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Democrats scramble to salvage U.S. methane fee proposal - sources

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By Jarrett Renshaw

Oct 27 (Reuters) - Democrats are considering paring down a proposed methane fee on U.S. oil and gas producers as a way pacify opposition to the idea from within its own ranks, according to three sources familiar with the discussions.

The effort reflects the difficulty faced by the progressive wing of the party in enacting ambitious climate change measures in spending and infrastructure bills, after political opposition forced out other high profile plans to curb emissions, including from the power industry.

Democrats initially wanted to force oil and natural gas producers to pay $1,500 for each metric ton of methane they emit above specific intensity thresholds, but they ran into opposition from U.S. Senator Joe Manchin, of West Virginia, and other Democrats from oil and gas states.

Methane is the second most prevalent greenhouse gas after carbon dioxide but has a higher heat-trapping potential. A recent UN report said "strong, rapid and sustained reductions" in methane emissions would have an immediate impact on combating climate change.

Now, Democratic Senators Sheldon Whitehouse and Tom Carper are offering a pared-down version of the plan that would phase in the fee over several years and front-load incentives like rebates to help producers comply, the three sources, who requested anonymity to discuss internal deliberations, told Reuters.

While sources say recent discussions have built some momentum, they said the proposal is still no sure bet to be included in the Democrats spending bill at the center of debate in the nation’s capital.

Among the complications, a source said, is the prospect of a natural gas shortage this winter heating season that could cause home heating prices to skyrocket. Republican critics have said a methane fee would further raise costs associated with heating homes and fueling cars.

An analysis by Energy Innovation found that the original methane fee proposal would have reduced the same amount of emissions as removing 36 million gasoline-powered vehicles from the road.

A methane fee would complement a forthcoming proposed rule by the Environmental Protection Agency that would regulate methane from existing oil and gas regulations for the first time. The upcoming rule is also creating doubt on the necessity of the methane fee among some Democrats.

The United States recently announced a Global Methane Pledge with the European Union to cut methane emissions 30% by 2030.

The White House recently told Congressional Democrats that it expects the climate programs in the party's spending bill will range between $500 billion and $555 billion, the sources told Reuters. That is likely the largest allotment in a spending package that is expected to land between $1.5 and $2 trillion. (Reporting By Jarrett Renshaw and Valerie Volcovici Editing by Marguerita Choy)

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