Trump tax bill expands leasing, tax credits for oil and gas while cutting environmental regulations

The Trump tax bill, signed July 4, 2025, offers the oil and gas industry expanded opportunities for development on federal lands and in federal waters, additional tax breaks, and streamlined permitting.

It simultaneously cuts most Biden-era incentives and regulations to promote wind and solar and regulate greenhouse gas and other emissions.

Lease sales

The nearly 900-page, $3.3-trillion bill requires a set schedule for both onshore and offshore lease sales, a high priority for the oil and gas industry.

The bill requires 30 offshore oil and gas lease sales in US Gulf waters and 6 in the Cook Inlet area of Alaska by 2040.

Onshore, it requires 4 lease sales in Alaska’s Arctic National Wildlife Reserve (ANWR) by 2032 and 5 in the National Petroleum Reserve-Alaska (NPR-A) by 2035. It also overturns former President Biden’s 2022 NPR-A leasing limits (OGJ Online, Feb. 7, 2022). 

The bill mandates quarterly onshore oil and gas lease sales on public lands in Wyoming, New Mexico, Colorado, Utah, Montana, North Dakota, Oklahoma, Nevada, and Alaska.

“Mandated … lease sales are absolutely essential,” National Ocean Industries Association (NOIA) President Erik Milito said in a statement July 2, lauding the offshore provisions. “They give companies…the predictability needed to invest, hire, and build.”

The Interior Department can slash Gulf of Mexico royalty rates to 12.5% but not exceed 16.67% under the bill’s provisions. It also sets a primary term for deepwater leases issued in a sale at 10 years.

Other leasing/federal lands provisions:

• Repeals royalties on methane produced on oil and gas leases on public lands and waters.
• Provides funding to the Department of Energy for administrative expenses for carrying out loan guarantees related to LNG projects from Alaska. 
• Allows commingling of production from 2 or more sources before production reaches the point of royalty measurement. 
• Decreases minimum royalty rates for onshore development of oil and gas on federal lands. 
• Directs Interior to establish a permit-by-rule process under which leaseholders may obtain approval to drill for oil and gas on federal land if the leaseholder pays a $5,000 fee and complies with other established regulations.
• Establishes a filing fee for protests of oil and gas lease sales.
• Reinstates noncompetitive leasing procedures under the Mineral Leasing Act to require lands that do not receive bids during an oil and gas lease sale, or where the highest bid is less than the national minimum, to be offered within 30 days for noncompetitive leasing and remain available for leasing for 2 years.

Permitting

The legislation seeks to streamline the permitting process by allowing project sponsors to pay a fee of 125% of the anticipated costs to prepare an environmental assessment (EA) or environmental impact statement (EIS) required under the National Environmental Protection Act to guarantee an EA is completed within 6 months and an EIS is finalized within 1 year.

It also develops a permit-by-rule system under which project sponsors can certify compliance with pre-established criteria. The system would automatically approve permits if no objections are raised within a specified time and the applicant meets all requirements. It would also streamline the permit process for projects that meet clear, pre-defined standards.

It also directs applicable agencies to develop a price for developers to avoid litigation over environmental reviews, which can hold up projects.

Environmental regulations, funding cuts 

The tax bill repeals the methane emissions reduction program under which the Environmental Protection Agency (EPA) provides financial incentives to encourage the reporting of greenhouse gases, the monitoring of methane, and the reduction of methane emissions from petroleum and natural gas systems.

It also eliminates funding for a variety of programs that provide incentives to monitor national ambient air quality, replace or maintain monitors, and deploy air quality sensors in disadvantaged communities. The bill also stops research and development related to the prevention and control of air pollution or encourages states to adopt and implement greenhouse gas and zero-emission standards for cars and trucks.

The bill nullifies the National Highway Traffic Safety Administration final rule on Corporate Average Fuel Economy Standards model year 2024-2026 passenger cars and light trucks and parts of the CAFE standards for model years 2027-2031 that required fuel economy rates to increase 2% annually for passenger cars models and light trucks, starting with model years 2027 and 2029, respectively (OGJ Online, Apr. 1, 2024).

It also stops funding to the Council on Environmental Quality to collect data related to environmental and climate issues, track “disproportionate burdens and cumulative impacts,” and ensure environmental mapping or screening tools are accessible by community-based organizations or the public. 

Tax incentives                                                                                   

While the bill rolls back most of the tax breaks in Biden-era legislation designed to progress wind and solar projects, it enables companies to get tax deductions for “intangible” costs of their operations, such as wages, supplies, and maintenance.

Other tax credits advocated by the industry include those to:

• Strengthen “key investment provisions” to support energy development and innovation.
• Maintain 45V credit eligibility for qualifying natural gas-based clean hydrogen by adjusting the start construction date to no later than Jan. 1, 2028. 
• Maintain 45Q credit’s full transferability to unlock private capital and drive new carbon capture investments, establishing credit value parity for secure geologic storage and utilization-then-storage (i.e., for enhanced oil recovery), inflation-adjusted from 2028 onwards.