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What the Inflation Reduction Act means for Montana energy, agriculture, and health care

The Inflation Reduction Act offers incentives for home electrification, like adding solar panels
Bill Mead
The Inflation Reduction Act offers incentives for home electrification, like adding solar panels

The massive Inflation Reduction Act signed into law last month includes investments in and changes to renewable energy oil and gas lease programs, health care and more. Here’s a breakdown of some key elements of the bill and how it could affect Montana.

Renewable energy

The Inflation Reduction Act provides rebates and tax credits to make homes more energy efficient, and could bring job opportunities to Montana as well.

The bill includes $9 billion across two rebate programs for people to retrofit their homes. That can look like adding insulation, changing out windows, replacing a furnace and AC system with a heat pump, or upgrading electrical panels. One program, available only for low- and moderate-income households, provides up to $16,000 for converting to electrical appliances.

The other rebate program offers funding for a variety of retrofitting projects. Funding is provided on a sliding scale based on how much more efficient a project is. For example, if someone improves their home’s energy efficiency by 30%, they can get $1,000 toward the cost of that work.

“Those rebates will cover 50 to 100 percent of the cost for new electrical appliances,” said Whitney Tawney, executive director of Montana Conservation Voters. “And hundreds of thousands of Montanans in low- and moderate-income households are eligible for these rebates.”

The U.S. Department of Energy will distribute funds to state energy offices, so it could take up to 18 months for rebates to be available.

And starting next July, there will be tax credits of up to $1,200 a year for home upgrades such as solar panels, or heat pumps, to replace furnaces and AC systems. There is an additional $2,000 per year tax credit for installing a heat pump for heating/cooling a home or for the water heater. The rebates and credits can also be used by renters for portable heat pump options like window-units.

Tawney says the act’s $7 billion dollar investment in renewable energy development means new job opportunities as well. Currently, nearly 10,000 Montanans are employed in clean energy jobs, according to the Clean Jobs America 2021 report.

Although the Inflation Reduction Act has been criticized for continuing environmentally harmful practices like oil and gas drilling, Tawney says the legislation makes important strides in addressing carbon emissions.

“I know people that worked on climate legislation their entire lives, right. And they never saw anything, to the extent and so it is definitely worth celebrating,” she said. “Is it perfect? Absolutely not.

“But at the same time, I just think that that's where I keep thinking about what it is going to do for Montanans in our everyday lives, and also make change for the long haul.”

The Inflation Reduction Act brings sweeping reforms to the federal oil and gas leasing process
Zbynek Burival
The Inflation Reduction Act brings sweeping reforms to the federal oil and gas leasing process

Oil and gas

The IRA brings extensive reforms to the federal oil and gas leasing program that aim to make public land leases reflect market values, says Aubrey Bertram, an attorney with the public lands advocacy group Wild Montana.

“These numbers, previously, were set in the 1980s. And it's never been updated, not even for inflation,” Bertram said. “So it's only fair that private companies have to pay more for the use of our public resources”

Among other changes, the act increases royalty rates, which could mean more revenue for counties in central and eastern Montana where oil and gas production is high. According to the federal Bureau of Land Management, as of 2020, Montana had the sixth most oil and gas leases in the country.

The federal royalty rate will go from 12.5%, which it has been since the 1920s, to 16.67%. Bertram says the old rate failed to account for inflation or was much lower than state and private royalty rates. Calculations done by the Government Accountability Office show that if the federal royalty rate had been the same as the state royalty rate, Montana would have received an additional $12 million per year from oil and gas lease sales.

The act also changes rent rates from $1.50 per acre to $3 per acre for the first two years of a lease, with higher rates for longer term leases on a tiered structure. It also increases the minimum bid for competitive lease sales from $2 to $10 per acre, and creates a $5 per acre “expression of interest fee” companies have to pay to nominate land for a lease sale.

Critics of the bill say it fails to hold up the Biden administration’s promises to end fossil fuel development on public lands. The act does promote development of renewable energy but requires that the Secretary of the Interior hold an onshore oil and gas lease sale every quarter in order to issue right away permits for wind or solar development.

Bertram says she understands the frustration, but thinks the changes are a step in the right direction.

“Frankly, it was between either this bill or nothing,” she said.

The Inflation Reduction Act puts a cap on out of pocket prescription costs
Alexander Grey
The Inflation Reduction Act puts a cap on out of pocket prescription costs

Health care

The Inflation Reduction Act also brings some big changes to prescription medications for Medicare recipients.

The act allocates funding to expand Affordable Care Act subsidies over the next three years and includes several prescription drug reforms, which aim to reduce the cost of prescriptions and increase Medicare’s ability to negotiate for affordable options.

“We're finally going to be in a position to allow Medicare to negotiate the price of prescription drugs,” said Mike Batista with the American Association of Retired Person’s Montana State Office. “Just like Costco or Sam's Club, Medicare will use its buying power to be able to reduce prescription drug costs.”

The reforms also include capping the monthly price of insulin for Medicare recipients at $35, and putting a cap on out-of-pocket costs for medications.

But the reforms don’t just benefit Medicare recipients. Americans spend twice as much on prescriptions as people from comparable countries. The act also allows for the federal government to penalize drug companies if they raise prices higher than the rate of inflation.

All of these changes are especially important for states like Montana, which has a rapidly growing older population. The U.S. Census Bureau reports that by 2030 more than 30% of Montana’s population will be over 60 years old.