Methane Emissions Reduction Act of 2021

II 117TH CONGRESS 1ST SESSION S. 645 To require the Secretary of the Treasury to levy a fee on methane emissions from oil and natural gas facilities, and for other purposes. IN THE SENATE OF THE UNITED STATES MARCH 9, 2021 Mr. WHITEHOUSE (for himself, Mr. BOOKER, and Mr. SCHATZ) introduced the following bill; which was read twice and referred to the Committee on En- vironment and Public Works A BILL To require the Secretary of the Treasury to levy a fee on methane emissions from oil and natural gas facilities, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Methane Emissions 4 Reduction Act of 2021’’. 5 SEC. 2. FINDINGS. 6 Congress finds that— 7 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 2 •S 645 IS (1) methane is a potent heat-trapping gas that 1 absorbs 28 to 36 times the quantity of energy that 2 carbon dioxide absorbs over a 100-year period; 3 (2) increased methane concentrations in the at- 4 mosphere are responsible for approximately 25 per- 5 cent of observed global warming; 6 (3) approximately 1⁄3 of global anthropogenic 7 methane emissions are produced by the production 8 and transmission of fossil fuels; 9 (4) recent estimates suggest that methane emis- 10 sions from oil and natural gas operations in the 11 United States are 60 percent higher than previously 12 believed, representing 2.3 percent of natural gas pro- 13 duction; 14 (5) methane emissions from oil and natural gas 15 operations in the United States represent approxi- 16 mately $2,000,000,000 in lost natural gas that could 17 be used to fuel 10,000,000 homes; 18 (6) estimates from the International Energy 19 Agency suggest that 1⁄2 of methane emissions from 20 global oil and natural gas supply chains may be 21 eliminated at zero net cost; 22 (7) some oil and natural gas companies have 23 announced plans to reduce methane emissions from 24 the operations of those companies to below 0.2 per- 25 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 3 •S 645 IS cent of production, demonstrating that significant 1 reductions in methane emissions are technically and 2 economically feasible; and 3 (8) numerous companies in the United States 4 are developing innovative technologies to allow oil 5 and natural gas companies to more cost-effectively 6 detect and reduce methane emissions. 7 SEC. 3. DEFINITIONS. 8 In this Act: 9 (1) BASIN.—The term ‘‘basin’’ means a geo- 10 logic province (as defined by the American Associa- 11 tion of Petroleum Geologists). 12 (2) EMPIRICALLY DETERMINED.—The term 13 ‘‘empirically determined’’ means determined through 14 the collection of sufficient data in situ, including 15 measurement on the ground or by drone, airplane, 16 or satellite, for the purpose of accurately estimating 17 the quantity of methane emissions from a basin. 18 (3) METHANE.—The term ‘‘methane’’ means a 19 chemical compound with the chemical formula CH4. 20 (4) METHANE EMISSION.—The term ‘‘methane 21 emission’’ means the release of methane from the ex- 22 traction, production, gathering, processing, compres- 23 sion, transmission, or storage of— 24 (A) oil; or 25 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 4 •S 645 IS (B) natural gas. 1 (5) METHANE FEE FACTOR.—The term ‘‘meth- 2 ane fee factor’’ means the amount calculated under 3 section 4(b)(2)(D) for the applicable calendar year. 4 (6) NATURAL GAS.—The term ‘‘natural gas’’ 5 has the meaning given the term in section 3 of the 6 Deepwater Port Act of 1974 (33 U.S.C. 1502). 7 (7) OIL.—The term ‘‘oil’’ has the meaning 8 given the term in section 3 of the Deepwater Port 9 Act of 1974 (33 U.S.C. 1502). 10 (8) PERCENTAGE OF VOLUME LOST TO THE AT- 11 MOSPHERE.—The term ‘‘percentage of volume lost 12 to the atmosphere’’ means, for any 1 company with 13 respect to any 1 basin— 14 (A) for companies that use the fee cal- 15 culated under section 4(b)(2)(B)(i), the per- 16 centage determined for the basin under the pro- 17 gram established under section 4(a); and 18 (B) for companies that use the fee cal- 19 culated under clause (iii) of section 4(b)(2)(C), 20 the quotient obtained by dividing— 21 (i) the methane emissions in the basin 22 during the applicable calendar year, as de- 23 termined by the company using a protocol 24 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 5 •S 645 IS validated by the Secretary under clause (ii) 1 of that section; by 2 (ii) the total quantity of natural gas 3 produced, gathered, processed, trans- 4 mitted, or released and lost to the atmos- 5 phere by the company in the basin during 6 the applicable calendar year, as determined 7 by the company using a protocol validated 8 by the Secretary under clause (ii) of that 9 section. 10 (9) SECRETARY.—The term ‘‘Secretary’’ means 11 the Secretary of the Treasury. 12 SEC. 4. FEE ON METHANE EMISSIONS. 13 (a) ESTIMATE OF METHANE EMISSIONS.—Not later 14 than December 31, 2022, the Secretary, in consultation 15 with the Administrator of the Environmental Protection 16 Agency and the Administrator of the National Oceanic 17 and Atmospheric Administration, shall establish and im- 18 plement a program to estimate, based on empirically de- 19 termined, peer-reviewed methane emission rates, annual 20 methane emissions, and methane emission rates (ex- 21 pressed in percentage of natural gas production), from 22 each oil and natural gas producing basin. 23 (b) FEE.— 24 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 6 •S 645 IS (1) IN GENERAL.—For calendar year 2023 and 1 each calendar year thereafter, the Secretary shall 2 levy a fee on methane emissions on each company 3 that produces, gathers, processes, or transmits oil or 4 natural gas. 5 (2) AMOUNT.— 6 (A) IN GENERAL.—The fee under para- 7 graph (1) shall be calculated in accordance with 8 subparagraph (B) or (C), as applicable. 9 (B) PROPORTIONAL FEE CALCULATION.— 10 (i) IN GENERAL.—Subject to subpara- 11 graph (C), the fee under paragraph (1) for 12 a basin in which a company produces, 13 gathers, processes, or transmits oil or nat- 14 ural gas for a calendar year shall be the 15 sum obtained by adding— 16 (I) the product obtained by mul- 17 tiplying— 18 (aa) the difference be- 19 tween— 20 (AA) the percentage of 21 volume lost to the atmos- 22 phere in the basin during 23 the calendar year; and 24 (BB) 0.2 percent; 25 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 7 •S 645 IS (bb) the total quantity of 1 natural gas produced or released 2 and lost to the atmosphere dur- 3 ing oil or natural gas production 4 by the company in the basin dur- 5 ing the calendar year; and 6 (cc) the methane fee factor 7 for the applicable calendar year; 8 and 9 (II) the product obtained by mul- 10 tiplying— 11 (aa) the difference be- 12 tween— 13 (AA) the percentage of 14 volume lost to the atmos- 15 phere in the basin during 16 the calendar year; and 17 (BB) 0.1 percent; 18 (bb) the total quantity of 19 natural gas gathered, processed, 20 or transmitted by the company in 21 the basin during the calendar 22 year; and 23 (cc) the methane fee factor 24 for the applicable calendar year. 25 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 8 •S 645 IS (ii) REQUIREMENT.—The fee cal- 1 culated under clause (i) for a company 2 shall be determined on a basin-by-basin 3 basis for each basin in which the company 4 produces, gathers, processes, or transmits 5 oil or natural gas. 6 (C) ALTERNATIVE FEE CALCULATION.— 7 (i) OPT OUT.—A company may opt 8 out of the fee calculated under subpara- 9 graph (B) if— 10 (I) the company submits to the 11 Secretary a peer-reviewed protocol for 12 empirically determining, on a basin- 13 by-basin basis for all basins, the total 14 amount of methane emissions that re- 15 sult from oil and natural gas facili- 16 ties— 17 (aa) that the company oper- 18 ates; or 19 (bb) in which the company 20 has an ownership interest; and 21 (II) the Secretary validates the 22 protocol in accordance with clause (ii). 23 (ii) VALIDATION.— 24 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 9 •S 645 IS (I) IN GENERAL.—The Secretary 1 may validate a protocol submitted 2 under clause (i)(I) if— 3 (aa) the Secretary deter- 4 mines that the protocol is an ac- 5 curate and comprehensive empir- 6 ical method for calculating the 7 methane emissions of the com- 8 pany submitting the protocol; 9 (bb) the protocol— 10 (AA) is peer-reviewed 11 by independent scientists; 12 (BB) is available to the 13 public in its entirety; and 14 (CC) requires the reg- 15 ular collection of data; 16 (cc) all underlying data col- 17 lected under the protocol are 18 available to the public; and 19 (dd) the Secretary deter- 20 mines that— 21 (AA) to the maximum 22 extent practicable, the com- 23 pany has installed state-of- 24 the-art technologies to detect 25 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 10 •S 645 IS and eliminate methane leaks 1 from all oil and natural gas 2 facilities the company owns 3 or operates; and 4 (BB) subject to sub- 5 clause (III), the company 6 has prohibited the venting 7 and flaring of methane, ex- 8 cept in emergency cir- 9 cumstances. 10 (II) TIMELINE.—A protocol de- 11 scribed in clause (i)(I) shall be sub- 12 mitted to the Secretary for validation 13 under subclause (I) not later than 14 June 30 of the calendar year before 15 the calendar year for which the com- 16 pany is seeking to opt out of the fee 17 calculated under subparagraph (B). 18 (III) EMERGENCY CIR- 19 CUMSTANCES.—An emergency cir- 20 cumstance for which the venting or 21 flaring of methane is authorized under 22 subclause (I)(dd)(BB) does not in- 23 clude— 24 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 11 •S 645 IS (aa) venting or flaring of 1 methane from oil wells because 2 the company has failed to develop 3 the infrastructure necessary to 4 capture, process, and transmit 5 methane associated with oil pro- 6 duction; or 7 (bb) any claim of economic 8 necessity. 9 (iii) CALCULATION.—For a company 10 that has opted out of the fee calculated 11 under subparagraph (B) in accordance 12 with clause (i), the fee under paragraph 13 (1) for a basin in which the company pro- 14 duces, gathers, processes, or transmits oil 15 or natural gas for a calendar year shall be 16 the sum obtained by adding— 17 (I) the product obtained by mul- 18 tiplying— 19 (aa) the difference be- 20 tween— 21 (AA) the percentage of 22 volume lost to the atmos- 23 phere in the basin during 24 the calendar year; and 25 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 12 •S 645 IS (BB) 0.2 percent; 1 (bb) the total quantity of 2 natural gas produced or released 3 and lost to the atmosphere dur- 4 ing oil or natural gas production 5 by the company in the basin dur- 6 ing the calendar year; and 7 (cc) the methane fee factor 8 for the applicable calendar year; 9 and 10 (II) the product obtained by mul- 11 tiplying— 12 (aa) the difference be- 13 tween— 14 (AA) the percentage of 15 volume lost to the atmos- 16 phere in the basin during 17 the calendar year; and 18 (BB) 0.1 percent; 19 (bb) the total quantity of 20 natural gas gathered, processed, 21 or transmitted by the company in 22 the basin during the calendar 23 year; and 24 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 13 •S 645 IS (cc) the methane fee factor 1 for the applicable calendar year. 2 (iv) REQUIREMENT.—The fee cal- 3 culated under clause (iii) for a company 4 that opted out of a fee calculated under 5 subparagraph (B) shall be determined on a 6 basin-by-basin basis for each basin in 7 which the company produces, gathers, 8 processes, or transmits oil or natural gas. 9 (D) METHANE FEE FACTOR.— 10 (i) INITIAL COST.—For calendar year 11 2023, the methane fee factor shall be 12 $1,800 per ton. 13 (ii) ANNUAL ADJUSTMENT.—For each 14 calendar year after 2023, the methane fee 15 factor shall be adjusted to an amount that 16 is equal to the product obtained by multi- 17 plying— 18 (I) the methane fee factor for the 19 preceding calendar year; and 20 (II) the percentage obtained by 21 adding— 22 (aa) 102 percent; and 23 (bb) the percentage by which 24 the Consumer Price Index for the 25 VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS 14 •S 645 IS calendar year exceeds the Con- 1 sumer Price Index for the pre- 2 ceding calendar year. 3 (3) TIMING.—Not later than July 1 of each 4 year, the Secretary shall calculate and levy the fee 5 under paragraph (1) for the preceding calendar year. 6 (4) NATIONAL COASTAL RESILIENCE FUND.— 7 Notwithstanding section 10(b)(2) of the National 8 Fish and Wildlife Foundation Establishment Act (16 9 U.S.C. 3709(b)(2)), the Secretary shall, on an an- 10 nual basis, transfer an amount equal to the amounts 11 collected under the fee under paragraph (1) to the 12 National Fish and Wildlife Foundation to provide 13 grants through the National Coastal Resilience 14 Fund of the National Fish and Wildlife Foundation 15 (or a successor program). 16 SEC. 5. SAVINGS. 17 Nothing in this Act— 18 (1) affects the ability to regulate methane emis- 19 sions under any other provision of law; or 20 (2) preempts a State from regulating or assess- 21 ing a fee on methane emissions from oil and gas fa- 22 cilities. 23 Æ VerDate Sep 11 2014 19:35 Apr 04, 2021 Jkt 019200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6301 E:\BILLS\S645.IS S645 pbinns on DSKJLVW7X2PROD with BILLS