Reduce your methane emissions to minimize the impact of the coming “methane fee” that will start in 2024.
The Inflation Reduction Act of 2022 was signed into law on August 15, 2022. This legislation amended the Clean Air Act to include a “Waste Emissions Charge” on excess methane (CH4) emissions from the oil and gas (O&G) industry. The charge has been named by some the “methane fee.” The U.S. Environmental Protection Agency (EPA) is directed to add the methane fee to the greenhouse gas reporting rules in 40 CFR 98 subpart W. Data submitted to EPA’s e-GGRT system is expected to be used to determine methane fees owed.
In some operations, the methane fee cost may be more expensive than the cost of emission controls.
Facilities that annually emit 25,000 metric tons or more of CO2e will have potential methane fee charges. The fee amount will be based on the O&G sector and the amount of methane emitted above the threshold amounts.
The methane fee will be assessed on metric tons of methane emitted that exceeds the percentages of sales/throughput gas for the facility (Table 1). For onshore production and onshore gas gathering and boosting facilities, the reporting unit (i.e., facility) will be Basins.
Facilities required to report GHG emissions under subpart W are charged for methane metric ton emissions that exceed the following:
- Onshore Petroleum and Natural Gas Production: 0.2 percent of the natural gas sent to sales from a facility.
- Onshore Petroleum Production: 10 metric tons of methane per million barrels of oil sent to sale from such facility, if such facility sent no natural gas to sales.
- Offshore Production: 0.2 percent of the natural gas sent to sales from a facility.
- Gathering and Boosting, Gas Processing, LNG Import/Export: 0.05 percent of the natural gas sent to sale from or through a facility.
- Natural Gas Transmission, Underground Storage: 0.11 percent of the natural gas sent to sale from or through a facility.
Methane Fee Schedule
The law lists the following phased-in methane fee schedule:
| Year | Excess CH4 ($/mton CH4) |
| 2024 | $900.00 |
| 2025 | $1,200.00 |
| 2026 | $1,500.00 |
Methane Fee Determination
The fee will be charged on excess methane emissions above a calculated threshold. Currently, the EPA has not specified the equations to use to calculate the methane fee.
Methane emissions are a target for reduction because of methane’s relatively high global warming potential (approximately 25 to 36 on a 100-year time horizon) and on the magnitude of O&G emissions. EPA 2020 methane emission estimates for the O&G industry in the U.S. totaled 211 million metric tons CO2e (MMTCO2e). The oil and gas production segment accounted for approximately 60% (126 MMTCO2e) of the total methane emission for the O&G industry.
Strategies
Strategies to reduce methane emissions can include the following:
- Facility based that apply various methane reduction techniques at the largest emitting facilities.
- Equipment/emission source based that use methane reduction techniques at the largest emitting equipment types.
- Hybrid strategy that targets the largest emitting facilities along with the largest emitting equipment.
Action items
Action items to take for methane reductions include the following.
- Prepare an emissions inventory for all facilities.
- Rank methane emissions from highest to lowest by:
- Facility
- Equipment type
- Facility/equipment type
- Use emission inventory data to determine targeted facilities, equipment types and combinations of facilities and equipment types.
- Select methane reduction techniques to use based on your operations.
- Implement methane reduction actions.
- Track and document progress on a regular basis
Methane Reduction Techniques
The following are some proactive methane reduction techniques that oil and gas operations can use.
Flaring Gas
- Replace existing conventional flares with higher destruction and removal efficiency (DRE) flares. Conventional, nonassisted flares typically have a default 98% DRE. Air-assisted flares (Cimarron’s DreamDuo™) can achieve a DRE of 99%+ to reduce methane emissions from storage tanks, blowdown events and associated gas flaring.
The extra 1% of high DRE flare reduces methane by an additional 50%.
If your flare is assumed to have a 98% DRE for methane, then
2%-0.2% = 1.8% of the methane is taxable.
If your flare has a 99% DRE for methane, then
1%-0.2% = 0.8% of the methane is taxable.
For such a case, the saving from 1.8% to 0.8% is more than half.
Storage tanks
- Route storage tank vent gas to a vapor recovery unit (VRU). This recovers the methane gas for use as a fuel or sends the gas to the sales pipeline.
- For some applications route storage tank vent gas to a vapor recovery tower (VRT) and send the VRT gas to a VRU.
- Use high DRE flares and enclosed combustion devices (ECD).
- Minimize the time that storage tank thief hatches are open and venting to the atmosphere. Use systems such as NOVENT™ to alert operators of open thief hatches so that swift corrective actions can be taken to reduce methane venting.
Leak Detection and Repair (LDAR)
- Reduce reported methane fugitive equipment leaks by increasing frequency of LDAR surveys. Approved methods include optical gas imaging (OGI) and EPA Method 21.
- Conduct Leak Detection and Repair (LDAR) surveys at least quarterly or monthly to reduce calculated methane emissions from fugitive equipment leaks. Emission factors in 40 CFR 98 subpart W for equipment monitored for leaks are lower than the population emission factors that are used for non-monitored equipment. Also, conducting more frequent LDAR surveys lowers the assumed number of hours a leaking component was leaking gas.
- Conduct EPA approved alternative LDAR continuous monitoring to reduce equipment leaks.
Natural Gas Pneumatic Devices
- Replace natural gas pneumatic pumps with electric pumps or devices not using natural gas.
- Replace natural gas controller devices with zero bleed devices, electronic devices or devices not using natural gas.
Reciprocating Compressors
- Conduct periodic (quarterly) leak rate measurements using a high-volume sampler. Replace rod packing seals that are leaking excessively. Some regulations consider reciprocating compressor leak rates greater than 2 standard cubic feet per minute as excessive.
- Route reciprocating compressor rod packing seals to a vapor recovery system (if not mixed with air) or a combustion control device.
Centrifugal Compressors
- Use dry seals rather than wet seals.
- Conduct periodic (quarterly) leak rate measurements using a high-volume sampler. Some regulations consider leak rates for centrifugal compressors greater than 3 standard cubic feet per minute as excessive.
- Route compressor seal vent gas to a vapor recovery system (if not mixed with air) or a combustion control device.
Summary and Conclusions
Starting in 2024, a “methane fee” will be charged on excess methane emissions from the oil and gas industry as required by the Inflation Reduction Act of 2022. To minimize the impact of this fee, operators should take action in 2023 to reduce methane emissions. The methane fee will be charged on excess emissions above a threshold, with specific calculation equations yet to be specified by the EPA.
Strategies for reducing methane emissions can include facility-based, equipment-based, or hybrid approaches. Action items involve preparing an emissions inventory, ranking emissions, selecting reduction techniques, implementing actions, and tracking progress. Proven control methods discussed in this blog are available to reduce methane emissions from O&G facilities.
Cimarron – Who We Are
Cimarron’s vision is to work with our clients to create a cleaner environment. The company engineers and manufactures environmental, production and process equipment for the upstream, midstream and downstream energy industries, as well as environmental control solutions for biogas at wastewater facilities, digester tanks and landfills. Our flares and ECDs meet all federal and state environmental regulatory requirements for control efficiency and destruction efficiency.
Cimarron offers our customers the know-how and environmental expertise to meet the environmental standards of today and tomorrow. Cimarron is committed to bring value to the Energy industry and their shareholders based on our financial strength, experienced personnel, and engineering capabilities.
As a company, we thrive every day to make a difference through innovation (e.g. ESG), customer focus, and operational efficiency. In addition to being present in all major regions in the US, Cimarron serves more than 45 countries around the world, ranging from offshore to desert. From key operational centers in the United States, Italy and the United Arab Emirates, Cimarron offers ongoing service and support through its own field service personnel and strategic third-party partners, creating a cleaner environment for our customers and their shareholders.
Since its founding in the mid-1970’s in Oklahoma, the company’s product offering has expanded from production equipment to include the largest line of environmental solutions that capture or incinerate fugitive vapors. With the acquisitions of HY-BON/EDI in 2019 and AEREON (including Jordan Technologies) in 2020, Cimarron has added strong brands, products, and services to its portfolio.
Please contact us to learn more about our products and services and about all our ESG solutions at sales@cimarron.com or visit our website cimarron.com.