State energy office outlines how federal 'HR 1' will reshape Utah oil, gas, coal and clean-energy outlook

Jake Garfield, deputy director of the Utah Office of Energy Development, told the Energy and Technology Interim Committee on an HR 1 summary that the recently enacted federal package contains changes that could increase fossil fuel leasing activity while narrowing or ending some federal incentives for wind and solar. "There are some really, really great changes," Garfield said, adding the bill also creates opportunities for critical-minerals projects and grid reliability work.

Garfield said the law requires the Bureau of Land Management to hold quarterly oil and gas lease sales and to put at least half of eligible acreage into each sale, and reduces royalty rates for oil and gas from 16.7% to 12.5% and for coal from 12.5% to 7%. "Royalty rates for oil and gas leasing were also reduced from 16.7% down to 12.5%," he said. He told lawmakers a coal lease permit application process is now required to be completed within 90 days, including public comment and fair market valuation.

The deputy director said federal funding was shifted: the Strategic Petroleum Reserve receives new facility and petroleum-product funding; the Department of Energy will receive $1 billion in loans refocused toward traditional energy and critical-minerals projects; and tax-credit parity was expanded for some carbon-sequestration activities. "There will be additional investments in this into the strategic petroleum reserve," Garfield said.

At the same time, Garfield told the committee the bill will phase down key investment and production tax credits for wind and solar. Projects need to either start construction by June 30 of the current year and complete within four years, or be placed in service by the end of 2027 to qualify. "We are anticipating a real rush for projects that are currently under construction to make sure that they're finished," he said. He added investment and production credits for energy storage, geothermal and certain nuclear facilities remain in place.

Garfield described new limits on the share of materials from ‘‘foreign entities of concern’’ (China, Russia, Iran, North Korea) used in energy projects, saying the restriction is not an outright ban but sets a declining allowance over time and will likely affect solar manufacturing and battery projects that currently use significant China-made components. He said detailed rules must be issued by year-end next year. "We anticipate this having really tremendous impacts on the solar industry," Garfield said.

Garfield also told the committee the bill eliminated several programs that supported clean-energy deployment previously funded through the Inflation Reduction Act and related initiatives, including the Greenhouse Gas Reduction Fund that funded the EPA's Solar for All program (which Utah had been preparing to implement). He said electric-vehicle and several clean-energy loan and grant programs were canceled, which will affect entities that were relying on those sources.

When Representative Shelly asked about a federal bonding rule requiring a $500,000 bond for wells, Garfield said he did not have that information on hand and offered to follow up. When Senator Milner asked whether the revived DOE loan program would be available to states or private developers, Garfield said the bill language suggests states and private sector applicants could be eligible and OED would engage the DOE to clarify application timing and eligibility.

Garfield urged lawmakers to consult the Office of Energy Development for detailed, bill-specific analysis and to identify opportunities for Utah projects to access new interagency loans, tax parity for carbon sequestration, and the retooled Strategic Petroleum Reserve and DOE loan funds. "We have very capable staff at our office that would be happy to dig into the details of this bill," Garfield said.

Ending: Garfield closed by stressing both opportunities and challenges from the federal changes and offering OED technical support to the legislature as Utah evaluates how the law will affect state projects and investments.