Lame duck may seal fate of transportation, wind, as time crunch intensifies
Credit: By Nick Juliano and Elana Schor, E&E reporters • Posted: Friday, June 15, 2012 | via: www.governorswindenergycoalition.org 15 June 2012 ~~
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Renewable power and transportation represent the two poles of America’s power mix, the former competing with gas and coal while the latter is yoked to oil. But as the partisan rancor of even-numbered years spikes to a presidential election-fueled high, builders of wind turbines and highways are in a surprisingly similar jam.
For roads, rail and bridges, the lame-duck session represents a round of high-stakes poker with few chips left. The nation’s highway trust fund is projected to run dry during 2013 if no new funding is chosen to supplement ever-dwindling gasoline tax proceeds, meaning that the six-month extension of current law floated last week by House Speaker John Boehner (R-Ohio) could lead transportation programs to the brink.
Meanwhile, clean energy advocates have continued their push for quick action to renew a key break for the wind industry that gives developers a 2.2 cent tax credit for every kilowatt-hour of electricity they generate. Previous lapses in the production tax credit (PTC), which was first established in 1992, have caused deployment of wind turbines to virtually disappear, and industry backers say the economic pain would be even more acute this year because of significant growth in U.S.-based manufacturing of turbine components.
The two measures may share a similar fate – fighting for life during a jam-packed lame-duck session – despite at least some signs of life in the Senate this week.
On the PTC, Senate Finance Committee members huddled behind closed doors to begin negotiating a potential package to extend it along with as many as 100 or more other “tax extenders” that expired last year or are set to do so at the end of this year. Senators would not rule out action on the extenders before the election, although none indicated that a potential deal was on the table.
There was no consensus in interviews with several wind industry lobbyists this week on whether a deal could be reached before the election, and some worry that there may not be enough time or energy among lawmakers to actually tackle a PTC extension during the lame duck.
And with a new infrastructure bill limping through cross-Capitol conference talks despite a June 30 deadline for action – “it’s on life support, but it still has a pulse,” Sen. Mary Landrieu (D-La.) said yesterday – some in the transportation world align with the wind industry in casting a hopeful eye to the post-election session.
Those betting on lame-duck action, American Association of State Highway and Transportation Officials (AASHTO) finance director Jack Basso explained this week, reason that “we might be able to get something on revenue” to solve the highway trust fund’s fuel-efficiency-induced puzzle after the parties face voters in November.
But such an outcome hinges on Congress’ ability to avert the multitrillion-dollar mess of spending cuts and expiring tax breaks known as the year-end “fiscal cliff.” Basso added candidly, “I wouldn’t want to find out” whether waiting until after the election provides a better political climate for a transportation compromise.
Both policies are caught up in a mix of election-year politics, resistance from tea party conservatives and policy disagreements that are unusually stark compared to earlier years when efforts to fund road construction or provide businesses with tax breaks were typically able to move through Congress with relatively little controversy.
“The No. 1 issue” bogging down action on transportation “is partisan polarization, that Washington is not functioning at a high level right now and does not recognize the urgency of infrastructure and transportation’s effect on the economy,” said Robert Puentes, a transportation analyst at the Brookings Institution. “If they did, transportation would be at the top of the list of things they would be doing.”
And in both cases, real jobs are at stake, although those consequences have so far been unable to break the gridlock.
Wind farms canceled; layoffs starting
The American Wind Energy Association estimates that 10,000 jobs will be lost by September – primarily among manufacturers of wind turbines and components facing a dearth of orders for next year. By the end of the first quarter of 2013, the industry will have shed about 37,000 jobs without quick action on a PTC renewal, according to a widely cited study AWEA commissioned from Navigant Consulting. The industry estimates it employed about 78,000 people at the beginning of this year.
Wind farm developers generally say they have placed few, if any, turbine orders for next year because of uncertainty over the PTC’s fate, and several companies have already announced plans to cancel or suspend projects that already have been in development.
Just this week, developer Gamesa canceled a 30-turbine project in Pennsylvania, the third project cancellation in that state in less than a month, following Iberdrola Renewables’ decision in May to abandon two planned wind farms, according to press reports. Also last month, Invenergy delayed until at least 2015 plans for a 15- to 18-turbine wind farm in Roanoke, Va., citing uncertainty around the production tax credit.
NRG Systems, which manufactures turbine components, announced last month it would lay off 18 employees to reduce its work force to 100, with the company’s CEO saying at the time that the decision was required in the face of a “deeply unstable” industry.
“The constant threat of expiration of the PTC is an example of how government can negatively impact the private sector. … And the slowdown in the wind sector because of the games that Congress is playing with the PTC should serve as a canary in the coal mine for the broader economy,” said Joshua Freed, who directs the clean energy program at the centrist think tank Third Way.
Construction season central to transportation push
For AASHTO, the American Public Transportation Association, and other groups that have spent years helping lawmakers summon up the will to pass an infrastructure bill, the start of the summer construction season represents a potent opportunity to portray their legislation as a tool to bring the economy back from its recent stagnancy.
Yet Democrats, conscious that their incumbent president needs a boost in his job-creation credentials, at the moment are amplifying that message much more loudly than the GOP. Sen. Chris Coons (D-Del.) on Wednesday accused House Republicans of imposing a strategy of prolonged conference talks that “suffocates” jobs, while Sen. Mark Begich (D-Alaska) warned that “every day we delay” keeps states from beginning new infrastructure projects.
Senate Republicans have “been terrific,” as Landrieu put it yesterday, in supporting the bipartisan bill crafted by Oklahoman James Inhofe (R) and California Democratic Sen. Barbara Boxer, chairwoman of the Environment and Public Works Committee. Their House counterparts, however, have a stronger right flank that made a show of force last week by giving 82 votes to federal transportation funding levels 30 percent lower than the Senate-passed measure (E&ENews PM, June 8).
That vote failed on the floor but indicates that House GOP leaders are likely to need Democrats in order to pass any transportation conference report – a possible recipe for inaction until the lame duck, given how frequently House Democrats have blasted them in recent days for failing to simply take up the Senate’s version.
On the opposite end of the spectrum from tea party groups calling for new federal transportation investment to remain at levels equivalent to gas-tax revenue are green advocates, many of whom are loath to compromise on a Senate bill they see as already negotiated toward the right with Inhofe and his fellow Republicans (E&E Daily, June 11).
Upper-chamber Democrats’ No. 2 leader, Dick Durbin of Illinois, yesterday asked conservationists to trust that the party’s top negotiator on transportation would remain their champion: “Could you just remind all the environmental groups that Senator Barbara Boxer is sitting at the table?”
Clock ticking as lame duck looms
Boxer has led Senate conferees on both sides of the aisle in declining to entertain the prospect of an extension, let alone the six-month one offered by Boehner. Off Capitol Hill, however, plenty of stakeholders are privately beginning to reckon with the consequences of a lame-duck session that adds a sprawling transportation debate to the “fiscal cliff.”
“No matter who wins in November, you’ve got sequestration” of federal spending wrought by last year’s debt deal as well as the PTC and other tax issues, Brookings Institution transportation analyst Robert Puentes said. “The transportation conversation has to live within those larger conversations. There’s an opportunity there, but more likely is that it’s a bit problematic.”
While the coming transportation deadline has created more urgency around that bill, members of Congress are beginning to pay more notice to the wind industry’s plight, although a path forward remains frustratingly unclear, lawmakers and lobbyists say.
Sen. Mark Udall (D-Colo.), who is co-sponsoring bipartisan legislation that would extend the PTC through 2014, has pledged to come to the Senate floor every morning to urge his colleagues to extend the credit. Udall has highlighted the industry’s growth in his first few speeches – noting industry estimates that the PTC spurs an average of $15 billion in domestic investment and has led to growth in U.S. manufacturing – and has singled out success stories from particular states.
Udall told reporters earlier this week that he was not giving up hope on a pre-election PTC vote.
Senate Finance Chairman Max Baucus (D-Mont.), who is spearheading broader negotiations on all of the tax extenders, convened a closed-door meeting of Democrats and Republicans on the committee earlier this week, but participants said big question marks remain on the path forward for an extenders package.
One lobbyist for a major wind developer, who was granted anonymity to discuss the situation candidly, sounded hopeful that reports that senators on both sides of the aisle were beginning to get serious about dealing with the extenders, suggesting that Republicans may want to be able “to claim some credit for this” and would be willing to reach a deal.
Pushing the PTC back to a crowded post-election calendar has its own risks, this source notes, because Congress may simply run out of time to get to everything on its plate as the holidays approach and lawmakers start itching to get out of town. “Then what you worry about is maybe they don’t even get to it in the lame duck,” the lobbyist says.
A second wind company representative was much more pessimistic, however. This source, also speaking on condition of anonymity, noted that even if a bill could make it to the floor of the Senate – a massive hurdle in and of itself because of persistent partisan wrangling over amendments and procedural issues – the House has shown little interest in dealing with the extenders before the election.
Many observers suspect Republicans will try to delay action on the PTC in order to use it as a bargaining chip in an effort to force Democrats to extend George W. Bush-era tax cuts that also are set to expire at the end of this year.
Some GOP aides have said such a gambit is being considered, although Rep. Pat Tiberi (R-Ohio), who is spearheading the extenders effort in the House, have said the extenders and Bush tax cuts will be dealt with separately. Nonetheless, Tiberi also has said he does not expect to have an extenders package ready for the floor until after the election.
“It’s hard to get too excited about what’s going on,” the second wind lobbyist said.
Time is of the essence because of the 12- to 18-month lead time wind farms require before they can become operational and begin generating the tax benefits, industry sources say. Even if the credit is extended in November or December, industry representatives predict a significant downturn in 2013 compared to what is expected to be a banner year for turbine deployment this year.
Further complicating the PTC effort is growing opposition from tea party-supporting groups such as Americans for Prosperity, which counts the Koch brothers among its top backers. Americans for Prosperity is targeting Republican co-sponsors of House and Senate bills that would extend the PTC, with an email campaign from its members urging GOP lawmakers to withdraw their support from the PTC-extension bill.
More than 20 Republicans have signed onto the House bill from Reps. Dave Reichert (R-Wash.) and Earl Blumenauer (D-Ore.), H.R. 3307, which would extend the PTC through 2016. Three Senate Republicans are signed onto a similar bill in the upper chamber, S. 2201, that would extend the PTC through 2014.
Adam Berkland, Americans for Prosperity’s federal affairs manager, said the group plans to ramp up its campaign over the summer, although he acknowledged that efforts to defeat the credit could become more difficult if it makes it into a lame-duck package that would also include changes to tax policy the group could support, such as an extension of the Bush tax cuts.
“What are we going to do if they come out with a package like that but they’ve thrown the wind PTC in there?” he said in an interview this week.
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