American Oil and Gas Reporter - December 2021 - 37

and some advocates on the Hill to pull
something together, " he recounts. " The
issue surfaced again in the infrastructure
bill, and we were pretty successful in
moving it. Much of the work was about
making sure the states had programs to
deal with orphaned wells and would want
to seek the funding and authority. "
Press accounts note that the infrastructure
bill also contains more than
$8.5 billion for constructing carbon capture
and sequestration infrastructure. Although
the measure seeks to put greenhouse
gases into the ground instead of the air,
some industry opponents have blasted
such provisions. Earlier this year a few
hundred entities-almost all of them antidevelopment
groups-addressed an open
letter to Biden, Speaker of the House
Nancy Pelosi, D-Ca., Senate Majority
Charles Schumer, D-N.Y., and other members
of the Biden administration, imploring
them to reject CCS.
" Simply put, technological carbon capture
is a dangerous distraction, " they protest.
" To avoid catastrophic climate change,
we need to deploy resources to replace
the fossil fuel industry, not prop it up. Directing
government support to CCS diverts
resources from the most sustainable and
job-creating solutions to the climate crisis:
phasing out oil, gas, and coal; investing in
energy efficiency and noncombustion renewable
energy sources; and nurturing
forests, wetlands, and other natural landscapes
that function as carbon sinks. "
As for the suggestion that the infrastructure
bill's cumulative effect bodes
well for oil and gas demand, some analysts
note that any bill that reauthorizes surface
transportation programs for five years and
includes $110 billion in additional funding
to repair roads and bridges and support
major highway projects will require a lot
of asphalt. The analysts add that higherquality
roads will encourage driving.
Fuller, who once worked as a staffer
on the U.S. Senate's Environment &
Public Works Committee, says the analysts'
prediction that the bill will support
oil demand makes sense. " I used to deal
with highways when I was on the Hill, "
he recounts. " Our country has not adequately
funded our highway program for
quite some time because Congress has
been constrained by gridlock over how
to fund it. The overall highway system
has deteriorated, and repairing it will require
a lot of work. "
Moreover, the demand drivers extend
beyond crude oil products, he observes,
noting that the concrete and steel infrastructure
projects require is generally
manufactured through energy-intensive
processes that rely on natural gas. ❒
Senate Realities Make Bill's
House Passage Largely Symbolic
Although the House passed H.R.
5376, the $2 trillion " Build Back Better
Act " on Nov. 19, Lee Fuller, officer-
environment and general strategy for
IPAA says the real action to determine
the legislation's shape will take place
in the other chamber.
" The basic bet is that whatever the
Senate passes, the House will have to
pass (if such a bill is to become law), "
he relates. " To pass the House, the bill
had to contain some items the Senate is
unlikely to accept. When the Senate finally
acts, the House will not be left
with much maneuvering room. "
That is because the legislation has
thus far lacked any GOP support in
the evenly divided Senate, a reality
that has prompted the chamber's Democratic
leaders to try passing a bill
under budget reconciliation rules that
require only 51 votes, or more realistically
50 votes and the vice president
breaking the tie, but also constrain the
subjects the bill may address.
Although earlier versions of H.R.
5376 included extensive tax hikes on
tobacco companies, big banks and private
equity firms, press accounts note, the
version that eventually passed the House
dropped or shrunk those measures. But
while it also discarded attempts to
remove federal oil and gas tax treatments
such as intangible drilling cost expensing
and the percentage depletion allowance,
the House's final version retained a
much-debated methane fee. Media accounts
note that for production facilities,
the fee would be $900 a ton beginning
in 2023, $1,200 in 2024 and $1,500
after that. The fee would apply to site
emissions that exceed 0.20% of natural
gas sent to sale.
Rystad Energy estimated that the
version of the measure introduced in
committee could cost the industry $1.3
billion in 2025. Noting that the bill as
passed has more relaxed requirements,
and that its estimate assumes producers'
methane intensity stays at 2019-2020
levels rather than continuing to improve
quickly, Rystad suggests the methane
fee's true impact would be smaller.
However, " the latest iteration will still
have a profound economic impact, especially
on smaller onshore producers, "
the firm says. " Even though the proposed
bill would go into effect in 2023, the
phased introduction-60% in 2023, 80%
in 2024 and 100% in 2025-means the
full effect would not be felt until the
middle of the decade. "
In the unlikely event the Senate
adopts the House's structure, says Artem
Abramov, head of shale research at Rystad
Energy, the actual impact in 2025
will fall short of $1 billion based on
base case production growth and expected
improvements in methane intensity.
" It is important to point out that
the real impact will be biased even more
toward smaller producers and conventional
legacy fields in contrast to what
the current status quo suggests, " Abramov
assesses. " If implemented, we will see
a larger number of smaller producers
included in the methane fee calculation,
and they typically have higher methane
intensity levels than their larger peers. "
The fee's disproportionate impact
on small businesses is among the points
Kansas Independent Oil & Gas Association
President Edward Cross says he
has emphasized in his Washington outreach.
Other key questions and points
Cross says he has raised with policymakers
about the matter include:
· If all methane emissions are bad,
why is only the oil and gas industry
taxed?
· Environmental Protection Agency
emissions factors that are used to calculate
Subpart W were never intended
for that purpose, and so EPA should revise
those factors to allow Congress to
assess emissions more accurately as it
considers such a fee.
· The fee's 0.20% threshold is not
an industry standard and is likely to
burden small businesses.
As has been the case with other controversial
bills in this Congress, the legislation's
success or failure appears to
hinge on the support of moderate senators
such as Joe Manchin, D-W.V. and Kyrsten
Sinema, D-Az., Fuller acknowledges.
" The Senate has to work its will,
and there are still a lot of moving
parts, " Fuller observes. " Manchin,
among others, has said he is not willing
to move on anything until seeing the
final language. He has said he doesn't
have a problem if it gets done in December,
but also that we might want to
sit back and watch what happens with
inflation first. "
❒
DECEMBER 2021 37
American Oil and Gas Reporter - December 2021

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