Inflation Reduction Act’s Oil Industry Impact

Photo by Arvind Vallabh on Unsplash

When President Joe Biden scrolled his signature on H.R. 5376 – Inflation Reduction Act (IRA), he opened the door, reinstating the largest oil and gas lease sale in U.S. history that a federal judge previously blocked due to climate concerns.

The new law has provisions for solar, wind, and other renewable energy models and tax incentives for investments in the ‘green agenda.’ However, it also contains provisions to reinstate Lease Sale 257, an offshore oil and gas lease covering a whopping 81 million acres in the Gulf of Mexico.

Lease Sale 257 sold at auction in March 2019 for $192 million, but environmental groups challenged the sale, citing a violation of federal law. In addition, they claimed there was an “inadequate environmental impact review” of greenhouse gas emissions.

The lease sale halted when Judge Rudolph Contreras of the U.S. District Court of the District of Columbia ruled in January that proceeding with the sale was “arbitrary and capricious.”

The Biden Administration did not appeal Contreras’s decision, but by signing the IRA, Biden effectively and successfully revived the lease.

The National Ocean Industries Association (NOIA) announced the lease reinstatement in a Tuesday press release.

“Lease Sale 257 is reinstated, and high bidders must get their lease.”

The offshore oil, gas and wind industries group also noted that the Lease sales 258, 259, and 261 must be held. NOIA noted Lease Sale 258 must occur no later than December 31, 2022; Lease 259 would occur by March 31, 2023, and Lease 261 by September 30, 2023. They also pointed out a handful of other lease sales that must proceed after enacting the IRA.

NOIA gave the legislation a “passing grade,” citing the placement of “a framework for continued development of U.S. offshore oil and gas, mechanisms to advance offshore wind, and incentives to spur offshore carbon sequestration innovation.”

“No legislation is perfect, but the IRA’s offshore energy provisions will enable continued investment in U.S. energy projects by an industry that is already solving, scaling, and deploying low carbon energy solutions,” NOIA President Erik Milito said in a statement.

The Epoch Times reported the Inflation Reduction Act requires the reinstatement of Lease Sale 257 within 30 days of the legislation’s enactment.