Joe's interested in his home state of West Virginia, which is hugely invested in fossil fuel. Is he interested in your state? Haha.
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Inside Climate Bill, a Broad Energy Push
$369 billion measure has tax incentives to spur clean energy, but also guarantees for oil and gas drilling in what Sen. Joe Manchin calls an ‘all-in energy policy’
The Senate climate, healthcare and tax package would lift green-energy efforts, but also broadly support oil, gas and coal along with nuclear power.
By Timothy Puko Katy Stech Ferek, WSJ
Updated July 28, 2022 6:06 pm ET
WASHINGTON—Senate Democrats are moving forward on the costliest and most ambitious effort ever by the U.S. to address climate change—powered in part by benefits for fossil fuels and the broader energy industry.
The proposed $369 billion compromise bill struck by Senate Majority Leader Chuck Schumer (D., N.Y.) and Sen. Joe Manchin (D., W.Va.) includes tax incentives aimed at channeling billions of dollars to wind, solar and battery developments that put clean power onto the grid.
At the insistence of Mr. Manchin, the legislative package provides support for traditional sources of energy like oil, gas and coal along with nuclear power. There are tax subsidies for plants that capture the carbon emissions from burning those fossil fuels, and others for producing hydrogen, often done with natural gas.
Even expanding offshore wind and solar-power development on federal land will now require the federal government to offer more access for drilling on federal territory.
On Thursday Mr. Manchin called the deal “an all-in energy policy” to boost U.S. energy independence. He said the new bill—the Inflation Reduction Act—would help tame inflation in several ways, including by spurring domestic energy production that will lower costs.
Under the bill, the Interior Department would be required to offer up at least two million acres of federal land and 60 million acres of offshore acreage to oil and gas producers every year for the next decade. If Interior officials fall short, they wouldn’t be able to advance some permitting aspects of the wind and solar projects on federal land. It would be the first-ever required minimum acreage for offshore oil and gas leasing and significantly increase the acreage requirements for onshore leasing.
The compromise deal comes after months of wrangling between Mr. Manchin and other Democratic leaders, including President Biden, over how to balance the urgency of global warming with an emerging energy crisis and rising inflation. Gasoline, diesel and natural-gas prices all hit historic highs this year, and U.S. allies in Europe are facing energy shortages in part caused by Russia’s invasion of Ukraine.
Some environmentalists and liberals in Congress expressed concerns about the provisions Thursday, casting doubt on whether Democrats can hold their narrow majorities to pass the bill. But more have expressed enthusiastic support, saying the deal is needed in a Senate evenly split between Republicans and Democrats to secure Mr. Manchin’s critical vote for costly programs that will reduce greenhouse gas emissions.
“Tough trade-offs are the only path for getting major climate investments over the finish line,” said Sam Ricketts, co-founder Evergreen Action, a climate group with ties to the Biden administration and progressives. “And a major investment package like this is absolutely essential to meeting our climate goals.”
Mr. Manchin, who has coal-business ties and represents a big coal-and-gas state, has said that the U.S. needs to ensure its supply of domestic energy while the renewables industry continues to grow. Many of his allies doubled down on that view after Russia’s invasion of Ukraine pushed Western countries to find alternatives to Russian oil and gas.
Mr. Manchin has also said he wants to keep the U.S. from becoming dependent on China for batteries, other clean-energy technologies and the minerals needed to build them.
“Putin weaponized energy like no other time I’ve ever seen,“ Mr. Manchin told reporters Thursday. ”I think [Chinese president] Xi Jinping will do the same with rare-earth minerals."
An electric vehicle’s qualification for a tax credit under the Senate climate, healthcare and tax package will depend in part on what amount of the battery’s critical materials come from the U.S.; a Mercedes-Benz EV battery factory in Alabama.
So while the deal gives subsidies to promote zero-emissions electric vehicles, those are now tied toward requirements that auto makers use U.S. minerals.
Starting Jan. 1, 2024, for a vehicle to qualify for a tax credit, 40% of the critical minerals in its battery would have to come from either a U.S. mine, a free-trade country or a U.S. facility that recycles minerals, a practice that isn’t widespread.
To boost domestic energy, the bill includes a new per-kilowatt hour production tax credit for nuclear power to staunch the closing of nuclear plants. Mr. Manchin and some climate groups have embraced nuclear power as a source of emissions-free electricity.
For the oil industry, the bill would also effectively reinstate an 80 million-acre sale for the Gulf of Mexico from last year that a federal judge had invalidated. It was the largest offshore oil-and-gas lease sale in U.S. history—producing $191 million in bids.
Major oil companies such as Chevron Corp., Exxon Mobil Corp. and Shell PLC that had bid in the offshore auction could quickly benefit. Some have said that lease sales are essential to maintaining their U.S. production.
Shell Chief Executive Ben van Beurden, speaking to reporters Thursday, praised the deal and highlighted its promise of new lease sales to come. Shell has been investing in new platforms to boost its Gulf of Mexico operations, and he said oil production there has to go on even amid efforts to address climate change.
“The world needs new oil and gas to come on stream,” he said. “Just curtailing domestic supply, in the hope that somehow domestic demand will follow suit, is not a realistic policy.”
Toby Rice, chief executive of EQT Corp., the largest natural-gas producer in the U.S., said the deal was a win for the natural-gas industry, saying it would provide an accelerated timeline for building the pipelines and terminals needed to increase production and exports of the fossil fuel.
The agreement was yet another proof that governments are adjusting their policies to “make it easier for us to bring this energy into the world,” he told investors in an earnings call Thursday.
In exchange for access to more federal territory, oil-and-gas companies would also have to pay higher royalty rates for drilling there. It would also require them to pay royalties on methane they burn off or let intentionally escape from their operations on federal lands.
Senate Democrats say the more climate-focused provisions of their bill would reduce the country’s greenhouse gas emissions 40% by 2030. That would help revive Mr. Biden’s long-stalled initiative to cut greenhouse-gas emissions 50% below 2005 levels by 2030.
If approved by Congress, the bill would be the biggest federal spending package to address climate change. Its nearly $370 billion dwarfs the last similar move, the roughly $90 billion for clean energy in the financial crisis recovery package from more than a decade ago.
Independent analysts said the package would likely go far toward accomplishing Mr. Biden’s goal.
The most significant climate provisions are tax credits that would channel billions of dollars to wind, solar and battery developments that put clean power onto the grid, according to Rhodium Group, an independent research firm.
The credits could be cemented into law for at least a decade—rather than require frequent reauthorizations in Congress under current law—which utilities and developers say will spur more investment more quickly and reduce greenhouse-gas emissions years ahead of the current pace.
“This is more certainty and predictability than this industry has ever seen—by a lot,” said Heather Zichal, chief executive of the American Clean Power Association, a trade group.
The bill also aims to reduce emissions with a per-ton tax on major oil-and-gas producers for leaks of methane from wellheads, pipelines, storage tanks and other facilities. In November, the Congressional Budget Office evaluated a previous, similar proposal and estimated that the industry would pay between $1.2 billion and $1.4 billion annually the first three years of collection.
The American Petroleum Institute, the oil-and-gas industry trade group, said that the bill has some improvements over previous versions but criticized the proposed tax increases. “We oppose policies that increase taxes and discourage investment in America’s oil and natural gas,” said Amanda Eversole, the group’s chief advocacy officer.
Many of the other elements of the package attempt to address climate change with programs Mr. Manchin has emphasized that also would benefit fossil-fuel producers. An expanded subsidy for power plants and other industrial sites that can capture the carbon from their emissions is proposed, as well as a production tax credit for hydrogen.
Subsidies for carbon capture can help keep coal- and gas-burning plants alive. And hydrogen is often favored by the oil industry because it can be produced using natural gas and shipped in pipelines that are already built. Some environmental advocates point to evidence that suggests both approaches may be ineffective at preventing greenhouse-gas emissions.
Mr. Manchin said Thursday his vote is also contingent on the passage of permitting reform that would limit review periods to two years. He suggested it could help both natural gas pipelines and electric transmission lines for clean power.
Some scientists and clean-energy business advocates have said the country needs more streamlined permitting procedures to avoid hang ups at federal and local levels that often block projects.
It could also expand domestic mining. And Mr. Manchin has advocated for such changes in permitting that he wants primarily for natural-gas pipelines, such the Mountain Valley Pipeline project that connects shale gas producers in his home state to buyers elsewhere.
The Center for Biological Diversity a nonprofit environment organization influential among progressives, called the measures “poison pills.” Unknown is whether such complaints could derail approval amid the slim majorities Democrats have in Congress.
Siobhan Hughes, Jenny Strasburg and Benoît Morenne contributed to this article.