Company: GULTU
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001641172-25-001201
Chunk: 5

Company: Gulf Coast Ultra Deep Royalty Trust
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1A
Chunk 5
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 of 2022 (the IRA) included new CAA section 136(c) directing the EPA to collect the Waste Emissions Charge (WEC)
from facilities in the oil and gas sector that report more than 25,000 tons of carbon dioxide equivalent emissions in a calendar year.
The charge will first apply to methane emissions from calendar year 2024. The charge is determined by comparing actual reported methane
emissions to statutorily established “methane intensity figures” that are based on gas production or throughput, with a charge
assessed for every ton of methane emissions that exceeds the facility’s allowable emissions based on the applicable methane intensity
figure. The charge will be $900 per ton for 2024 emissions and will increase to $1,200 and then $1,500 per ton in subsequent years. The
program includes key exemptions, most notably a regulatory compliance exemption that applies to and exempts the emissions from facilities
that are subject to and in complete compliance with the EPA’s new or existing source methane requirements. The EPA adopted new
rules to implement the WEC program in November 2024. The EPA adopted new rules to implement the WEC program in November 2024. The fate
of the WEC and the EPA rules implementing the WEC is unclear. In February 2025, the United States House of Representatives and Senate
both passed resolutions to repeal the EPA’s 2024 WEC rules under the Congressional Review Act (CRA), and on March 14, 2025 President
Trump signed the resolution repealing those rules under the CRA. In addition, the United States House of Representatives and Senate may
be considering amendment or repeal of certain portions of the IRA, including the statutory provisions establishing the WEC. As a result,
the legislative face of the WEC is unclear.

Additionally,
more than one-third of the states have begun taking actions to control and/or reduce emissions of GHGs, primarily through the planned
development of GHG emission inventories and/or regional GHG cap and trade programs. Although most of the state-level initiatives have
to date focused on large sources of GHG emissions, such as coal-fired electric plants, it is possible that smaller sources of emissions
could become subject to GHG emission limitations or allowance purchase requirements in the future. In addition, Congress may consider
adopting legislation to reduce emissions of greenhouse gases. Any one of these climate change regulatory and legislative initiatives
could have a material adverse effect on HOGA’s business, capital expenditures,