Mitigating Risk with Continuous Monitoring Under the New Methane Fee and Super-Emitter Program
Author: Dave Levy
The new Methane Waste Emissions Charge and Super-Emitter Program carry potential costs to operators for emissions exceeding certain thresholds and volumetric rates. While some leaks will occur under the best operational circumstances, the best way for operators to avoid financial penalties and reputational harm is to implement a continuous monitoring system that can detect leaks in real time, pinpoint the source, and accelerate remedial workflows that reduce the duration and severity of emission events.
The Methane Emissions Charge (Methane Fee)
The Inflation Reduction Act (IRA) provides new authorities under Section 136 of the Clean Air Act to reduce methane emissions from the petroleum and natural gas sector through the creation of the Methane Emissions Reduction Program (MERP).
MERP establishes a methane fee for methane emissions from applicable facilities. This is the first time the federal government has directly imposed a penalty on GHG emissions. The charge applies to a subset of facilities that report more than 25,000 metric tons of CO2 equivalent per year to the Greenhouse Gas Reporting Program (GHGRP), and will only apply when statutorily specified waste emission thresholds for the facility type are exceeded.
Scope and Applicability of the Methane Fee
The scope of emissions subject to the charge is based on 1) the facility’s reported emissions under EPA’s GHGRP, and 2) an emissions threshold that varies by facility type. The thresholds allow some methane to be released from these facilities without being subject to the charge.
The rule takes effect in 2024. The charge starts at $900 per metric ton of methane in 2024, $1,200 per metric ton in 2025, and $1,500 per metric ton in 2026-on. Operators now have a clear financial incentive to find and fix leaks as soon as possible under the newly created MERP and methane waste emissions charge.
The Super-Emitter Program
In a separate but connected action on December 2, 2023, EPA announced its final ruling aimed at reducing methane emissions from the oil and gas sector. This promulgation establishes new source performance standards (NSPS) and emissions guidelines for methane and volatile organic compounds (VOCs) from new or modified oil and gas sources; new emissions guidelines for states to follow in designing and executing implementation plans to cover existing sources; and a new super-emitter program that allows third parties to track large emissions events, and which prescribes prompt remedial steps when such an event is detected and attributed.
EPA developed the super-emitter program in response to findings that approximately 50 percent of all methane emissions come from large, irregular events. The final rule defines a super-emitter event as one that has a methane emission rate of at least 100 kg/hr. Under the super-emitter program, approved third parties can be used to supplement regular facility monitoring and report super-emitter events to EPA. Once EPA verifies the event, the responsible operator must follow a prompt, prescribed course of remedial, reporting, and follow up actions. The rule takes effect in April 2024.
Direct and Indirect Costs of a Super-Emitter Event
Although the super-emitter program itself does not impose a fee, super-emitter events are likely to carry a cost to operators since the volume of gas associated with such an event will likely exceed - by itself or when added to other documented emissions - allowable levels of emissions under OOOOb.
Of particular consequence under the super-emitter program, the operator’s name and emission event details will be made public by EPA. Negative publicity such as this can harm an operator’s stock price and reputation among investors, consumers, and the communities in which they operate.
Putting Numbers to it: Super-Emitter Events and the Methane Fee
The following table summarizes time-to-detection assumptions for different monitoring technologies under the Super-Emitter Program, and the projected methane fee for emission events of that duration.
Time-to-detection assumptions for different monitoring technologies under the Super-Emitter Program, and the projected methane fee for emission events of that duration.
When a super-emitter event is detected, EPA’s default assumption is that, in lieu of contrary data, the event has been going on for 182 days (column D). If an operator has implemented a quarterly OGI inspection program, EPA assumes - in lieu of contrary data - the super-emitter event began the day after the last quarterly inspection, or 91 days prior to detection (column E).
Column F shows the probable time-to-detection and associated fee if a continuous monitoring system were in place when the emission event began. If an approved continuous monitoring system under the new methane rule were in place when the emission began, the assumed time-to-detection is only 7 days, and the associated fee is significantly less than it would be if using OGI inspections or similar intermittent methods.
In this table, the hypothetical emission rate is 100 kg/hr (column B) which is the volumetric rate threshold for a super-emitter event under the new OOOOb rule.
To calculate the methane fee associated with this hypothetical super-emitter event for each detection method, we multiply the emission rate of 100 kg/hr (column B) by the applicable fee (column C), and by the number of assumed days the emission occurred prior to detection (columns D, E, or F).
As you can see, the difference in projected fees between continuous monitoring and other methods is substantial. In 2024 the projected fee for a super-emitter event at a single site would be $196,560 under an OGI program compared to $15,120 if using a continuous monitoring system.
By 2026 the projected fee for a super-emitter event under an OGI program would be $327,600 compared to $25,200 if using continuous monitoring for detection.
It’s important to note that this fee calculation applies to only one super-emitter event at only one site. For operators with multiple sites that have a super-emitter event, the fee totals can be staggering for undetected emissions that go on for an extended period.
Mitigating the Risk with Qube and Continuous Monitoring
Taken together, these new rules pose serious financial and reputational risks to operators when major leaks occur. While some leaks will occur under the best operational circumstances, and a portion of that will likely be subject to fines under MERP, the best way for operators to avoid severe financial penalties and reputational fallout is to implement a continuous monitoring system that can detect leaks faster than other emission management systems.
The immediacy and accuracy of Qube’s platform can greatly reduce the time to detection, the time to localize the source, the time to understand the emission rate and, ultimately, the time to remediate the issue and minimize regulatory exposure.