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- 💰💾 We take a closer look at a proposal from Sen. Ron Wyden of Oregon to impose a tax on data centers.
- 🛢️🚢 We also dive into how much oil is moving through the Strait of Hormuz.
Welcome to Daily on Energy, written by Washington Examiner energy and environment writers Callie Patteson (@CalliePatteson) and Maydeen Merino (@MaydeenMerino). Email cpatteson@washingtonexaminer dot com or mmerino@washingtonexaminer dot com for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
DATA CENTERS WOULD PAY UP UNDER WYDEN PLAN:
Data centers would face a very different tax landscape under a new proposal from Sen. Ron Wyden of Oregon.
Wyden, the top Democrat on the Finance Committee, last week released a white paper proposal to change the taxation of data centers. The plan would limit data centers’ ability to claim certain deductions available under existing law, such as the immediate write-off for investments under the One Big Beautiful Bill Act.
Wyden would go further, though, by applying a new excise tax on the facilities. Specifically, it would be a gross receipts tax with a rate in the low single digits. (Of note: The tax would apply to any data centers located in space, as envisioned by Elon Musk and Jeff Bezos.)
The tax proposal includes exemptions, including for internet infrastructure, corporate IT departments, and small local data center operators.
Overall, the tax is framed as a way to raise revenues to benefit people whose lives are disrupted by data centers and AI.
The pushback: Wyden’s proposal has drawn criticism that it would raise costs on internet services. The conservative Americans for Tax Reform called the proposal an “internet tax.” James Erwin, director of innovation policy at the conservative group, said the tax would be paid by anyone using the internet.
The senator’s office did not respond to requests for comment on the criticism.
The existing tax landscape: In general, data centers often benefit from tax incentives offered by lower-level governments – although that is changing fast, as the backlash to data center development grows. Currently, 38 states offer tax incentives to data centers, with all of them waiving sales taxes on key equipment like computers, according to the National Conference of State Legislatures. About 14 states extend the exemptions to electricity used at the facilities and 11 states offer data centers a partial property tax abatement.
Darrell West, a senior fellow at Brookings’ Center for Technology Innovation, told Maydeen that Wyden’s proposed tax is telling the tech companies “they need to be more responsible and pay more for their costs.”
West said the tax won’t slow down data center development and it doesn’t solve the fundamental problem of the energy use required to operate these facilities. But it puts the industry on notice that policymakers expect them to do more for the communities.
West said it is a good first step toward addressing some of the problems created by data centers.
“There should be more explicit contracts between data centers and communities to lay out the costs and the benefits, just so everybody knows what the deal is,” he said. “There's a lot of secrecy in the negotiations, and that just breeds public paranoia about data centers.”
HOW MUCH OIL IS ACTUALLY BEING MOVED THROUGH THE STRAIT OF HORMUZ?
Energy Secretary Chris Wright is claiming that oil leaving the Arabian Gulf region has hit above pre-war levels and that crude oil flowing out of the Strait of Hormuz alone is nearly 9 million barrels per day.
The figures, if accurate, would send a major signal that the U.S. has been able to facilitate the trade of oil through the strait, without another ceasefire deal with Iran. But, Wright’s estimates far exceed those of any other major tanker traffic tracker or energy analyst.
Wright’s claim: Earlier today, Wright posted this on X: “Thanks to the coordinated efforts of the U.S. military and our gulf allies, the seven-day average for oil leaving the Strait of Hormuz is currently up to almost 9 million barrels per day. When combined with the additional 5-7 million barrels per day leaving the region via newly upgraded pipelines and export facilities, total oil flows are currently averaging approximately 15 million barrels per day.”
He said that, on Sunday alone, more than 20 million barrels of oil were exported from the Arabian gulf region, above the typical pre-war daily oil shipments that passed through the Strait of Hormuz.
He did not say what data he was using.
What everyone else is saying: Following Wright’s claim, several energy analysts noted their own estimates were millions of barrels lower.
Gregory Brew, a senior analyst for Iran and oil at the Eurasia Group, said he’s seeing a seven-day average of around 5 million barrels.
Oil market researcher Rory Johnston also estimated that the seven-day average, as of last week, peaked around 7 million barrels.
“[I]t’s *possible* that with dark transit revisions we’ll get higher, but 9 feels like a stretch,” Johnston wrote in a post to X.
Johnston also questioned Wright’s estimates for the amount of oil that has been rerouted via upgraded pipelines, saying only about 4 million barrels per day is being pumped out by land, not 5-7 million.
Some dismissed the estimate altogether, with Brett Erickson, managing principal at Obsidian Risk Advisors, saying, “Realistically though…no evidence supports 9Mbpd.”
Some background: Before the war, about 20% of global oil demand transited the strait daily, roughly equivalent to 20 million barrels per day.
Throughout the war in Iran, the Trump administration has repeatedly said that it has been able to facilitate the flow of oil through the strait despite the threat from Iranian forces.
It has been an apparent effort to calm global markets and keep prices from surging above $100 a barrel and thereby increasing the prices of petroleum goods such as gasoline. Wright’s estimates did not appear to put any downward pressure on oil prices on Tuesday, with domestic and international benchmarks sticking in the mid to high $80s.
You can read more from Callie on this here.
All the rest
TRUMP ADMINISTRATION PULLS SUPPORT FOR ARCTIC CLIMATE REPORT: In its latest effort to eliminate federal funding for research into climate change, the Trump administration is ending its support for a flagship annual scientific report that focuses on how climate change affects the Arctic.
Two people familiar with the issue told Politico this week that the report's authors were informed of the administration’s decision, which will involve rescinding government resources from the National Oceanic and Atmospheric Administration’s Arctic Report Card.
NOAA has been publishing this Arctic climate report every year since 2006, making it public on the agency’s website. It has historically been used for additional climate research, academic purposes, and national security policy and has been cited by NATO, according to CNN.
Zack Labe, a climate scientist with Climate Central and one of the report’s authors, told Politico that NOAA’s backing is essential for the paper, saying researchers will lose critical insights into rising temperatures in the Arctic.
“[I]t has been the key reference for understanding our changing Arctic for the last two decades,” Labe said.
PHILLIPS 66 HEADED BACK TO CALIFORNIA…WITH A PIPELINE: Less than a year after Phillips 66 effectively ended its refining operations in California, the oil company has announced its return to the Golden State with a massive pipeline stretching all the way to Texas.
Phillips 66 is partnering with Kinder Morgan and HF Sinclair to build the $5 billion Western Gateway Pipeline system, which will stretch 1,300 miles – 900 of which will run from Borger, Texas to Phoenix, Arizona. There, the project will reverse the direction of Kinder Morgan’s existing pipeline that stretches from Phoenix to Colton, California, to increase the flow of oil to California.
The project is expected to be completed by 2029 and could transport 230,000 barrels of oil per day.
Why this matters: California has removed roughly 17% of its oil refining capacity in recent years, adding upward pressure on the prices of petroleum products such as gasoline. The state historically has some of the highest gas prices in the country, with an average of $5.58 a gallon as of today. Increasing imports of oil from other states would help California reduce its reliance on foreign imports, but it complicates the state’s efforts to hit net-zero by 2045.
CHICAGO MAYOR CALLS FOR DATA CENTER BAN: Democrat Chicago Mayor Brandon Johnson is calling for a moratorium on data centers, following the lead of other cities like New York and Denver.
The mayor signed an executive order that would establish a number of regulations on air pollution, set noise rules, and require a more rigorous review for new data centers. The order also establishes a task force on data centers.
Johnson also called on the city council to issue a temporary ban on data center development as the city works to establish permanent regulations.
HEAT WAVES BECOMING MORE COMMON AND INTENSE, UNITED NATIONS SAYS: Heat waves are lasting longer and becoming more frequent and intense, according to the United Nations weather agency, Reuters reports.
"Extreme heat is becoming more frequent, more intense, it's lasting longer, and covering much wider areas than in the cooler climates of the past," John Kennedy, the World Meteorological Organization's head of climate information, said.
Europe has experienced one of the hottest Julys on record. It is now entering its fifth heat wave of the summer. The intense heat and drought have sparked wildfires across the continent.
Kennedy noted that the current heat wave in Europe is caused by the interaction between a persistent area of high pressure across the Northern Hemisphere and the effects of a warming climate. The high-pressure system traps warm air, limits cloud formation, and prevents cooler air from entering. This allows for heat to build up for several days or weeks.
RUNDOWN
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High Country News Utah is killing the Great Salt Lake
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