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US ‘methane fee’ could cost oil and gas firms close to $1bn in 2025
The ‘methane fee’, part of the amended text of the Build Back Better Act released by the House Rules Committee in the US, could cost the oil and gas industry $1.3bn in 2025 under a status quo scenario, according to analysis by Rystad Energy.
Although the latest draft bill relaxes some of the previously proposed regulations, the latest iteration will still have a profound economic impact, especially on smaller onshore producers, it says. Even though the proposed bill would go into effect in 2023, the phased introduction – 60% in 2023, 80% in 2024 and 100% in 2025 – means the full effect would not be felt until the middle of the decade. The $1.3bn estimated cost impact in 2025 assumes that producers will continue output and methane intensity at 2019–2020 levels on average.
Methane intensity is, however, improving quickly based on the Subpart W accounting methodology, reports the market analyst. As a result, by 2025 many key producers will be under the intensity thresholds proposed in the latest version.
On the other hand, the US Environmental Protection Agency (EPA) still has a plan to decrease the Subpart W reporting threshold from 25,000 to 10,000 tonnes CO2eq/y. If implemented, Rystad Energy expects a larger number of smaller producers to be included in the methane fee calculation and they typically have higher methane intensity levels than their larger peers.