Along with destroying the United States’ energy system, making life worse in the coal states, and failing to do anything to actually reduce inflation, the Manchin/Schumer “Inflation Reduction Act of 2022” includes troublesome tax incentives to support biofuel production and infrastructure, as well as carbon capture and storage (CCS). 

These tax credits will encourage existing petroleum refining capacity to convert to renewable fuels -- making it harder for Americans to get the petroleum fuel products they need for transportation and home heating. 

And these incentives will also force the United States to import more petroleum products from places like China and the Middle East.

The bill now establishes a new tax credit for sustainable aviation fuel (SAF) of between $1.25 and $1.75 per gallon … extends several existing biofuel tax credits, including those for biodiesel, renewable diesel and second-generation biofuels … and allocates $500 million to support biofuel infrastructure and agriculture project market expansion.

But these subsidies will do nothing toward keeping existing U.S. refineries operational and processing oil into the gasoline, diesel, jet fuel, and heating oil that American families desperately need for transportation and home heating. 

Instead, the subsidies are designed to turn agriculture products into biofuels to displace oil production in the United States. Since 2019 about one million barrels per day of U.S. refining capacity have already shuttered, and many refineries are switching to producing biofuels as the tax incentives enhance their profits. 

Those one million barrels per day of refining capacity have now been converted to biofuel processing -- handicapping the U.S. refining industry’s ability to produce petroleum products urgently needed by the American economy.

We’re already in the position that no new major oil refinery has been built in the United States since the Carter administration and Biden’s climate policies and regulations will ensure that none are built in the future. 

But even as the United States is shuttering refining capacity, China and the Middle East are aggressively adding refining capacity. According to the Energy Information Administration, at least nine refinery projects (2.9 million barrels per day) are beginning operations or are scheduled to come online before the end of 2023 in China and the Middle East. 

While additional refinery closures are expected in the United States, China’s primary refining capacity is expected to reach 20 million barrels per day by 2025.  Refined products are essentially value-added manufacturing products which China will use to both run their country and for exports to power their economy.

It’s clear that, while President Trump made the United States energy independent in 2019, President Biden and the Democrats in Congress today want Americans to be dependent on China and OPEC countries in the Middle East for energy.

“The Inflation Reduction Act of 2022” is a lose-lose for American businesses and consumers, as it will drive up energy costs here at home, while increasing our dependence on foreign oil -- and failing to improve the environment or reduce inflation, to boot!

So thank you for coming alongside us as AEA fights to end the American energy crisis!

Tom Pyle
President

American Energy Alliance