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Size Matters for US Oil Firms in Climate Law

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Carbon capture & storage 1416920-carbon

The oil industry's reaction to newly inked US tax and climate legislation has been striated, with smaller producers and the US oil lobby castigating the law’s heightened tax burden and potential demand destruction catalysts. Meanwhile, the response of majors has been largely positive. Enhanced certainty over US Gulf of Mexico access and fresh tax incentives for carbon negative technologies give large to midsize producers more to cheer about. The law allocates billions in fresh, generously structured tax incentives for carbon capture and storage (CCS) and hydrogen, although there are limitations that prevent oil companies from double dipping on using credits for both technologies. But for companies that have put low-carbon technologies at the center of their transition strategies, US policy around those technologies just got surer footing. BP CEO Bernard Looney said the tax incentives will aid BP’s US-based transition strategies, including hydrogen, offshore wind, and electric vehicles. Exxon Mobil CEO Darren Woods similarly said it anticipates incentives for several low-carbon projects in the pipeline, naming blue hydrogen as one area where the tax incentives could be “beneficial.” For companies with more exposure to direct air capture and CCS technologies, the law could be a game changer given the ample hikes to tax credits for both technologies. Richard Jackson, Occidental Petroleum’s head of US onshore and carbon management operations, said the bill “gives certainty in some of the revenue to allow us to build this development.”

Topics:
Low-Carbon Policy, Offshore Oil and Gas, Carbon Capture (CCS), Policy and Regulation, Exploration, Offshore Oil and Gas, Fiscal Terms
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