TRP Clean Energy Report

February 9, 2015
Last week, President Obama sent his fiscal 2016 budget request to Congress, and Cabinet officials spent the week explaining the details to relevant House and Senate committees. The Administration’s nearly $4 trillion budget called for a spending increase for both domestic programs and the military, including $74 billion in additional discretionary spending – about 7 percent above the level set under sequestration. The budget proposed to offset the new spending with a mix of taxes increases over a decade, mostly on top earners, to fund tax breaks for middle-class families, child care and education.

In legislative activity, a Congressional stalemate over funding for the Department of Homeland Security (DHS) deepened Thursday as Senate Democrats blocked action on the bill for a third straight day to protest Republican language on immigration. The vote was 52-47, eight short of the 60 needed to advance. Two procedural votes earlier in the week yielded similar outcomes. Homeland Security funding will lapse Feb. 27 without action. Passed last month by the House, the measure (H.R. 240) funds the agency through the remainder of the budget year while rolling back President Obama's executive actions to shield some immigrants from deportation. Senate Democrats say they won't agree to the bill unless all the immigration language is removed. Republicans say such a bill won't pass the House. Leaders in both chambers insist they will not allow DHS to go without funding. Aides say the likeliest scenario may be a short-term funding extension. Separately, the Senate voted 99-0 for a bill (H.R. 203) to provide additional transitional mental health and suicide prevention services for veterans.
In the House, members voted 239-186 on Affordable Care Act (ACA) legislation (H.R. 596), that would direct panels to come up with a replacement for the healthcare reform law. The House-approved bill likely will be defeated in the Senate, where the GOP has a smaller majority, and faces a certain White House veto. In other floor activity, House members voted 260-163 for a bill (H.R. 527) requiring federal agencies to measure the costs of regulations on small businesses. Last Thursday's vote was for the second bill on the floor last week to reform the regulatory process. The House passed legislation (H.R. 50) on Wednesday to require federal agencies to report the full economic effects of regulations in a 250-173 vote.
This week, partisan jockeying is expected to continue over a Homeland Security funding bill (H.R. 240) that would reverse President Obama’s immigration policies. Sen. Susan Collins (R-ME) has floated a compromise that could see floor time this week. Congress must pass a new spending bill for DHS by Feb. 27 or the agency will shut down. The Senate may also take up a House-passed bill (H.R. 527) that would repeal the Affordable Care Act and call for a replacement.
In the House, members are likely to approve Senate-passed legislation (S. 1) that would force approval of the Keystone XL oil pipeline, setting up a veto confrontation with President Obama. The Senate approved the measure on Jan. 29 by 62-36, short of the two-thirds majority that would be needed to override a veto. The amended Senate bill has a number of items not in the House-passed Keystone approval bill, including energy efficiency provisions and language that states “climate change is real and not a hoax.” The House also plans to vote on two packages of bills (H.R. 644/H.R.636) to permanently extend sections of the tax code.

Energy Efficiency

Administration Announces Energy Upgrade Partnership
On Jan. 29, the Obama Administration launched a pilot program to allow multifamily buildings to finance solar and energy efficiency upgrades through their property tax bills. The Department of Housing and Urban Development (HUD), the State of California, and the MacArthur Foundation partnered to develop the initiative using Property Assessed Clean Energy (PACE) loans. Commercial PACE programs provide capital to speed up renewable energy and efficiency retrofits through so-called ‘on-bill’ financing. Under the partnership, HUD will issue guidance clarifying how it can approve PACE financing for properties that it insures and funds, while the DOE will study project outcomes. PACE began as a pilot project in 2007, and more than half of U.S. states have adopted related legislation. Efforts to expand the program stalled in 2010, however, when federal housing officials called for a “pause” to PACE programs, citing repayment priority concerns in the case of mortgage defaults. (E&E News, Kahn, 1/29).
Senate Approves Portman-Shaheen Efficiency Measure Amendment

On Jan. 20, the Senate approved an energy efficiency amendment to legislation (S. 1) that would approve the Keystone XL pipeline. The vote was 94-5. The amendment is a scaled back version of a bill by Senators Rob Portman (R-OH) and Jeanne Shaheen (D-NH) that is aimed at improving energy efficiency in buildings. The amendment has broad support among members of both parties in Congress. But it will almost certainly languish in Congress before it can become law as part of the Keystone bill or as a stand-alone measure. (PoliticoPro, Restuccia, 1/20).


Senate Rejects PTC Amendment

On Jan. 28, the Senate voted down a non-binding measure to reinstate the production tax credit (PTC) for five years. The amendment was attached to a bill authorizing the Keystone XL pipeline, and failed in a 47-51 vote.  The PTC credit expired on Jan. 1, and supporters hope to see a longer term extension or phaseout of the credit enacted as part of comprehensive tax reform or an "extenders" package. Senate Republicans criticized Democrats for forcing a vote on the amendment, saying it should go through the committee process rather than being tacked onto a larger energy bill. (E&E News, Juliano, 1/29).
Fiscal 2015 Budget

President Outlines Fiscal 2016 Budget Proposal

On Feb. 2, President Obama proposed a nearly $4 trillion budget package aimed at improving the nation’s infrastructure and boosting middle-class Americans, offset with tax increases on businesses and the wealthy as well as an end to existing spending caps. The President’s budget plan would provide billions of dollars into climate-change and renewable-energy technologies, and repeal nearly $50 billion in tax breaks from the oil, natural-gas and coal industries.

Among other notable provisions, the 2016 proposal includes:

  • $239 million to support the EPA’s climate agenda and $25 million to help states comply with its rule on power plants.
  • $1.29 billion toward the Administration’s global climate efforts, part of which would go toward a pledge from late last year to commit $3 billion for an international fund.
  • A new $4 billion fund to help states comply with draft EPA regulations cutting carbon emissions from U.S. power plants.
  • Permanent extension of the wind energy tax credit (PTC) and tax credit for solar power, which together would cost the government $31.5 billion over the next decade. The wind credit expired at the end of 2013, and Congress must vote to renew it. The solar industry’s credit expires at the end of 2016

Elsewhere, the President’s budget includes:

  • $29.9 billion for the DOE budget; nearly 10% over current levels.
  • $7.4 billion for clean-energy programs primarily within the Energy and Defense departments, which is up 13.8% from current levels.
  • $13.2 billion for the Interior Department; an increase of 12.8% over current funding levels.

The President’s budget proposes repealing a series of oil, natural-gas and coal tax deductions that the White House estimates would raise nearly $50 billion for the federal government over the next decade. Republicans are generally opposed to the renewable-energy tax incentives, as well as repeal of the oil and gas tax breaks.  The President’s fiscal 2016 budget proposal is not expected to advance in the GOP-led Congress (Wall Street Journal, Harder, 2/03).

Climate Policy

White House Plan Targets Methane Emissions
On Jan. 14, the White House announced a new plan to cut methane emissions in the oil and gas sector by 40 to 45% over the next decade. EPA officials said the reductions will come in part from fixing leaky equipment and the intentional “flaring” of gas at oil and gas production sites. By stopping such waste, the White House said it will save enough natural gas in 2025 to heat more than 2 million homes for a year. The White House’s initiative comes is part of a broader effort to reduce greenhouse gas emissions, including stricter vehicle efficiency standards and proposed limits on carbon dioxide emissions from power plants. President Obama has vowed to reduce overall emissions in the U.S. by 26% (from 2005 levels) by 2025. Methane accounts for 9 percent of U.S. greenhouse gas pollution, but the gas is an estimated 20 times more powerful than carbon dioxide. EPA officials said they are working closely with industry and other stakeholder groups to limit any new costs (, 1/14).
EPA Delays Timeline for New Power Plant Rules

On Jan. 7, the EPA delayed the release of final rules regulating new, existing and modified power plant emissions until this summer.  The agency has had three separate rules governing carbon emissions from power-plant sources on different timetables. EPAs official said the agency will issue the final rules for all three types of power plants at the same time.  The three regulations are at the heart of President Obama’s climate-change agenda and a target for Congressional Republicans. In June, the EPA proposed the most significant of these three rules, mandating that existing power plants cut U.S. carbon-dioxide emissions 30% by 2030 from levels seen in 2005. The proposal set different carbon-emission limits for each state and depends heavily on individual plans to meet those targets, which the agency is requiring states submit by June 2016.

Federal officials also announced that the EPA had drafted a federal implementation plan to use if states don't meet the targets the agency sets in the existing power plant rule. This move could be controversial in states run by conservative governors who believe the Administration’s regulations are misguided and unworkable. The EPA, however, maintains that carbon capture and storage has worked in other industries and would be ready by the time the rule goes into effect. The EPA originally was aiming to issue the final rule for new power plants, which it proposed in September 2013 (E&E News, Detrow, 01/08; BNA, Ambrosio, 01/08).

Alternative Fuels

House Bill Would Alter RFS

On Feb. 4, Rep. Bob Goodlatte (R-VA) led a bipartisan group of lawmakers in offering legislation to eliminate the conventional biofuels mandate of the Renewable Fuels Standard (RFS) and cap the amount of ethanol that can be blended into the fuel supply. Goodlatte and 28 House member sponsored the RFS reform bill, which would effectively repeal a mandate that corn-based ethanol be blended in gasoline and override a waiver that raised the cap on ethanol content at 15 percent from 10 percent after Congress expanded the RFS policy in 2007. A similar bill gained 82 cosponsors in the previous Congress.

The EPA has not yet set target levels for 2015 and 2016 and is under scrutiny for its handling of the RFS after it delayed setting blend mandates for 2014. The issue has also garnered some attention in the Senate, where Senators Dianne Feinstein (D-CA) and Patrick Toomey (R-PA) introduced legislation to remove the RFS’s corn ethanol mandate as an amendment during consideration of a bill to approve construction of the prosed Keystone XL crude oil pipeline (E&E News, Natter, 2/05).

Other News

Interior Secretary Says Sage Grouse Decision on Schedule

On Jan. 26, Interior Department Secretary Sally Jewel said her agency is still on track to make a determination about whether to list the greater sage-grouse as protected under the Endangered Species Act by a Sept. 30 court deadline.  Jewell wrote letters to Colorado Gov. John Hickenlooper (D) and Wyoming Gov. Matt Mead (R) in response to their request for guidance on how states should proceed in the wake of language attached to the fiscal 2015 omnibus bill.  The $1.1 trillion spending bill included a rider, which includes language forbidding the Fish and Wildlife Service from using money to "write or issue" listing rules for the greater sage grouse. But Jewell said the language does not supersede the court-mandated Sept. 30 deadline for Fish and Wildlife to decide whether to propose listing the bird for ESA protection (E&E News, Streater, 1/28).

Bill Offered to Swap Gas Tax for Carbon Levy 

On Jan. 13, Rep. Jared Huffman (D-CA) introduced legislation that would eliminate federal gas and diesel taxes in favor of a levy tied to various fuels' carbon emissions.  The bill would access a tax on gas, diesel and any other fuels the EPA determines has a sizeable carbon footprint. Huffman said the new tax would generate enough money to ensure the Highway Trust Fund's solvency and promote clean energy production. While intended to be fully supported by fuel tax revenue, the dwindling trust fund has needed several Congressional bailouts in recent years, including $11 billion last summer to avoid transportation funding cuts (E&E News, Reilly, 1/14).

DOE Issues Cybersecurity Guidance

On Jan. 8, the Department of Energy published guidance to help electricity, oil, natural gas and other energy companies assess and improve their cybersecurity systems. The guidance aims to help firms meet the goals of the 2013 Cybersecurity Framework, which contains voluntary standards and practices to strengthen security of critical infrastructure. DOE officials said the guidance was developed in collaboration with the energy sector as an effort to assess risk management processes and standards that are being used throughout the industry (E&E News, Sobczak, 1/12).