US House yet to broker deal to advance bills seen as key to Biden's climate agenda

Sweeping efforts to use the levers of federal government to expedite the transition to a lower-carbon energy sector hung in the balance Sept. 30 as Democratic congressional leaders sought to corral votes for an ambitious two-track approach.

As of the afternoon of Sept. 30, Democrats were struggling to meet their target for a House vote on a $1 trillion bipartisan infrastructure bill as the wrangling continued. Moderates were holding to their objections about the $3.5 trillion price tag of the budget reconciliation package. And House progressives continued to oppose the more modest infrastructure bill unless it was accompanied by action on reconciliation, which contained more ambitious climate provisions.

Administration officials have been tamping down expectations for quick action while still voicing optimism that energy provisions ultimately will prevail, at least in some form.

"I think it's not going to be exactly as people have described it. This is what negotiation is all about, obviously," Energy Secretary Jennifer Granholm said at a Sept. 29 Washington Post forum. "I am confident certainly in the climate space that there will be significant legislation passed."

Senate Energy and Natural Resources Committee Chairman Joe Manchin, Democrat-West Virginia, the moderate with outsized influence on the two-tiered process, has tied his objections to the budget reconciliation's spending totals. But in a committee hearing, he also aired concerns about what the proposed Clean Electricity Performance Program (CEPP) would mean for consumers in his coal-heavy state and for electric reliability.

White House Press Secretary Jen Psaki said "active negotiations" on intricate details of the package were ongoing Sept. 30, with President Joe Biden making calls from the Oval Office.

"We're working towards winning a vote tonight. We have several hours left in the day," she said during her afternoon briefing.

Shutdown averted

Separately, Congress approved a stop-gap funding bill to keep the government running through Dec. 3, while a deal remained elusive for the time being on raising the federal debt limit and thus averting a consequential default.

The Senate passed the stop-gap spending measure in a 65-35 vote Sept. 30, followed by a 254-175 House vote that sent the continuing resolution to the president's desk.

The move avoids a federal government shutdown that otherwise would have begun at midnight. The continuing resolution temporarily keeps spending levels static but does not address a looming Oct. 18 deadline to deal with the debt ceiling or risk a default on the national debt.

Failing to raise or suspend the debt ceiling would have more severe economic consequences than previous government shutdowns, said Beth Ann Bovino, US chief economist for S&P Global, who ultimately thinks Congress will meet that deadline.

"Should a default occur, the resulting sudden, unplanned contraction of current spending would be staggering," she said. "The economy would fall back into a recession, wiping out much of the progress made by the recovery."

COP26 implications

Biden has been pressing other countries to increase the ambition of their emissions reduction targets ahead of the 26th UN Climate Change Conference of the Parties.

Because the reconciliation package is key to Biden administration goals, Washington insiders have suggested that showing up in Glasgow, Scotland, with that legislation dead, delayed, or badly watered down would shatter the US' credibility and negotiating power.

White House National Climate Advisor Gina McCarthy in recent days has insisted the administration has other means beyond Congress to advance its agenda, including regulatory action and "other opportunities for investment strategies" to push industry toward clean energy solutions.

"It doesn't mean we're going to give [the CEPP] up without lots of kicking and screaming, but it does mean that I don't think we need to have every penny in here to make tremendous progress," she said. "Anything near this level of investment sends a gigantic signal to the private sector."

Here is a look at what is at stake for the energy sector in the infrastructure and reconciliation bills:

Transmission shines in infrastructure bill

• The White House touted the bill as the largest-ever investment in clean energy transmission with $73 billion for electricity infrastructure, though researchers have noted that only $28.8 billion would be designated for the electric grid.
• The bill would allow the Federal Energy Regulatory Commission to approve transmission line construction projects in corridors designated by the Department of Energy, granting the agency authority to override state application denials or delays.
• The legislation contains billions for electric vehicle charging stations, the buildout of which is one of Biden's energy goals.
• Helping keep nuclear generation afloat, the bill would provide $6 billion for a new five-year civilian nuclear plant credit program for reactors in merchant power markets at risk of closure. DOE would have to certify that a merchant plant was recording operating losses to participate. Preference would be given to reactors using uranium produced, converted, enriched and fabricated into fuel in the US.

Oil, gas wins in infrastructure bill

• The Senate bipartisan infrastructure package would have left room to breathe for the oil and gas sectors, with funding directed toward cleaner technologies that could prolong their use. Billions of dollars would be invested in carbon capture and storage and various forms of clean hydrogen, with regional hubs established to help ease the energy transition hit to fossil-fuel-producing regions.
• Benefits would also flow to the oil and gas industry from investments in plugging and reclaiming orphaned wells to cut methane emissions. Even provisions on electric vehicle infrastructure and electrification of school buses were tweaked to include natural gas, hydrogen and propane-fueled vehicles.

Reconciliation costs for oil, gas

• Aspects of the budget reconciliation package sought to hit fossil fuel companies' bottom lines if they fail to keep pace with the move to a net-zero economy. Most notably, a new plan to place a fee on climate-warming methane emissions could impact the breakevens of oil and gas operators who have reported high methane intensities to the tune of $11 billion, according to S&P Global Platts Analytics.
• The methane fee would have lowered the threshold for companies to report emissions from 25,000 mt of CO2 equivalent per year to 10,000 mt of CO2e/year. Starting in 2023, oil and gas producers would have to pay $1,500/mt of methane produced in excess of 0.2% of total gas sent for sale. Gas pipelines and associated transmission and compression facilities would pay the fee on emissions above 0.11% of gas sent for sale. All other downstream facilities, including LNG terminals and gathering and storage facilities, would trigger the fee at a methane intensity above 0.05%.
• Oil and gas companies would also face higher royalty rates and leasing costs for development on federal properties, provisions strongly opposed by independent producers.
• The reconciliation bill skipped a proposal by Biden and some Democrats to revoke tax benefits for oil and gas producers worth some $35 billion over a decade, including a key measure allowing immediate deductions of drilling and development costs. House Democrats in energy-producing states had urged leadership not to repeal the tax benefits.

Reconciliation offers CEPP

• The House budget bill includes the CEPP, which would provide grants to utilities that increase their proportion of clean energy generation and penalize entities that fail to meet certain targets. The program aims to transition the electric fleet to cleaner energy sources, excluding fossil fuel generators that lack carbon capture technology.
• The proposal includes investments for the electricity grid, weatherization programs and rebates for home retrofits as well.