Energy extenders hang in balance amid scant progress in budget talks

Source: Nick Juliano, E&E reporter • Posted: Friday, November 30, 2012

Ongoing budget negotiations between President Obama and House Speaker John Boehner (R-Ohio) showed little sign of progress yesterday, leaving a suite of energy-related tax breaks hanging in the balance.

Expired or expiring tax incentives for wind energy, alternative fuels, home weatherization and other activities are expected to be included as part of a broader legislative package aimed at addressing the looming spending cuts and tax hikes collectively known as the “fiscal cliff.”

The energy-related breaks are a minor part of the overall discussion, compared to the intense disagreements between the White House and congressional Republicans over income tax rates for wealthy individuals and cuts to entitlement programs like Medicare.

But the fiscal cliff deal is seen as the most viable — perhaps the only — option to give the temporary breaks for energy and other sectors of the economy, collectively known as “tax extenders,” new life before the end of this year. A Senate Republican aide yesterday said it was unfathomable that Congress would address the extenders for “special interests” in isolation without addressing individual income tax rates.

Senate Finance Chairman Max Baucus (D-Mont.) was less definitive that the extenders could not be broken off, although he acknowledged that the broader fiscal cliff remained the top priority.

“Anything is possible around here, yes. But I think it’s very important to get the main cliff issue dealt with reasonably and responsibly to minimize uncertainty so we can get our country moving,” Baucus told reporters yesterday.

Sen. Tom Carper (D-Del.), a strong supporter of the production tax credit and investment tax credit for wind energy companies along with other extenders, said he remained optimistic that Obama and Boehner could reach an agreement on the outline of a fiscal cliff deal, to which the extenders could be attached. He would not even entertain a hypothetical in which they failed.

“The president and the speaker have to find common ground, they’ve got to. Our country is counting on it,” he said. “They both need to step up and show great leadership, which includes keeping out of step with everybody else in your own party who’s marching to the wrong tune.”

Sen. Chuck Grassley (R-Iowa), who wrote the first PTC bill in 1992 and has championed an extension, said he was optimistic that the wind credit would survive if a broader deal is reached. Beyond this year, though, he suggested the wind industry would be well served to come to an agreement on how the credit could be phased out.

“Right now, in order to build up support we’re trying to get the wind energy industry to come to some conclusion among themselves for [a] phaseout,” he said, noting that even efforts for a short-term extension would be aided by a phaseout plan.

“I think that has to be a part of it,” he added. “But they say that they’re maturing, so I think if they could do it in a four-year period of time it would help a lot.”

Prospects for the broader talks seemed dim yesterday. Boehner accused the White House of not taking the negotiations seriously and refusing to put on the table sufficient spending cuts in response to his offer to raise additional tax revenue.

“I’m disappointed in where we are, and disappointed in what’s happened over the last couple weeks,” Boehner said during a press conference. “But going over the fiscal cliff is serious business. And I’m here seriously trying to resolve it. And I would hope the White House would get serious, as well.”

While Republicans have put revenue on the table, they remain steadfast in their opposition to increasing tax rates for wealthy individuals, which Obama has said must be part of any deal. At issue are tax cuts first enacted in 2001 and 2003 that are set to expire at the end of the year. Obama has said rates should increase on individuals earning more than $200,000 per year or couples earning more than $250,000.

White House spokesman Jay Carney shot back at Boehner in his daily briefing yesterday, saying that Republicans must acknowledge that higher rates need to be part of a deal.

“The president will not sign any legislation that extends the Bush-era tax cuts for top earners in this country,” Carney said. “Once the acknowledgement is made that rates need to be part of this, I don’t think it’s … all that difficult to achieve the kind of balanced compromise that the president seeks.”

House Minority Leader Nancy Pelosi (D-Calif.) accused Republicans of “hostage taking” by refusing to entertain higher tax rates on wealthy individuals while refusing to take up a Senate-passed bill that would maintain the tax cuts for the bottom 98 percent of taxpayers.