Senate Democrats approve budget bill with higher costs, some leasing for oil and gas
Senate Democrats approved a tax and spending bill Aug. 7 with expensive provisions for oil and gas companies but also some requirements for leasing in the federal offshore.
The weekend vote was 51-50 along party lines, with Vice-President Kamala Harris casting the tie-breaking vote on the “budget reconciliation bill” negotiated over many months by Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Chuck Schumer (D-NY).
The House is expected to pass the bill, called the Inflation Reduction Act of 2022, in a matter of days. The House allows its members to vote by proxy, which means they will be able to vote from home or other locations during what is normally their August recess. President Biden has said he will sign the bill.
If the bill becomes law, it will raise oil and gas royalties, rents, and minimum bids for operations on federal lands, and it will increase Superfund taxes on crude oil and oil products. It will set a “waste emissions charge” for methane emissions from offshore and onshore oil and gas production, gas storage, and gas pipelines. 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 also contains a provision for a minimum tax of 15% for corporations with adjusted income of $1 billion or more.
Overall it would raise $739 billion from various tax provisions, and it would commit to $369 billion in spending for a variety of energy and climate provisions, especially to extend subsidies for wind and solar energy and electric vehicles, but also for such measures as methane monitoring.
Climate emphasis
Schumer stressed climate provisions as historic accomplishments. Those provisions also were needed to satisfy Biden and Democratic members of Congress.
House Speaker Nancy Pelosi (D-Calif.) lavished praise Aug. 7 on the bill. “By defending America’s energy security and reducing carbon pollution by nearly 40% by the end of the decade, it will slash energy costs and help save the planet,” she said.
Senate Minority Leader Mitch McConnell (R-Ky.) described the spending on climate-related programs as subsidies to help prosperous people buy expensive electric vehicles and new stoves. It will not put a dent in global greenhouse gas emissions, he argued Aug. 6. Instead it will drain money out of the public’s pockets at a time when only 3% of the public says climate is our biggest problem, he said.
Republicans’ energy-related amendments all went down to defeat. Sen. John Barrasso (R-Wyo.), for example, offered an amendment to require more lease sales on federal onshore lands, but it was not accepted.
The spending is far smaller than envisioned by Biden in July 2021 when he and leading Democrats agreed on a $3.5 trillion budget bill. But Manchin had doubts about the wisdom of the spending, and the scaling back of the plan began. In November, the House passed a $2.2 trillion spending package (OGJ Online, Nov. 19, 2021).
Offshore leasing, NEPA issues
The bill will require the Interior Department to complete the lease sales planned in the last 5-year offshore leasing program, which officially ended June 30.
Lease Sale 257, held in Nov. 17 and invalidated by a federal judge, will be reinstated, and Interior will have to accept the highest valid bid for each tract. Lease Sales 258 and 259, canceled by the Biden administration, will have to be held not later than Dec. 31. Lease Sale 261 will have to be conducted by Sept. 30, 2023.
The bill will not allow an offshore wind lease to be issued unless at least one offshore oil and gas lease sale had been held during the preceding 1-year period, and unless the oil and gas leasing in that year covered not less than 60 million acres.
Manchin in late July said Biden, Schumer, and Pelosi committed to advancing a suite of permitting reforms this fall, a statement that implied tackling the difficulties of the National Environmental Policy Act (NEPA) and the Clean Water Act (OGJ Online, Aug. 2, 2022).
But most Democrats solidly oppose NEPA and Clean Water Act changes to smooth out project approvals, and they demonstrated their resistance to such changes again this month.
The Trump administration had revised NEPA regulatory guidelines to streamline several elements, and in April the Biden administration rolled back some of those provisions. On Aug. 4, senators voted 50-47 on a resolution to rescind the April rollbacks, and only one Democrat, Manchin, joined with Republicans to support the resolution. It did not bode well for the fate of that resolution or other permitting reform initiatives in the House.
The White House Council on Environmental Quality has indicated it will be rolling back more of the Trump administration’s NEPA regulatory guidelines later this month.
