Tag: Fossil Fuels

Final Carbon Capture Regs Seeks to Boost Development, but Challenges Remain

Seeking to clarify the incentives available to developers of projects that capture carbon emissions during emission, the U.S. Treasury Department and the Internal Revenue Service (IRS) released final regulations for Section 45Q of the Internal Revenue Code in early January.[1]

Section 45Q incentivizes tax equity investors to invest in carbon capture and sequestration (“CCS”) by making financing easier through liberalization of several concepts and provisions.[2] Notwithstanding Section 45Q, though, various costs, inconsistent public support, and transportation and storage challenges remain barriers to implementing CCS.[3]

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Biden’s Moratorium on Public Lands Drilling Leases will have a Muted Impact–at Least in the Short-term

One week after his inauguration, President Biden issued Executive Order 14008, “Tackling the Climate Crisis at Home and Abroad” (the Order), a move consistent with the progressive environmental platform he championed during his campaign.[i] The Order lays out aggressive domestic policy mandates and reaffirms the Biden Administration’s commitment to leading the global effort to combat the climate crisis.[ii]

As part of the sweeping domestic policies set forth in the Order, President Biden directed the Secretary of Interior (the Secretary) to pause new oil and gas leases on public lands and offshore waters.[iii] The Order does not specify the length of the moratorium, but does prohibit the issuance of any new leases until the Secretary conducts a “comprehensive review” of the current oil and gas permitting requirements under law.[iv]

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Bureau of Land Management Reduces Royalty Rates for Onshore Drilling Operators

In April, the U.S. Department of Interior’s Bureau of Land Management (“BLM”) issued guidance reducing the royalty rate for energy companies that drill for oil and gas on public land.[1] The announcement came as analysts began to understand the dire financial consequences of the COVID-19 pandemic on the oil and gas industry. BLM’s guidance aimed to provide a lifeline to the already struggling industry.[2]

The Mine Leasing Act of 1920 (“MLA”) governs the development of oil and gas on federal land.[3]  It authorizes the Secretary of the Interior to hold auctions for the subsurface rights of federal lands that contain fossil fuel deposits.[4] Under this arrangement, an energy company submits a bid for the lease, and, if successful, pays the federal government rent and royalties for its use.[5]

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