Natural Gas Tax Favors Foreign Producers, Hinders Climate Progress

Ensuring that Americans have access to affordable, reliable energy while continuing to reduce emissions associated with energy production is the U.S. natural gas and oil industry’s chief focus–and it should be Washington’s, too.

But some in the nation’s capital continue to advance policies and legislative proposals that would increase costs for American families and incentivize foreign energy production–over American energy development–to fuel our economic recovery.

A natural gas tax included in the congressional budget reconciliation is just the latest example. It imposes a tax on American energy production while exempting other top methane sources, such as agriculture and waste management operations.

Proposals that single out our industry for higher taxes–in this case to help pay for trillions in reconciliation spending–risk chilling new American energy investment and production and could harm the economy and weaken national security. It also could impede environmental progress.

This view isn’t ours alone; 130 organizations representing a cross-section of the U.S. economy–producers, distributors and users of oil, natural gas and propane–wrote to the chairman and ranking member of the Senate’s Environment and Public Works Committee to oppose the natural gas tax. By some estimates the annual tax could total $8.4 billion, potentially impacting the production of natural gas and oil that supply nearly 70 percent of the energy Americans use every day.

Make no mistake: Our industry is committed and taking action to reduce methane emissions from operations. And we’re highly incentivized to do so, because methane is the main component of the natural gas we sell to customers. Through industry-led initiatives such as The Environmental Partnership, a growing coalition of nearly 100 oil and natural gas companies, we’re deploying new technologies and using aerial surveys, optical gas imaging cameras and other innovations to detect and capture methane emissions.

In fact, The Environmental Partnership reported a 50 percent decrease in flaring from 2019 to 2020. In addition, more than 171 billion cubic feet of flare gas was avoided or diverted for beneficial uses–roughly equal to the natural gas used by 2.9 million U.S. homes during a typical winter heating season.

And the trend of cutting emissions continues. Methane emissions per unit of production, or emissions intensity, fell nearly 70 percent between 2011 and 2019 across five of our country’s major producing regions. At the same time, increased use of natural gas has helped U.S. power-sector emissions of carbon dioxide, another key greenhouse gas, reach their lowest levels in a generation.

American-made natural gas and oil are critically important to our economy and way of life. They strengthen our security by making us less reliant on imported energy. But conversely, proposals that restrict domestic production through new taxes and fees risk increasing U.S. dependence on foreign suppliers. Hindering U.S. production could make natural gas more expensive and boost the use of fuels with higher emissions intensities, like coal, reversing many of the gains noted above. This is exactly the trend many parts of the world are experiencing due to bad policy choices.

Rather than imposing targeted and punitive taxes on American energy, API supports the federal regulation of methane from new and existing sources, and we’re working with the Biden administration and EPA on effective rules to continue reducing emissions without curbing production of the energy our country needs.

We must look to policy solutions that reduce emissions while supporting energy production, job creation and economic growth. API’s Climate Action Framework is a blueprint for this path, including accelerating technology and innovation, further mitigating emissions from operations, advancing a carbon price policy, developing cleaner fuels and driving climate reporting. As a nation, we must concentrate our efforts in these ways instead of limiting the affordable, reliable energy America has, which will continue to drive American economic growth, security and progress.

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