President Donald Trump’s latest legislative push, known as the “One Big Beautiful Bill,” marks a dramatic shift in U.S. energy policy. The bill rolls back major provisions of the Inflation Reduction Act and revives a full-throttle approach to oil and gas production by unlocking new drilling leases, expanding tax breaks, and reshaping carbon capture incentives.
At its core, the bill reestablishes quarterly onshore lease sales under the Mineral Leasing Act, forcing the Department of the Interior to hold at least four sales per year across nine states, including major producing regions like Texas, New Mexico, Wyoming, and Oklahoma. In a sharp departure from prior limitations, any land not explicitly banned by law is now considered eligible for leasing. The Bureau of Land Management is required to process lease requests within 18 months, and agencies are barred from tacking on new environmental conditions beyond what is already outlined in existing land use plans.
Offshore drilling may also see a massive boost. The bill mandates 30 new lease sales in the Gulf of Mexico between 2026 and 2039, averaging two per year, plus six more in Alaska’s Cook Inlet. Each Gulf sale must offer at least 80 million acres, or the entirety of unleased and available acreage if less remains. It is one of the most aggressive offshore drilling expansions seen in decades.
Tax Windfalls and Carbon Capture Shakeup
The legislation delivers major financial wins for producers. It cuts the federal royalty rate for oil and gas extracted on public lands and waters from 16.67 percent to 12.5 percent. Several fees imposed by the previous administration are eliminated altogether, including those targeting methane emissions and environmental reviews. These changes are designed to speed up production and lower operational costs.
The bill also revises how oil and gas companies handle intangible drilling costs, allowing them to deduct the full amount in the year incurred rather than spreading it out over the life of a well. This upfront deduction significantly reduces taxable income and delivers a cash flow advantage for active drillers.
Perhaps the most controversial piece involves the overhaul of the federal 45Q tax credit program for carbon capture and sequestration. Previously, companies permanently storing carbon underground received a higher credit than those using carbon for enhanced oil recovery, or EOR. That distinction is now gone. Both uses qualify for the same $85 per metric ton credit. Direct air capture projects used for EOR will now receive $180 per ton, matching the rate for permanent storage.
Supporters of the new structure argue that it levels the playing field and encourages broader adoption of carbon management technologies. Critics claim it dilutes the incentive to permanently store carbon dioxide and instead rewards more fossil fuel production under the guise of carbon recycling.
The bill’s impact could be far-reaching. By making oil and gas development more profitable and easier to pursue, it is expected to drive up domestic drilling activity and emissions. At the same time, it reorients federal support away from long-term climate goals and back toward traditional energy dominance. Whether this is a reset or a rollback will depend on who you ask, but one thing is certain—the oil patch is about to get busier.
