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Democrats reach budget deal that could pave way for aggressive US climate action

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Senate Majority Leader Chuck Schumer, D-N.Y., left, and U.S. President Joe Biden spoke with reporters July 14, 2021, while Biden was on Capitol Hill to discuss the $3.5 trillion reconciliation deal that Senate Democrats announced the night before.
Source: Drew Angerer/Getty Images News via Getty Images North America

Key U.S. Senate Democrats agreed to a $3.5 trillion budget resolution that party leaders said will support President Joe Biden's efforts to address climate change.

The budget deal, reached late July 13, would expand Medicare and fund climate and infrastructure measures, among other priorities. The agreement came a day before the Senate Energy and Natural Resources Committee advanced a $98 billion infrastructure bill aimed at upgrading the country's electric grid and easing domestic production of critical minerals.

"Every major program that President Biden has asked us for is funded in a robust way," Senate Majority Leader Chuck Schumer, D-N.Y., said in announcing the budget deal.

Biden and congressional Democrats have been pursuing a two-track process for advancing infrastructure legislation. The first involves a $579 billion bipartisan infrastructure agreement the president reached with a group of senators in June.

The second, more contentious track involves a budget reconciliation package Democrats will likely have to pass without GOP support that would contain more aggressive climate measures. But reconciliation measures only need support from a simple majority to pass the Senate and U.S. House of Representatives. Provisions can only be attached to a reconciliation bill if they change the federal budget, however, meaning nongermane policy items must be left out.

"The plan we put together, which is fully paid for, will make the investments in American families [and] take on ... the existential threat of climate change in a way that will meet the needs," said Senate Budget Committee member Mark Warner, D-Va.

Legislation to carry out the $3.5 trillion budget agreement has yet to be released, but some lawmakers are already giving details.

In a July 14 tweet, U.S. Sen. Tina Smith, D-Minn., said a national clean electricity standard, or CES, is in the budget deal. In the last Congress, Smith introduced CES legislation targeting net-zero carbon dioxide emissions by 2050. But Biden has sought more ambitious targets, including a carbon-free power sector by 2035 with an interim goal of 80% by 2030.

"CES is the cornerstone of the progressive, practical transformation to a clean energy future we urgently need," Smith said.

Other Biden climate priorities that energy industry sources said could be added to a reconciliation package include extensions to clean energy and electric vehicle tax credits and a federal accelerator program to boost clean energy investment.

But even under the reconciliation process, Democratic leaders will need to persuade more moderate members of their caucus to back big spending and climate policies for the package to pass, which could be a heavy lift.

Senate panel approves infrastructure bill

Ahead of the introduction of a fleshed-out, more partisan reconciliation measure, efforts to form a bipartisan infrastructure bill are moving ahead in Congress.

The Senate energy committee on July 14 voted 13-7 to advance a proposal exceeding 400 pages titled the Energy Infrastructure Act. The bill seeks to ease siting and development of interstate transmission lines that could facilitate greater renewable energy deployment.

The legislation includes provisions to plug and remediate orphaned oil and gas wells on federal lands, support hydrogen demonstration projects, and improve the federal permitting process for projects to extract critical minerals from federal lands. In addition, the bill includes the full text of the Storing CO2 and Lowering Emissions Act aimed at driving deployment of carbon capture, utilization and storage technology.

Ahead of the committee's vote, Republican lawmakers expressed concern with Section 1005 of the bill, which would give the Federal Energy Regulatory Commission the authority to approve high-interest transmission projects if a state utility commission has denied an application or failed to decide whether to approve a project. The provision was aimed at clarifying part of the Energy Policy Act of 2005 that gave FERC limited "backstop" authority for siting and eminent domain for transmission development under certain circumstances.

During the July 14 business meeting, Committee Ranking Member John Barrasso, R-Wyo., read part of a letter from the National Association of Regulatory Utility Commissioners, or NARUC, opposing that part of the legislation. Among other criticisms, NARUC said Section 1005 "would overrule legitimate state agency concerns and laws with regard to how a state ruled on a transmission project even when a state provides a ruling within the one year time frame provided in the section."

"This new provision simply gives the state an ultimatum: 'Approve the [transmission] project or FERC will approve it for you,'" Barrasso said, quoting NARUC's letter.

Members of the committee's Democratic majority defended the proposal. Sen. Martin Heinrich, D-N.M., said lawmakers involved in writing the Energy Policy Act of 2005 had intended to allow FERC to override states on transmission siting if doing so was in the national interest. More broadly, proponents of the section said transmission permitting policies need updating to ease the development of new projects.

"We've had the current system in place for 15 years, and we know it's not working," Committee Ranking Member Joe Manchin, D-W.Va., said.

GOP committee members also sought to strike Section 1007 of the Energy Infrastructure Act, which would allow the federal government to be an "anchor tenant" in transmission projects. Sen. James Lankford, R-Okla., said the provision would allow the federal government to own up to 50% of such projects.

"This is a pretty dramatic shift from our regional transmission organizations that typically decide how we're going to do power, how we're going to distribute it," Lankford said. "It puts centralized federal government [in the role of] trying to decide this large power piece that we have not done in the past, nor do I think it's an efficient way to do it."

Nina Plaushin, vice president of regulatory and federal affairs for transmission developer ITC Holdings Corp., said in an email that the company would "caution against open-ended financial commitments to private entities without clear rules for eligibility and a solid plan to ensure federal recovery of monies spent."

The bill's anchor tenant provisions "are an area where this is a concern as the risk of stranded investment appears high," Plaushin said.

Sen. Roger Marshall, R-Kansas, offered an amendment to strike Section 1005 of the bill, with Lankford calling to remove Section 1007. Both amendments failed to get enough votes for adoption.