New Tax Credit Targets Mine Methane Leaks: Companies Get Incentives to Turn Waste Gas into Pipeline Fuel After 2024

The “Methane Reduction and Economic Growth Act” creates a brand-new tax incentive aimed squarely at reducing one of the most potent greenhouse gases: methane leaking out of mines. Starting after December 31, 2024, companies capturing methane from underground, abandoned, or surface mines can claim a tax credit similar to the existing carbon capture credit (Section 45Q). To qualify, this captured gas must be methane that would have otherwise just vented into the atmosphere, and the facility must capture at least 2,500 metric tons of CO2 equivalent methane annually. This is a direct financial incentive to stop a major source of leakage and turn it into something useful.

The Mine-to-Market Pipeline

The biggest change here is that the tax code is finally acknowledging that mine methane is a valuable, if leaky, resource. To get the credit, the captured methane can’t just be captured—it has to be put to work. The bill gives companies two main options: either injecting the gas into a regulated pipeline system (which must follow strict integrity and leak monitoring rules under 49 CFR) or using it directly to produce heat or other energy. The key is that during energy production, companies can’t release more than a “tiny, insignificant amount” of methane back into the air. For everyday folks, this means the bill aims to take a waste product and convert it into usable energy or pipeline gas, which could slightly diversify local energy supplies.

The Fine Print on Facility Deadlines

Not every mine can jump on this. The bill defines a “qualified facility” as a single source (like a borehole or vent shaft) where both the source itself and the methane capture equipment must begin construction before January 1, 2036. This long deadline gives the industry plenty of time to plan and invest in the necessary infrastructure. However, the requirement for a minimum annual capture of 2,500 metric tons of CO2 equivalent means this credit is likely designed for larger mining operations. Smaller, less active, or lower-output mines might find it financially difficult to meet that threshold, effectively excluding them from the benefit. This is a classic case of policy favoring large-scale industrial solutions.

Where the Details Get Fuzzy

While the bill is pretty clear on the deadlines and the minimum capture volume, it leaves a little wiggle room that analysts should watch. For instance, when methane is used for energy, the requirement that only a “tiny, insignificant amount” can be released lacks a specific number. That phrase is open to interpretation, and without a clear quantitative standard, it could allow for more fugitive emissions than intended, potentially undercutting the environmental goal. Furthermore, the credit calculation will be based on the highest amount of methane captured in any previous year, which could incentivize companies to game the system early on to set an artificially high benchmark for future tax claims. Overall, though, this bill is a strong move to monetize environmental cleanup, offering a clear path for large mining companies to mitigate their emissions while gaining a significant tax advantage.