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US details plan to draw clean energy into oil, coal communities

Published 04/04/2023, 06:12 AM
Updated 04/04/2023, 11:43 AM
© Reuters. FILE PHOTO: A pile of coal in an active coal mine located next to a new solar power plant development site in Hurley, western Virginia, U.S., May 11, 2021. Picture taken May 11, 2021. REUTERS/Dane Rhys
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By Jarrett Renshaw

(Reuters) - The Biden administration on Tuesday released final guidance on how clean energy companies can secure additional tax credits when investing in U.S. communities economically tied to fossil fuels like oil and coal.

The Inflation Reduction Act (IRA) passed last year by Democrats extended a 30% tax credit for wind, solar and other green energy projects, but also provided an extra 10% boost to those investing in so-called "energy communities."

The boosted tax credit is central to the administration’s goal of ensuring areas long dependent on fossil fuels benefit from clean energy. It also helped secure West Virginia Democrat Joe Manchin's essential support for the bill.

The extra credit will likely cover projects in places like coal-heavy Appalachia decimated by mine and plant closures.

"Communities like coal communities have the knowledge, infrastructure, resources and know-how to play a leading role in the move to a clean energy economy," U.S. Deputy Treasury Secretary Wally Adeyemo said.

The bonus credit also is available to other "energy communities" - areas that have significant employment or local tax revenues from fossil fuels and higher than average unemployment.

To qualify for the bonus, a metropolitan statistical area or non-metropolitan statistical area must have or have recently had at least 0.17% direct employment, or at least 25% local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas, the Treasury Department said.

The community must also have an unemployment rate at or above the national average unemployment rate for the previous year.

The text of the IRA specifies that "brownfield" properties contaminated by hazardous materials or other pollutants, also qualify as energy communities and Treasury is partnering with an interagency group to help identify areas that may be eligible for the bonus tax credit.

The Treasury said it will open project applications for the first round of coal and energy communities tax credits on May 31.

© Reuters. FILE PHOTO: A pile of coal in an active coal mine located next to a new solar power plant development site in Hurley, western Virginia, U.S., May 11, 2021. Picture taken May 11, 2021. REUTERS/Dane Rhys

The Treasury will also release a searchable mapping tool that helps identify areas that may be eligible for the energy community bonus based on the fresh guidance. The bipartisan infrastructure bill and IRA tend to favor red states, including those that have been heavy coal producers.

The Department of Energy is also announcing that it is making $16 million available through the IRA to the University of North Dakota and West Virginia University to complete design studies on refineries that will extract and separate rare earth elements and other critical minerals from coal ash, acid mine drainage, and other mine waste. Those minerals are crucial to producing clean energy technologies like batteries and solar panels.

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