Lobbyists from all sectors are gearing up for the tax reform fight, which could have broad implications for tax benefits enjoyed across energy technologies, from wind to oil to natural gas. A reformed tax code could seek to strip away those incentives, such as the temporary production tax credit for wind that won a one-year extension in the cliff deal or baked-into-the-code incentives like the “intangible drilling costs” deduction enjoyed by oil and gas producers.
With the “fiscal cliff” crisis largely behind it, a new Congress convenes today with continued fights over the federal budget looming over the next few months.
It remains to be seen whether the coming battles over the debt ceiling, mandatory spending cuts and federal appropriations will monopolize lawmakers’ attention or poison the chances for bipartisan cooperation on energy and environmental policymaking – on incentives for renewable energy, efforts to confront climate change, decisions on whether to export North American oil and natural gas resources, how to regulate oil and gas extraction or myriad other areas.
The safest bet seems to be in favor of continued gridlock for the 113th Congress, but as 18th-century poet Alexander Pope once wrote, “Hope springs eternal.”
Some congressional observers said yesterday that they remain cautiously optimistic that lawmakers will be able to put aside their differences to tackle emerging issues and those that have languished for years.
‘It can’t be any worse’
At the stroke of noon today, the 112th Congress will go down as the least productive Congress in modern political history. Unless hundreds of bills miraculously become law by then, the 112th will have passed only a fraction of the 906 bills enacted under the 80th Congress, which President Harry Truman dubbed the “Do-Nothing Congress.”
“It can’t be any worse than the 112th” Congress, said congressional expert Thomas Mann of the Brookings Institution in an email yesterday.
While Congress managed at the eleventh hour to avoid the worst of the so-called fiscal cliff, the deal passed earlier this week leaves a few more high-stakes showdowns looming. Around late February, Congress will need to increase the debt ceiling to avoid a government default, and by the end of March, the current appropriations continuing resolution will expire and across-the-board spending cuts known as the sequester will kick in – unless Congress acts.
Analysts at ClearView Energy Partners, a Washington-based research firm, dubbed those three showdowns “mini-cliffs” that “virtually guarantee partisan conflict” over the first three months of the year, despite the bipartisan vote this week in favor of the cliff package.
While acknowledging that those fights are sure to see plenty more political posturing, Mann said he also believes those issues can and will be resolved through some kind of deal.
Afterward, “a reeling Republican Party worried about its political marginalization and a skillful president could produce a surprisingly productive 113th Congress,” he said. “Nothing guaranteed, but some surprising achievements … are possible.”
Norman Ornstein, a resident scholar at the American Enterprise Institute and Mann’s co-author on the book “The Broken Branch: How Congress Is Failing America and How to Get It Back on Track,” said the tribalism and deep dysfunction that exist in Congress won’t be erased by the swearing in of 95 new members.
“It’s fairly clear that you’ve got a lot of forces out there, including some outside the political process, that thrive on division,” he said.
Ornstein pointed to the partisan skepticism in some circles about Secretary of State Hillary Rodham Clinton’s concussion and her subsequent illness as an example of the problem.
“Jumping in and challenging people’s integrity, savaging them, there’s still a market for that,” he said. “A good part of it is a media problem. Another part of it is the money problem,” as powerful special-interest groups use their deep pockets to threaten members who dare to try to come together with those on the other side of the aisle.
But like Mann, Ornstein offered a few avenues where he believes the 113th Congress has some potential to move legislation in a bipartisan way.
After Republicans took a beating from Hispanic voters in the November election, Ornstein said the GOP has indicated a willingness to do more on the issue of immigration reform.
“You have a very different dynamic on immigration than we had a year ago,” he said.
And the mass shooting in Newtown, Conn., last month has opened the door for some sort of bipartisan movement on the gun issue. Though it likely won’t be a sweeping new gun-control measure, Ornstein said, a targeted piece of legislation, perhaps tightening restrictions on private gun sales or restricting certain types of ammunition, is possible.
Ornstein also pointed to limited opportunities for legislative progress on funding for infrastructure projects, tax reform and moving an energy bill.
In an interview on NBC’s “Meet the Press,” which aired Sunday, President Obama highlighted energy as one of his top three priorities for his second term.
“We’ve got a huge opportunity around energy. We are producing more energy, and America can become an energy exporter,” the president said. “How do we do that in a way that also deals with some of the environmental challenges that we have at the same time?”
Paul Bledsoe, an independent energy consultant and former Clinton White House and Senate aide, said yesterday that when it comes to energy policy, he believes the two parties agree on much more than the 2012 campaign suggested.
“There seemed to be an effort by Democrats to paint Republicans as only interested in oil company tax breaks and an effort by Republicans to paint Democrats as only interested in funding Solyndra,” he said, referring to the now-bankrupt solar energy company. “Obviously that’s not the case at all.”
Bledsoe noted that Sens. Ron Wyden (D-Ore.) and Lisa Murkowski (R-Alaska), who will be leading the Senate Energy and Natural Resources Committee in the 113th Congress, have repeatedly stressed their close personal friendship and their desire to make the next Congress a productive one on the panel.
“There’s every reason to believe that an energy bill can move forward,” at least in the Senate, he said. “It strikes me that a package that included increased access to domestic oil and gas reserves in tandem with more robust energy efficiency standards could strike the right balance to gain broad bipartisan support in both chambers because both of those measures are good for the economy.
A Wyden aide said the incoming energy chairman hopes for some successes in the new Congress.
“Senator Wyden isn’t going to give up trying to advance better policies, including overhauling energy incentives,” Wyden spokesman Keith Chu said in an email. “Given that those incentives were once again extended in piecemeal, short-term fashion, it’s even more important that Congress work on a permanent solution, to replace the boom-and-bust cycles and uncertainty that have plagued the energy sector.”
Some energy experts say the fiscal cliff deal has made them optimistic for the future, pointing in particular to its extension and modification of the production tax credit for wind and other renewable sources (Greenwire, Jan. 2). The wind industry lobbied most aggressively this year for an extension to the credit, with help from a diverse cast of lawmakers from both parties.
“It demonstrates that even in the very difficult environment we find ourselves in now, where there’s bipartisan support for something, there is an opportunity,” said Manik Roy, vice president for strategic outreach at the Center for Climate and Energy Solutions, formerly the Pew Center on Global Climate Change.
The fiscal cliff debacle – and the new showdowns it has created – came amid a growing desire for comprehensive reform of the tax code, which leaders of both parties reiterated this week.
Speaking after passage of the cliff deal, Obama called for more spending cuts in conjunction with “further reforms to our tax code so that the wealthiest corporations and individuals can’t take advantage of loopholes and deductions that aren’t available to most Americans.”
And Rep. Dave Camp (R-Mich.), who chairs the Ways and Means Committee, said on the House floor Tuesday night that the cliff deal was only the “first step” of a process to simplify the tax code through “comprehensive and fundamental tax reform to make American businesses and workers more competitive in the global marketplace.”
The tax code has not been fundamentally updated since 1986 – a process that stretched over several years – and a new overhaul would be an unquestionably heavy lift for any Congress.
Nonetheless, lobbyists from all sectors are gearing up for the tax reform fight, which could have broad implications for tax benefits enjoyed across energy technologies, from wind to oil to natural gas. A reformed tax code could seek to strip away those incentives, such as the temporary production tax credit for wind that won a one-year extension in the cliff deal or baked-into-the-code incentives like the “intangible drilling costs” deduction enjoyed by oil and gas producers.
The oil industry is resisting changes to its tax preferences. The wind industry’s main lobby, meanwhile, last month offered some ideas to Congress on how the production tax credit could be phased out over six years, in an effort to get ahead of the conversation (E&E Daily, Dec. 13, 2012).
“We’ve seen a growing consensus that the existing suite of tax breaks and credits for both fossil and renewable energy are under pressure, and I think there is reason to believe that a broader-based tax proposal that rewards energy innovation could gain support,” Bledsoe said.
Some lawmakers and advocates are pushing new ideas that could gain steam in a tax reform debate. For example, Sen. Chris Coons (D-Del.) is the lead sponsor of bipartisan legislation that would allow renewable energy companies to organize as master limited partnerships to attract new investors, while Roy’s group is spearheading a coalition urging expanded tax credits to encourage the use of captured carbon dioxide in enhanced oil recovery.
Numerous groups also continue to push Congress to enact a carbon tax to offset revenue that would be lost by lowering corporate rates in tax reform.
Environmental groups aren’t particularly optimistic that a divided Congress will come together on their issues in the next two years.
Clean Air Watch’s Frank O’Donnell said yesterday that he doesn’t expect any significant Clean Air Act action anytime soon.
“There may be continued attempts in the House to pass ‘message’ bills, protesting various EPA rules. But at this point, it’s a little like the boy who cried wolf too often. At some point, even the lobbyists will stop paying attention,” O’Donnell said.
Paul Billings of the American Lung Association said that he doesn’t see much hope for Congress’ playing a constructive role in improving public health on clean air over the next two years.
“The pattern of the last two years was to try to weaken and undermine Clean Air Act public health protections,” he said.
Still, there seem to be at least some Washington insiders who believe that the 113th Congress is poised to do more.
In a speech on the House floor during the final hours of the fiscal cliff showdown Tuesday, outgoing House Rules Chairman David Dreier (R-Calif.), who is retiring after 32 years in office, said he believes Congress is on the verge of being better than ever.
Dreier – who in his speech listed climate change as one of the “great challenges to which we all must rise,” despite having voted against carbon cap-and-trade legislation in 2009 – said that while political division is a current reality, it is not Congress’ fate.
“I believe that as an institution, Congress can and must forge new consensus and restore hope and optimism for future generations,” he said.
While Dreier may be among the most optimistic voices, it does appear that on the dawn of a new Congress, there are at least a few in Washington believe the new body should be entitled to a “free shave,” as the famous Washington Post cartoonist Herbert Block once put it.
Before Richard Nixon was elected president, Block was famous for drawing him as a shady character with a permanent five o’clock shadow. After the 1968 election, Block decreed that as the new president, Nixon was entitled to a “free shave.”
But it didn’t take long for Block to resume portraying Nixon as evil – even without the stubble.
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