House Democrats approved a tax and spending bill Aug. 12 with expensive provisions for oil and gas companies but notable provisions for offshore leasing.
A vote of 220-207 strictly along party lines passed the “budget reconciliation bill,” under the name Inflation Reduction Act of 2022. President Biden has promised to sign the bill.
The bill includes an array of spending plans and technology subsidies to help address climate change. House Speaker Nancy Pelosi said the bill will “save the planet.”
The legislation will increase oil and natural gas royalties, rents, and minimum bids for operations on federal lands, and it will hike Superfund taxes on crude oil and oil products. It will set a “waste emissions charge” for methane emissions from oil and gas production and onshore gas pipelines and gas storage. It will require royalties on all extracted natural gas, including gas vented, flared, or leaked, with exceptions for safety (OGJ Online, July 28, 2022).
The bill is intended to raise $739 billion from various tax provisions, and it commits the government to $369 billion in spending on a variety of energy and climate matters, especially to extend subsidies for wind and solar energy and electric vehicles, but also for such measures as methane monitoring and work on carbon capture, use, and storage.
Republicans on the House Ways and Means Committee—the committee that writes tax bills—objected. The committee’s GOP members Aug. 11 took to Twitter to complain that the Democrats’ bill will use taxes to help prosperous people buy $80,000 luxury electric vehicles.
Industry objections
Industry groups criticized the bill in a joint letter Aug. 11 to House Speaker Nancy Pelosi (D-Calif.) and House Republican Leader Kevin McCarthy (R-Calif.). The letter was signed by the American Petroleum Institute, the Independent Petroleum Association of America, the American Fuel and Petrochemical Manufacturers, and dozens of other associations.
The industry letter lamented “considerable tax increases and new government spending” in the bill. It singled out a new minimum tax of 15% on corporations with adjusted income of $1 billion or more; an “$11.7 billion tax on crude oil and petroleum products,” a reference to reinstated and increased Superfund taxes; higher fees on domestic energy production; and a “new $6.3 billion natural gas tax,” a reference to the methane emission fee system.
The $11.7 billion and $6.3 billion estimates, released by Congress, are cumulative cost estimates for a 10-year budget window.
The bill was not all bad news for oil and gas companies. It will require the Interior Department to complete four lease sales planned in the last 5-year offshore leasing program, which officially ended June 30. A judge blocked one of the sales and the Biden administration chose not to hold the other three sales.
