Update – July 8, 2025
As part of the FY2025 budget reconciliation bill—also referred to as the “One Big Beautiful Bill Act”—enacted on July 4, 2025, the implementation of the methane waste emissions charge (WEC) has been delayed by 10 years. While the underlying provisions of the WEC established under the Inflation Reduction Act remain in place, the charge will now apply beginning in calendar year 2034, with payment required in 2035. Companies should still prepare for compliance by monitoring emissions and evaluating mitigation strategies, but immediate financial impacts from the WEC have been deferred.

The following article was originally published prior to this legislative change. While the WEC timeline has shifted, the considerations outlined below remain relevant as operators plan for future regulatory compliance. Minor updates have been made throughout the article to reflect the 10-year implementation delay.

The Methane Tax and the EPA's Implementation Rule 

The Inflation Reduction Act (IRA), enacted in 2022, amended the Clean Air Act to require the EPA to impose and collect a tax on certain methane emissions. This tax applies to oil and gas facilities that report emissions exceeding 25,000 metric tons of carbon dioxide equivalent annually. The IRA specified the tax rate per metric ton based on reported emissions: $900 for 2024, $1,200 for 2025, and $1,500 for 2026 and subsequent years. 

However, the IRA did not include detailed procedures for calculating the exact tax owed or setting specific payment deadlines. To enable tax collection, the EPA developed the Waste Emission Charge (WEC) Rule, which provided methods for tax computation and established payment deadlines for affected entities. 

Congress subsequently used the Congressional Review Act (CRA) authority to pass a Joint Resolution disapproving the EPA's WEC Rule. Upon presidential signature, this action made the rule ineffective. A significant aspect of the CRA process is its restriction on the agency that issued the rule (the EPA) from issuing a new "substantially similar" rule in the future, unless specifically authorized by Congress. 

Although the WEC Rule technically took effect on January 1, 2025, the original payment deadline for 2024 emissions (August 31, 2025) is no longer applicable due to the CRA repeal and the subsequent 10-year delay in the tax’s enforcement. This situation presents a challenge: while the statutory requirement in the IRA for the EPA to impose and collect the methane tax remains in place, the administrative framework to support compliance—previously contained in the repealed WEC Rule—is now absent. Although the tax has been delayed until 2034, how it will ultimately be implemented remains unresolved. 

Despite repealing the WEC Rule, the CRA action did not eliminate the underlying methane tax requirement in the IRA. Even with the 10 year delay in its implementation, a complete repeal of the tax would require Congress to pass new legislation through the standard process; some members have indicated an intention to pursue such efforts. 

In the interim, the CRA significantly constrains the EPA's ability to issue a new rule to implement the methane tax. The prohibition against issuing a "substantially the same" rule limits the EPA's discretion to recreate the prior implementation framework, absent specific congressional authorization. The interpretation of "substantially the same" is subject to discussion, and the likelihood of the EPA undertaking a new regulation also depends on executive branch administrative priorities. 

Preparing for an Evolving Methane Tax Landscape 

Given the current state of regulatory uncertainty surrounding the methane tax and the WEC Rule, oil and gas companies that would have been subject to these provisions may consider taking proactive steps to navigate the evolving landscape: 

• Focus on Compliance with the 2024 Methane Rule: It is important to note that the primary EPA 2024 Methane Rule, which sets operational requirements for leak detection, flaring limitations, and equipment standards, remains in effect unless it is separately challenged and altered through a distinct legal or regulatory process. Oil and gas companies should continue their efforts to understand and comply with these foundational requirements. 

• Enhance Methane Emissions Measurement and Reporting: Accurate data remains crucial. Companies are still required to comply with the reporting mandates of the revised Greenhouse Gas Reporting Program (GHGRP) under Subpart W. Improving the precision of emissions data through advanced monitoring technologies is beneficial for current reporting, identifying opportunities for reduction, and assessing potential future obligations. 

• Pursue Proactive Methane Emission Reductions: Investing in technologies and practices that reduce methane emissions can offer operational and strategic advantages independent of the WEC Rule's status and potentially decrease future exposure and retrofit costs.  

• Monitor Legislative and Regulatory Developments: Congress and federal agencies can take action to change the situation. Companies should stay informed about legislative proposals regarding the methane tax, any guidance or actions from the EPA, and the progress of ongoing legal challenges related to methane regulations. 

• Assess Potential Financial Exposure: Using data reported under Subpart W, companies can model potential tax liabilities based on the IRA's specified rates. This analysis can help companies understand potential financial implications should a mechanism for collecting the tax be re-established closer to the now-effective 2035 payment window. 

The repeal of the EPA's WEC Rule, combined with the 10-year delay enacted through the FY2025 budget bill, has postponed immediate implementation and collection of the federal methane tax. While the underlying tax provision from the IRA remains law, its future administration is uncertain and contingent on legislative or regulatory developments. Companies should consider continuing to focus on compliance with the 2024 Methane Rule, improving emissions data quality, and tracking policy developments that could shape long-term obligations.