US Senate clears budget bill, paving way to resume coal leases on federal lands

The US Senate passed its version of a massive $3.3 trillion tax-cut bill July 1 that expands domestic mining activities, provides production credits for metallurgical coal producers and resumes coal leases on federal lands.

The bill, which passed by 51-50 with Vice President JD Vance casting the tiebreaking vote, has been a top priority for President Donald Trump and congressional leadership, who see it as a presidency-defining package.

The final Senate bill includes the phaseout of advanced manufacturing credits, referred to as 45X credits for the section of the IRA where they are described, for critical minerals production as part of the rollbacks. It also drops a $7,500 electric vehicle tax credit and guts clean energy tax credits included in the Inflation Reduction Act.

The contentious bill must still be reconciled with a House version, but for mining, the language in both bills is similar, supporting the Trump administration's efforts to expand coal usage and increase domestic energy production.

It now heads back to the House, where the new version must pass before reaching Trump's desk. Congressional leaders set a July 4 deadline to send the bill to the president.

Expanding mining

The Senate bill supported the House-passed budget by expanding domestic mining and resuming coal leases on federal lands.

The Department of Interior placed a moratorium on most federal coal leases under former President Joe Biden in 2016 to conduct a review of the leasing program.

The Senate version of the budget, like the House bill, also reduces the royalty rate for coal mined on federal land from 12.5% to 7%.

The Senate bill added a leasing-related provision not included in the House bill that would make 4 million acres of "known recoverable coal reserves" on federal land available for lease within 90 days of the bill's enactment. The provision excludes coal reserves on protected federal lands.

US coal production has been falling for decades. Coal producers have not until recently sought to open new mines, but rising power demand from data centers may change that calculus.

The Senate bill also added a provision that requires the Bureau of Land Management, which is responsible for most federal coal leasing, to expedite the issuance of coal leases to qualified applicants.

The bill requires the Interior Secretary to approve new coal lease applications within 90 days of receipt.

Tax credits for critical minerals and EVs phaseout

Both the Senate and House eliminated a $7,500 tax credit for buyers of electric vehicles. In order to give car buyers access to the credit, US car companies had to buy metals from US or allied suppliers, and they could not purchase from companies owned or partially controlled by "Foreign Entities of Concern," defined as China, Russia, North Korea and Iran. The provision was seen as a lynchpin for the IRA's efforts to promote US industrial production of battery metals and EVs. The Senate version terminates the credit for vehicles acquired more than 180 days after the bill's enactment.

Both versions of the bill create a sunset for critical mineral tax incentives, which had previously been allowed to run indefinitely.

The Senate version eliminates the 45X advanced manufacturing credit for critical minerals in 2034, compared with the House version, which proposed ending credits in 2032.

The 45X provision in the IRA, Biden's signature climate law, created eligible tax credits equal to 10% of the production costs of US critical mineral production, including lithium production and aluminum smelting.

Under 45X, critical minerals production received tax credits indefinitely, while credits for the manufacturing of clean energy components were set to expire for most products in 2033.

The Senate proposal supports the House budget bill by adding critical minerals to the clean energy components step-down schedule. It includes 25 percentage point reductions each year starting in 2031 before eliminating the credit in 2034 -- two years later than the House proposed.

The provision includes similar language to the House bill that excludes the use of any eligible components produced or processed by prohibited foreign entities.

Tax credits for metallurgical coal

The Senate bill adds a provision that makes metallurgical coal, used to produce steel, eligible for the 45X manufacturing production credit.

It excludes metallurgical coal from the critical minerals phaseout schedule. The DOE designated met coal as a critical material on May 23.

Met coal is eligible for credits in an amount equal to 2.5% of production costs.

Trump has targeted coal as a solution to expanding domestic energy production, issuing an executive order in April for agencies to identify coal resources and prioritize coal leases.

Senate scraps access road to Alaskan mining district

The Senate bill scrapped one provision that would establish surface transportation to an Alaskan mining district after the Senate parliamentarian ruled it violated a procedural rule for being extraneous to the budget.

The road would have provided access from the Ambler Mining District to the Dalton Highway.

The provision was also struck from the final House-passed budget bill.

The final Senate bill omitted several other items from the House-passed budget, including a federal coal lease at the Bull Mountains Mine in Montana. It also did not include a provision that reinstated certain 20-year hard rock mineral leases in the 3 million acre Super National Forest in Minnesota.