Natural gas prices are expected to spike to the highest levels seen in more than fifteen years this winter and prices at the pump are already making more than our tires squeal. Astonishingly, President Joe Biden and a cohort of Senate Democrats have decided now is the right time to ratchet our energy costs higher with a new methane emissions scheme.
The scheme targets methane that escapes in the oil and gas production process. According to the language passed by the House as part of the trillion-dollar Build Back Better (BBB) Act, it will charge $1,500 for each ton of methane escaping from oil and gas facilities in excess of a set limit. While over the weekend West Virginia Senator Joe Manchin announced his opposition to the BBB package, blocking it from yielding a majority, New York Senator and Majority Leader Chuck Schumer says the Senate will vote on a revised version of the bill in January. But if a BBB vote comes up short, the threat of a methane scheme will linger as new legislation is introduced in a more piecemeal fashion in 2022. Dislodged from a wider package, the methane program could indeed become more viable as a means for moderates to signal their opposition to all-or-nothing politics. This contingency makes the methane fee yet more pernicious.
As Roll Call has noted, the plan’s supporters are playing three-card monte to hide the nature of the new scheme. First it was a “charge,” then it was a “fee,” now it’s being called a “penalty.” For all intents and purposes, it’s a tax, and the verbal gymnastics are meant to conceal the bottom line: the methane scheme will push our energy costs even higher.
Benjamin Zycher, an economist at the American Enterprise Institute, calculates that the cost to the U.S. economy will exceed $10 billion in the scheme’s first year and only increase from there.
Supporters like Colorado Representative Diana DeGette say the methane scheme is an application of the “polluter pays” principle. According to Rep. DeGette, “Customers won’t be paying a fee on gas delivered. The only fee will be paid [by an operator] on what doesn’t make it to the consumer.”
While producers will pay directly, in the end, we’ll all be paying.
The new tax on methane emissions would increase substantially the cost of producing oil and gas. The oil and gas products we use for driving, heating our homes, powering our businesses, and much else will thus cost more.
In Rep. DeGette’s mind, that’s the proper way of accounting for methane’s influence on global warming. The problem — beyond the immediate harm to families and businesses — is that we are almost entirely ignorant of what the true cost of these emissions is. While we know that methane contributes to global warming, we don’t know how to translate that cost into dollar terms with any reasonable degree of certainty.
Politicians hungry for new revenue will throw up their hands and say, “We know there’s a problem, we need to do something,” but this hubris risks imposing an alleged solution that’s worse than the emissions issue itself.
What we know with certainty is that oil and gas are our two leading sources of energy in the United States and that driving up their costs will have ramifications across the country.
Take Arizona, for example. Eric Knott, chairman of the board of the Arizona Small Business Association, noted in the Arizona Republic in September that more than 1.25 million households and more than 350,000 commercial buildings like hospitals, schools, and businesses in Arizona rely on natural gas directly. According to one study, these customers could face a nearly 20 percent uptick on their bills.
For colder states in the Rocky Mountains, Midwest, and New England, driving up oil and gas prices will be even more dire. Maine, to cite another example, uses fuel oil to heat 75 percent of its homes, the highest percentage in the country. Despite having a population smaller than Manhattan, Maine uses more fuel oil for heat than all but four other states. The new methane fee jeopardizes these Americans’ well-being and could substantially increase cold-weather deaths.
The great irony here is that the methane scheme would punish an industry for waste that it has already shaved considerably. From 1990 to 2019, even though oil and natural gas production rose by more than 50 percent and more than 100 percent respectively, methane emissions from oil and gas systems dropped by more than 15 percent in absolute terms. With the totals as low as they are now, eliminating all methane emissions from U.S. oil and gas systems would yield a global greenhouse gas emissions reduction of less than half of one percent.
Putting more upward pressure on costs amid an ongoing energy crisis would be perilous. When held up against its vanishingly thin environmental benefits, the proposed Build Back Better methane scheme looks nonsensical. In the ongoing struggle between the energy visions of Joes Manchin and Biden, it’s clear where the wisdom lies.