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Proposed natural gas tax would hurt Colorado ratepayers

The U.S. Senate is currently debating the Build Back Better Act (House Resolution 5376).

Paul Griffin

President Joe Biden is advertising this multi-trillion dollar legislation as the “most transformative investment in children and care giving in generations” and “the largest effort to combat climate change in American history.”

Unfortunately, the administration and Congress seek to pay for this investment or spending package by levying a fee on methane emissions produced by oil and gas companies.

Colorado’s senators, Michael Bennet and John Hickenlooper, should think twice about supporting this provision, given the Western Slope’s substantial energy production and reliance on natural gas for electricity.

There are many reasons why this so-called “fee” or consumer energy tax is unfair and unsound economically. The most obvious reason is the effect of runaway inflation on nearly every American household. The inflation rate is at a 30-year high and eating into the substantial gains in wages and salaries made during the pandemic. The non-partisan U.S. Energy Information Administration has already warned homeowners that natural gas prices could rise significantly this winter – maybe by as much as 50%.

Record-high inflation and the EIA’s dire natural gas forecast should be enough justification for Congress and the president to abandon the Build Back Better Act’s tax on methane emissions. However, there are other sound arguments for why this tax doesn’t make sense for consumers and for tackling climate change.

Methane emissions from natural gas operations constitute, at approximately 10.1% per Environmental Protection Agency data, a tiny slice of total U.S. greenhouse gas emissions. What’s even more impressive is that methane emissions rates in America’s largest energy-producing regions have continued to decline, even as production has increased.

As the oil and natural gas industry has developed innovative technologies to capture and control methane, there has been a steady decline in emissions. For example, from 1990 to 2018, methane emissions from natural gas systems dropped 23.6% when production increased more than 70%. This drop is effectively a 55% reduction in the rate of emissions.

A principal reason for this dramatic reduction is the successful state and federal government partnership already in place regulating methane emissions. As a result, there is no need for a fee on top of EPA and state regulation of methane. Colorado, for instance, has regulated methane emissions since 2014, requiring oil and gas producers to check wells and transmission lines for leaks twice a year.

Methane detection and mitigation has also been a critical focus of the natural gas industry. The Environmental Partnership, an association made up of companies in the oil and natural gas space, has prioritized reducing and tracking methane and volatile organic compounds associated with oil and natural gas production.

Just how much of an unjustified burden would the methane fee be on the private sector? The answer is quite alarming. Assuming the full fee impacts households, the $14.43 billion cost could reduce the number of jobs supported throughout the economy by 155,000. Most of these job losses would come from the service industries and would disproportionately affect low-income earners.

The potential effect on low-income earners coupled with the argument that the proposed methane fee is duplicative, unnecessary and simply doesn't make sense has led to a wide range of opposition. For example, in mid-October, a group of 19 state attorneys general sent a letter urging Congress to reject the methane tax proposal. They “support reasonable and lawful measures to reduce methane emissions. But a de facto tax administered through an onerous administrative regime is not that.”

These attorneys general are right. It’s an undue punitive burden on the oil and gas industry – an industry that has dramatically reduced methane emissions while maintaining the supply of affordable and reliable natural gas.

Simply put, the proposed methane fee just doesn’t make sense, and Sens. Bennet and Hickenlooper should vehemently oppose it when the Senate debates the Build Back Better Act this month.

Paul Griffin serves as the executive director of Energy Fairness and is a member of the Energy Bar Association.