Energy Workforce continues to digest the potential reconciliation deal — the “Inflation Reduction Act” — in the Senate. Initial thoughts are mixed; some provisions may be beneficial to our sector while others will be negative.
Source: World Oil
The below summary is based on an initial read, and we can expect additional details to be forthcoming.
Provisions That Will Benefit Sector
- $370 billion for tax credits for clean energy tech and hydrogen, with CCUS included
- $60 billion in production tax credits for clean energy manufacturing (direct pay for first five years of project)
- The Section 45Q Credit for Carbon Capture and Sequestration (CCS) is extended through 2032
- Enhanced 45Q at $85/ton for industrial facilities/power plants for saline geologic formations, $60/ton for utilization of captured CO2, and $60/ton for enhanced oil recovery
- $1.5 billion in methane reducing grants (EPA)
- Oil and gas leasing tied to wind — this will mean if President Biden (or a future President) holds a lease sale for offshore wind, they will have to hold one for oil and gas and vice versa. This will provide long-term stability to both programs.
- Reinstate oil and gas lease sale conducted in Gulf last year
- Requires Biden Administration to conduct two new leases in Gulf and Alaska Cook inlet that were cancelled in May
- $27 billion toward a clean energy technology accelerator
Concerning Provisions
- $7,500 rebate for new electric vehicles, $4,500 for used vehicles
- $2 billion in grants to covert existing auto manufacturing into electric
- $20 billion in loans for new electric vehicles
- Increased fees for oil and gas companies that emit more than 25,000 metric tons of carbon per year, beginning in 2025, if methane leakage exceeds 10 metric tons per million barrels of oil. Fee is $900 per metric ton in 2025 to $1,500 in 2027. Covers emissions at the wellhead, compressor stations, gathering stations, onshore pipelines and storage facilities.
- Methane fee has a carve out that if companies follow the forthcoming regulation they do not pay the fee
- Raises onshore royalty to 16.66% from 12.5% currently
- Raises offshore to 16.66% from 12.5% currently
- 15% Corporate Minimum Tax (Starts in 2023)
- Similar the language from last December and the House-passed provision
- Applies to corporations with average annual adjusted financial statement income of $1 billion per year (domestic) or $100 million per year (foreign-owned) for a consecutive three-year period
- Allows 80% of financial statement losses and general business credits
- Score: House-passed version was estimated to raise $318.9 billion; summary materials here claim $313 billion
Prospects for Passage
In order to use reconciliation rules, the package must pass before the end of September. All Democrats in the chamber will likely be needed for passage. Currently, it is not clear that Sen. Kyrsten Sinema is on board, and her vote will be critical.
Additionally, the package is starting to receive criticism from many progressives in the House for not going far enough. Many members from New York, California, Massachusetts, Connecticut and other high tax states are facing a very difficult decision, as the package does not contain a provision to restart the ability to deduct state income taxes on their federal income tax — a provision that many have said was a must-have for their support. For all of these reasons, passage does not appear to be a sure thing at this point.
If you would like to get involved with Energy Workforce advocacy efforts or the Government Affairs Committee, contact SVP Government Affairs Tim Tarpley.
