What's in That "Big Beautiful Bill" for Energy, Anyway?

Guest Post from the Institute for Energy Research.

The U.S. House passed Trump’s tax bill by a 215-214 vote, which overturns many provisions of Biden’s climate bill, the Democrat-passed Inflation Reduction Act (IRA).

The bill increases oil and gas leasing, calling for more lease sales in the Gulf of America (Mexico) and reviving leasing in Alaska, which will reverse policies put in place by former President Biden. It also cuts clean energy tax credits. The bill now moves to the Senate.

Gulf Lease Sales

The House bill requires at least 30 lease sales in the U.S. Gulf of America over the next 15 years, with the first to be held August 15. The lease sales would rotate between August and March through 2040. Each Gulf lease sale would have to offer at least 80 million acres, if that much unleased acreage is available.

The bill directs the Interior Department to “immediately resume” quarterly onshore lease sales, in contrast to Biden’s policy that curbed oil and gas drilling shortly after he took office in 2021. The 30 lease sales represent a significant shift from the policies of the Biden administration, which implemented an offshore leasing program featuring only three lease sales in five years.

Secretary of the Interior Doug Burgum is already working on a revamped offshore oil and gas lease plan that will add more lease sales to the current schedule produced by the Biden administration.

The bill also modifies the GOM Energy Security Act (GOMESA), which outlines how offshore oil and gas revenue is distributed to Gulf Coast states, raising the distribution cap from $500 million to $650 million from 2026 to 2034 before lowering the cap back to $500 million.

Lease Sales in Alaska

The House bill orders the Interior Department to hold at four lease sales in Alaska’s Arctic National Wildlife Refuge and restores oil and gas leases that were canceled by the Biden administration. It also orders Interior to resume the oil and gas program in the National Petroleum Reserve-Alaska and requires at least six lease sales in the next decade in Alaska’s Cook Inlet, with the first required by March 2026.

“Clean” Energy Credits

The bill rolls back tax credits for solar and wind, along with clean hydrogen production, and “clean” vehicles, among other measures.

Specifically, the House bill requires projects to “commence construction” within 60 days of the bill’s enactment to qualify for tax credits and be placed in service by the end of 2028.

According to “clean” energy developers, the bill weakens the “clean” electricity investment and production tax credits in a way that could make them largely unusable. Because the credits mostly help wind and solar — technologies that have been around for decades, receiving massive subsidies during that time — they should be considered mature and no longer need credits.

In fact, driven by subsidies, wind and solar have overtaken coal in their combined share of the generating market. While coal once had a 50% share, it is now reduced to 15%.

Nuclear developers are subject to a phaseout, but would be able to access investment and production tax credits when they start construction on a plant, instead of when they begin delivering energy, extending the window within which they can benefit from subsidies.

Existing nuclear reactors have received an extended lifeline, as the production tax credit now phases out at the end of 2031, rather than at the start of 2029, as proposed under the previous plan. For nuclear energy, companies are allowed to transfer tax credits to a buyer in exchange for cash, an option known as transferability.

The bill also rescinds unallocated funds from the IRA. It also repeals funding for a methane emissions reduction program under the Clean Air Act. The carbon capture tax credits that were increased through the IRA, known as 45Q credits, were left intact.

Other Provisions

The bill sets a $1 million fee for gas companies that apply to the Department of Energy to import or export liquefied natural gas and allows those applicants to pay an additional $10 million to expedite their federal regulatory reviews.

The bill also provides $1.32 billion to the Energy Department to refill the Strategic Petroleum Reserve (SPR) and repeals a provision that would have forced the agency to draw down specific amounts of oil from the SPR in 2026 and 2027. President Biden substantially drew down the emergency oil reserve to keep oil and gasoline prices low during the Russian invasion of Ukraine and ahead of the 2022 midterm elections.

Tax credits for electric vehicles remain largely the same as in previous drafts, as they were approved by the Ways and Means Committee.

Conclusion

The House-approved tax bill includes several energy provisions that largely overturn the subsidies for “clean” energy in Biden’s climate bill, the Inflation Reduction Act, and provide for numerous additional lease sales in the Gulf and Alaska.

Wind and solar installations must start construction within 60 days of the bill’s enactment and be completed by December 31, 2028, to qualify for tax credits.

The change, if agreed to by the Senate, would finally put an end to the decades of tax credits that American taxpayers have been paying for intermittent and unreliable wind and solar power, which have raised electricity prices and caused problems for the electric grid, threatening blackouts, as recently occurred in Spain and Portugal.

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