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Insight
Client Alerts
V&E Environmental Update
March 19, 2025 • 3-minute read
On March 14, 2025, President Trump signed legislation disapproving the Environmental Protection Agency’s regulation implementing the Inflation Reduction Act’s tax on methane emissions from the oil and gas sector. The Joint Resolution of Disapproval under the Congressional Review Act prohibits the EPA’s so-called Waste Emission Charge rule (“WEC Rule”) from taking effect. Even though the rule is no longer in effect, the Joint Resolution did not repeal the tax itself. As Congress continues its efforts to repeal the tax itself, the detailed tax computation methods and tax payment deadlines from the WEC Rule are no longer effective. Because the Inflation Reduction Act did not include a tax payment deadline or detail how the tax is to be calculated, companies currently have no means by which to compute or pay their methane tax for reporting year 2024. This article provides a brief overview of the methane tax and examines the questions raised by Congress’s repeal of the WEC Rule.
As discussed further in our previous Insight, the Inflation Reduction Act of 2022 (“IRA”) amended the Clean Air Act and instructed the EPA to impose and collect a tax on certain methane emissions. The IRA imposed the tax on companies emitting more than 25,000 metric tons of carbon dioxide equivalent per year from nine segments of the oil and gas industry. The IRA sets the methane tax as the product of: (1) methane emissions reported in metric tons under the EPA’s Greenhouse Gas Reporting program; and (2) a per ton amount that escalates from $900 for reporting year 2024, to $1,200 for reporting year 2025, and to $1,500 for reporting year 2026 and beyond. The EPA’s WEC Rule filled in the statutory gaps left by the IRA by instructing companies on further needed details related to how to calculate and pay their methane tax along with establishing payment deadlines.
Congress repealed the WEC Rule using the Congressional Review Act (“CRA”). The CRA authorizes a Joint Resolution under certain circumstances that—when signed by the President—disapproves an executive branch regulation. A Joint Resolution renders the regulation ineffective and limits the promulgating agency’s discretion to re-promulgate a similar rule in the future. Even though the WEC Rule became effective on January 1, 2025, the methane tax payment for reporting year 2024 was not due until August 31, 2025. Now that the rule’s tax payment deadline is ineffective, it appears as though companies need not make their August 31, 2025, methane tax payments. What remains uncertain is what, if any, contingent liabilities companies may face for their 2024 reported emissions given the oddity of a statute that creates the tax but the lack of practical means for companies to definitively determine the tax or pay it.
Although Congress eliminated the WEC Rule, it did not repeal the statute originally establishing EPA’s obligation to impose and collect taxes on covered emissions. If Congress wants to eliminate the methane tax entirely, it will need to use the traditional legislative process to repeal the tax. Republican legislators have indicated that congressional Republicans intend to use the budget reconciliation process to repeal the methane tax, a process that will likely be engaged in March 2025 as part of the looming budget battle.
In the meantime, the EPA will face challenges in any effort to adopt a new methane tax implementing rule. The CRA prohibits any future regulations from having “substantially the same form” as the repealed rule unless Congress passes a statute authorizing the rule after the CRA repeal. Absent such authorization, the EPA’s discretion to pass any future implementing regulations would be limited, although the scope of what would count as “substantially the same” is not entirely clear. When reissuing rules in the past, agencies have looked to the legislative history of the joint resolution of disapproval repealing the rule for guidance on what may still be fair game. But given the Trump Administration’s Executive Order on Unleashing American Energy, it is far from clear that the EPA would be willing to entertain a new implementing regulation.
Companies subject to the statutory methane tax should continue to closely watch for further action from Congress and guidance from the EPA.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.
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