American Oil and Gas Reporter - August 2022 - 28

Manchin Seeks To Thread The Needle
Federal Energy Policy
By Del Torkelson
WASHINGTON-July began with the
Biden administration proposing an offshore
oil and gas leasing plan that may lack
any new leases. The month closed with
Congress' swing vote senator saying that
he had reached an agreement with his
chamber's leader to preserve offshore
leasing in a package with considerable
subsidies for " green " energy.
In early August, such a legislative
package still had considerable hurdles to
clear before becoming law, press accounts
note, but the development set Washington
abuzz with discussion about federal energy
policy. According to media reports, the
framework that Senator Joe Manchin, DW.V.,
negotiated with Senate Majority
Leader Charles Schumer, D-N.Y., includes
a version of the methane fee on oil and
gas companies that Democrats sought in
earlier versions of the " Build Back Better "
bill the party pushed this year and last.
Independent oil and gas representatives
have offered measured responses. A July
29 update from the Texas Alliance of
Energy Producers articulates that ambivalence.
" The Alliance stance on any fee or
tax on methane emissions has been simple
and clear-we are opposed. However, in
the unfortunate reality that such a bill may
become law, we were forced to draw some
other lines in the sand, " the group acknowledges.
" First and foremost, exemptions
or protections for smaller operators.
Second, an 'off-ramp' for operators that
can be realized by complying with the
statute and the rules put into place to carry
out the legislation, that would keep it from
simply becoming a production tax.
" In those regards, the bill is better
than the version proposed during the
original BBB massive reconciliation bill
under consideration last fall, " The Alliance
adds. " The threshold for an operator to
be subject to the fee was raised from
10,000 tons to 25,000 tons (we think),
and there is indeed language about the
off-ramp. "
Published reports indicate federal permitting
reform also was pivotal toward
obtaining Manchin's promised vote, with
Schumer expressing support for bringing
a separate package on that subject this
autumn.
Leasing Proposal
The U.S. Department of the Interior
on July 1 issued its proposed program
28 THE AMERICAN OIL & GAS REPORTER
for the National Outer Continental Shelf
Oil and Gas Leasing Program for years
2023-2028. DOI says the document includes
no more than 10 potential sales
in the Gulf of Mexico and one potential
sale in the northern portion of the Cook
Inlet Planning Area offshore Alaska,
which is the same as in the five-year
program finalized in 2016. However, the
department acknowledges that it may
adjust or forgo the sales entirely after
public input and agency analysis. " The
final program also may include fewer
potential lease sales, including no lease
sales, " it says.
According to Marty Durbin, president
of the U.S. Chamber of Commerce's
Global Energy Institute, the proposal
constitutes another muddy message
about the Biden administration's priorities.
Durban says DOI's announcement
" sends more mixed signals from the
administration and is another punch in
the gut to consumers and businesses
suffering from high energy prices and
inflation. Reliable, affordable energy
requires long-term planning, a governmentwide
approach and clear signals
to the market. This proposal provides
none of that.
" It defies common sense to allow the
five-year plan to lapse for the first time
ever and propose restricting oil and natural
gas development at home while
asking OPEC nations to produce more, "
Durbin states.
Interior Secretary Deb Haaland is encouraging
public comment on the proposed
offshore leasing program, noting that the
proposal is not a decision to issue leases
or authorize any industry activity, but
constitutes the second step in a threestep
process to determine whether or how
many offshore oil and gas lease sales to
hold during the next five years.
" The proposed plan puts forward several
options, from no lease sales up to 11
lease sales over the next five years, " the
secretary describes. " Like the current
program finalized in 2016, it removes
from consideration the federal waters off
the Atlantic and Pacific coasts while inviting
public comment on 10 potential sales
in the Gulf of Mexico and one in the
Cook Inlet off south-central Alaska.
" From day one, President Biden and I
have made clear our commitment to transition
to a clean energy economy, " Haaland
adds. " The time for the public to weigh
in on our future is now. "
Manchin-Schumer Framework
The prospects for offshore oil and gas
leasing seemed to take a turn for the
better when Manchin announced his deal
with Schumer. The " Inflation Reduction
Act of 2022 " that Manchin described in
a July 27 statement was a far cry from
the BBB bill Washington Democrats had
tried to force through the reconciliation
process so they could pass it with a bare
majority vote. The original BBB was a
$3.5 trillion proposal that included extensive
tax hikes on tobacco companies,
big banks and private equity firms, before
it was trimmed to nearly $2 trillion late
in 2021 but nevertheless failed to gain
the backing of Democratic moderates
Manchin and Senator Kyrsten Sinema,
D-Az. (AOGR, Dec. 2021, pg. 37).
The $700 billion Inflation Reduction
Act, press accounts note, focuses on
healthcare and energy, although many of
the energy provisions target global climate
change. The healthcare portions would
extend federal subsidies for low-income
Americans' Affordable Care Act premiums
for three years, while spending in the energy
portion totals $369 billion.
A July 28 update from the Kansas Independent
Oil & Gas Association says
the proposal includes:
· A 15% minimum corporate tax that
applies to corporations with average
annual adjusted financial statement income
of $1 billion a year (domestic) or $100
million a year (foreign-owned) for a consecutive
three-year period;
· An extension of the Section 45Q
Credit for Carbon Capture and Sequestration
through 2032;
· An Enhanced 45Q Credit at $85/ton
for industrial facilities/power plants for
saline geologic formations, $60 for utilization
of captured carbon dioxide, and
$60 for enhanced oil recovery, with direct
pay for the full value of the tax credit for
the project's first five years;
· Requirements for DOI to hold the
three offshore lease sales the Biden administration
canceled in offshore Alaska
and the Gulf of Mexico;
· $30 billion for production tax credits
to encourage domestic manufacturing of
solar panels, wind turbines, batteries and
critical minerals processing, as well as
investment tax credits valued at $10
billion to build clean technology manufacturing
facilities;
· Consumer tax credits to encourage
new and used electric vehicle purchases;
American Oil and Gas Reporter - August 2022

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