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The Inflation Reduction Act: Fuels focus

The Inflation Reduction Act: Fuels focus

In August 2022, the Inflation Reduction Act (IRA) was signed into law. This historic legislation is the largest action ever taken by Congress and the U.S. government to combat climate change, with a total of $369 billion invested in energy security and climate change alone. The IRA delivers several provisions to help boost investment in U.S. energy manufacturing, promote further development of clean-energy sources, and accelerate decarbonization efforts. If you’re in the fuels market, you may be left wondering, “How does this impact me, and how can I capitalize on these incentives now?”

The IRA includes several new and extended tax credits that impact the fuels market, including:

Let’s take a closer look at how these incentives can impact your organization’s biofuels, oil and gas, and environmental and climate initiatives.

Biofuels

The IRA provides incentives to increase production of ethanol, SAF, biodiesel, and other biofuels. In addition to the above credits, $10 million in grants are available to support the advancement of biofuel industries, and $500 million in funds are allocated for infrastructure improvement through 2034.

If you have an upcoming project involving carbon capture, utilization, and storage (CCUS), air permitting, stack testing, or environmental, health, and safety (EHS) management, you won’t want to miss out on these tax credits.

As industries around the world continue to focus on environmental, social, and governance (ESG) initiatives, the biofuels market was already projected to see huge growth. With IRA incentives now in play, we can expect market growth to increase at an even faster rate.

Oil and gas

The IRA mandates the leasing of vast areas of public land and coasts by grouping renewables and fossil fuels together. This opens up new drilling opportunities in the Gulf of Mexico, Alaska, and other locations. However, companies in the oil and gas industry are required to participate in the Methane Emissions and Waste Reduction Incentive Program, which involves fees of up to $1,500 per metric ton of methane emissions reported to the EPA. Organizations can offset this cost by evaluating fee exemptions, including exemptions for sources subject to the proposed New Source Performance Standards.

Environmental and climate

Grants from the Environmental Protection Agency (EPA) are available for environmental and climate justice initiatives. A total of $200 million in three-year grants will provide technical assistance with projects related to climate change and air pollution. To reduce methane emissions in the oil and gas industry, the EPA is also distributing $1.55 billion in the form of grants, incentives, contracts, and loans.

The IRA also targets methane reduction by helping operators and communities to:

  • Support monitoring, reporting, and source plugging

  • Provide technical and financial assistance

  • Install innovative solutions

  • Mitigate health impacts

  • Perform environmental restoration

Now is the time to capitalize on climate change and/or methane reduction funding for air pollution monitoring, resilience and adaptation, community engagement, or other environmental initiatives.

Next steps

Barr regularly tracks incoming IRA grants and incentives to keep our clients informed and support them in the application process. As some of these changes may take years to go into effect, effectively tracking grants and incentives is essential. Barr has already provided reports to one of our oil and gas clients to support them in navigating the regulation and incentive changes introduced in the IRA.

The impacts of the IRA are complex. Potential impacts depend not only on facility-specific rates but also on future EPA actions on proposed methane emissions standards. Contact us to learn how your organization can capitalize on these new IRA incentives and for support navigating this complex and rapidly changing regulatory environment.

About the author

Rayan Shahid, marketing coordinator, is responsible for tracking major legislation, funding, market intelligence, and project opportunities to keep Barr’s clients and staff informed. He is involved in summarizing, tracking, and distributing intelligence on the Inflation Reduction Act to support clients as they look for ways to leverage incoming funding. Rayan has been a part of Barr’s Corporate Business Development group for more than four years, focusing on market and strategy development for the fuels industry while also supporting Barr’s mining and public sector business.

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