President Joe Biden has unveiled a $2.3 trillion infrastructure plan that aims to relay the foundations of the US economy while also addressing the climate crisis, although some of the proposals — which include an attack on fossil fuel subsidies — may be difficult to carry into law.

Biden presented his plan last week in Pittsburgh, the economic epicentre of the Marcellus and Utica shale plays and heart of the US steel industry.


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He trumpeted the proposals as a "once-in-a-generation investment" that will lead to "good-paying jobs" while helping to "grow the economy".

One of the main thrusts of the plan” is $350 billion in tax credits and federal funding for electric vehicles and associated infrastructure and electric grid modernisation.

Billions more would be made available for clean energy generation and storage and for building and retrofitting energy-efficient houses, schools and other public buildings.

The “American Jobs Plan” covers generous investment in traditional infrastructure such as roads and bridges, but also includes measures intended to help oil industry workers adapt to the energy transition.

Orphaned wells

Biden’s bill offered immediate up-front investment of $16 billion to put the energy industry to work plugging orphaned oil and gas wells and cleaning up abandoned mines.

Generally speaking, an oil or gas well is considered abandoned or "orphaned" when it has been permanently taken out of production and the legal owner responsible for its plugging is not possible to determine.

The Environmental Protection Agency pegs the number of abandoned hard-rock mines in the US at about 500,000, and the number of unplugged inactive wells at about 2 million.

These wells can leak methane into the atmosphere, by some estimates emitting as much carbon pollution as 2 million passenger vehicles per year.

"Hundreds of thousands of former orphan oil and gas wells and abandoned mines pose serious safety hazards, while also causing ongoing air, water, and other environmental damage. Many of these old wells and mines are located in rural communities that have suffered from years of disinvestment," the White House stated.

Biden’s job-creation hopes were supported by a joint paper from Columbia University, which estimates that a significant federal effort to plug about 500,000 orphaned and abandoned oil and gas wells could provide as many as 150,000 jobs.

Carbon capture and sequestration

Biden’s funding requests include $35 billion for “technology breakthroughs addressing the climate crisis” and $15 billion for “demonstration projects” for climate research and development priorities.

His proposal calls for the creation of 10 “pioneer facilities” intended to demonstrate carbon capture retrofits at large-scale cement and chemical production facilities.

Currently, research and development of carbon capture systems in the US has been done largely by private industry, with Chevron, ExxonMobil and Occidental Petroleum among the leading oil companies involved.

The White House said the administration intends to capitalise on existing legislation and tax programmes to make carbon capture more attractive to industry.

Ending fossil fuels subsidies

The White House plans to pay for the proposals by raising corporate taxes to 28% from 21% and eliminating tax breaks for fossil fuels.

Although Biden did not flesh out the details of how the administration would claw back revenue by ending tax relief for oil companies, a 2017 congressional joint committee on taxation said eliminating direct tax breaks for intangible drilling costs would generate $1.59 billion in revenue in that year, or $13 billion over ten years.

For percentage depletion — an accounting method that works like value depreciation — the joint committee said ending relief for coal, oil and natural gas would generate $12.9 billion over ten years.

In a 2019 report, the Washington DC-based Environmental and Energy Study Institute (EEIS) calculated that the benefits of indirect subsidies, including Last In-First Out accounting, foreign tax credit, and domestic manufacturing deduction, run to hundreds of billions of dollars.

The Biden plan would also change the tax code to close loopholes that allow companies to move profits overseas, according to a briefing paper released by the White House.

Biden’s plan would also set a “clean energy standard” mandating utilities to produce power that is carbon-free by 2035.

Oil industry wary

Frank Macchiarola, senior vice president of policy, economic and regulatory affairs for the American Petroleum Institute, said the industry lobby group supported the administration's goal of modernising infrastructure and addressing the risks of climate change, but warned against increasing the tax burden.

"This proposal misses an opportunity to take an across-the-board approach to addressing all our infrastructure needs — including on modern pipelines.

"Targeting specific industries with new taxes would only undermine the nation’s economic recovery and jeopardise good-paying jobs, including union jobs," he said in a statement.

Macchiarola insisted that the oil industry "receives no special tax treatment."

He added: "We will continue to advocate for a tax code that supports a level playing field for all economic sectors along with policies that sustain and grow the billions of dollars in government revenue that we help generate."

Many observers are predicting a rough ride for the bill in a Congress where the Democrats have the slimmest of majorities and are facing an almost certain filibuster strategy by the Republicans.

Perhaps anticipating these difficulties, Biden was willing to risk upsetting those on the left of his own party by scaling down some funding promises for federal research and procurement linked to clean-energy innovation.

The bill promised more than had been expected for worker retraining and broadband infrastructure, while leaving spending on the more “social” categories of infrastructure for a second package, promised this month.