Impact Of The Inflation Reduction Act’s Methane Fee Charge Explained

By Chris Kipp

The two greenhouse gases (GHGs) most abundant in the oil and gas industry are carbon dioxide (CO2) and methane (CH4). One way to look at GHGs and create an equal comparison is on a carbon dioxide equivalent (CO2e) basis. This equation normalizes the ability of a molecule to trap heat in the atmosphere to that of a CO2 molecule, using a Global Warming Potential (GWP) factor. The United States primarily uses the 100-year GWP as a measure of the relative impact of different GHGs that results in a GWP factor of 25 for CH4. In 100 years, 1 ton (0.9 tonnes) of CH4 emitted would have the same warming potential as 25 tons (22.7 tonnes) of CO2, resulting in this equation:

CO2e = CO2 + (CH4 × 25) + others

However, CH4 molecules break down much faster in the atmosphere and have a higher short-term global warming impact; therefore, other metrics have been developed to compare one GHG to another. For example, the 20-year GWP is sometimes used as an alternative to the 100-year GWP; the 20-year GWP is based on the energy absorbed over 20 years. Since all GWPs are calculated relative to CO2, GWPs based on a shorter time frame will be larger for gases with lifetimes shorter than CO2, and smaller for gases with lifetimes longer than CO2. Using the 20- year GWP results in a GWP factor for CH4 several times higher than the 100-year GWP.

CH4 emissions have become an important topic with an increasing number of industry conferences focusing strictly on CH4 mitigation. The CH4-focused conferences typically consist of oil and natural gas producers presenting and demonstrating technology used to capture all vented CH4 and reducing every possible source, at times going above and beyond current regulations. This is a benefit from a public perception perspective and benefits investors, shareholders, communities, as well as the entire oil and gas industry. By responsibly producing oil and natural gas today, the industry is helping pave the way for a strong future.

What are the typical emissions sources and where do the CO2 and CH4 emissions originate on a compressor station? CO2 emissions are almost directly correlated to the amount of fuel burned on-site, with the largest sources being any engines or turbines and smaller sources like heaters. CH4 emissions are more complicated to measure and are emitted in two different ways: from vented or leaked sources and through engine exhausts. The CO2e footprint of a typical lean-burn compressor station, from engine exhaust and vented CH4, comprises 67% CO2 and 33% CH4 using the 100-year GWP. The CO2 emissions are almost entirely from the engine’s exhaust, while the CH4 emissions are split almost equally between uncombusted CH4 in the engine exhaust and CH4 from leaks and vents. With the major sources identified, production companies can target reductions in those specific areas.

The Inflation Reduction Act (IRA), signed August 16, 2022, includes a few provisions related to CH4 emissions impacting the oil and gas industry. Section 60113 of the IRA adds Section 136 to the Clean Air Act, imposing the first ever direct “charge” on … Click here to continue reading this article in the digital issue of April 2023 Gas Compression Magazine.

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