Inflation Reduction Act is opportunity for Wyo energy diversity

As originally published on Wyofile.com on August 5, 2022


By Nathan Wendt, President, Jackson Hole Center for Global Affairs


Legislation creates an opportunity for state to thrive in the new energy economy and reduce carbon emissions all at the same time.

The Inflation Reduction Act, unveiled in a surprise announcement last week after West Virginia Sen. Joe Manchin came on board — proposes changes to health care — including giving Medicare the power to negotiate for prescription drug prices — as well as addressing deficit reduction, climate change and energy. Manchin’s heavy hand in the negotiations resulted in a plan that gives a big opportunity to energy producing states like Wyoming and West Virginia. West Virginia is the U.S.’s second largest producer of coal. Wyoming is the largest. The bill is designed to fight climate change and strengthen at-home-domestic energy security and manufacturing at the same time, and when looked at in tandem with the opportunities coming through the Infrastructure Investment and Jobs Act, there’s a lot for Wyoming, and other energy-producing states, to go after.

Carbon capture Through investments like the Integrated Test Center, a CO2 pipeline initiative and research being done at the University of Wyoming, the state has positioned itself to lead in carbon capture and carbon removal technologies — increasingly viewed as critical industries that the globe will need to fight climate change in the years ahead. The bill’s $369-billion climate and energy credits include generous applications for the carbon capture (45Q) tax credit, such as options for direct payment of the credit, multiyear extension of the commence construction window to qualify for the credit, expanded transferability of the credit to another entity, increased credit values for direct air capture and more.

Renewable energy Wyoming has over 50% of the best quality wind capacity in the nation, and continues to have a tremendous opportunity to build out this resource. Wind can lead the charge in diversifying Wyoming’s economy — bringing new jobs, revenue and industries. Beyond wind farms, the state can be a central cog in the wind manufacturing supply chain and, through making wind energy directly procurable for businesses, tap into the growing business demand to directly procure renewable energy. Wyoming wind projects should fare well under the IRA, which provides $30 billion in incentives for wind, solar and battery production. Further included in the bill are another $10 billion in tax credits that can go toward the construction of facilities that make renewable energy technologies.

Electric vehicles and critical minerals Elon Musk is presumably pretty happy about what the bill does for Tesla, headquartered in Texas. Tesla used up its previously allotted tax credits available after the company sold 200,000 cars. These credits will be reset without a quota and only applied to EV cars made in North America. Future demand for EVs is looking strong. Further, to strengthen American manufacturing, cars only qualify for the credit if their batteries are made with materials and components from the United States or nations that we have trade agreements with. This is good news for Wyoming, home to abundant critical minerals including lithium in the southwestern part of the state. Perhaps there is an opportunity to play a role in the Tesla supply chain and the critical minerals that go into it?

Nuclear and hydrogen The bill includes tax incentives for next-generation technologies, including clean hydrogen and advanced nuclear. That’s got to be good news for the plans underway for Kemmerer and the TerraPower Advanced Reactor Demonstration Project. Wyoming has signed onto a plan to coordinate and develop, alongside Colorado, New Mexico and Utah, a regional clean hydrogen hub. Those clean hydrogen tax credits will undoubtedly be useful.

Fossil fuels Relative to energy security concerns exacerbated by the war in Ukraine and the elevated awareness of domestic reliance on petrostates’ fossil fuel production, the bill provides opportunity for expanded oil and gas exploration, increases oil and gas royalty rates from 12.5% to 16.67%, and ends non-competitive oil and gas leasing on public lands. On Manchin’s website, he outlined his priorities in energy security: “As the superpower of the world, it is vital we not undermine our superpower status by removing dependable and affordable fossil fuel energy before new technologies are ready to reliably carry the load.” This clearly means that Manchin’s support is contingent on an approach that incentivizes innovation in clean energy while preserving traditional energy generation sources.

Coal communities The bill would provide full and permanent funding for the Black Lung Disability Trust Fund. This acknowledges the commitment that the U.S. has to step up to the health impacts that coal workers who have powered America have sometimes suffered, particularly in Appalachia.

The bill is a big deal for climate action and putting the U.S. back into a meaningful leading position globally. It’s projected to reduce carbon emissions by around 40% by 2030, which gets near the U.S.’s current goal of cutting U.S. emissions by at least 50-52% below 2005 levels by 2030. A week ago, U.S. climate action looked like it was over, with global implications. The IRA creates an opportunity for Wyoming and other energy producing states to thrive in the new energy economy and reduce carbon emissions all at the same time, if it passes.

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