Photo: Orhan Çam/Adobe Stock
This week, committees in the U.S. House of Representatives unveiled their initial legislation responding to instructions in the fiscal year 2025 budget resolution. As budget reconciliation has evolved into a key procedural mechanism for U.S. policymaking, these bills propose changes to energy subsidies, strategic reserves management, and low-carbon innovation that will affect the energy landscape in the United States.
With legislation emerging from both the House Committee on Energy and Commerce and the House Committee on Ways and Means, the scope of proposed changes is large. In this Experts React, our team examines the most significant, surprising, and nuanced aspects of these legislative proposals, assessing their potential impact on U.S. energy policy amidst the forthcoming congressional debate.
A Vote of Confidence for LNG | Joseph Majkut
A Practical Approach to Refilling the SPR | Clayton Seigle
In House Bills, Natural Gas Flexes, and Nuclear Flops | Kyle Danish
Un-Unleashing Commercial Nuclear Power | Leslie Abrahams
Unintended Casualty of the Clean Vehicle Credit Termination | Jane Nakano
Cost of Capital and Supply Chains in a Post-IRA Market | Arushi Sharma Frank
Deepening Uncertainty for the Clean Molecules Sector | Mathias Zacarias
Joseph Majkut, Director, Energy Security and Climate Change Program
The Trump administration has moved swiftly to approve permits for new liquified natural gas (LNG) export facilities, emphasizing their significance as a leading U.S. export and cornerstone of energy dominance. Now, House Republicans are proposing to make export permits for projects serving non–free trade agreement (FTA) countries almost immediately available upon payment of a $1 million fee. This represents a potentially enormous shift in U.S. energy policy and signals growing confidence in the United States’ energy dominance.
Under the Natural Gas Act, every facility exporting to non-FTA countries must be approved based on it serving the national interest. To evaluate that criterion, the Department of Energy (DOE) has studied how new exports might affect domestic gas prices, energy security, and emissions. Last year’s debate over the temporary pause in new licenses and the DOE’s concurrent study was a procedural structure around a much more fundamental debate: Was the United States ready to be a leading exporter in the global LNG market?
Should this new fee-based scheme come into effect, the answer will be yes. Such a permissive policy would indicate that U.S. policymakers see a bright future for U.S. LNG exports. It would demonstrate confidence in the ability of domestic producers to meet increasing demand domestically and abroad and let the market drive investment decisions more directly. The United States would be affirmatively, and more fundamentally, an exporter.
Clayton Seigle, Senior Fellow and James R. Schlesinger Chair in Energy and Geopolitics, Energy Security and Climate Change Program
President Trump’s vow to immediately refill the strategic petroleum reserve (SPR) to the top was never realistic. The reserve can hold about 700 million barrels, and today it stands at 400 million barrels; about 300 million barrels would be required to fill it completely. Whether the purchase price of that crude oil is closer to today’s $62 per barrel, or potentially even as low as Trump’s hoped-for $50 per barrel, a full fill would cost $15–18 billion. The House Committee on Energy and Commerce’s draft bill would appropriate only $1.3 billion for purchases into the reserve.
Allocating such a small fraction of the funds needed for a full refill makes sense given the SPR’s physical limitations and today’s budget-conscious Washington. The SPR’s plumbing is designed to distribute oil quickly in the event of an emergency, but to refill at only about one-sixth of its drawdown rate. When all four facilities are at full performance, the refill rate is about 700,000 barrels per day. But with some of the facilities undergoing maintenance and only certain storage caverns within the operable facilities ready to receive barrels, today’s actual refill rate is closer to just 100,000 barrels per day. This is why the Department of Energy has issued a string of solicitations in recent months to purchase (on average) about 3 million barrels per month—that’s the most it can receive under today’s operating conditions.
Asking for the full $15–18 billion needed to purchase 300 million barrels is unnecessary, because the SPR can’t take delivery, and is inopportune as Congress looks to cut spending to pay for tax cuts. From this perspective, an appropriation of $1.3 billion makes sense—it allows for maximum practical refill of 3 million barrels per month (average) for the next half year, and Congress can revisit in a subsequent (year-end) budgetary process.
Kyle Danish, Senior Associate (Non-resident), Energy Security and Climate Change Program
The natural gas sector fared well in the House budget reconciliation bills introduced this week. Advanced nuclear reactors came up short.
The Committee on Energy and Commerce bill provides relief from the Waste Emissions Charge (aka the “methane fee”), by delaying the imposition of that fee for 10 years. Budget reconciliation rules prohibit measures that increase the federal deficit beyond the budget window unless offset by new revenues.
The House bills also include significant permitting reforms for natural gas projects as well. The Energy and Commerce bill allows the developer of an interstate pipeline project to pay a fee in return for a guarantee that all needed federal authorizations—from air permits to environmental impact statements—will be issued within 12 months or deemed approved. Whether these fee-based expedited permitting approaches will pass muster with the Senate Parliamentarian remains to be seen.
The House bills went “big” and “beautiful” for gas. For advanced reactors, they went small, reducing the federal funding needed. The Energy and Commerce bill pares back the Department of Energy’s Loan Programs Office, a primary source of reactor project financing. The Ways and Means bill cut off the 45Y clean electricity production tax credit for facilities placed into service after 2031. That is bad news for renewables but devastating for advanced reactors; most observers believe that it will take 10 years for commercial reactors to come online. Recent reports suggest the White House is considering regulatory reforms for advanced reactors. However, without federal funding, regulatory reforms may not be sufficient to launch a U.S. advanced reactor industry.
Leslie Abrahams, Deputy Director and Senior Fellow, Energy Security and Climate Change Program
Despite the White House and the secretary of energy’s strong pronouncements supporting nuclear energy expansion as a key domestic energy resource, draft reconciliation language from the House Ways and Means and Energy and Commerce Committees all but eliminates federal support for new nuclear.
The draft language calls for an early phase-out of the zero-emissions nuclear power production credit, jeopardizing the continued operation of the existing nuclear fleet. And early sunsetting for the technology neutral tax credits, combined with the shift in eligibility language from “began construction” to “placed in service” by the designated calendar year, precludes any large-scale nuclear reactors from leveraging these tax credits due to their 8-to-10-year construction timelines.
Two additional eligibility changes, the early repeal of transferability—which allows nuclear project developers to attract low-cost private sector investment—and the addition of stricter foreign entity of concern limitations—including ineligibility stemming from use of critical minerals or other core project components and materials—will further impede the immediate viability of both large- and small-scale nuclear projects.
Beyond the tax incentives, the Committee on Energy and Commerce’s clawback of unobligated Loan Program Office (LPO) appropriations hinders its ability to fund credit subsidies necessary to support high-risk, highly capital-intensive nuclear projects, including reactor restarts. LPO funding is arguably even more essential to nuclear energy’s success as a domestic industry than the tax credits; nuclear-specific applications to the LPO totaled over $64 billion in FY 2024 across the entire nuclear value chain.
Jane Nakano, Senior Fellow, Energy Security and Climate Change Program
The termination of the Clean Vehicle Credit (30D) proposed in the tax package would raise not just one but two important questions. How else to commercially incentivize the development of domestic minerals projects? And, how to secure a domestic supply chain for energy storage batteries?
Intended to effectuate a massive onshoring of electric vehicle battery manufacturing, the 30D provision incentivized U.S. original equipment manufacturers (OEMs)and foreign battery manufacturers to begin initiating or expanding investments in qualified manufacturing activities. The provision also created a strong demand signal to those exploring opportunities to invest in projects to mine and refine battery-related minerals in the United States. No other market appears readily available to send the signal needed.
What’s more, the nation is highly import dependent for stationary batteries, especially from China. Energy storage batteries are key to enhancing resilience in the nation’s expanding electricity network and could have greatly benefitted from the tax credit provision. Power system resilience warrants as much attention as hydrocarbon production in Washington’s pursuit of energy dominance.
Arushi Sharma Frank, Senior Associate (Non-resident), Energy Security and Climate Change Program
The proposed changes to energy tax credits will add to the headwinds already coming toward small-scale U.S. manufacturers and developers in infrastructure and component sectors like batteries. The cost of capital for small-to-medium-sized firms in the business of manufacturing, assembly, and processing in IRA-boosted sectors has crept upward over the past year—driven by rising interest rates and risk premiums, delayed IRS guidance, and fluctuating tax credit prices.
Eliminating transferability will be a gust in these headwinds. Its proposed loss leaves these firms even more financially exposed—especially those betting on thin-margin business lines like battery manufacturing, community solar, or utility-scale projects. Tax credit cash sales are seen as a rare bright spot that many hoped would survive the proposed cuts, preserving one of the few tools smaller firms could use to derisk equity and preserve leverage. Without that market, the liquidity squeeze only tightens.
We also need to anticipate and account for impacts upstream in the value chain. Manufacturers who scaled domestic operations, anticipating lasting tax credits for project developers, now face uncertainty. These suppliers must recalibrate their expectations around supply chain speed, pricing, and demand certainty in their pipeline. The negative effects of this volatility will give us a clear demonstration of the need for clear, bankable reasons for U.S. (and foreign) buyers to make durable, long-term commitments with small- and medium-sized suppliers throughout the supply chain.
At the same time, these headwinds create openings for consolidation, refinancing, and strategic resets. I expect to see capital-strained firms that domestically manufacture batteries and power grid components use this opportunity to shore up balance sheets and realize their scale-up ambitions. Market discipline begets innovation.
Navigating these headwinds successfully is crucial for enhancing the competitiveness of U.S. energy value chains against global players like China. Fostering a robust domestic technology base is a vital hedge against potential future trade conflicts and supply chain vulnerabilities.
Mathias Zacarias, Associate Fellow and Energy Transitions Fellow, Energy Security and Climate Change Program
The reconciliation bill’s draft presents a mixed bag of news for clean molecules, proposing modifications to Inflation Reduction Act provisions for hydrogen, carbon capture, and low-carbon fuels. Long plagued by uncertainty and extensive debate, the 45V tax credit for clean hydrogen production potentially faces termination for projects beginning construction after the end of 2025. In practice, this means that only 1.3 million tons worth of capacity at the operational or final investment decision stage will have the chance to access the tax credit, virtually all of it “blue” hydrogen from natural gas.
Meanwhile, the proposed changes to the 45Q tax credit for carbon sequestration appear minimal and inconsequential at first but reveal a constraining outlook for the technology’s domestic deployment upon closer examination. The proposed “prohibited foreign entities” and tax-credit transferability restrictions would hinder financing opportunities for carbon capture projects by narrowing tax-credit monetization pathways.
Conversely, positive developments for low-carbon fuel developers include a four-year extension of the 45Z claiming period to the end of 2031, in addition to a broadening of qualifying fuel criteria. These changes offer a small demand-pull boon for clean hydrogen and carbon capture technologies, both of which enable domestic production of low-emission biofuels and e-fuels. However, these flexibilities would result in uncertain emissions outcomes, increased federal spending, and a potential weakening of confidence in low-carbon fuels as a decarbonization tool.
Altogether, these proposed amendments engender further uncertainty for the nascent clean molecules space, effectively inhibiting the growth of these new U.S. energy technologies.
