It is sometimes tempting to think you know it all, or at least have some knowledge of what is going on in the industry around you. Wrong ! This was highlighted on Tuesday this week (February 6, 2024) at the AIEN's Seminar at NAPE in the panel led by Dennis Petito of Montrose Capital on Environmental Disclosure and the Energy Transition.
Grant Swartzwelder of ESG Dynamics and OTA Environmental Solutions (joined by Ann Rhoads from Gulf Capital Bank and Troy Harder from Bracewell) highlighted this new tax and the challenges it is likely to bring. Its introduction had slipped past me completely and (from my own highly unscientific straw poll) most of the audience it seems.
Introduced as part of the "Methane Action Plan" under the interestingly-named Inflation Reduction Act, the "Waste Emissions Charge", as it seems more formally to be known, will enact an annual charge on methane emissions exceeding a certain threshold and where more than 25,000 tonnes of CO2 equivalent are reported, starting at $900 per tonne in 2024, rising to $1,200 per tonne in 2025, and $1,500 per tonne in 2026 and thereafter (https://www.whitehouse.gov/wp-content/uploads/2023/12/Methane-Action-Plan-2023-Topper.pdf).
That seems to be the only part that can simply be summarized. If I followed the panel correctly, the problem is that as of now it is not at all straightforward to actually calculate the emissions to which the charge (tax) will be applied. Emissions will be "deemed" based on a combination of production and facilities / equipment. I am not going to attempt to describe further the details underlying the calculation - because I can't ! - but the message conveyed was that no-one has a real handle on the calculation at present, and there is real concern as to its potential economic impact on the thousands of small producers and producing wells.
Further discussion on this can be found on ESG Dynamics website at https://esg-dynamics.com/blog/.
For such an important new charge I was surprised at how little publicity this production tax seems to have garnered; maybe I have missed it, but then so have many others. A quick review of the EPA's website advises that there is a virtual public hearing on proposed regulation of the tax on February 12, with further seminars on February 20 and March 5. It will be interesting to see what these bring forth.