Proposed natural gas tax would hurt Colorado ratepayers

ICYMI: Energy Fairness Executive Director Paul Griffin authored an article in The Sentinel Colorado on the proposed natural gas tax in the Build Back Better Act recently passed by the House of Representatives. The original piece can be viewed here.

The House of the Representatives just passed on Nov. 19 a massive spending proposal known as the Build Back Better Act (H.R. 5376).  This passage came on the heels of the once-in-a-generation infrastructure law that President Joe Biden just signed into law.

The president and the Democratic-led Congress are advertising this multi-trillion dollar legislation as, amongst other things, the “most transformative investment in children and care giving in generations” and “the largest effort to combat climate change in American history.” But, unfortunately, the administration and Congress are seeking to pay for this investment or spending package – otherwise known as the “Reconciliation Bill” – by levying a fee on methane emissions produced by oil and gas companies.  Now that the Senate will consider this reconciliation bill, Colorado’s senators should think twice about supporting this provision, given our state’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 just unsound economically.  The most obvious reason is the effect that run-away inflation is having 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 (EIA) 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 policymakers in Congress and the president to abandon the reconciliation bill’s ill-timed tax on methane emissions. However, there are other equally sound arguments for why this tax just doesn’t make sense for consumers and for tackling climate change – the underlying argument for the proposal.

First and foremost, methane emissions from natural gas operations constitute, at approximately 10.1% percent per EPA data, just 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.

Just how much have rates fallen?  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 1990-2018, 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 comprised of companies in the oil and natural gas space, has prioritized reducing and tracking methane and volatile organic compounds (VOCs) 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 to this unneeded consumer energy tax. 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 generals are right. It would be an onerous and unnecessary energy tax on consumers already suffering under the weight of unprecedented inflation. 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 – effectively a natural gas tax – just doesn’t make sense. Colorado’s senators should oppose this burdensome tax that will only exacerbate inflation for our state’s residents.

Paul Griffin is the executive director for Energy Fairness