A New Biological Opinion and Tax Reconciliation Bill Impacting Offshore Energy Operations

A new biological opinion for the Gulf of America, formerly the U.S. Gulf of Mexico, has forestalled the risk of ending new and existing oil and natural gas operations, staving off the danger to American energy security, based on the industry’s reaction. This came shortly before President Donald J. Trump’s new tax reconciliation bill inched closer to the finish line with its passage in the House of Representatives.

The National Marine Fisheries Service (NMFS), part of NOAA and known as NOAA Fisheries, was given more time last year to undertake an environmental review of the effects of oil and gas drilling in the Gulf of America, thanks to a revised court decision, which came after the U.S. District Court for the District of Maryland vacated the NMFS 2020 Biological Opinion for Gulf of Mexico Oil and Gas activities (BiOp).

The lawsuit to address the risks oil and gas operations present for endangered species, such as Rice’s whale, was filed by the Sierra Club, Earthjustice, and other climate organizations and activists. The court’s previous decision, made by District Judge Deborah Boardman, was perceived to come with the potential to bring all oil and natural gas activities in the region to a halt while also carrying unintended consequences for the offshore wind program.

Given the outcry that arose, the continuation of the BiOp court case battle, ongoing since 2020, saw Judge Boardman grant a five-month extension, giving the National Marine Fisheries Service until May 21, 2025, to come up with a new biological opinion on the potential impact of oil and gas exploration and production in the U.S. Gulf of America on endangered species.

To comply with the order, NMFS disclosed a new biological opinion for the Gulf of America ahead of the court-ordered deadline. This biological and conference opinion on the oil and gas program in the Gulf of America, which supersedes and replaces all other prior biological opinions on that action, is interpreted to avoid significant and immediate consequences for American energy security.

Erik Milito, President of the National Ocean Industries Association (NOIA), commented: “We appreciate the Trump administration’s timely efforts to improve a Biological Opinion that was originally developed through a flawed, opaque process. Their willingness to revisit and revise the document reflects a strong commitment to restoring scientific rigor and regulatory balance. As we continue reviewing the new opinion, we are concerned by the inclusion of a jeopardy finding for the Rice’s whale.

“That determination appears inconsistent with the best available science and triggers unnecessary regulatory uncertainty. The Gulf of America stands as one of the world’s most environmentally responsible and economically critical offshore energy hubs. It supports hundreds of thousands of American jobs, generates billions in vital revenue that funds conservation and coastal restoration efforts, and produces some of the lowest-carbon intensity oil globally.

“Far from being in conflict, environmental stewardship and energy production are deeply interconnected—and the Gulf demonstrates this every single day. An effective Biological Opinion must serve as a foundation to build upon—not an endpoint—as we pursue policies that reflect the reality on the water each and every day.”

According to the American Petroleum Institute (API), the biological opinion provides a necessary foundation for oil and natural gas operations in the Gulf of America; thus, a gap between opinions would significantly slow down or halt all permits for routine, daily operations. Aside from generating 14% of U.S. crude oil production, the Gulf Coast is seen as the heart of America’s vast network of energy infrastructure that connects its economy.

Holly Hopkins, API’s VP of Upstream Policy, highlighted: “With a new biological opinion in place, the administration has helped ensure that the Gulf of America will remain the backbone of our nation’s energy supply. While we appreciate the administration’s prompt action, they inherited flawed analysis under a short timeline. We welcome the opportunity to work with the Departments of Commerce and Interior to improve the biological opinion and ensure it reflects the best available science and data.”

‘One Big, Beautiful Bill’ knocks on Senate’s doors

The White House has described President Trump’s ‘One Big Beautiful Bill Act,’ which is the House of Representatives’ version of the reconciliation package that contains aspects deemed to be critical offshore energy provisions, as “a once-in-a-generation opportunity to cement an America First agenda of prosperity, opportunity, and security into law.”

Milito emphasized: “House passage of this legislation is a significant milestone in advancing American energy dominance. Many of the included provisions are vital to preserving the Gulf of America’s role as a strategic energy hub and reinforcing U.S. leadership in offshore energy.”

NOIA’s President urged lawmakers to deliver “a final, balanced reconciliation package that maintains essential offshore oil and gas measures while ensuring current offshore energy tax credits are protected from premature repeal or phase-out.”

According to Milito, undermining such credits could disrupt critical investments in American manufacturing, infrastructure, ports, shipbuilding, and offshore energy projects nationwide. Therefore, he sees the reconciliation process as “a historic opportunity to advance U.S. energy production, environmental stewardship, and economic resilience.”

Mike Sommers, API’s President, underscored: “By preserving competitive tax policies, beginning to reverse the ‘methane fee,’ opening lease sales and advancing important progress on permitting, this historic legislation is a win for our nation’s energy future. We look forward to working with the Senate to strengthen pro-investment provisions and keep America at the forefront of energy innovation.”

The Independent Petroleum Association of America (IPAA), which wants this legislation to be promptly approved by the Senate and sent to President Trump for signature, sees the passage of the budget reconciliation bill in the U.S. House of Representatives in a similar fashion to the American Petroleum Institute.

Jeff Eshelman, IPAA’s President & CEO, stated: “President Trump’s ‘One Big, Beautiful Bill’ is a win for American energy. Multiple House committees included language in the bill passed today that improves the ability of independent oil and natural gas producers to supply reliable, affordable energy to the American people. IPAA is pleased that the legislation reinstates oil and natural gas lease sales for onshore and offshore federal lands and makes common sense reforms to the permitting and leasing process on federal lands.

“IPAA members, the small businesses of the oil patch, are grateful that industry tax treatments including intangible drilling costs and percentage depletion were protected, along with carried interest deductions being preserved. We are disappointed that the legislation does not include a full repeal of the Methane Emissions Reduction Program (MERP) including the methane tax. Included within the bill is a 10-year delay of the MERP, but IPAA has consistently urged, and will continue to argue, for a full repeal of the statute.”

Expected to unlock trillions worth of deficit over the next decade, the bill, passed with a vote of 215 votes to 214, will not only enlarge the 2017 Trump tax cuts but also curb $1.5 trillion in federal spending, which is anticipated to be accomplished by repealing the Inflation Reduction Act (IRA) tax credits. This legislation is expected to face hurdles in the Senate, where some changes are forecast to be woven into it.

‘Climate-killing bill’ scraps clean energy tax credits

Climate activists believe this tax bill will enable the Trump administration to gut clean energy tax credits for individuals and businesses. Samantha Harrington, Director of Audience Experience for Yale Climate Connections, has described the legislation as “one big, beautiful, climate-killing bill,” which puts in jeopardy incentives for businesses that invest in clean energy practices or industries if the Senate green-lights the bill without major changes.

Ari Matusiak, CEO of Rewiring America, stated: “This policy about-face couldn’t come at a worse time: Energy prices have surged 30% since 2020. Maintaining these tax credits gives American households an opportunity to offset these price hikes.”