The largest U.S. natural gas producers and associations are calling on U.S. Senate committees to reconsider a proposed tax on methane in an upcoming budget bill, arguing that direct regulation would serve the purpose of cutting emissions best.
Democrats on the House Natural Resources Committee are proposing more offshore drilling bans and higher fees and royalty charges on the oil and gas industry to raise funds for wildlife conservation efforts, according to a document that Bloomberg News has seen.
The $3.5-trillion spending plan has not been finalized yet, and it is not certain it would pass in Congress.
Yet, the U.S. natural gas associations are pre-emptively opposing what the American Petroleum Institute (API) described as "a misguided punitive tax on natural gas."
"If the objective is to reduce methane emissions, direct regulation of methane is the best method to implement such a government policy and do so in an equitable manner that is tied to actual emissions," the API and 130 energy, manufacturing, business, and labor trade organizations across the natural gas and oil supply chain wrote in a letter to the U.S. Senate Committee on Environment and Public Works.
"[B]ecause the bill would tax companies based on the amount of oil or natural gas they produce or handle, not based on their actual emissions, it could perversely disincentivize facilities with higher emissions intensities relative to the basin average from reducing their emissions. At the same time, this approach could unfairly punish high production operators with lower emission intensities," the organizations say.
"Congress has never discussed the potential impacts of the methane fee on consumers or the U.S. energy market," the associations noted.
In a separate move, the American Gas Association (AGA) has launched a campaign against the methane tax, saying it is "devastating for families and businesses."
"This is the wrong approach for emissions reduction and penalizes consumers," AGA argues.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More