Summary

The U.S. Department of Energy (“DOE”) and the U.S. Environmental Protection Agency (“EPA”) recently issued a competitive $850 Million federal funding opportunity (“FOA”) designed to provide grants to eligible U.S. entities, including industry, academia, NGOs, Tribes, and state and local governments for the purpose of helping mitigate methane emissions from marginal conventional wells (MCWs) and other oil and natural gas assets; accelerating the commercialization, scale-up and application of innovative methane emissions reduction technologies; and advancing the characterization and reduction of methane emissions through multi-scale, measurement-informed data collection and analysis. 

Applications are due at 5 P.M. ET on August 26, 2024. 

The FOA, together with $350 million of formula grants awarded to fourteen states by DOE and EPA in January 2024¹, are funded through a $1.55 billion appropriation under Section 60113 of the Inflation Reduction Act (“Methane Emissions Reduction Program”) that supports federal grants, rebates, contracts, loans, and other activities to reduce methane and other greenhouse gas emissions from petroleum and natural gas systems.

The FOA reflects the culmination of efforts during three consecutive administrations, including, the Trump administration’s passage of the PIPES Act, the Biden administration’s U.S. Methane Emissions Reduction Action Plan and the Obama administration’s Climate Action Plan. Currently, the Biden administration aims to minimize emissions of methane during production, processing, and transportation across the oil and natural gas industry through economic incentives, such as those available under the FOA, coupled with the imposition of new obligations and costs on the sector, including a proposed rule that would assess an annual waste emissions charge for emitters exceeding specified threshold methane emissions levels beginning with 2024 emissions² and new methane emission measurement, reporting and reduction obligations pursuant to rules issued by the EPA, the Bureau of Land Management and the Pipeline and Hazardous Material Safety Administration.

FOA Areas of Interests

In furtherance of the Administration’s methane reduction efforts, the FOA sets forth three defined areas of interests (AOIs) each with different objectives and criteria.  See chart below and the FOA here for further details.  The Areas of Interest are:

• AOI 1: Methane Emissions Reduction from Existing Wells and Infrastructures
  
  
• AOI 2: Accelerating Deployment of Methane Emissions Reduction Solutions
  
  
• AOI 3: Accelerating Deployment of Methane Emissions Monitoring Solutions

 

Each of the three sub-funding opportunities under AOI 1 seek a lead organization to develop and execute a program focused upon elimination and reduction of emissions from marginal conventional wells (“MCWs”) and other low producing wells and associated infrastructure with high methane emission intensity held by small owners/operators by facilitating the purchase and distribution of commercially available, “off-the-shelf” methane emissions mitigation technologies.  Such selected lead organization will be required, in collaboration with DOE/EPA, to develop guidelines for MCW emissions mitigation funding prioritization, equipment procurement and distribution, methane emissions measurement at MCW locations both before and after emissions mitigation action(s) have taken place in general alignment with the DOE/NETL developed methane measurement guidelines.  For purposes of AOI 1, a small operator is defined as an entity generating a revenue of less than $40 million in a fiscal year and an MCW is defined as an idle or producing vertical or slightly deviated oil or natural gas well (excludes highly deviated or horizontal wells) with a known owner / operator producing less than or equal to 15 barrels of oil equivalent per day (BOED) or 90 thousand cubic feet (Mcf) gas per day over the prior 12-month period. 

Applicants submitting under AOI 2 must present emission reduction technology solutions with a starting “technology readiness level” of TRL 6 or 7 and achieve a TRL of 8 at the end of the project.  TRL 6 is defined in the FOA as a system/subsystem model or prototype demonstration in a relevant environment.  TRL 7 is defined in the FOA as a system prototype demonstration in an operational environment.   TRL 8 is defined in the FOA as an actual system completed and qualified through test and demonstrated.  The FOA details DOE’s approach to determining a project’s TRL in the case a technology contains multiple integrated systems or components. AOI 2 applicants must identify an industry partner(s) and include letters of commitment from such industry partner as evidence of intentions to commercialize the technologies and a location(s) for field demonstration of the proposed technology.  In addition, such applicants must satisfy DOE’s 20% cost share requirement as further detailed in the FOA. 

AOI 3 seeks multiple entities for each sub-AOI including but not limited to technology solution providers, oil and natural gas operators, and disadvantaged communities. Project entities must include letters of commitment from industry partners and disadvantaged communities for access to locations to be used for the installation of methane monitoring equipment.

Details about each AOI, sub-parts of each AOI and their respective anticipated number of awards and anticipated funding amounts can be found in the chart below:

 

AOI Number	AOI Title	Anticipated Number of Awards	Anticipated Minimum Award Size for Any One Individual Award (Fed Share)	Anticipated Maximum Award Size for Any One Individual Award (Fed Share)	Approximate Total Federal Funding Available for All Awards	Anticipated Maximum Period of Performance (End date no later than 9/30/2028)
1a	Reducing Methane Emissions from Marginal Conventional Wells	1	$299 million	$300 million	$300 million	~44 months
1b	Reducing Methane Emissions from Small Operators Wells and Other Oil and Natural Gas Assets	1	$209 million	$210 million	$210 million	~44 months
1c	Reducing Methane Emissions from Marginal Conventional Wells and Oil and Gas Assets on Tribal Lands	1	$49 million	$50 million	$50 million	~44 months
2a	Field Deployment of Engine and Compressor Methane Reduction Technologies	Up to 10	$11.5 million	$6 million	$60 million	~44 months
2b	Field Deployment of Gas Flaring Reduction Technologies	Up to 10	$1.5 million	$6 million	$60 million	~44 months
2c	Field Deployment of Emissions Reduction Technologies at Oil and Gas Productions Facilities	Up to 6	$1 million	$5 million	$30 million	~44 months
3a	Improving Access to Monitoring Data for Impacted Communities	Up to 4	$8 million	$10 million	$40 million	~44 months
3b	Regional Methane Emissions Characterization	Up to 5	$18 million	$20 million	$100 million	~44 months

Baker Botts would be pleased to assist you in your eligibility review and analysis under the FOA, as well as in preparation of any application you might wish to submit thereunder. Baker Botts also assists clients who successfully receive awards in the award negotiation process and post-award compliance.

¹See https://www.bakerbotts.com/thought-leadership/publications/2023/september/new-us-grant-program-to-help-states-reduce-methane-emissions and https://iratracker.org/actions/epa-announces-350-million-in-grants-to-14-states-to-reduce-oil-and-gas-sector-methane-emissions/
²See Waste Emissions Charge | US EPA; 89 Fed. Reg. 5318 (Jan. 26, 2024).

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