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Inflation Reduction Act aligns with Wyo policy, but not politics

Wyoming Innovation Center celebrated its grand opening June 10, 2022. (Energy Capital Economic Development)

Measure increases tax credits for carbon capture, use and sequestration and supports hydrogen, nuclear and rare-earth initiatives.

Dustin Bleizeffer, Wyofile

With some $370 billion to entice more demand for efficiency and cleaner forms of energy, the Inflation Reduction Act promises to reshape the national energy landscape that steers much of Wyoming’s economy. 

That doesn’t bode well for Wyoming’s fossil fuel industries. Many of its provisions, however, directly align with aspects of Wyoming energy and climate strategies — especially combined with another piece of federal legislation, the Infrastructure Investment and Jobs Act. 

Increased tax credits for carbon capture, use and sequestration, for example, is a boon to Wyoming’s primary energy and climate strategy: capturing CO2 from coal-fired power plants (and other industrial facilities) and injecting the greenhouse gas underground for permanent storage or to produce more oil. Gov. Mark Gordon claims Wyoming can achieve net-zero CO2 emissions with such technology. The Legislature and University of Wyoming have spent more than a decade developing partnerships and building infrastructure to take advantage of CCUS technologies in hopes of providing a lifeline for Wyoming fossil fuels.

“[The IRA] could certainly make the state more attractive for investment in some of the technology that, frankly, the governor has been pushing and has been leading on for a number of years now,” Gov. Mark Gordon’s spokesperson Micheal Pearlman told WyoFile.

The IRA also aligns with state ambitions to launch hydrogen energy and nuclear power generation, while domestic sourcing requirements for renewable energy, electric vehicles and battery storage are expected to entice the production of rare earth minerals in the state. 

While the federal bill helps finance more demand for cleaner forms of energy, it does not include specific measures to limit the use of fossil fuels. The threat of those types of restrictions come directly from courts, the Biden administration, the investment community and other states.

“Nothing was really taken off the table,” University of Wyoming energy economist Rob Godby said. “You can look at [the IRA] and say this is broadly consistent with the energy strategy that the state has been developing for the long term.”

Political reception

Wyoming has much to gain from the IRA with the state’s industrial-scale wind and solar energy potential, according to analysts. Businesses, municipalities, school districts and homeowners also will find a more affordable path to installing rooftop solar and other energy-efficiency strategies. 

“I think there’s a lot in there, at the local level, to really help address the local interests and needs of communities to address the climate crisis,” Powder River Basin Resource Council attorney Shannon Anderson said. “It will help municipalities continue in some areas that they’ve already been doing, which is installing solar systems to meet their own electrical needs. They can retrofit their own buildings and infrastructure and begin thinking about how to integrate this for school districts.”

But whether the incentive-based strategy of the IRA to accelerate the use of cleaner forms of energy is ultimately good for Wyoming “depends on who you talk to,” Pearlman said. While Wyoming leaders generally embrace an “all-of-the-above” energy strategy, Pearlman said, many in the state see any gains in renewable energy as direct losses for Wyoming’s fossil fuel industries.

There’s also a wariness in the state of one-time federal funding and programs that could grow continuing operational costs in the state. All three Wyoming congressional delegates voted against the IRA as well as the Infrastructure Investment and Jobs Act.

For all the ways the IRA aligns with current Wyoming policy goals, it is primarily a partisan climate and health reform bill. It is designed to use cost savings and a 15% minimum corporate tax to spend on measures that cut the nation’s greenhouse gas emissions 40% below 2005 levels by 2030. It’s also a major win for the Biden administration. For these reasons, the IRA has been criticized by Wyoming’s congressional delegation, its governor and the Republican-dominated Legislature.

“This bill attacks our fossil fuel industry, which not only causes prices to go up for every family in Wyoming, but it also puts into place unrealistic measures to cut carbon emissions that will cost millions of jobs and hundreds of billions of dollars,” U.S. Sen. Cynthia Lummis said in an Aug. 7 statement.

“The governor’s position is in line with the delegation,” Pearlman said. “He is really not a supporter of the bill. He’s concerned about the tax increases, he’s concerned about the cost it’s going to put on businesses and consumers.”

Despite Wyoming’s political opposition to the IRA, the law doesn’t limit where state leaders want to drive energy policy at home, UW’s Godby said.

“There’s a lot of stuff in here that Republicans in the state have been talking about for quite a while,” Godby said. “Those technologies are in here, even though the bill didn’t pass on a bipartisan basis.”

Senate President Dan Dockstader (R-Afton) serves on the legislative energy council and is a board member of the Lower Valley Energy electric co-op. Dockstader, who is a proponent of TerraPower’s proposed Natrium nuclear power plant in Kemmerer,  said he supports efforts to keep Wyoming fossil fuels in the nation’s energy mix. However, he said, the IRA and Infrastructure laws both present significant opportunities that the Legislature will have to consider carefully.

“I want to be a part of a successful solution for Wyoming,” Dockstader said. “As a state we have to stay with the changes, or we’ll be left behind. I am convinced of this.”

Fossil fuel effect

Adding CCUS to existing Wyoming coal-fired power plants — a legislative goal in recent years — hasn’t penciled out in utilities’ analyses. But Wyoming officials are hopeful that may change with the IRA. The law expands the “Section 45Q” tax credit for carbon sequestration from $50 per metric ton of CO2 to $85, and from $35 per ton for CO2 used in enhanced oil recovery and other forms of “utilization” to $60 per ton. 

Those provisions, in addition to tens of millions of dollars for CCUS research and development via the Infrastructure bill, represent a “once in a generation” opportunity for Wyoming to adjust to and grow with a rapidly changing energy landscape, according to UW School of Energy Resources Senior Advisor Kipp Coddington. SER-led efforts such as the CarbonSAFE project to inject CO2 for permanent storage north of Gillette, and related programs to create commercial products from CO2 and Wyoming coal, might have faced faltering support in coming years without the legislation, according to Coddington.

“These two bills together, I think, are significantly positive for the state of Wyoming,” Coddington told WyoFile. “The dollar amounts that are now available truly may move the needle on [CCUS] projects that were otherwise wavering in the proverbial valley of death.”

Wyoming Energy Authority Executive Director Glen Murrell, whose agency is tasked with the nuts-and-bolts of implementing components of the state’s top energy policies, said the IRA and Infrastructure laws combined “align with the energy strategy that we’re trying to do.

“Some of the CCUS provisions are things that people in the CCUS world have been asking for and fighting for for years,” Murrell said. “And they got everything — everything they wanted. Check, check, check, check.”

The same can be said, perhaps to a lesser degree, of Wyoming’s climate and energy policy ambitions for nuclear and hydrogen power, as well as wind energy, according to Murrell. “It’s great,” he said. “There are some really good things in [the IRA] which will absolutely influence, positively, the deployment of those technologies.”

For Wyoming oil and gas producers, the IRA is mostly harmful, Wyoming Petroleum Association Communications Director Ryan McConnaughey said. It includes beneficial CCUS provisions that bolster enhanced oil recovery and may provide some certainty for mineral leasing on federal lands. But the law erases a federal mineral royalty tax exemption for flared gas and will add a fee for leasing so-called “unproven” oil and natural gas reserves.

“Obviously, there are some beneficial programs,” McConnaughey said. “Overall, for the state of Wyoming, the negatives are just too great.”

The decline of Wyoming coal will likely accelerate with the IRA, according to UW’s Godby, though contraction was inevitable before the IRA became law. “[The U.S. is] not building new coal-fired power plants,” Godby said. “And it’s not necessarily just for regulatory reasons. They just don’t see those as compatible for the long term.”

The IRA recognizes where things were already headed in the energy landscape and adds incentives to accelerate the shift, PRBRC’s Anderson said. “Power plants were already being retired prior to this bill,” she said. “The electric sector was already moving in a direction where coal was a disfavored energy source. This bill doesn’t really speak to that directly, but what it does is it recognizes the trend and builds upon it.”

The IRA unfairly selects energy-resource “winners and losers” with renewables coming out on top, Wyoming Mining Association Executive Director Travis Deti said. Yet, there are many beneficial aspects in the bill for fossil fuels and mining.

“There are incentives for carbon capture, so that’s a good thing [for Wyoming coal],” Deti said. “The incentives to get uranium and nuclear off the ground — our guys really like that. And there’s good stuff in there for rare earth [minerals]. So it’s a mixed bag.”

This article was originally published by WyoFile and is republished here with permission. WyoFile is an independent nonprofit news organization focused on Wyoming people, places and policy.