How the Big Beautiful Bill Impacts U.S. Energy | Shale Magazine

Congress voted to pass President Donald Trump’s Big Beautiful Bill on Thursday, ahead of the Fourth of July holiday weekend. Trump’s multi-trillion-dollar domestic agenda is a massive package of tax and federal spending cuts. It passed the House, with a vote of 218 to 214, despite a unanimous vote against the bill by Democrats.  

“There could be no better birthday present for America than the phenomenal victory we achieved just hours ago when Congress passed the ‘one big, beautiful bill’ to ‘Make America Great Again,’” Trump said upon hearing the news on stage in Des Moines, Iowa.  

Overview of the Bill

The Big Beautiful Bill (BBB) aims to provide tax cuts and boost funds for national security, which is paid for in part by the largest cut to the federal safety net in decades. 

Big business groups and manufacturers are set to benefit from the bill thanks to the introduction of a wide range of tax breaks, which could also benefit small business owners. Workers who receive tips or work overtime may be able to deduct this pay under new tax laws. In addition, the net income for the top 20% of U.S. earners is expected to rise by almost $13,000 a year, after taxes and transfers, under the BBB. For the top 0.1% of earners, wages could increase by as much as $290,000. 

Conversely, low-income workers are expected to be worse off as the BBB introduces work requirements for access to Medicaid and food stamps, meaning many will lose their benefits. Some forecasts suggest that the BBB could result in an additional 10 million more people being uninsured by 2034. The funding cuts will severely affect hospitals, with almost $1 trillion in Medicaid cuts. In addition, those in the lowest-income group, earning less than $18,000 a year, would see a $165 reduction (1.1% cut) in their after-tax, after-transfer income. 

The clean energy and electric vehicle (EV) industries are also expected to be hit hard. Although the Senate did remove a last-minute excise tax on wind and solar, the BBB removes various tax incentives for wind, solar, and other renewable energy projects by 2027. The American Clean Power Association expects the BBB to lead to a reduction in energy jobs and an increase in utility costs. 

Meanwhile, the BBB puts an end to the up to $7,500 in tax credits for EVs by the end of September, rather than the previous end date of 2032. This could lead to a downturn in EV uptake in the coming years. 

What Can the Energy Sector Expect Following the Bill?

When President Trump entered office in January, he promised to establish U.S. energy dominance through the expansion of oil and gas operations, as well as to drive down costs for the consumer. In recent months, Trump has passed several policies that make it easier to develop oil, gas, and coal projects, while placing more limitations on the clean energy sector.  

The BBB opens up federal lands and waters to oil and gas drilling, undoing the restrictions introduced by the Biden administration. It mandates 30 lease sales in the Gulf of Mexico over 15 years and 30 each year on lands across nine states, including Alaska. It also reduces the royalties that producers are required to pay the government for drilling for fossil fuel on federal lands.

The bill introduces a carbon capture tax credit to encourage oil firms to incorporate carbon capture and storage (CCS) technologies into operations to increase production by injecting sequestered emissions into wells to produce more oil. 

It could also encourage greater investment in the hydrogen sector by delaying the end of a hydrogen tax credit to 2028. The coal industry is also benefiting from the bill, which makes at least 4 million additional acres of federal land available for mining and reduces the royalties coal companies have to pay to the government. 

Meanwhile, Trump has positioned the BBB to phase out clean electricity investment and production tax credits for wind and solar power. Production tax credits were introduced in 1992 and were expected to continue to 2032 to encourage higher levels of clean energy production; however, wind and solar farms that commence operations after 2027 will no longer be eligible for the credit, unless they begin construction within the next year.  

The funding phaseout had a shorter time frame in previous versions of the law, but alterations before it was passed give solar and wind companies slightly more time to manage developments. Another tax credit for using U.S.-made components in solar and wind farms, which was aimed at reducing U.S. reliance on Chinese equipment, will also be cut. At the consumer level, the BBB scraps tax credits for rooftop solar and heat pumps. 

 Abigail Ross Hopper, the CEO of the Solar Energy Industries Association, said, “Despite limited improvements, this legislation undermines the very foundation of America’s manufacturing comeback and global energy leadership.”

While the BBB is expected to help bolster the fossil fuel and nuclear power industries, it will almost certainly slow clean energy development in the mid-term. It will also likely spur the closure of domestic factories producing clean energy components and lead to a loss of jobs across the renewable energy industry. As progress towards a green transition stalls, it will also drive up greenhouse gas emissions and allow other countries to race past the United States in renewable energy development. 

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