eral substantive changes made through the IRA. This legislation raises offshore and onshore royalty rates to 16.66% from 12.5% currently. The bill also increases the minimum bid rate to $10/acre from $2/acre, instituted a $5/acre fee for operators to informally nominate lease tracts inclusion in lease sales to the Department of Labor and eliminates non-competitive leasing if leases fail to receive competitive bids at auction. The IRA took a bold step and ordered the Department of Interior (DOI) to hold oil and gas lease sales in order to issue a right-of-way for new wind or solar energy development on Federal Lands. Additionally, DOI must reinstate the November 2021 Gulf of Mexico oil and gas lease sale that was vacated by a federal district court, and requires the Department to hold the Alaska Cook Inlet and two Gulf of Mexico lease sales that were cancelled earlier this year.
Regulatory and Tax Increases
This legislation creates a methane emissions charge which, if enacted, would be the first time the federal government would directly impose a charge, fee or tax on GHG emissions. This fee on methane emissions would apply only to methane emissions from specific types of facilities that are required to report their greenhouse gas (GHG) emissions to the EPA’s Greenhouse Gas Emissions Reporting Program (GHGRP). The charge would start in calendar
year 2024 at $900 per metric ton of methane, and increase to $1,200 in 2025, increase to $1,500 in 2026 and would remain at $1,500 for subsequent years. The biggest uncertainty surrounding the formation of this fee is the potential for businesses to be exempt from the charge if future, final EPA regulations addressing methane emissions are in effect in all states and if adherence would result in equivalent or greater emissions reductions as would be achieved by the November 2021 rule. The IRA enacts a new Chapter 37 and Section 4501 of the Internal Revenue Code that imposes on a “covered corporation” (generally, a publicly traded U.S. corporation) a non-deductible excise tax equal to 1% of the fair market value of the stock of the corporation that is considered “repurchased” by the corporation during the tax year. The IRA also introduces the corporate alternative minimum tax of 15% targeted at certain large U.S. corporations if such corporation’s adjusted financial statement income which is similar to book earnings prepared in accordance with U.S. GAAP, exceeds certain threshold amount. The Energy Workforce Government Affairs team will continue to monitor these funding and tax opportunities and regulatory changes as they are enacted. WellServicingMagazine.com
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