The House reconciliation bill would bar the sale of new oil and gas leases in Pacific and Atlantic waters as well as the eastern Gulf of Mexico. It also would abolish a four-year-old requirement that the government sell drilling rights in the Arctic National Wildlife Refuge’s coastal plain and void nine leases issued in that northeast Alaska region earlier this year. Congress previously required two auctions of refuge leases by December 22, 2024 to help pay for the 2017 tax cuts.
The proposed bill would also impose fees on oil and natural gas development and mining on federal land, including:
- a new seven-cent-per-ton fee on displaced material would increase rental rates for onshore oil and gas leases along with shortening their duration,
- a new $4-per-acre “conservation of resources fee” on tracts,
- a royalty on vented or flared methane,
- increasing royalty rates from 12.5 percent to 20 percent, and
- creating annual fees of as much as $10,000 per mile on offshore pipelines — including the Gulf of Mexico’s existing 8,600-mile network
These provisions, by limiting access to resources and increasing the cost of doing business, will increase the cost of petroleum products, including gasoline, diesel and heating oil, and natural gas, which is used to heat almost 50 percent of U.S. homes and is used to generate 40 percent of U.S. electricity. For example, residents in Connecticut will be hit hard as about 44 percent of Connecticut households use fuel oil or other petroleum products for home heating, the fourth-highest share for any state, and 36 percent of the households use natural gas.
An example of the punitive fees is the “natural gas tax” on methane, which sets methane emissions intensity targets that companies would need to meet or pay a fee of $1,500 per metric ton of methane produced in excess. If passed, fee collection would begin in 2023. It also creates new reporting thresholds, adding to the costs of oil and gas businesses. It would direct the Environmental Protection Agency (EPA), within two years, to lower the emissions threshold for companies to report emissions from the current 25,000 metric tons of carbon dioxide equivalent per year to 10,000 metric tons per year, covering many smaller operators for the first time.
This fee would most likely reduce oil and gas production and make the United States less energy independent—a goal achieved under President Trump. The “natural gas tax” is regressive in that its costs will be passed onto consumers in their gas and electric bills, which will affect lower income people more since they spend more of their income on energy. It also conflicts with President Biden’s campaign promise to not raise taxes on anyone making less than $400,000 a year. Because there is already an EPA regulation addressing it, and another which will be released this month, it is duplicative. Further, it is expected that smaller producers incorporated into the program through the lowered reporting threshold would feel the majority of the burden.
The House reconciliation bill would also reduce oil and gas demand through its subsidies and incentives for electric vehicles and associated infrastructure. One of these incentives is allocating $13.5 billion for electric vehicle charging infrastructure. The funding is supposed to target charge points at weak areas in the country, including along roads and highways, in apartment buildings and condos, at workplaces, and in underserved areas. It also provides tax credits for purchasers of electric vehicles. Under current law, consumers may receive a tax credit of up to $7,500 if they purchase an eligible electric vehicle. That tax credit phases out permanently once automakers sell over 200,000 units. Several automotive makers, including General Motors, have already exceeded the current cap. The proposed bill would increase the tax credit as follows: New plug-in vehicles would qualify for a $4,000 tax credit as a base amount. Vehicles placed in service before the end of 2026 would qualify for an additional $3,500 tax credit as long as their battery capacity is at least 40 kilowatt hours, increasing to 50 kilowatt hours for new vehicles put on the road from 2027 onward. Then there is an additional $4,500 credit available as long as the vehicle was manufactured at a unionized U.S. facility. A final $500 credit would also apply if more than 50 percent of the vehicle’s content, including the battery cells, is made in the USA. These provisions apply to incomes as high as $800,000, thereby subsidizing wealthy Americans who have typically purchased electric vehicles as a 3rd or 4th vehicle.
Conclusion
The House reconciliation bill’s attack on the U.S. oil and gas industry would result in higher prices for consumers and lower oil and natural gas production, which is the aim of President Biden and his Democrat Congress, as they try to wipe out fossil fuels and push the country toward renewable energy. It deliberately makes it harder and more expensive to produce oil and gas. The proposed bill removes parts of the offshore area and the Arctic National Wildlife Refuge from oil and gas production, increases current fees on oil and gas production on federal lands and creates new fees. It also incentivizes the purchase of electric vehicles and subsidizes electric vehicle charging stations in order to reduce the demand for petroleum products. While business will be hurting, so will consumers, who are already seeing gasoline prices escalate $1.00 per gallon since Trump was President because of President Biden’s policies.
