July marked official signs of the U.S. economy entering a recession, with prices economy-wide cooling slightly at the prospect of a coming global contraction. In Washington, Democrats have been frantically working behind the scenes to secure policy wins ahead of midterms, with Sens. Schumer and Manchin just last week announcing a reconciliation deal in the form of the Inflation Reduction Act (IRA). The IRA is a mixed bag of policies that doesn’t provide much hope. Democrats are taking seriously the dire need to support the North American upstream market. While some aspects are promising, including provisions that would reinstitute offshore lease sales, the legislation includes quixotic changes like raising royalties as much as 50% on some federal lands, and shelling out over $7,000 to consumers for luxury electric vehicles. Other changes include:
- Increasing the minimum bid amount for acreage from $2 per acre to $10 per acre.
- Increasing the royalty rate from 12.5% to 16.67%– a 33% increase.
- Increasing the rental rate from $1.50 per acre to $3 per acre.
As part of the deal, Manchin has secured promises from Democrats to pass a bill later this year to address federal permitting deficiencies. Specifically, that legislation would direct the president to designate 25 energy projects to be prioritized for review, would set maximum timelines for environmental reviews, and would mandate the federal government to finish the Mountain Valley Pipeline project. As we head into August, we will see lawmakers begin to return to their states to campaign ahead of what will likely be a landscape-changing election on November 7th. Democrats’ other priorities ahead of that include passing USICA and continuing to confirm as many appointees and judges as possible ahead of midterms.