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US MIDTERMS 2022: IRA bill could be top target of Republican oversight agenda

Highlights

Infrastructure permitting, NEPA also in focus

Pressures likely on Biden climate regulations

House energy panel Republicans set sights on FERC

  • Author
  • Maya Weber    Molly Christian
  • Editor
  • Joe Fisher
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  • 2022 US Midterm Elections

Should Republicans reach a majority in the US Congress in the November midterm elections, the party could put Democrats' energy and climate policies under intense scrutiny — even as obstacles remain to advancing major Republican goals in that space.

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Although Democratic President Joe Biden could veto any Republican-sponsored bills that threaten his agenda, tough oversight from a Republican majority could target implementation of the Inflation Reduction Act, with its billions in energy and climate spending.

A Republican-led House or Senate could also ratchet up scrutiny of federal agencies such as the Environmental Protection Agency at a time when the Biden administration is seeking to complete a suite of regulations to fulfill its greenhouse gas reduction goals.

"From a practical standpoint, [aggressive congressional oversight] in the past has had the result of slowing the agency work down," said Christopher Guith, senior vice president at the US Chamber of Commerce's Global Energy Institute. "It also from a political standpoint starts to frame certain issues for the 2024 general [presidential election]," he said.

For months, the Republican Party has cast Democratic policies as driving up inflation and discouraging fossil fuel production needed at a perilous energy security moment.

The pace of natural gas infrastructure approvals by the Federal Energy Regulatory Commission already has come under fire from Republican lawmakers and Senate Energy Natural Resources Committee Chairman Joe Manchin, Democrat-West Virginia. That barrage could intensify if Representative Cathy McMorris Rodgers, Republican-Washington, takes the helm at the House Energy and Commerce Committee, a panel with a long history of hounding the opposing administration.

Rodgers and Senator John Barrasso, Republican-Wyoming, on the Senate energy panel, already have peppered the energy regulator with detailed inquiries on gas and electric policies they contend could put energy security and reliability at risk.

Jack Heretik, a spokesman for Republicans on House Energy, in an email confirmed those members would conduct "rigorous oversight of FERC" should they retake the House.

More broadly, infrastructure permitting and Biden's turnback of the Trump administration's National Environmental Policy Act reforms also are expected to attract oversight attention should the House flip. The Republicans also may push its own legislation to make its case on permitting red tape.

Other targets could include the Interior Department's five-year oil and gas leasing plan and the Securities and Exchange Commission's climate disclosure rules for public companies.

Even an independent agency such as the Commodity Futures Trading Commission has been investigating how climate risk should affect its role overseeing derivatives markets, as the Biden administration has pursued a whole-of-government approach to addressing climate.

Republicans are expected to seize on a recent US Supreme Court ruling in West Virginia v. EPA to bolster their case that agencies lack an express mandate from Congress to pursue their climate policy goals.

Scrutinizing IRA spending

If Republicans control Congress, they also vow to scrutinize a wide sweep of Democrats' climate and energy policies in the past two years. A particular focus is expected on the Inflation Reduction Act and the bipartisan infrastructure law of 2021, two pieces of legislation that made huge federal investments in clean energy.

House Republican leaders are expected to include as part of their agenda for the next Congress a pledge to cancel "Build Back Better," the name for an earlier version of the massive legislative package.

"Oversight of the billions of dollars in federal funds for energy and environmental provisions that have been doled out over the last two years should be a critical component of congressional energy oversight in the 118th Congress," Representative Morgan Griffith of Virginia, ranking member of House Energy's subcommittee on oversight and investigations, said in an email to S&P Global Commodity Insights.

"It has the potential to make Solyndra look like chump change," said Thomas Pyle, president of pro-fossil energy group Institute for Energy Research, making a reference to the millions in government-backed loan guarantees provided to the collapsed solar company Solyndra. He contended there is opportunity for abuse in the IRA's "vague descriptions" for certain new climate grant programs.

The roughly $1.2 trillion Infrastructure Investment and Jobs Act contains major funding to spur construction of new transmission lines and electric vehicle infrastructure. The bill also provides the Department of Energy record money for clean energy research, development, demonstration and deployment.

Some of that funding is contingent on recipients meeting certain labor, wage and domestic content standards that could be tough to satisfy. If those hurdles prove too high to clear, Republican lawmakers may try to claw back unused money from the legislation.

"I suspect that we're going to find in the coming months that there are tens of billions of dollars that are available out there that nobody's ever going to really touch because the price of admission is just too high," said Jim Barnette, a partner at Steptoe & Johnson who previously served as general counsel for House Energy. "So something has to give - either that money should just be rescinded, or you've got to loosen up the requirements in order to get that money out the door."

Clean energy project developers and manufacturers must also meet certain labor and domestic content requirements to claim bonus tax credits contained in the Inflation Reduction Act, presenting similar potential challenges for that new law. The IRA included about $369 billion worth of clean energy tax credits and other climate and energy spending.

Democratic control of the White House for at least the next two years will stymie any Republican attempts to rescind congressionally approved climate and energy spending. But Republican lawmakers would be in a better position to do so if their party clinches the White House in 2024 while holding majorities in Congress.

"The spending over the last couple years... has been pretty loose, so Republicans are going to be looking for pay-fors for everything that they want to do," Barnette said, adding that unused funds from the infrastructure law "would be real prime territory for offsets."

Matthew Davis, senior director, government affairs for the League of Conservation voters, said control of Congress could determine whether there is cooperative and beneficial oversight of the IRA, versus a more hostile and impeding approach. It could also shape whether there is adequate funding for agencies writing guidelines and policies to implement the act, enabling some of the spending.

So far, the partisan divide has been stark. The bill passed with no Republican support, with party lawmakers accusing Democrats of jamming through a "reckless tax and spending spree."

Reliability concerns

In addition to probing the recently passed laws, oversight of domestic energy resources, grid and pipeline security, the future of the Strategic Petroleum Reserve, and regulatory actions by the Environmental Protection Agency "will be necessary," Griffith said.

Grid reliability could get particular attention as states such as California have struggled recently to meet demand amid soaring temperatures and a shift toward more intermittent renewable resources. Those challenges could prompt scrutiny of clean energy transition broadly and the efficacy of wholesale power markets regulated by FERC, former commission member Bernard McNamee said in an interview.

"Because of the changing resource mix, we're seeing that the [regional grid operators] may not be providing reliability or the economic value that was promised to customers, particularly as you have a growing number of subsidized resources like wind and solar that also don't have fuel costs and yet power prices are generally set at a clearing price set by natural gas and all resources are then paid at price," McNamee said. "As we get more subsidized resources, the question is going to become, when are those economic benefits going to pass to customers?"

While stepped-up attention from Congress could put agencies on the defensive, it's not guaranteed to slow or derail new regulation, according to LCV's Davis, reflecting on prior Republican efforts to hobble Obama administration actions.

"Did it burn some resources from some agencies? Yeah, probably," he said. "But, overall, did it knock the Obama administration off its game? I didn't necessarily think it made a major change in terms of the way the administration moved forward."

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