End Polluter Welfare Act of 2025
- Sponsor
- Rep. Omar, Ilhan [D-MN-5]
- Committees
- Foreign Affairs Committee (primary)
- Last action
- Jul 23, 2025
Bottom line
The bill comprehensively targets federal financial and regulatory support for the fossil fuel industry through direct subsidy elimination, tax code changes, and legislative repeals, aiming to shift economic incentives away from carbon-intensive energy sources.
What it actually does
This bill, titled the "End Polluter Welfare Act of 2025," seeks to eliminate a wide range of federal subsidies and tax expenditures benefiting fossil fuel production and use. It achieves this by repealing specific provisions in existing laws, amending the Internal Revenue Code to terminate various tax credits and deductions, increasing royalty rates and liability limits, and prohibiting federal agencies and international financial institutions from supporting fossil fuel projects. Additionally, it repeals several recent legislative acts that provided support or regulatory relief to the fossil fuel industry, including portions of the BUILDER Act, Inflation Reduction Act, and One Big Beautiful Bill Act.
Proponents argue
Proponents argue that the bill is a critical step towards addressing climate change by ending government support for industries that contribute to greenhouse gas emissions. They contend that fossil fuel companies are mature industries that no longer require taxpayer subsidies and that these funds could be better allocated to renewable energy development or other public priorities. Eliminating these subsidies would level the playing field for clean energy technologies and ensure that polluters bear the full cost of their operations, including environmental damage.
Opponents contend
Opponents would likely argue that eliminating these subsidies would significantly increase energy costs for consumers and businesses, jeopardize energy security by reducing domestic fossil fuel production, and lead to job losses in the oil, gas, and coal sectors. They might contend that some provisions, such as royalty relief or tax deductions for exploration, are necessary to incentivize investment in energy production and maintain a stable energy supply, especially during periods of high demand or geopolitical instability. Furthermore, they may argue that certain tax provisions are standard business deductions, not unique subsidies.
The bill is extensive and highly technical, covering multiple areas of federal law. A thorough understanding requires significant time, far exceeding what is typically available for public review during rapid legislative processes.
Sec. 102, Title I
Elimination of Royalty Relief for Offshore Oil and Gas
This section repeals existing provisions that allow for royalty relief under the Outer Continental Shelf Lands Act and the Energy Policy Act of 2005 for offshore oil and gas production. It specifically targets incentives for natural gas production from deep wells in the shallow waters of the Gulf of Mexico and other deepwater production. Moving forward, no royalty relief will be permitted under new leases.
Supporters argue
Proponents argue that royalty relief constitutes an unnecessary subsidy for profitable fossil fuel companies, allowing them to extract public resources without paying fair market value. Eliminating it ensures taxpayers receive a proper return on public resources and encourages more efficient resource allocation.
Critics contend
Opponents would contend that royalty relief is crucial for incentivizing investment in high-cost, high-risk offshore drilling, particularly for deepwater projects. Without it, some projects may become uneconomical, leading to reduced domestic production, job losses, and increased reliance on foreign energy sources.
Tradeoffs
This provision balances the goal of maximizing federal revenue from public resources and reducing fossil fuel subsidies against the potential for reduced domestic energy production and investment in challenging offshore environments.
Sec. 103, Title I
Increase in Onshore Mineral Leasing Act Royalties
This section amends the Mineral Leasing Act to increase royalty rates for coal, oil, and natural gas leases on federal lands. Specifically, it raises the minimum royalty rate from 12.5% to 18.75% for coal leases and for oil and natural gas leases on land where these resources are discovered or believed to exist.
Sec. 106, Title I
Removal of Liability Limits for Offshore Facilities and Pipeline Operators
This section amends the Oil Pollution Act of 1990 to eliminate the caps on liability for responsible parties in oil spills from offshore facilities and certain pipeline operators. Specifically, it removes the $75,000,000 limit for offshore facilities and extends unlimited liability to onshore facilities transporting diluted bitumen, bituminous mixtures, or oil manufactured from bitumen.
Sec. 108, Title I
Termination of the Office of Fossil Energy and Carbon Management
This section terminates the authority of the Secretary of Energy to carry out the Office of Fossil Energy and Carbon Management (FECM) within the Department of Energy. All unobligated funds for FECM are rescinded, and no future funds may be expended, except for costs associated with terminating ongoing research.
Sec. 114, Title I
Prohibition on International Financial Support for Fossil Fuel Projects
This section prohibits the United States International Development Finance Corporation (DFC), Export-Import Bank (EXIM), U.S. Trade and Development Agency (USTDA), U.S. Agency for International Development (USAID), and Millennium Challenge Corporation (MCC) from obligating or expending funds to support any project, transaction, or activity that supports the production or use of fossil fuels.
Sec. 201, Title II
Termination of Various Tax Expenditures for Fossil Fuels
This section creates a new Internal Revenue Code section (7875) to terminate several tax provisions related to fossil fuels for taxable years beginning after the date of enactment. These include the enhanced oil recovery credit (Section 43), the credit for producing oil and natural gas from marginal wells (Section 45I), special rules for spudding oil/gas wells, working interests in oil/gas property, and limitations on percentage depletion for oil/gas wells (Section 613A). It also ends amortization for atmospheric pollution control facilities and deductions for capital costs in complying with EPA sulfur regulations.
Sec. 202, Title II
Termination of Certain Deductions and Credits Related to Fossil Fuels
This section further amends the Internal Revenue Code to terminate additional tax benefits for fossil fuel activities. It disallows the special allowance for certain property (bonus depreciation) for property primarily used for fossil fuel activities placed in service after enactment. It also excludes income from fossil fuel activities from qualified business income (Section 199A) and foreign-derived intangible income (Section 250), denies the credit for increasing research activities (Section 41) for fossil fuel-related research, and eliminates like-kind exchange treatment (Section 1031) for real property used for fossil fuel activities.
Sec. 209, Title II
Increase in Oil Spill Liability Trust Fund Financing Rate
This section increases the excise tax rate on crude oil received and petroleum products entered into the U.S. for the Oil Spill Liability Trust Fund. The rate, which was 8 cents a barrel, is increased to 10 cents a barrel after December 31, 2025. It also modifies the application of the rate, ensuring it applies if the unobligated balance in the Trust Fund is less than $2,000,000,000.
Sec. 212, Title II
New Tax on Crude Oil and Natural Gas from Gulf of Mexico OCS
This section imposes a new tax equal to 13 percent of the removal price of crude oil or natural gas produced from federal submerged lands on the Outer Continental Shelf (OCS) in the Gulf of Mexico. A credit is allowed against this tax for federal royalties paid, up to the amount of the tax. The tax is paid by the producer and is deductible for income tax purposes.
Sec. 222, Title II
Termination of Credit for Carbon Oxide Sequestration (45Q)
This section terminates the Section 45Q tax credit for carbon oxide sequestration for any qualified carbon oxide captured after the date of enactment. It also mandates a report from the Secretary of the Treasury detailing taxpayer identity, total credit amounts, and how the credit was used (e.g., secure geological storage, enhanced oil recovery, or other utilization), with an exception from confidentiality rules for this report.
Sec. 224, Title II
Modifying Clean Hydrogen Production Credit
This section significantly modifies the Section 45V clean hydrogen production tax credit. It fixes the credit amount at $0.60 (inflation-adjusted) and narrows the definition of 'qualified clean hydrogen.' Under the new definition, hydrogen must be produced using an electrolyzer powered by electricity from new (placed in service not more than 36 months prior) qualified renewable energy resources (wind, solar, geothermal, marine/hydrokinetic, hydropower) located in the same grid region, and the electricity must be produced not less than 1 hour prior to use by the electrolyzer. It also removes regulatory authority for determining lifecycle greenhouse gas emissions.
Sec. 301, Title III
Repeal of the BUILDER Act (NEPA Modifications)
This section repeals Sections 106 through 111 of the National Environmental Policy Act of 1969 (NEPA), which were added by the BUILDER Act. These repealed sections introduced significant modifications to NEPA, including provisions related to lead agencies, categorical exclusions, environmental assessments, and environmental impact statements. The bill also restores the original language of Section 102(2) of NEPA, removing the BUILDER Act's changes to environmental review requirements.
Sec. 302, Title III
Repeal of Inflation Reduction Act Fossil Fuel Lease Sales and Energy Security Provisions
This section repeals Sections 50264 and 50265 of the Inflation Reduction Act of 2022. Section 50264 mandated certain oil and gas lease sales in the Gulf of Mexico and Alaska. Section 50265 linked renewable energy leasing to fossil fuel leasing, requiring that no renewable energy lease could be issued unless an oil and gas lease sale had been held in the prior year. The repeal eliminates these mandates and linkages.
Sec. 303, Title III
Repeal of One Big Beautiful Bill Act Fossil Fuel Subsidies and Provisions
This section repeals numerous provisions from the 'One Big Beautiful Bill Act' (Public Law 119-21) that provided tax benefits or regulatory relief to the fossil fuel industry. This includes the exclusion of metallurgical coal from the advanced manufacturing production credit, specific amendments related to intangible drilling and development costs, and certain income from carbon capture and hydrogen activities. It also repeals sections related to oil and gas, mining, and energy, and amends the Clean Air Act's methane emissions charge to revert its applicability to calendar year 2024, effectively removing a later sunset. Additionally, it repeals the NEPA project sponsor opt-in fees for environmental reviews.
Sec. 401, Title IV
Study and Elimination of Additional Fossil Fuel Subsidies
This section mandates the Secretary of the Treasury, in coordination with the Secretary of Energy, to submit a report to Congress within one year. The report must detail all federal laws (including regulations) that include a 'subsidy for fossil-fuel production,' defined broadly to include direct funding, tax incentives, risk-reduction benefits, financing assistance, royalty relief, or other financial benefits. Following this, for any property type identified as receiving a subsidy under Section 168 of the Internal Revenue Code (accelerated cost recovery), that section will no longer apply for property placed in service in taxable years beginning after such determination, provided the determination is published before the taxable year.
Eliminates the exclusion of certain large lenders from being considered 'owners or operators' under CERCLA (Superfund liability). Specifically, investment companies, investment advisers, brokers/dealers with $250 billion or more in assets under management, and bank holding companies with $10 billion or more in total consolidated assets would no longer be exempt from liability if they hold security interests in facilities that release hazardous substances.
Sec. 116, Title I
Why it matters:This is a highly technical amendment to a complex environmental liability statute, making it easy for a casual reader to overlook. Its placement within a bill focused on fossil fuel subsidies might also obscure its broader implications for financial institutions involved in any industry with potential environmental liabilities.
Case for: Proponents argue that large financial institutions should not be shielded from liability for environmental contamination at facilities they finance or control, especially when their scale of assets allows them to absorb such risks. This promotes responsible lending practices and ensures that cleanup costs are borne by those with financial ties to the pollution.
Case against: Opponents would contend that this provision could significantly increase the financial risk for large lenders, potentially making them hesitant to provide financing to a wide range of industries that might have environmental liabilities, not just fossil fuel companies. This could restrict access to capital for many businesses and lead to economic disruption.
Estimated impact: Potentially significant increase in environmental liability exposure for major financial institutions, leading to altered lending practices and increased due diligence costs across various sectors.
Amends Section 1031(a)(2) of the Internal Revenue Code to explicitly exclude any exchange of real property used for fossil fuel activities from like-kind exchange treatment if the exchange occurs after the date of enactment. This means that gains from such exchanges can no longer be deferred for tax purposes.
Sec. 202(e), Title II
Why it matters:The provision is technically phrased and targets a specific tax deferral mechanism. While impactful for the affected industry, it's not a headline-grabbing change, making it easy to miss amidst broader subsidy eliminations.
Case for: Proponents argue that like-kind exchanges for fossil fuel property act as a subsidy, allowing companies to defer taxes on asset sales and reinvest in further fossil fuel development. Eliminating this deferral ensures a fairer tax burden and disincentivizes continued investment in fossil fuels.
Case against: Opponents would contend that like-kind exchanges are a common tool for capital-intensive industries to manage assets and reinvest efficiently. Removing this option for fossil fuel property would increase the cost of capital, hinder asset modernization, and reduce liquidity in the market for such properties, potentially leading to higher energy costs.
Estimated impact: Increased tax revenue for the federal government and higher transaction costs for fossil fuel companies seeking to exchange real property, potentially impacting investment and asset management strategies.