The Republican-controlled US Senate is set to vote as early as today on a bill that would gut clean energy tax credits from the Inflation Reduction Act, open vast amounts of land to drilling, dismantle fuel-economy standards and extend trillions of dollars in expiring tax cuts.
The Senate over the weekend voted 51-49 to start debate on the bill following weeks of infighting among moderates and conservatives, setting up a final vote that could occur as soon as today. Ahead of the vote, Republicans overhauled the bill to make deep cuts to existing tax credits for wind and solar energy, in addition to imposing an excise tax on wind and solar projects that come online after 2027 unless developers can show their equipment does not come from "prohibited foreign entities" such as China.
Renewable energy groups say the last-minute changes to the budget bill — which would make tax credits contingent on a project starting to begin service, rather than just starting construction, by 2027 — would be devastating for investors and cause hundreds of thousands of job losses. Wind and solar developers say they could not invest in new projects because of the uncertainty on whether they would qualify for tax credits or be subject to the excise tax.
"The Senate language effectively takes both wind and solar electric supply off the table," American Council on Renewable Energy chief executive Ray Long said.
President Donald Trump's administration had pushed to terminate the tax credits for wind and solar, which had been expanded under the Inflation Reduction Act climate legislation Congress passed in 2022 as a way to transition to clean electricity. US energy secretary Chris Wright, in an opinion piece on 27 June, contended that the tax credits were raising prices and that it was "time to stop subsidizing such insanity in perpetuity."
The revised bill would give clean hydrogen developers until 1 January 2028 to start construction to qualify for a tax credit of up to $3/kg. In another change, US senator Mike Lee (R-Utah) dropped a proposal that could have sold off millions of acres of public land toward private developers and landowners.
Trump has said the US House of Representatives "must be ready" to send the bill to his desk before the 4 July holiday, a timeline that would not allow the chamber to consider any changes to the measure. Trump has said Republicans should not take vacation until the bill passes, even as some far-right conservatives have balked at the policies in the bill and a price tag that is expected to add more than $3 trillion to the deficit over a decade, according to the US Congressional Budget Office.
The bill is expected to cut more than $500bn in funding by gutting most of the climate and energy programs from the Inflation Reduction Act. It would eliminate most incentives to purchase electric vehicles by terminating a $7,500 tax credit within 90 days and repealing penalties for automakers that fail to achieve fuel-economy standards.
Senate Republicans such as Lisa Murkowski (R-Alaska) and John Curtis (R-Utah) had pushed to walk back some of the proposed cuts to the clean energy tax credits, but the last-minute revisions restored the deep cuts sought by far-right conservatives in the House.
Nuclear and geothermal power plants would fare slightly better under the bill, remaining eligible for the full value of an electricity tax credit through 2033, although it could have remained in place indefinitely under existing law.
US biofuel producers are also set to benefit from the bill from a four-year extension, through 2031, of a clean fuel production credit worth up to $1.25/USG for transportation fuel and $1.75/USG for sustainable aviation fuel.
Oil and gas producers would see major benefits under the bill's overhaul of energy policy on federal lands. The bill would mandate twice-a-year lease sales in the US Gulf of Mexico, require regular onshore oil and gas leasing, slash royalty rates on new oil and gas leases, and roll back leasing changes made under the Inflation Reduction Act. In another win for the industry, the bill would reinstate a deduction for "intangible" drilling costs that is worth an estimated $427mn over a decade.
The Senate bill lacks many of the permitting changes the House had in their version of the bill, such as a fee-for-permit program found ineligible for avoiding a filibuster. Also stripped out of the bill is a repeal of tailpipe standards that would support electric vehicles. Republicans have started to consider separate permitting legislation but any deal would likely need Democratic votes.
