The process for implementing a federal tax on methane emissions from the oil and gas sector, established by the Inflation Reduction Act (IRA) of 2022, is currently uncertain. On March 14, 2025, a Joint Resolution of Disapproval related to the Environmental Protection Agency's (EPA) rule for this tax was signed into law by President Trump. In response to the joint Congressional resolution, the EPA issued a final rule to remove the Waste Emissions Charge (WEC) regulatory text from the Code of Federal Regulations (CFR) on May 13, 2025. This action has rendered the EPA's specific implementation rule ineffective, creating questions about how the tax, which remains in the underlying law, will be administered.
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 was effective January 1, 2025, its established payment deadline for 2024 emissions (due August 31, 2025) is no longer binding due to the repeal. 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 necessary administrative details for companies to precisely calculate and make the payment, previously contained in the repealed WEC Rule, are currently absent. This raises questions regarding potential future liability for 2024 reported emissions and how such matters might be resolved.
Despite repealing the WEC Rule, the CRA action did not eliminate the underlying methane tax requirement in the IRA. 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.
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 established in the future.
The repeal of the EPA's WEC Rule has introduced uncertainty regarding the immediate implementation and collection of the federal methane tax for 2024. While the underlying tax provision from the IRA remains law, the path forward for its administration is currently unclear and subject to potential future legislative actions by Congress. Companies should consider understanding and complying with the 2024 Methane Rule, accurate reporting, and close monitoring of policy developments.