As the House of Representatives passes Democrats’ social spending, tax and climate bills on Friday, energy industry officials are sounding the alarm that it will hamper their industry as a recession begins.
“Overall, we believe this legislation will do more harm than good to the American energy sector given the increases in taxes and fees that will hit many American energy producers,” Anne Bradbury, CEO of the American Exploration and Production Council, told FOX Business.
“Given the potential that we are now in a recession, we think raising taxes on American companies, including American energy producers, is a bad idea.”
But Sen. Joe Manchin, DW.Va., said the bill will help the fossil fuel industry in general, and an energy policy expert says the bill’s overall impact could be more muted, in part due to poorly managed spending.
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Sen. Bernie Sanders, I-Vt., has his own point of view.
“This legislation includes a huge giveaway to the fossil fuel industry – both in the reconciliation law itself and in a side agreement that was just published,” Sanders said.
The competing claims about the legislation, dubbed the “Inflation Reduction Act,” come a little over two weeks after Manchin and Senate Majority Leader Chuck Schumer, DN.Y., unveiled the more than 700-page package. The bill wastes more than $400 billion and would collect over $700 billion in taxes.
Now, on Friday afternoon, the House of Representatives will synchronize with the Senate and send the bill to President Biden’s desk in what many Democrats see as their biggest legislative victory yet.
Energy industry groups say taxes in the bill will likely be among the most detrimental factors to their bottom line. The American Gas Association, along with more than two dozen other industry groups, said in a letter to Congress that a $6.5 billion tax on methane emissions would result in consumers paying about 17% more for natural gas .
The conservative group Americans for Tax Reform also lists several other energy taxes it opposes in the bill, including a $12 billion tax on imported petroleum products and a $1.2 billion tax on coal mining. A coalition of state coal associations wrote to Manchin specifically berating the taxes included in the bill, arguing that their tax bills would become more complex.
Manchin wrote back to them in a pointed letter, pushing back the characterization of the coal levy as a new tax. This tax has been in place since 1985, he wrote, and has only recently expired.
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“The argument that this is a new tax is a lie,” Manchin said. “[E]A great many coal companies have and will plan for this tax every year.”
Manchin also said the largest tax increase in the bill would not affect coal companies, which often struggle with profits, at all.
“My staff have analyzed the financial statements of the two largest U.S. coal companies — Peabody Energy and Arch Resources, Inc. — and neither of them came anywhere near the average of $1 billion required to meet the company minimum of Trigger 15%,” Manchin said. “As their records reflect, Peabody reported an average annual income of $541 million over the last 3 years. Arch reported an average annual income of $76 million over the last 3 years.”
AXPC’s Bradbury, however, said that while coal companies would be exempt from the tax, it would fall on “some domestic oil and gas producers”.
The state-owned coal companies also argued that the bill’s most damaging impact on them is the subsidies, which are primarily aimed at supporting green energy.
“[B]By inflating the lofty incentives already stretching to renewable energy, our nation’s (reliable) coal-fired power generation assets will continue to be devalued and driven into rapid decline, as will the thousands of miners, factory workers, and the 371,000 American families whose household incomes depend on them depend on these jobs,” says the letter from the coal companies.
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Devin Hartman, director of energy and environmental policy at the R Street Institute, told FOX Business that while both sides make a lot of a bill, it could potentially have a more nuanced and potentially minimal impact.
“There are some provisions that could help advance … fossil technologies that would help advance US interests in some kind of long-term role for fossil fuels,” Hartman said. “But I think there are other regulations that will help shrink some elements of the domestic fossil fuel industry.”
Though there are “handouts” in the bill for most energy sources, Hartman said the largest go to green sources. But, he added, the bill may not meet many of its emissions targets because it “mainly throws subsidies at a regulatory problem.”
Manchin is touting other parts of the deal he made with Schumer as key to the fossil fuel industry. Among them are subsidies for “direct payment” for carbon capture in fossil fuel power plants, which Manchin blocked during negotiations for similarly positioned renewable energy companies.
Also crucial, Manchin says, is a commitment he received from Schumer for a future vote on permitting reform so that domestic projects like pipelines can move forward.
AXPC’s Bradbury said her group is evaluating permitting reform separately from the Reconciliation Act because they are separate pieces of legislation.
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There is no guarantee it will happen. Some Republicans are threatening to sacrifice the law in retaliation against Manchin for approving the party’s Social Spending and Tax bill.
Bradbury also acknowledged that the bill the House of Representatives will pass is nowhere near as damaging to the fossil fuel economy as an earlier version dubbed “Build Back Better” that Democrats were considering around this time last year. But, Bradbury said, the new legislation will cost US fossil fuel producers overall and leave many regulatory problems unresolved, while promoting renewable energy and creating “an unlevel playing field.”