[House Report 118-15]
[From the U.S. Government Publishing Office]


118th Congress   }                                          {   Report
                          HOUSE OF REPRESENTATIVES
   1st Session   }                                          {   118-15

======================================================================


 
                       NATURAL GAS TAX REPEAL ACT

                                _______
                                

 March 23, 2023.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mrs. Rodgers of Washington, from the Committee on Energy and Commerce, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 1141]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 1141) to repeal the natural gas tax, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Committee Action.................................................     3
Committee Votes..................................................     3
Oversight Findings and Recommendations...........................     6
New Budget Authority, Entitlement Authority, and Tax Expenditures     6
Congressional Budget Office Estimate.............................     6
Federal Mandates Statement.......................................     6
Statement of General Performance Goals and Objectives............     6
Duplication of Federal Programs..................................     6
Related Committee and Subcommittee Hearings......................     6
Committee Cost Estimate..........................................     7
Earmark, Limited Tax Benefits, and Limited Tariff Benefits.......     7
Advisory Committee Statement.....................................     7
Applicability to Legislative Branch..............................     7
Section-by-Section Analysis of the Legislation...................     8
Changes in Existing Law Made by the Bill, as Reported............     8
Minority Views...................................................     9

                          PURPOSE AND SUMMARY

    H.R. 1141 was introduced by Rep. August Pfluger on February 
21, 2023. The purpose of H.R. 1141 is to repeal Section 136 of 
the Clean Air Act, the Natural Gas Tax, and rescind the 
unobligated balance of any amounts available under Section 136.

                  BACKGROUND AND NEED FOR LEGISLATION

    H.R. 1141 repealed the natural gas tax contained in Section 
136 of the Clean Air Act (CAA). The natural gas tax was 
established through amendments to the CAA included in the 
Inflation Reduction Act (IRA). The IRA was signed into law on 
August 16, 2022. Specifically, Section 136 of the CAA 
authorizes the Environmental Protection Agency (EPA) to impose 
or collect a ``charge on methane emissions'' which operates 
effectively as a tax. Additionally, the IRA authorized and 
appropriated over $1.5 billion under Section 136 of the CAA.
    This new natural gas tax undercuts the ability of American 
energy producers by imposing financial and filing burdens on 
independent oil and gas producers, jeopardizing their 
operations. According to the bill's author, Congressman August 
Pfluger (TX-11), independent oil and gas producers produce 83 
percent of America's oil and supply 90 percent of our natural 
gas. There were no congressional hearings, expert testimony, or 
economic analysis prior to passing the IRA and implementing the 
natural gas tax. Rough estimations projected the fee would 
result in an annual cost between $39 and $65 billion, and as 
much as $337 million in fees per facility. However, the natural 
gas tax would only reduce GHG emissions by 2.6 percent. Between 
2005 and 2019, CO2 emissions from the U.S. power 
sector declined by almost 30 percent, with the generation of 
power from natural gas accounting for more than half of that 
decline. According to the EPA, emissions declined 31 million 
metric tons from 1992 to 2017 in CO2, and over the 
same time period natural gas production also rose 51 percent. 
Taxing these independent producers would make operating more 
expensive, undercutting their ability to produce and contribute 
to emission reductions.
    These producers recognize the importance of managing air 
emissions of methane and other volatile organic compounds. They 
are highly motivated to capture methane as it is a valuable 
energy product, and the American oil and gas industry is taking 
action to better detect, monitor, and measure methane leaks. 
They already participate in voluntary programs to identify and 
implement cost effective management technologies and work 
diligently to comply with state and federal regulations. The 
oil and gas industry in the United States has already 
drastically cut emissions over the past decade. Production 
emissions have fallen by 70 percent since 2011.\1\ Further, the 
tax is unnecessary and duplicative as the EPA and many states 
already directly regulate methane emissions. Roughly 40 percent 
of power generation in the United States comes from natural 
gas, taxes that hamstring the ability of producers to operate 
could significantly increase energy prices and create 
vulnerability issues.
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    \1\https://www.api.org/news-policy-and-issues/blog/2021/07/12/
eight-points-natural-gas-reducing-emissions-and-environment.
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    The natural gas tax proposes to collect emission data, 
which historically has been reported under Subpart W of the 
Clean Air Act. Under the current law, the EPA will use this 
emission data to assess a tax for emissions exceeding 25,000 
tons of CO2 equivalent. The EPA has proposed a 
supplemental rule to regulate methane emissions; the public 
comment period for this rule closed on February 13, 2023.\2\ 
This proposed supplemental rule does not include a tax, however 
a violation of the supplemental regulations would carry the 
penalties and fines set forth in the CAA. The Committee finds 
the natural gas tax implemented through the IRA goes beyond the 
scope of the CAA as well as the jurisdiction and original 
mandate of the EPA by turning the Agency into a tax collection 
agency.
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    \2\https://www.epa.gov/controlling-air-pollution-oil-and-natural-
gas-industry/epa-issues-supplemental-proposal-reduce.
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                            COMMITTEE ACTION

    On February 7, 2023, the Subcommittees on Energy, Climate, 
and Grid Security and Environment, Manufacturing, and Critical 
Materials held a joint hearing entitled, ``Unleashing American 
Energy, Lowering Energy Costs, and Strengthening Supply 
Chains,'' on 17 pieces of legislation, including H.R. 1141. The 
Subcommittees received testimony from:
           The Honorable Mark Menezes, Former United 
        States Deputy Secretary of Energy, Department of 
        Energy;
           The Honorable Bernard McNamee, Former 
        Commissioner, Federal Energy Regulatory Commission;
           Jeffrey Eshelman, II, President and Chief 
        Executive Officer, Independent Petroleum Association of 
        America;
           Katie Sweeney, Executive Vice President and 
        Chief Operating Officer, National Mining Association;
           Raul Garcia, Legislative Director for 
        Healthy Communities, Earthjustice; and
           Tyson Slocum, Director of the Energy 
        Program, Public Citizen.
    On February 28, 2023, the Subcommittee on Environment, 
Manufacturing, and Critical Materials met in open markup 
session and forwarded H.R. 1141, without amendment, to the full 
Committee by a recorded vote of 13 yeas and 7 nays. On March 9, 
2023, the full Committee on Energy and Commerce met in open 
markup session and ordered H.R. 1141, without amendment, 
favorably reported to the House by a recorded vote of 26 yeas 
and 21 nays.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII requires the Committee to list the 
record votes on the motion to report legislation and amendments 
thereto. The following reflects the record votes taken during 
the Committee consideration:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                 OVERSIGHT FINDINGS AND RECOMMENDATIONS

    Pursuant to clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII, the Committee held a hearing and made findings that 
are reflected in this report.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    Pursuant to clause 3(c)(2) of rule XIII, the Committee 
finds that H.R. 1141 would result in no new or increased budget 
authority, entitlement authority, or tax expenditures or 
revenues.

                  CONGRESSIONAL BUDGET OFFICE ESTIMATE

    Pursuant to clause 3(c)(3) of rule XIII, at the time this 
report was filed, the cost estimate prepared by the Director of 
the Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974 was not available.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

         STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    Pursuant to clause 3(c)(4) of rule XIII, the general 
performance goal or objective of this legislation is to 
increase American energy production and restore energy 
leadership by repealing Section 136 of the Clean Air Act, the 
Natural Gas Tax, and rescind the unobligated balance of any 
amounts available under Section 136.

                    DUPLICATION OF FEDERAL PROGRAMS

    Pursuant to clause 3(c)(5) of rule XIII, no provision of 
H.R. 1141 is known to be duplicative of another Federal 
program, including any program that was included in a report to 
Congress pursuant to section 21 of Public Law 111-139 or the 
most recent Catalog of Federal Domestic Assistance.

              RELATED COMMITTEE AND SUBCOMMITTEE HEARINGS

    Pursuant to clause 3(c)(6) of rule XIII,
    (1) the following hearings were used to develop or consider 
H.R. 1141:
    On January 31, 2023, the Committee on Energy and Commerce 
held an oversight hearing entitled, ``American Energy 
Expansion: Strengthening Economic, Environmental, and National 
Security.'' The Committee received testimony from:
           The Honorable Paul Dabbar, Former Under 
        Secretary of Energy, Department of Energy;
           Robert McNalley, President, Rapidan Energy 
        Group, LLC;
           Donna Jackson, Director of Membership 
        Development--National Center for Public Policy 
        Research, Project 21; and
           Ana Unruh Cohen, Former Majority Staff 
        Director, U.S. House Select Committee on the Climate 
        Crisis.
    On February 16, 2023, the Subcommittee on Energy, Climate, 
and Grid Security held a field hearing in Midland, Texas, 
entitled, ``American Energy Expansion: Improving Local 
Economies and Communities' Way of Life.'' The Committee 
received testimony from:
           The Honorable Lori Blong, Mayor of Midland, 
        Texas, and President of Octane Energy;
           Adrian Carrasco, Chairman, Midland Hispanic 
        Chamber of Commerce, and President of Premier Energy 
        Services;
           Steven Pruett, President and CEO, Elevation 
        Resources, and Chairman of the Board for Independent 
        Petroleum Association of America; and
           Dr. Michael Zavada, Professor of Biology and 
        Geosciences, and Chair, Department of Geosciences at 
        The University of Texas--Permian Basin.
    (2) The following related hearing was held:
    On February 7, 2023, the Subcommittees on Energy, Climate, 
and Grid Security and Environment, Manufacturing, and Critical 
Materials held a joint hearing entitled, ``Unleashing American 
Energy, Lowering Energy Costs, and Strengthening Supply 
Chains,'' on 17 pieces of legislation, including H.R. 1141. The 
Subcommittees received testimony from:
           The Honorable Mark Menezes, Former United 
        States Deputy Secretary of Energy, Department of 
        Energy;
           The Honorable Bernard McNamee, Former 
        Commissioner, Federal Energy Regulatory Commission;
           Jeffrey Eshelman, II, President and Chief 
        Executive Officer, Independent Petroleum Association of 
        America;
           Katie Sweeney, Executive Vice President and 
        Chief Operating Officer, National Mining Association;
           Raul Garcia, Legislative Director for 
        Healthy Communities, Earthjustice; and
           Tyson Slocum, Director of the Energy 
        Program, Public Citizen.

                        COMMITTEE COST ESTIMATE

    Pursuant to clause 3(d)(1) of rule XIII, the Committee 
adopts as its own the cost estimate prepared by the Director of 
the Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974. At the time this report was 
filed, the estimate was not available.

       EARMARK, LIMITED TAX BENEFITS, AND LIMITED TARIFF BENEFITS

    Pursuant to clause 9(e), 9(f), and 9(g) of rule XXI, the 
Committee finds that H.R. 1141 contains no earmarks, limited 
tax benefits, or limited tariff benefits.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    Section 1 provides the short title of ``Natural Gas Tax 
Repeal Act''.

Section 2. Repeal

    This section repeals section 136 of the Clean Air Act (42 
U.S.C. 7436). This section was established through the 
Inflation Reduction Act and authorizes the EPA to impose or 
collect a ``charge on methane emissions,'' also referred to as 
a tax on natural gas.

Section 3. Repeal

    Section 3 rescinds the unobligated balance of any amounts 
made available under Sec. 136. The IRA authorized and 
appropriated over $1.5 billion under Sec. 136 of the CAA.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    With respect to the requirement of clause 3(e) of rule XIII 
of the Rules of the House of Representatives, changes in 
existing law made by the bill, as reported, this section was 
not made available to the Committee in time for the filing of 
this report.

                             MINORITY VIEWS

    We oppose H.R. 1141, legislation to repeal Section 136 of 
the Clean Air Act (CAA), relating to the Methane Emissions 
Reduction Program (MERP). H.R. 1141 repeals and rescinds any 
unobligated funds for MERP, which was enacted as part of the 
Inflation Reduction Act (IRA). The program curbs methane leaks 
and excess pollution from the oil and gas industry, protects 
the health of our communities, and creates good-paying jobs in 
the process. Repealing this program, as proposed by H.R. 1141, 
is nothing more than the majority prioritizing polluter 
profits, over the health and future of the American people.

                               BACKGROUND

    The Methane Emissions Reduction Program is an important 
part of our effort to combat the climate crisis as methane 
pollution is accelerating the pace of climate change and 
harming the health of our families and communities. Methane is 
a potent greenhouse gas (GHG) that accelerates climate change 
and is about 84 times more powerful than carbon dioxide when 
measured over a 20-year period.\1\ The oil and gas source 
category is the largest industrial emitter of methane in the 
United States, consists of hundreds of thousands of sources, 
and emits roughly a third of our methane emissions each year. 
Methane also contributes to the formation of smog and is 
released alongside toxic air pollution during oil and gas 
production that can worsen respiratory illnesses.\2\ Without 
strong controls paired with incentives, methane pollution will 
continue to cause significant harm to public health, threaten 
the stability of our economy, and compromise the well-being of 
future generations and our planet.
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    \1\U.S. Environmental Protection Agency, Understanding Global 
Warming Potentials (epa.gov/ghgemissions/understanding-global-warming-
potentials) (accessed Mar. 21, 2023); See Table 8.7 of 
Intergovernmental Panel on Climate Change, Climate Change 2013: The 
Physical Science Basis. Contribution of Working Group I to the Fifth 
Assessment Report of the Intergovernmental Panel on Climate Change 
(2013).
    \2\Environmental Defense Fund, Federal Methane Map, Oil and Gas 
Population: United States (www.edf.org/federalmethanemap) (accessed 
Mar. 21, 2023); Clean Air Task Force, Gasping for Breath: An Analysis 
of the Health Effects from Ozone Pollution from the Oil and Gas 
Industry (Aug. 2016).
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    To that end, the IRA included the MERP to control excess 
methane pollution from the oil and gas industry.\3\ The program 
builds on EPA's existing Greenhouse Gas Reporting Program. It 
recognizes the cleanest performers, holds individual companies 
responsible for their own leaks and wasted methane pollution, 
drives innovation in the sector, creates good-paying jobs, and 
supports projects to protect American communities from the 
effects of the climate crisis.
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    \3\Pub. L. No. 117-169, Sec. 60113 (2022).
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    The Republican claims that MERP is a natural gas or methane 
tax are completely false. The program includes a suite of 
incentives to drive down excess methane pollution and remediate 
the effects of pollution that does occur. First, the program 
immediately provides more than $1.55 billion to assist industry 
with reducing current and legacy methane emissions, including 
$700 million in incentives for small producers. Second, EPA 
establishes methane waste emissions thresholds for petroleum 
and natural gas facilities, and then applies a charge for waste 
emissions exceeding such thresholds. Unlike a tax on methane or 
natural gas, the charge only applies to wasted methane above 
these thresholds.
    If companies fulfill their public climate commitments, they 
will not have to pay any charge at all. The charge only applies 
to methane emissions above the thresholds. The thresholds are 
based on the oil and gas industry's own climate commitments and 
methane reduction targets. These targets are achievable, and in 
many cases are already being met by industry leaders. They are 
set at a level that incentivizes better performance from the 
rest of the oil and gas industry.

                          SUMMARY OF H.R. 1141

    Section 2 of H.R. 1141 repeals Section 136 of the CAA, 
relating to MERP, and Section 3 of the bill rescinds all 
unobligated funds.
    Proponents of H.R. 1141 refuse to characterize MERP as 
anything but a tax on polluters, which has apparently left the 
Majority blind to the reality that the program raises revenue. 
According to the Congressional Budget Office (CBO), MERP is 
expected to generate $6.35 billion in revenue from Fiscal Years 
2022-2031, and even more beyond the ten-year window.\4\ 
Enacting this legislation would undermine the Majority's 
supposed goal of balanced budgets and is contrary to their 
ethos of deficit reduction. During Committee consideration of 
H.R. 1141, Democratic Members offered an amendment to 
illustrate this fundamental problem with the bill. All 
Republican members voted against an amendment ensuring the Act 
cannot go into effect until CBO certifies that it will not add 
to the Federal deficit.
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    \4\Congressional Budget Office, Estimated Budgetary Effects of H.R. 
5376, the Inflation Reduction Act of 2022 (Aug. 5, 2022) (www.cbo.gov/
publication/58366).
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    Furthermore, MERP is fully paid for through the charge on 
wasted methane pollution and ensures that consumers no longer 
pay for wasted energy or the harm its emissions can cause. The 
charge begins at $900 per ton for wasted emissions in 2024 and 
ramps up to $1,500 per ton by 2026. The charge corrects a 
market failure that currently makes it cheaper for owners and 
operators to waste methane than to install or upgrade equipment 
to prevent leaks and flaring. Leaked or intentionally wasted 
natural gas never makes its way to customers, but they are 
nevertheless stuck with the bill. H.R. 1141 would ensure 
polluters continue to exploit this market failure, and 
customers continue to pay for it.
    H.R. 1141 would also forego the accelerated energy 
innovation and job growth created by MERP. By incentivizing 
companies to address wasted methane, MERP will spur 
technological innovation and broader adoption--particularly in 
the methane mitigation industry, which provides services and 
equipment to detect, fix, and prevent leaks. The program also 
spurs job growth by driving companies to perform frequent leak 
detection and repair, providing a source of sustainable, 
skilled, and well-paying union jobs for workers laid off during 
the pandemic. Repealing MERP would block these critical 
opportunities for new job creation and innovation, in service 
of allowing polluters to spew methane with reckless abandon.\5\
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    \5\The GOP's Failed Obamacare Repeal Effort Holds Lessons for the 
Climate Law, Washington Post (Feb. 9. 2023).
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                               CONCLUSION

    H.R. 1141 is a political vendetta against the historic 
climate achievements of the IRA. MERP curbs methane leaks and 
excess pollution from the oil and gas industry, protects the 
health of our communities and creates good-paying jobs in the 
process. The Majority's rushed attempt to rescind MERP would 
prioritize polluter profits over a clean and sustainable future 
for all Americans.
    For the reasons stated above, we dissent from the views 
contained in the Committee's report.
                                        Frank Pallone, Jr.,
                  Ranking Member, Committee on Energy and Commerce.

                                  [all]