Including a wind energy incentive in a tax extenders package during the congressional lame-duck session threatens to drag the simmering civil war between conservatives and establishment Republicans into the spotlight, potentially complicating the congenial tone the GOP hopes to strike as it takes over both the House and the Senate in January.
Conservatives want House GOP leaders to abandon the production tax credit for renewable energy that lapsed last year. The incentive primarily aids wind power through a 2.3-cent per kilowatt-hour credit awarded to power producers. But Republican leaders in both chambers appear willing to extend a suite of tax credits that includes the wind incentive to “clear the deck” before the next Congress so that lawmakers can focus on overhauling the federal tax code.
“If they do just a straight-up tax extender package and put in the [tax credit], I think you could see it pass in the current House and Senate. But you’re going to have defections from the Right,” an aide for a conservative House Republican told the Washington Examiner. “It’s an issue that draws [internal GOP tensions] to the front.”
With Republicans poised to take control of the Senate, some of the party’s rank and file on Capitol Hill want to use that as leverage to get a better deal on the extenders in the lame duck or address them on their own terms in January. But business groups are pushing House leadership to move quickly on tax extensions, some of which lapsed this year, to give the private sector certainty.
Many conservatives on and off Capitol Hill agree that there isn’t enough opposition to shoot down a tax extenders package, though there’s some outstanding tactical questions about whether to address them in the lame duck or when Republicans control Congress in January.
The energy tax credit in particular would underscore longstanding schisms between conservatives and business-oriented members in the GOP if it’s included in a tax extenders package, sources said. Fifty-four House members signed an August letter led by Rep. Mike Pompeo, R-Kan., imploring House GOP leadership to nix the 22-year-old credit. And last week, 66 conservative groups pressed House Speaker John Boehner, R-Ohio, and Sen. Mitch McConnell, R-Ky., likely the next majority leader, to kill it as well.
“[That letter] was meant to be exactly what it said – don’t give away something to [Senate Majority Leader] Harry Reid [D-Nev.] that the groups that spent millions helping you get the majority are fighting,” Tom Pyle, president of the conservative American Energy Alliance, told the Examiner. His group has taken a prominent role in killing the wind credit.
Conservative groups have increasingly targeted the wind production tax credit in recent years. They say it is a market-distorting subsidy that prices out coal- and nuclear-fired generation and that “hides the cost,” in Pyle’s words, of some of the Obama administration’s climate change regulations.
The credit garnered attention heading into 2013, when a key change allowed wind power producers to collect the credit for up to 10 years as long as wind turbines were “under construction” – which means having 3 percent of its cost paid for – rather than already producing power, by the end of the year. That alteration came with a $12 billion price tag, according to the Congressional Budget Office.
The wind industry, for its part, notes that the credit leverages millions of dollars in private-sector investment and that its supply chain supports jobs in nearly every state.
Groups aligned with the billionaire industrialist Koch brothers have aggressively ramped up lobbying in recent months, as have some electric utilities with sizable nuclear fleets, to press for an end to the tax credit, said an industry source. A group of about 20 to 30 House Republicans will stand against the wind tax credit on conservative principles, a group that could grow if the measure is put on the floor for a vote, the source said.
“If and when it hits the sort of echo chamber – that changes everything, too, when that 20 becomes 60,” the source said.
But the credit also enjoys support from many Republicans, particularly those in windy states. It was first introduced by Sen. Chuck Grassley, R-Iowa, who continues to defend it. In the House, Rep. Kristi Noem, R-S.D., has been a vocal proponent.
That’s partly why the credit likely won’t derail any tax extenders package. Senate Finance Committee Chairman Ron Wyden, D-Ore., is still pushing his legislation that would extend tax provisions for two years, spokesman Keith Chu told the Examiner.
Dysfunction within the House GOP caucus, stemming partly from disagreement over the PTC, also could leave the lower chamber simply voting for whatever the Senate chamber sends its way.
“They want a ‘kumbaya’ moment,” said the House GOP aide. “I think they’re going to want to show that with passing something right before taking over Senate that everything can be bipartisan. But that’s not going to work with conservatives.”
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