Lawmakers, advocates already looking to lame-duck vote on energy tax extenders

Source: Nick Juliano, E&E reporter • Posted: Tuesday, March 27, 2012

Whatever happens on Election Day, members of the 112th Congress will have to return to Washington following their victory parties or concession speeches with a full slate of legislative business to complete before the year is over, including deciding whether to extend a suite of renewable energy tax breaks that are now scheduled to disappear after Dec. 31.

Expectations that the lame-duck session will be a busy one are growing on Capitol Hill, as activity is expected to soon wind down so members can focus on their re-election campaigns. But that doesn’t mean lawmakers are looking forward to the end-of-the-year rush, which will be accompanied by the bruised feelings that inevitably follow a hard-fought election season.

“I think there will be long nights and long weeks,” lamented Sen. Mark Begich (D-Alaska) in an interview last week.

Sen. John Cornyn (R-Texas) was blunter in his assessment.

“I think most people look at the lame duck with dread,” he told E&E Daily, “because it’s going to be so consequential in terms of the issues that we’ll have to deal with. And it really is, I think, a sad commentary on how the agenda’s been managed that we have basically kicked everything to post-election in the lame-duck session.”

With a close presidential election looming, and control of at least the Senate seriously up for grabs in November, the political composition of the White House and the Congress beginning in 2013 could have some bearing on how members comport themselves during the lame-duck session.

On the energy front, a variety of expiring tax provisions, such as the production tax credit for wind, are likely to attract the most attention on a crowded lame-duck agenda. The wind industry has spent much of this year arguing that an extension of its 2.2-cent-per-kilowatt-hour credit is vital to avoid layoffs by developers and turbine manufacturers, and the lobbying campaign is expected to continue throughout the year.

Biofuels producers also have been urging Congress to extend two key tax breaks for their industry, the Cellulosic Biofuel Producer Tax Credit, which provides up to $1.01 per gallon of cellulosic fuel, and the Accelerated Depreciation Allowance for Cellulosic Biofuel Plant Property, which provides a 50 percent depreciation deduction to cover costs of a new cellulosic biofuel refinery.

But waiting until after Election Day to tackle the energy credits could expose the GOP to Democratic charges of foot-dragging at a time when wind advocates warn of large-scale job losses if the industry’s tax outlook remains clouded.

“We’re in a situation where business decisions are being made right now about whether to move forward with jobs in advanced manufacturing,” Sen. Debbie Stabenow (D-Mich.) said yesterday, contrasting the permanent nature of fossil-fuel tax incentives opposed by her party with the more temporary nature of the alternative energy benefits.

“Anything we do to compete with Big Oil has this year-to-year tax issue, so it makes the environment for businesses uncertain,” she said. “We need some long-term certainty for alternatives to oil.”

The wind PTC and biofuel credits have fairly broad bipartisan support in both the House and Senate, but legislation that would provide the PTC a lifeline has so far failed on largely party-line votes. Those earlier efforts have been seen primarily as “message votes” designed as much for political point-scoring as for actually achieving policy goals.

The latest example was yesterday’s vote on Sen. Robert Menendez’s (D-N.J.) bill combining an extension of the PTC and other renewable tax breaks with elimination of $4 billion worth of tax benefits for oil and natural gas companies, a package that was pre-assured to turn off most Republicans and even some Democrats who could otherwise support a PTC extension.

In a procedural vote yesterday, Republicans did not block the Menendez bill from coming to a vote, although they are expected to broadly oppose the underlying measure, saying they hope to force Democrats into a debate about energy policy during the ongoing period of high gasoline prices (see related story).

Several Republicans who are expected to vote against the Menendez bill have said they support extending some of the renewable energy tax breaks, and the U.S. Chamber of Commerce made a similar point yesterday as it warned senators to oppose the measure.

“While the Chamber supports the extension of certain energy extenders, such as the wind production tax credit and percentage depletion for oil and natural gas from marginal wells, it strongly opposes the punitive tax provisions in S. 2204 aimed at major integrated oil producers,” wrote Bruce Josten, the business group’s executive vice president of government affairs, in a “key vote” letter indicating the chamber would include the Menendez bill on its annual legislative scorecard.

Politics at play everywhere

The oil and gas provisions were not the only poison pill for Republicans who are expected to help vote down the Menendez bill. They also voted en masse against a Stabenow amendment to the transportation bill offered earlier this month that would have extended many of the same tax breaks without touching the oil industry’s goodies. Opponents of the Stabenow bill said they could not support reinstating an expired Treasury Department green power grant program, known as 1603, created by the 2009 economic stimulus law.

Some renewables proponents are growing frustrated at the packaging of Menendez’s and Stabenow’s efforts, both of which would have reinstated 1603 and other stimulus-created programs, saying that the future of industries like wind and biofuels is too important to tie to such divisive, political matters.

“What we need is a politically sober package to run through, [but] the stuff that really needs to happen is getting fouled up by things that don’t need to happen,” said Brooke Coleman, executive director of the Advanced Ethanol Council, in an interview yesterday. “I don’t know that we need to have the let’s-keep-the-stimulus-alive fight when a whole bunch of industries are on the line looking at their base-level tax incentives.”

Senate Democrats are expected to try again this year to pass a tax extenders bill, aides say, although timing remains unclear (E&E Daily, March 21). And House Republicans are planning something of a temperature-taking exercise during this week’s budget debate, when an initial take at a lame-duck package is expected to receive a vote on the floor (E&ENews PM, March 22).

Two key tax-writing subcommittees also will begin examining the fate of energy tax extenders. The Senate Finance Subcommittee on Energy, Natural Resources and Infrastructure begins the effort today when it convenes a hearing on the effects recently expiring and already expired tax incentives are having on renewable energy markets. And the House Ways and Means Subcommittee on Select Revenue Measures last week announced plans to begin hearings in April looking at how to handle tax extenders.

Nonetheless, the number of legislative vehicles able to make it to the president’s desk before November is dwindling, and tax issues are increasingly likely to be among Congress’ unfinished business after the election.

“If you were a betting man, you would bet that this stuff gets taken care of at this point in the lame-duck session, when we have a bunch of stuff up and people are politically tired and aren’t paying as much attention to the details but are paying attention to the downside of letting this stuff expire,” Coleman said.

Kevin Book, an analyst with the Washington-based firm ClearView Energy Partners, said he also expected the tax extenders to be dealt with during the lame-duck session, unless Congress decides to move legislation that would undo the “sequester” in last year’s Budget Control Act, which triggers deep, across-the-board cuts to defense and discretionary spending after this year because the congressional “supercommittee” failed to reach a deficit-reduction deal. Such legislation could include the energy tax extenders, although if Congress does not address the sequester before the lame duck, it could color the lame-duck debate, as Congress will have less money to play with.

“When we get to extenders, the question will be, are budget constraints real?” Book said.

The lame duck’s unfinished business also will include questions over how to deal with Bush-era personal income tax rates for the wealthiest Americans, another contentious issue that bitterly divides the parties. Senior Senate Democrats, including Majority Leader Harry Reid (D-Nev.) and Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.), have suggested in recent weeks that Republicans are withholding support from the renewable tax extenders now to give themselves leverage once that debate emerges.

“No doubt the expiration of the PTC is going to give conservatives leverage, just as expiration of the Bush tax cuts is likely to give the president leverage,” Paul Bledsoe, senior energy adviser at the Bipartisan Policy Center, said in a recent interview

The parameters of the House lame-duck package expected this week remained unclear yesterday, but in the Senate, conversations on how to get to 60 votes on the expiring tax credits have been slower to begin.

“You have to have an exit strategy for the end of session, [but] I haven’t seen an exit strategy for our lame duck, which we all know is coming,” said Sen. Lisa Murkowski (R-Alaska), ranking member of the Energy and Natural Resources Committee.

The gang’s all here?

One potential template for a post-election energy package is the package offered last year by Sen. Kent Conrad (D-N.D.), a leader of the “Gang of 10″ centrist senators in both parties who first began searching for a comprehensive deal during 2008’s then-record high in gasoline costs (Greenwire, June 17, 2011).

One of those “gang” members, Sen. Mary Landrieu (D-La.), said in an interview last week that the current uptick in pump prices means “it would be a good time to call a meeting” of the group Conrad led alongside Sen. Saxby Chambliss (R-Ga.). “We make headway, then prices start to go down, then we disband,” Landrieu remarked.

An updated version of the “gang” proposal, she said, could include “expanded drilling in some areas” as well as “investment in alternative energy sources and increased options for automobiles that run on something other than petroleum.” Landrieu also pointed to coastal-state revenue sharing — a closely held goal for the Louisianan — as one of her top priorities for a year-end measure.

Complicating the lame-duck picture is the expectation that at least the first half of next year will be dedicated to a broader push to reform the tax code by lowering individual and corporate rates while eliminating various tax loopholes ranging from the renewable incentives to a mortgage interest reduction prized by homeowners.

While that effort is expected to decide the long-term fate of benefits energy producers receive through the tax code, lawmakers are cognizant of the desire to avoid disrupting the industry with a sudden end to the breaks come January.

“I would say there’s a rational basis for not just lopping it off for them tomorrow because a lot of businesses have been built based on an expectation of what federal law would be and tax treatment,” said Cornyn, whose state leads the nation in installed wind capacity and also is among its largest producers of oil and gas. “But I think what we would need to do is start a process by which we would sunset these provisions, and that’s going to be controversial but, I think, necessary if we’re going to do the kind of tax reform that will bring down rates and encourage growth.”