TRP Clean Energy Report

Members of the House and Senate return to Washington this week following a 5-week recess. Lawmakers will have just a few weeks to handle a series of ‘must-pass’ legislative items before adjourning again until the November elections.  Key issues expected to be considered include a short-term continuing resolution (CR) to avoid a government shutdown, reauthorization of the Export-Import bank, extending the Internet Tax Freedom Act and consideration of a fiscal 2015 Defense Authorization bill. House leadership plans to revisit several energy and environmental measures in September, including bills to approve the Keystone XL (KXL) pipeline, block federal limits on carbon emissions from power plants and expand access to drilling offshore and on federal lands.

 
Taxation
 
Reid Promises Vote on Clean Energy Tax Credits
 
On September 4, Senate Majority Leader Harry Reid (D-NV) said he will bring legislation to the Senate floor by the end of the year to extend tax credits for renewable energy sources. Speaking at the National Clean Energy Summit in Las Vegas, Reid said that allowing several lapsed tax incentives for clean energy to remain expired “is not an option.” He criticized Senate Republicans for blocking legislation to extend the credits when it came to the floor earlier this year. Senate leaders plan to vote on an $84 billion tax extenders package (H.R. 3474) that would retroactively extend more than 50 expired tax credits, including the wind production tax (PTC) credit and several credits for alternative fuels. Separately, Reid called for reform of the tax code’s treatment of liquefied natural gas and diesel. LNG and diesel are both taxed based on their volume. But since LNG is less energy-dense, it results in an effectively higher tax – causing a disincentive to switch from diesel. While the Senate tax extenders bill (H.R. 3474) doesn’t address LNG tax equity, Senate Finance Chairman Ron Wyden (D-OR) has said fixing the imbalance between the two fuels is a priority item.
 
The fate of the PTC and other expired energy incentives may rest on which party wins control of the Senate in the November midterm elections. If Republicans capture control of the Senate, they may be less likely to support a Democratic-led extenders bill during a lame-duck Congressional session. But even if Democrats retain control of the Senate, some observers doubt that another tax extenders measure will be passed. The credits face a significant hurdle in the House, where a tax reform proposal offered earlier this year by Ways and Means Chairman Dave Camp (R-MI) would have eliminated the PTC and reduced its value for many current recipients. GOP members in the Senate have prioritized a number of other credits in the extenders bill, giving clean energy-backers hope that the PTC will be rolled into the final package (BGOV, Barron-Lopez, 09/04).
 
GOP Lawmakers Urge End to PTC
 
On August 12, 54 House Republicans urged GOP leadership to let the production tax credit (PTC) stay expired, in anticipation of expected end-of-year efforts to reinstate the subsidy. In a letter to House leadership, the GOP members argued that the PTC has outlived its usefulness, noting that federal subsidies for wind have grown from $476 million per year in 2009 to $4.98 billion per year today. For its part, the wind industry says the increased activity is related to Congress’ decision to extend the PTC at the end of its previous session, with streamlined requirements that simply required projects to be under construction before the credit expired. Industry officials also noted that if the PTC is renewed, it would be also be available for biomass, geothermal, waste-to-energy and some hydro-electric projects. However, its reinstatement remains very questionable given House GOP opposition (E&E News, Juliano, 8/13; The Hill, Cox, 8/14).
 
Renewable Energy
 
Fish and Wildlife Service Releases Sage Grouse Habitat Guidance
 
On September 5, the U.S. Fish and Wildlife Service (FWS) issued a detailed guidance document to assist federal and state agencies protect the greater sage grouse and keep it off of the endangered species list. The FWS’ framework details mitigation practices to reduce threats to the sage grouse and outlines strategies when their habitats are disturbed. The agency is reviewing whether to propose listing the sage grouse for protection under the Endangered Species Act, with a final decision expected by September 2015. Among the factors the FWS considers is whether existing regulations and practices protect the species from a variety of possible threats. The framework stresses that there is no specific design or formula used for the mitigation plan, but aims to ensure state and federal agencies get credit for current actions taken if the bird is listed as endangered. FWS biologists said that developing such mitigation programs could help to avert an ESA listing altogether.
 
Reaction to the FWS guidance was mixed, with some stakeholders arguing that FWS failed to identify an accountability process to ensure that land managers, developers and regulators take every precaution to protect the grouse habitat. Other stakeholders voiced concern that the guidance does not provide adequate details about effective mitigation strategies. Other impacted entities, including the oil and gas industry, rejected the guidance altogether. FWS’ action on the sage grouse is the latest chapter in a years-long debate over whether the bird needs federal protection. The agency ruled in 2010 that the bird deserves federal protection but said other species protection took higher priority.
 
The action comes amid increased scrutiny over FWS species evaluation process and the Endangered Species Act in general. In July, GOP lawmakers in the U.S. House passed ESA reform legislation (H.R. 4315) that would require federal agencies to detail data used to make listing decisions.  The bill is not expected to advance in the Democratic-led Senate. Separately, a group of western lawmakers, including Senator Jon Tester (D-MT) and Senator Mark Udall (D-CO) have sponsored a bill (S. 2575) to require the Interior Department make policy recommendations to Congress that could provide clarity to farmers, ranchers and other stakeholders in protecting the greater sage-grouse (E&E News ,Streater,9/05).
 
Alternative Fuels
 
EPA Sends Final RFS Rule to White House
 
On August 22, the EPA sent its proposed final rule setting the 2014 renewable-fuel standard to the White House for review, the final step before finalization. The 2007 renewable fuel standard requires EPA to mandate the amounts of ethanol and advanced biofuel that refiners must blend into petroleum fuel. While Congress laid out specific targets for those fuels, it gave EPA discretion to lower them under certain conditions. In announcing the White House review, the EPA did not say whether it changed the volumes from last year’s proposal but said it supports the program and wants to increase renewable volumes.  In its November proposal for 2014 requirements, EPA called for the first-ever rollbacks of both the ethanol and advanced biofuels mandates. The EPA has twice extended the compliance period for the 2013 requirements as it completes the final 2014 rule. The White House has up to 90 days for its review (The Hill, Cama, 8/22; National Journal, Foran and Plautz, 8/22).
 
USDA Provides Loan Guarantee for Advanced Biofuels Plant
 
On August 4, Majority Leader Reid and Department of Agriculture Secretary Tom Vilsack announced a $105 million loan guarantee for an advanced waste-to-energy plant in Nevada. The Fulcrum BioEnergy facility will convert municipal garbage to diesel and jet fuel. Reid announced the loan guarantee from USDA's Biorefinery Assistance Program in 2012.  Fulcrum executives said construction on the $200 million plant will start later this year with a two year completion timeline (E&E News, Juliano, 9/4)
 
Grid
 
Court Upholds FERC Clean Energy Grid Planning Reforms
 
On August 15, a federal Appeals Court upheld reforms from the Federal Energy Regulatory Commission (FERC) that require large-scale regional planning of the nation’s electric grid and greater consideration of clean-energy policy. The ruling came in response to dozens of state regulatory challenges to FERC’s July 2011 order on regional transmission planning. In its order, FERC said states can be mandated to comply with the planning and coordination process, but the states had argued they could not. Environmental groups praised the outcome as a win for clean energy (National Journal, Foran, 8/15).
 
Climate Policy
 
Senators Urge Caution on GHG Regulations
 
On August 7, a group of nine Democratic Senators wrote a letter to EPA Administrator Gina McCarthy urging caution against greenhouse gas restrictions they said would discourage the development of advanced biofuels.  Lead by Senator Tom Harkin (D-IA) and signed by eight of his Democratic colleagues, the letter comes as the EPA is preparing to issue a final rulemaking on how biomass carbon emissions will be treated in new agency rules. The letter was signed by Harkin and Senators Ron Wyden (D-OR), Maria Cantwell (D-WA), Patty Murray (D-WA), Tim Johnson (D-SD), Heidi Heitkamp (D-ND), Al Franken (D-MN), Amy Klobuchar (D-MN) and Joe Donnelly (D-IN). The Senators say that treating biogenic carbon emissions in the same way as fossil fuel emissions could negatively impact the development of advanced biofuels, biopower, renewable chemicals, and other industrial biotechnologies. Instead, they call on the agency to recognize that biogenic carbon emissions “do not result in lasting increases in atmospheric carbon dioxide, and therefore should not be subject to greenhouse gas regulations” (E&E News, Chemnick, 8/12)