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18 August 20227 minute read

The historic Inflation Reduction Act makes significant changes to federal environmental law and programs

In addition to numerous “clean energy” and transportation electrification tax incentives and funding, the recently enacted Inflation Reduction Act also aims to mitigate climate change and achieve other environmental policy goals through new and revised programs and initiatives. Some of those significant provisions of the Act are summarized below.

Our detailed summaries of other clean energy and climate change-related provisions of the IRA may also be of interest: The clean energy provisions of the IRA and Inflation Reduction Act aims to jumpstart electric vehicle market.  

New program to curb methane emissions

The new law increases regulatory efforts to cut methane emissions through a combination of fiscal “carrots” for companies that reduce emissions and “sticks” for those that do not.

The IRA authorizes $1.5 billion in additional funding and amends the Clean Air Act (CAA) to add a new Methane Emissions Reduction Act Program. The program calls for EPA to provide financial and technical assistance – through grants, rebates, contracts, loans and “other activities” – to petroleum and natural gas systems seeking to reduce their methane emissions through innovations and operational changes that reduce methane and other greenhouse gases (GHGs); mitigate adverse health effects; improve climate resiliency and support environmental restoration. The funds are available for distribution through September 2028.

The “stick” comes in the form of an amendment to the CAA that imposes a “waste emissions charge” starting in 2024 on facilities (including on- and off-shore petroleum and natural gas production, onshore natural gas processing and transmission compression, LNG storage and import and export equipment) that report emitting more than 25,000 metric tons of carbon dioxide equivalent of greenhouse gases per year.

The amount of the charge is equal to the annual metric tons of methane emissions that exceed the threshold set by EPA multiplied by $900 in 2024 and increasing to $1,500 by 2026 and for every year thereafter. Any wells plugged in the preceding year will not be charged, and there are exemptions for facilities that experience environmental permitting delays related to changes in gathering or transmission infrastructure or are otherwise in compliance with Section 111 of the CAA.

EPA’s compliance determination rests upon a finding that methane emissions standards and plans have been approved and are in effect in all states, as well as a finding that compliance will result in emissions reductions equal to or greater than those that would be achieved by the proposed Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review (November 15, 2021). This may raise concerns that the IRA aims to regulate emissions in a back-door fashion, avoiding the requirements of the Byrd Rule.

The Methane Emissions Reduction Program also establishes various reporting requirements and mandates that the EPA update the GHG registry.

Reducing greenhouse gas emissions

The IRA prioritizes reduction of US emissions of greenhouse gases (GHGs) and other forms of air pollution. This serves two of the law’s goals: mitigating climate change and promoting environmental justice.

The IRA allocates billions of dollars to assist states, Tribes, municipalities, businesses, and nonprofit organizations institutions in reducing or avoiding GHG emissions. The law prioritizes funding for frontline communities and targets replacement of older emissions-heavy transportation technology with new zero-emission equipment and technology. For example, IRA funding would promote replacement of port equipment and heavy-duty vehicles like garbage trucks and school buses, which together account for significant GHG emissions. Perhaps the most significant of the investments in this area is the IRA’s $27 billion Greenhouse Gas Reduction Fund, designed to incentivize private investment to combat climate change.

The IRA also provides additional funding to EPA to implement existing air pollution regulations. For instance, it allocates $60 million to the EPA to implement the regulatory goals of the Diesel Emissions Reduction Act through grants, loans, and rebates that recipients can use to identify and reduce certain diesel emissions in communities hit hard by the health effects of diesel air pollution.

The law would also funding the advancement of other aims of the Clean Air Act, including $117.5 million for air quality monitoring systems and other activities related to toxic air pollution; $50 million for the national ambient air quality multipollutant monitoring network; $3 million for air quality sensors in low-income and disadvantaged communities; $15 million for reducing pollution from wood heaters; $20 million for monitoring methane emissions; and $50 million for monitoring and reducing air pollution at schools.

Environmental justice

The IRA includes a number of environmental justice provisions. Specifically, the legislation provides $9 billion in combined Environmental and Climate Justice Block Grants to address public health disparities attributable to pollution and climate change; Neighborhood Access and Equity Grants to address negative environmental and social impacts of transportation projects; and grants to address air pollution at ports.

As discussed below, the IRA also allots $69 million to address diesel emissions around airports and railyards and $1 billion to promote zero-emission school buses, transit buses and garbage trucks in communities designated as non-attainment areas.

The package also reinstates the Superfund tax on oil and petroleum, which is projected to raise over $11 billion for cleanups in low-income and disadvantaged communities and approximately $286 million for air monitoring.

Funding for climate resilience projects

The law also provides for increased funding for climate resilience projects. The term “climate resilience” refers to the ability to prepare for, adapt to, and recover from an extreme climate event or trend. The IRA prioritizes climate resilience in four major areas: urban environments, coastal communities, indigenous communities, and wildlife habitats.

The law establishes funding for the monitoring, prevention, and environmental remediation and mitigation of climate and health risks from urban heat islands – urban areas that experience hotter temperatures than their natural environs. Such heat island risks and effects often disproportionally affect people with certain demographic characteristics (such as race and income levels).

To mitigate these adverse effects, the law allocates funds to make affordable housing units more climate resilient and to implement climate resilience and adaptation programs for urban and indigenous communities. Additional funding is also available to help coastal communities prepare for extreme storms and changing climate conditions. These areas are particularly at risk from climate change hazards, such as sea-level rise and increasing storm intensity.

Other environmental provisions

The IRA includes $750 million to support efficient and effective environmental reviews for surface transportation projects under the National Environmental Policy Act (NEPA). This includes $40 million to EPA and $100 million to the Federal Highway Administration (FHWA) to improve the efficiency of environmental reviews. It also includes $32.5 million to the Council on Environmental Equality to train personnel and make programmatic changes, including improvements to stakeholder and community engagement.

The Federal Permitting Improvement Steering Council (FPISC) Environmental Review Improvement Fund also is slated to receive $350 million to ensure that large scale federal critical infrastructure permits receive timely reviews with improved transparency and predictability.

For more information or assistance with environmental provisions of the Inflation Reduction Act, please contact one of the authors or your usual DLA Piper contact.