[House Report 118-15]
[From the U.S. Government Publishing Office]
118th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 118-15
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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H.R. 1141 repealed the natural gas tax contained in Section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]