US Declares Funding For Reducing Methane Emissions
Video: Funding efforts for methane emissions reductions in the USA.
Transcript
When you think of methane emissions, which can be more than 28 times as potent as carbon dioxide as a greenhouse gas, you’ll probably think of the dreaded cows. They’re the second largest source of methane emissions in the world, according to the International Energy Agency.
It’s gotten to a point where countries like Denmark are proposing taxing the cows. They’ve implemented a $96 USD tax per cow to penalize methane emissions.
Personally, I think this type of policy is bordering on unethical. Once you start attacking our food supply, that’s where things get dubious, because the average consumer isn’t going to change their eating or other personal habits. We need to make changes in how we create or transport goods, since affecting people’s lives personally is a lost cause. People won’t give up their convenience or way of life if it comes to that.
Governments can try… but we’ve already seen how many people hate paper straws. And that isn’t a big change… now try to get rid of real meat or dairy. So I don’t think something like a tax on cows is going to be sustainable.
So what else can we target instead when trying to reduce emissions?
Well, besides naturally occurring methane emissions from Wetlands and Agriculture, the third largest source of emissions is from the energy sector. Oil, natural gas, coal, and biomass.
Besides the obvious source of emissions from when oil and gas companies drill an oil well, millions of oil and gas wells are actually left abandoned across the United States alone.
According to the EPA, they estimate there are over 2 million inactive, unplugged wells emitting methane or other greenhouse gasses. These wells pose significant health risks beyond climate change itself, as they can leak toxic chemicals and contaminate the groundwater in the area.
The reason these wells remain unplugged is because of the difficult nature of the oil and gas sector. When a company goes insolvent and declares bankruptcy, oftentimes, there’s no one left to take accountability for handling the environmental work after a well is abandoned. With no one to place the bill on to take care of these orphaned wells, they can wreak havoc on the environment in these regions, potentially for decades.
To solve this problem, the United States government, under Biden, has announced several different spending initiatives to start solving this problem and plug these wells.
Back in 2021, the US passed the Revive Economic Growth and Reclaim Orphaned Wells, also known as the REGROW Act. This bill had significant bipartisan support, and was ultimately included in the Bipartisan Infrastructure Bill.
The REGROW Act provides around $4.3 billion for orphaned well cleanup projects, $400 million for well cleanup on public and tribal lands, and $32 million for research and development related to cleaning up these areas.
So massive levels of funding for the companies that can solve this problem. This tends to go to either smaller drilling companies that handle this work, or the oil and gas companies themselves who will go in and clean up their old wells.
But that’s not all, there’s another $850 million coming from the Inflation Reduction Act, so federal funding for plugging these wells currently exceeds $5 billion. This capital will primarily go to small operators to fund their efforts, and improve the monitoring and measuring data captured in the regions most affected.
And to further prove the bipartisan support for this work… back in April, the US House passed the Abandoned Well Remediation Research and Development Act (also known as AWRRDA), with a vote of 333 to 75. As you know if you follow American politics, we barely see any legislation have that type of support from both sides. This bill has yet to be passed by the Senate, but it’s expected to get broad support there as well.
AWRRDA would provide another $150 million over the next five years to help find 800,000 undocumented, orphaned wells. So not only is there funding to solve the problem, but they are providing funding to find more of the wells themselves.
Another addition from the Inflation Reduction Act was what they called the methane charge, a fee for facilities that weren’t compliant with some upcoming EPA regulations on methane. Any facility that emitted more than 25,000 tonnes of CO2-equivalent emissions per year would have to pay $900 per tonne of methane after that allowance limit. This fee would increase to $1,500 after two years.
It was estimated that there were around 2,000 facilities that would reach that limit and get penalized for their methane emissions. This applied to offshore and onshore oil and gas production facilities, natural gas processing and storage, as well as pipelines.
This is just another incentive for companies to begin limiting methane emissions, but election results in the US in November could determine how many of these funding efforts and penalties remain.
As I spoke about in my last video on the Chevron Doctrine, if Republicans sweep the elections in the US, then that could lead to the repeal of the Inflation Reduction Act entirely. Or at the very least, massive changes to what the IRA does. This isn’t even considering other legislation.
If I had to guess what will go, the methane fee will certainly be gone if Trump has the power to do so, but the bipartisan funding efforts for plugging oil and gas wells should survive, as long as the bills that allocated that funding aren’t repealed entirely. It really depends on how the US elections go, and what Republicans decide to cut if they win.
Considering how orphaned oil and gas wells pose a significant health risk, beyond climate change’s effect through pollution of the local area, I would think this funding should avoid Republican scrutiny, but we will have to see how things turn out next year.
Assuming that $5 billion of funding remains, then the beneficiaries of that money could use that capital to scale rapidly. On my Substack, I’ve added a microcap stock to my watch list whose CEO thinks they could receive around 20 to 30% of that funding. So they could potentially get hundreds of millions of dollars from the federal government, which would provide a massive tailwind for growth.
So if you’d like to learn more about that company, news in environmental sectors, and additional investment opportunities, then consider subscribing to my paid service on Substack. I will be raising the price of a subscription after the first 50 paid members sign up. So check that out if you’re interested. Thanks for watching.