilities are not subject to the methane charge. These include

162 natural gas distribution facilities, which reported 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 does 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.

Congressional Research Service

Inflation Reduction 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 from EPA’s emission

inventory for the petroleum and natural gas system activities that match the applicability of the

IRA methane charge.24 As 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

Total onshore petroleum and natural gas production

Methane Emissions

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

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 are not 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.

Congressional Research Service

Inflation Reduction 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 IRA, the scope of emissions subject to the charge is 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 applies 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

applies to methane emissions that exceed 0.05% of the natural gas sent for sale

from the facility.



For natural gas transmission facilities, the charge applies 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 are 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 are 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

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 are 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 August 3, 2022, cost estimate (“score”) of the Inflation Reduction Act, the Congressional

Budget Office (CBO) provided another resource that may be informative. CBO estimated the

revenue that the methane charge will 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

Congressional Research Service

Inflation Reduction Act Methane Emissions Charge: In Brief

emissions subject to the charge, but Table 4 provides these estimates by applying CBO’s revenue

estimate and the rate of the charge in the act. 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 (ranging from $900 to $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

August 2022 Cost Estimate Analysis of the Inflation Reduction Act

FY2026

FY2027

FY2028

FY2029

FY2030

FY2031

CBO Revenue

Estimate (Net)

$850 million

$1,350 million

$1,400 million

$1,200 million

$1,050 million

$500 million

Estimate of Gross

Revenue from

Methane Charge

$1,133 million

$1,800 million

$1,867 million

$1,600 million

$1,400 million

$667 million

Methane Charge

(dollars per metric

ton of methane)

$900

$1,200

$1,500

Estimated Methane

Emissions Subject to

the Charge (million

metric tons methane)

1.3

1.5

1.2

1.1

0.9

0.4

Estimated Methane

Emissions Subject to

the Charge (million

metric tons CO2e)

Source: Prepared by CRS; the data in the first row, “CBO Revenue Estimate (Net),” are from CBO, Estimated

Budgetary Effects of H.R. 5376, the Inflation Reduction Act of 2022, August 3, 2022, https://www.cbo.gov/publication/

58366. Gross revenues are net revenues multiplied by 1.25. In the above estimates, the revenue collected in

FY2026 accounts for methane emissions in calendar year 2024, during which the methane charge is $900 per

metric ton of methane; the revenue collected in FY2027 accounts for methane emissions in calendar year 2025,

during which the methane charge is $1,200 per metric ton of methane. Subsequent fiscal year collections involve

a methane charge of $1,500 per metric ton of methane.

Rate of Charge

The methane emissions charge in IRA starts in calendar year 2024 at $900 per metric ton of

methane, increases to $1,200 in 2025, and increases to $1,500 in 2026. The charge remains at

$1,500 in subsequent years. 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

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.

Congressional Research Service

Inflation Reduction Act Methane Emissions Charge: In Brief

rates below are comparable to the carbon tax and emission charge rates in recent legislative

proposals.27

Table 5. Methane Charge Rates

Methane Charge Measure

2024

2025

2026

After 2026

Dollars per metric ton of CH4 emissions

$900

$1200

$1500

Dollars per metric ton of CO2 equivalent

$36

$48

$60

Source: Prepared by CRS; dollars per metric ton of CO2 equivalent calculated using a global warming potential

(GWP) of 25. 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 2022) uses the GWP values presented in the Intergovernmental Panel on Climate Change

(IPCC) 2007 Fourth Assessment Report. In EPA’s inventories and in this report, 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. Pursuant to the United Nations Framework

Convention on Climate Change, the United States and other countries will be required to use the 2013 GWP

values for GHGs beginning with their 2024 emission inventories. A GWP for methane of 28 would lower the

dollars per metric ton of CO2 equivalent from $36 to $32.

Potential Exemption from Charge

IRA provides for a conditional exemption from the methane emissions charge if facilities are

subject to and in compliance with subsequent Clean Air Act methane regulations. To date, such

regulations have not been finalized. On November 15, 2021, EPA proposed regulations to address

methane emissions from the same categories of new and existing facilities that are subject to the

IRA methane charge.28 IRA allows for an exemption from the emissions charge if future, final

EPA regulations addressing methane emissions (1) are in effect in all states, and (2) will “result in

equivalent or greater emissions reductions as would be achieved” by the November 2021

proposed rule. IRA directs EPA to determine whether future methane regulations will meet these

conditions.

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 IRA

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:

27 For more information, see CRS Report R45472, Market-Based Greenhouse Gas Emission Reduction Legislation:

108th Through 117th Congresses, by Jonathan L. Ramseur.

28 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.

Congressional Research Service

Inflation Reduction Act Methane Emissions Charge: In Brief



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 are subject to the methane charge.29

As discussed above, if EPA finalizes these requirements, they may provide for an

exemption from the methane emissions charge. The degree to which the

regulations will affect the methane emissions charge depends 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 provides an economic incentive for facilities

to modify their equipment and operations in order to avoid paying the charge.

Economic theory suggests facilities will 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 will pay the charge for the remaining

emissions. The degree to which facilities make such changes will likely be based

on site-specific economic conditions.

Funding for Technological Improvements. The Inflation Reduction Act

includes supplemental appropriations of $850 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 act also includes supplemental appropriations of $700

million for “marginal conventional wells” for the same purposes. These funds

may lead to methane reductions at oil and natural gas facilities, thus affecting the

impact of the charge.

Other IRA Climate and Energy Provisions. IRA includes a range of climate

and energy-related provisions that will likely affect the portfolio of fuels and

sources of energy that are used in various economic sectors: electricity,

transportation, and industry.30

Author Information

Jonathan L. Ramseur

Specialist in Environmental Policy

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.

30 For example, see Rhodium Group, “A Congressional Climate Breakthrough,” July 28, 2022, https://rhg.com/

research/inflation-reduction-act/; and Princeton University Rapid Energy Policy Evaluation and Analysis Toolkit

(“REPEAT Project”), Preliminary Report: The Climate and Energy Impacts of the Inflation Reduction Act of 2022,

accessed August 4, 2022, https://repeatproject.org/.

Congressional Research Service

Inflation Reduction Act Methane Emissions Charge: In Brief

Disclaimer

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Congressional Research Service

R47206 · VERSION 3 · UPDATED

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