Califf goes to Congress

From: POLITICO Pulse - Tuesday Dec 14,2021 03:02 pm

Dec 14, 2021

Presented by The American Petroleum Institute (API)

With help from Kelsey Tamborrino.

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Quick Fix

— Electric vehicle tax credits that favor unions could have a rocky time comporting with the Senate's strict reconciliation rules, procedural experts say.

— Sen. Joe Manchin has lingering reservations over the true cost of the reconciliation package, but Majority Leader Chuck Schumer still wants the whole thing done by Christmas.

— The Biden administration is rolling out its game plan for a national electric vehicle charging build-out.

HAPPY TUESDAY! I’m your host, Matthew Choi. Congrats to Jeremy Ortiz of the Senate Energy Committee for knowing Francisco Pizarro was the Spanish conquistador who conquered the Incan Empire. For today’s trivia: What is the most populous city in Western Australia? Send your tips and trivia answers to mchoi@politico.com. Find me on Twitter @matthewchoi2018.

Check out the POLITICO Energy podcast — all the energy and environmental politics and policy news you need to start your day, in just five minutes. Listen and subscribe for free at politico.com/energy-podcast. On today's episode: EPA’s 2022 To-Do List.

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The Biden administration is looking just about everywhere for solutions to elevated gasoline prices. Unfortunately, the administration has looked in all the wrong places – repeatedly asking OPEC+ to ramp up crude production, while suggesting that U.S. companies are to blame.

Driving the Day

EVs FACE THE BYRD BATH: Democrats’ proposed tax credits favoring union-built electric vehicles have been criticized by Sen. Joe Manchin (D-W.Va.) and foreign governments alike. And as Senators enter discussions with the parliamentarian on Democrats’ reconciliation package, procedural experts tell ME that the credits could face additional challenges comporting with the “Byrd rule” that prohibits “extraneous matters” unrelated to the budget from being considered in reconciliation.

The proposal offers a tax credit of $7,500 for purchasers of electric vehicles made in the U.S., with another $4,500 of tax credits available for those made with union labor.

But a critical question facing pro-union EV tax credits is whether they would have a significant fiscal, or budgetary, impact, Bill Hoagland, former staff director of the Senate Budget Committee who is now senior vice president at the Bipartisan Policy Center, told ME. Currently there aren’t many electric vehicles that fit the criteria of being made in America with union labor, meaning Democrats could struggle to prove people would actually use the bonus pro-union tax credit to the extent that there would be significant outlays from the federal government (in the form of subsidies).

Right now, the only vehicle that fits the criteria is the Chevy Bolt, according to Brian Rothenberg, spokesman for United Auto Workers, which supports the bonus credits for union-made EVs.

“It raises a yellow flag, not necessarily a red one,” Hoagland said. “I don't think Republicans are going to be successful on challenging many of these, but this one is a tough, tough, call.”

But a lot more union and American-made EVs are coming — a case Democrats and the Biden administration have been eager to make, Rothenberg noted. President Joe Biden test-drove Ford's new F-150 pickup truck during a visit to the company’s Detroit auto plant in May, and he returned to the city last month to take GM’s first electric Hummer for a spin.

“To prove there are actual government outlays using that tax credit shouldn't be too hard to prove as these vehicles come online,” said Jamal Raad, executive director of Evergreen Action, an environmental group that supports the pro-union EV tax credits.

Zach Moller, director of the Economic Program at center-left think-tank Third Way, said the Congressional Budget Office, at the request of Democrats, could produce a score projecting how many qualified EVs there might be in the future. There is no specific number of vehicles that CBO would have to deem eligible for the credit to prove pro-union subsidies would have more than a “merely incidental” budgetary impact. The parliamentarian has wide latitude to make the call.

Manchin, whose state is home to a Toyota manufacturing facility, has derided the proposed tax credits as “not American” and bypassing workers who aren’t in a union, and several foreign governments have complained the proposal would unfairly target their automakers’ operations in the U.S.

It has been a point of tension between the Biden administration and several allies in Europe and Asia, with Canadian officials writing to senators Friday threatening to retaliate. Canadian Prime Minister Justin Trudeau offered extending the tax credits to Canadian-assembled cars and batteries as a potential solution, Pro's Zi-Ann Lum reports.

MANCHIN STILL ISN'T SOLD: The Senate Energy chair on everyone's mind still has major reservations on the reconciliation package, particularly its structure and its potential impact on inflation, POLITICO's Burgess Everett reports. He raised concerns with the true cost of the package, particularly after the Congressional Budget Office said Friday that if the provisions in Democrats' bill were extended, it would add $3 trillion to the deficit. Other Democrats and the White House retort that the bill's provisions will be paid for when they are extended and that inflation is peaking and soon to ease.

Democrats need to move in lockstep to get this package past the finish line, and Senate Majority Leader Chuck Schumer wants that to happen sooner rather than later. Speaking from the Senate floor, Schumer said his caucus would continue working with the parliamentarian and finalizing the package this week, with the whole enchilada passed before Christmas.

“People have been in a hurry for a long time to do something. But I think, basically, we're seeing things unfold that allows us to prepare better. And that's what we should do,” Manchin told Burgess.

Manchin is still hearing out his colleagues and hasn't made a decision either way on the package. He spoke with Biden on the phone Monday, where they "had a productive conversation this afternoon. They will continue to talk over the coming days," according to Manchin's office. Read more from Burgess.

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Around the Agencies

GRANHOLM AND BUTTIGIEG ANNOUNCE EV PUSH: Energy Secretary Jennifer Granholm and Transportation Secretary Pete Buttigieg are unveiling a joint office today to implement the administration’s EV charging goals pushed in the bipartisan infrastructure package. Speaking from the first fully electric EV charging station in the country in Takoma Park, Md., this morning, the two will sign an agreement finalizing the office, which will tap into resources from both departments, including DOE’s national labs.

The infrastructure package includes $7.5 billion to help build out charging stations for electric vehicles, including state funding to build out a national network and community grants for charging innovation. The White House sent out a sketch for how the administration plans to execute the EV charging goals Monday, with Vice President Kamala Harris touting the plan as vital to the country’s health, economy and sustainability. “The future of transportation, in our nation and around the world, is electric,” she said Monday.

Other actions include a request for input from community stakeholders, including through a DOE and DOT advisory committee on EVs. DOT is also working on a guidance for strategic charger deployment, and both DOT and DOE are asking for input from domestic manufacturers and workers on how to best shift the EV charging supply chain to the U.S.

AFTER THE STORM: A quarter million people lost power after last weekend’s devastating storms in the Midwest, according to the Tennessee Valley Authority. It was the worst damage the region had seen in a decade, the federally-owned utility reported. Electricity has been restored to more than 85 percent of impacted customers.

Biden is planning to travel to the area on Wednesday to assess the damage, including a visit to the U.S. Army base at Fort Campbell on the Kentucky-Tennessee border. Kelsey Tamborrino has more for Pros.

PHILLIPS JOINS THE FERC PARTY: Freshly sworn-in commissioner Willie Phillips will partake in his first public FERC meeting Thursday, where the commission will tackle transmission cost allocation and ratepayer charges for regulatory advocacy and public relations campaigns, Pro’s Catherine Morehouse reports. Phillips was sworn in as FERC’s fifth commissioner this month, giving Democrats a majority on the commission and ending a partisan deadlock. Read more from Catherine, who dives into what’s on the docket.

JOIN TODAY FOR A WOMEN RULE 2021 REWIND AND A LOOK AHEAD AT 2022: Congress is sprinting to get through a lengthy and challenging legislative to-do list before the end of the year that has major implications for women’s rights. Join Women Rule editor Elizabeth Ralph and POLITICO journalists Laura Barrón-López, Eleanor Mueller, Elena Schneider and Elana Schor for a virtual roundtable that will explore the biggest legislative and policy shifts in 2021 affecting women and what lies ahead in 2022. REGISTER HERE.

Beyond the Beltway

SOLAR SUPPLY, TRADE WOES: The U.S. solar industry saw a record-breaking third quarter this year, but supply chain constraints and uncertainty surrounding trade policy continue to plague the industry, according to a report released today by the Solar Energy Industries Association and Wood Mackenzie. Trade and supply chain headwinds "will cause a significant decrease in installations next year at a time when more solar adoption is critical to addressing the climate crisis," said SEIA president and CEO Abigail Ross Hopper in a statement. According to the report, year-over-year price increases in every segment except residential were the highest they've been since 2014, when Wood Mackenzie began tracking pricing data.

Residential solar might even take a hit in sunny California, where the California Public Utilities Commission proposed cutting back incentives for rooftop solar installations to the chagrin of industry advocates, Pro’s Colby Bermel reports. The plan would also include a "grid participation charge" for residential solar owners to offset their lower bills, but solar backers said it would just discourage future installations. The proposed decision could get voted on by the CPUC's commissioners as early as Jan. 27.

On the national front, the industry is setting its sights on key tax incentives in the proposed budget reconciliation package to stimulate solar market growth. An extension of the investment tax credit, for one, would result in an additional 43.5 gigawatts of solar capacity over the next five years, most of which would come from utility solar, according to today's report. That would bring cumulative solar capacity to over 300 GW, or triple the amount of solar deployed today.

On the Hill

KHANNA TARGETS ENHANCED OIL RECOVERY: Rep. Ro Khanna, who led the House Oversight Environment Subcommittee’s probe into the oil and gas industry earlier this year, wants to end tax credits for carbon capture that is used to pump more oil out of the ground. Khanna introduced the End Polluter Welfare for Enhanced Oil Recovery Act on Monday, which would erase provisions under the 45Q tax credit that helps companies use captured carbon for enhanced oil recovery. Khanna has gone after what he views as subsidies for the oil and gas industry in the tax code for months, with EOR 45Q benefits being a holdout in Democrats’ reconciliation bill.

Khanna told ME it was "common sense" to bar the federal government from financing technology used to extract more fossil fuels, saying doing so "actually undermines the case for CCS."

“Now if they can come up with a technology that can actually reduce the carbon footprint, then I am all for it,” Khanna said. The Californian has discussed the measure with Senate Finance Chair Ron Wyden , who went after EOR in his Clean Energy for America Act, and was optimistic about it getting in the final reconciliation package.

“This is a narrow provision," Khanna said. "No one is saying CCS shouldn’t be part of the broader Build Back Better.” Read Khanna’s bill text here.

The House-passed reconciliation package includes significant boosts for point-source capture and direct air capture benefits under 45Q. But Democrats’ edits to the tax credit faced backlash from carbon mitigation tech backers, who said minimum capture thresholds at 75 percent for power plants and 50 percent for industrial facilities would shut out a large swath of projects and make the credit functionally inaccessible. Lawmakers acquiesced by removing the 50 percent threshold for industrial facilities in the package passed by the House, and senators are discussing potentially ridding the 75 percent threshold as well.

But several environmentalists, including Khanna, fear that getting rid of the 75-percent threshold would remove a major accountability measure to ensure the tax credit is actually being used to mitigate emissions. "That’s moving in the wrong direction," Khanna told ME.

A Senate Finance spokesperson told ME that the tax credit is still being discussed.

THE CORN STATES STRIKE BACK: A bipartisan bunch of biofuel backing senators are introducing a bill today to bar EPA from retroactively lowering 2020 biofuel blending targets. The Defend the Blend Act, introduced by Sens. Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa) and cosponsored by Sens. Tammy Duckworth (D-Ill.) and Joni Ernst (R-Iowa), would prohibit lowering the minimum applicable volume of biofuels once levels are finalized for any given year. Reps. Ashley Hinson (R-Iowa), Rodney Davis (R-Ill.), Angie Craig (D-Minn.), and Ron Kind (D-Wis.) introduced companion legislation ( H.R. 6071 ) in the House last month.

EPA released its blending proposals last week, retroactively lowering targets for 2020 to soften the burden for refineries reeling from the pandemic and raising them for 2022. The 2020 target was a blow to ethanol backers, who say it would harm farmers who also had to deal with decreased demand.

STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.

Movers and Shakers

— Winnie Stachelberg is joining the Department of the Interior as its new senior adviser and infrastructure coordinator. Stachelberg was initially nominated to be assistant secretary for Policy, Management and Budget this summer. She most recently served as executive vice president for external affairs at the Center for American Progress.

The Grid

— “Crucial Antarctic ice shelf could fail within five years, scientists say,” via The Washington Post.

— “OPEC upbeat on 2022 oil demand, says Omicron impact to be mild,” via Reuters.

— “ China’s Solar Giants Make a Bid to Dominate Hydrogen Power,” via Bloomberg.

— “European gas prices rise after German concerns over Nord Stream 2,” via The Financial Times.

THAT’S ALL FOR ME!

A message from The American Petroleum Institute (API):

Four Things to Know About Crude Oil and Gasoline Prices:
It’s important to remember that the U.S. energy revolution helped America achieve greater self-sufficiency, a semblance of energy independence, and at a minimum helped protect American consumers from global crude oil price spikes. That is currently lacking. The reality is the administration’s policies have effectively thwarted the best response to a global crude supply shortfall that has put upward pressure on gasoline prices – increased American oil production.

Here's what policymakers should consider when assessing oil markets: