Page 5 - NorthAmOil Week 33 2022

NorthAmOil COMMENTARY NorthAmOil

The Inflation Reduction
Act is aimed, among
other measures,
at spurring new
investments in carbon
capture and storage.

been cited as praising the CCS provisions con- be subject to a 1% excise tax. Large oil and gas
tained within the legislation. companies that pay little income tax but also
NOIA – which represents the broader off- tend to have some of the largest share buyback
shore energy industry, including wind as well plans stand to be among the most affected by
as oil and gas – also highlighted the Inflation this new tax.
Reduction Act’s provisions pertaining to federal The Inflation Reduction Act also includes
lease sales as being among the positives for the various other tax measures that will have an
offshore energy industry. impact on oil and gas companies. The tax meas-
The bill reinstates Lease Sale 257, which had ures are generally opposed by oil and gas indus-
previously been annulled by a court, while also try groups, and the API recently joined around
requiring lease sales 258, 259, and 261 to be held 60 of those groups in writing to House Speaker
by the end of 2023. This is despite the fact that Nancy Pelosi and Minority Leader Kevin McCa-
the Five-Year Leasing Plan those lease sales fall rthy to voice their opposition to the bill and call
under expired in 2022. for various aspects of it to be reconsidered. This
This development is subject to further uncer- effort did not succeed, with the act since signed
tainty, given that a US appeals court this week into law and the API describing the tax increases
found a previous ruling against the Biden contained within the bill as “simply the wrong
administration’s moratorium on federal leasing policies at the wrong time”. The Inflation
too vague to review. The court’s decision annuls “From a new corporate minimum tax to an
a nationwide injunction forcing federal leasing $11.7bn tax on crude oil and petroleum prod- Reduction Act
to be restarted. ucts to a new natural gas tax, this legislation also includes
Nonetheless it looks as though leasing will imposes additional costs on American fami-
restart thanks to the Inflation Reduction Act. lies and businesses at a time when policymak- various other
The bill also makes future renewable energy ers should be looking for solutions to provide
projects on federal land and waters contingent relief,” stated the API’s president and CEO, Mike tax measures
on leasing. Under the legislation, the US govern- Sommers.
ment can issue new wind and solar rights only if that will have an
it has recently sold new drilling rights too. What next? impact on oil and
Further reactions to the act are likely to emerge
Tax concerns in the coming days and weeks, and could well gas companies.
While welcoming some of these developments, be equally mixed. It appears that the legislation
however, the oil and gas industry has also gives the industry more time to keep producing
expressed concern over the tax implications of oil and gas in the shorter term, while planning
the Inflation Reduction Act. for the energy transition in the longer term.
Among the major tax provisions included in CCS is certainly expected to play a significant
the bill is an increase in the minimum corpo- role within that energy transition, and on this
rate tax rate to 15% for those companies that count, the bill will be seen as a step in the right
have book profits of over $1bn. Additionally, direction. Tax changes, however, are expected to
companies that buy back their own stock will keep running into opposition.™

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