President Joe Biden signed what he called “one of the most significant laws in our history” last Tuesday. The energy provisions in the law that benefit oil and gas extraction exposed different perspectives within the industry on the law.
How does Big Oil feel about the Inflation Reduction Act of 2022 (H.R.5376), “the $370 billion climate, tax and health care package” that President Joe Biden signed into law on August 16?
Look no further than the Bloomberg News headline on July 29, two days after Senate Majority Leader Chuck Schumer and Sen. Joe Manchin (D-W.Va.) announced the surprise deal: “Exxon CEO Loves What Manchin Did for Big Oil in $370 Billion Deal”
“CEO Darren Woods said he was happy that oil and gas feature prominently in the bill, and that it’s not exclusively focused on solar and wind,” reported Kevin Crowley.
“The measure, which takes a carrot approach to reducing emissions, contains a number of ‘Easter eggs’ for the sector, including access to new federal waters for development in Alaska and the Gulf of Mexico,” wrote Arianna Skibell in POLITICO's Power Switch newsletter on Tuesday.
One egg that has received much attention is a requirement that “the Interior Department offer at least 2 million acres a year for onshore oil and gas lease sales,” wrote POLITICO energy reporter Ben Lefebvre on July 28. “Unless it holds those lease sales, the bill says, the department could not offer rights of way for solar and wind power projects.”
No Love From Little Oil
“The enthusiasm from Big Oil isn’t shared by some smaller and independent producers, which pump the vast majority of the crude and gas produced in the US,” reported Jennifer A Dlouhy, Kevin Crowley, and Zahra Hirji for Bloomberg News on Aug. 10, two days before the House passed the landmark bill (see related post), sending the bill to Biden, in the source article for this post.
They’re bracing for a raft of new fees and taxes, including penalties on leaking methane and much higher payments for drilling on federal land.
While Occidental’s Chief Executive Officer Vicki Hollub hailed the Democrats’ sprawling bill as “very positive,” and Exxon’s Darren Woods dubbed it “a step in the right direction,” for many smaller oil producers there’s little in the legislation to like, said Dan Naatz, executive vice president at the Independent Petroleum Association of America.
The American Petroleum Institute, the largest trade association for the oil and gas industry, outlined their opposition to the Inflation Reduction Act (IRA) on Aug. 11, citing “punitive new taxes and regulatory red tape that undermine the industry’s ability to promote energy security for the American consumer.”
Energy Transition
Dlouhy, Crowley, and Hirji point to other provisions in the IRA that will benefit Big Oil because of their scale and will help facilitate their transition to the production of cleaner energy.
By providing hefty tax credits for carbon capture, hydrogen and biofuels, the bill would help underwrite supermajors’ green transition strategies at a time when they’re under intense pressure to accelerate investments in clean energy. Smaller oil producers that don’t have refining arms or renewable investments are more exposed to provisions that take aim at fossil fuels.
Andrew Logan, a senior director at Ceres, a not-for-profit coalition of investors and companies advocating sustainability, explained the division within the industry on what has been called “the most substantial federal investment in history to fight climate change.”
“The oil and gas industry is actually many different industries under a single umbrella,” said Logan. This bill “endorses the vision that many of the large companies have put out around what the transition will look like,” he said.
That vision can be seen, to some extent, in the Bay Area, where “[t]wo large oil refineries want to switch from processing crude oil and instead turn vegetable oil and animal fats into biofuels.”
Recent Inflation Reduction Act Posts:
- The Surprising Oil Tax in the Inflation Reduction Act, August 15, 2022
- Missing From the Climate-Energy Legislation: Bikes! August 9, 2022
- 'Inflation Reduction Act' a Mixed Bag for Climate Action, Planning Innovation, August 1, 2022
Related 'Big Oil' Posts:
- Exxon Wants 'Financial Incentive' for $100 Billion Carbon Capture Hub, April 27, 2021
- Big Oil Not Happy With Methane Regulation Rollback, September 3, 2019
- Royal Dutch Shell: Big Oil with a Conscience? April 5, 2019
- At World Oil Conference, No One Questioned Climate Change Science, March 22, 2019
FULL STORY: Big Oil Sees Upside of Climate Bill As Small Drillers Brace for New Fees, Taxes
The Surprising Oil Tax in the Inflation Reduction Act
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