The recently announced Inflation Reduction Act has been hailed as Congress’ biggest investment in the fight against climate change, but the 725-page bill also has benefits for the fossil fuel industry.
While the centerpiece of the bill is about $385 billion to fund climate change efforts, the sweeping legislation also includes “cuts” for the fossil fuel industry, as economist Douglas put it Holtz-Eakin at Yahoo Finance. These bits include provisions that can spur more oil production, open up new areas to drilling and incentivize “carbon capture” technology.
The bill includes new taxes on the industry, but this latest effort is arguably friendlier to fossil fuel producers than last year’s stalled “Build Back Better” effort. Exxon’s ( XOM ) Darren Woods told investors the bill was a “step in the right direction,” and others in the industry have also praised the bill.
“Definitely not a green bill”
Senators Chuck Schumer (D-NY) and Joe Manchin (D-WV) surprised everyone on July 27 when they announced their deal and instantly revived a key Democratic effort.
Exxon’s Woods became a notable backer just two days later, saying the deal includes a “more comprehensive set of solutions.”
BP America, in a statement to Yahoo Finance, said it applauds “Senate lawmakers for moving toward a historic climate deal,” adding that the company supports strong climate action and “supports regulatory certainty “. Valero Energy ( VLO ) also praised the deal.
The friendliness to the energy sector was “really eye-opening for everybody,” a close industry watcher, Tortoise portfolio manager Rob Thummel, said in a Yahoo Finance Live interview.
Barrons reports that ExxonMobil, Chevron ( CVX ), Occidental Petroleum ( OXY ) and Equitrans Midstream ( ETRN ) could benefit the most from the bill’s provisions, including controversial carbon capture incentives that many climate activists say do not they will help in the short term. .
During his round of television appearances on Sunday, Senator Manchin repeatedly emphasized the bill’s benefits to the energy industry.
The story continues
“We’ve accelerated permitting, which is what they want, and we’ve increased energy production, which is what they want,” Manchin told CNN, speaking of Republicans, who are expected to oppose the bill. . “It’s not a Democratic bill, it’s not a Republican bill [and] It is definitely not a green bill”.
Sen. Joe Manchin (D-WV) speaks to reporters Aug. 1 on Capitol Hill. (Anna Moneymaker/Getty Images)
The bill would change certain rules about selling federal land for oil drilling — raising money for the federal government by raising rates, but also speeding up the process of opening up more land to energy production . The bill could also expose new areas to drilling, particularly in federal waters off Alaska and the Gulf of Mexico.
Manchin says his deal includes a future Senate vote on a broader permitting reform bill, which the oil industry has long called for. The bill, on which details are scarce, could open up more areas for drilling and also spur the construction of more natural gas pipelines.
Most climate activists have certainly welcomed the move and the billions going into green energy. Still, some have focused on the Manchin-led provisions, calling them a giveaway.
“This bill is more of a climate scam bill than a climate change bill,” said a group called 350.org.
Still, Josiah Neeley, a senior energy fellow at the “limited government” think tank R Street Institute, notes that drilling rights can often change dramatically from administration to administration. These rule changes could have the advantage of leading to more “stability and predictability” in the coming years, he said.
“Throw a little less money at the fossil people”
The bill imposes new taxes on the industry. It would also reinstate a tax on pollutants under the Environmental Protection Agency’s Superfund program that could cost the industry up to $25 billion.
The bill also includes new taxes on excess methane emissions. Katie Tubb, a researcher at The Heritage Foundation, sees this provision as “a point of divergence between the big oil companies and the smaller ones”.
“The biggest producers, the Exxons of the world, I think are more on board with the tariff a) because they can afford it and b) because it drives out the smaller producers who can’t afford it,” he said.
The American Petroleum Institute, for its part, praised some provisions of the bill while noting that it opposes taxes on the industry.
Meanwhile, Holtz-Eakin, the president of the American Action Forum and former chief economist of George W. Bush’s Council of Economic Advisers, was unimpressed with the bill’s overall strategy.
“It’s kind of throwing money at different clean things and hoping something good happens,” he said, “and throwing a little less money at fossil people and hoping that doesn’t backfire.”
Ben Werschkul is the Washington correspondent for Yahoo Finance.
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