EfficiencyLaw.com

All policy efforts in Washington, D.C. are in a holding pattern as Vice President Biden leads bipartisan negotiations to craft a major deficit-reduction initiative to clear the way for an increase in the federal debt limit by August 2nd. The $14.29 trillion debt limit was breached on May 16, although officials at the U.S. Treasury have said they have the ability to juggle assets to delay the possibility of the U.S. Government defaulting on its debt until August 2nd at the latest.

Top administration officials and independent economists have warned that, unless the statutory borrowing limit is increased before August 2nd, the economic consequences could be dire. If the U.S. is unable to pay its creditors, the Federal Government faces the prospect of losing its AAA credit rating – a move which could exacerbate the fiscal straits the country is currently facing as a lower debt rating will result in drastically higher borrowing costs and the value of the dollar will suffer heavy losses.  However, negotiations appear to be at an impasse this morning over taxes, which may mean that President Obama and House Speaker John Boehner will soon take over the negotiations and hammer out a deal in the Oval Office.

In the meantime, regulatory uncertainty constrains energy companies as the industry waits for Congress to extend important tax incentives and address related policies. Below is a very basic overview of energy proposals that will advance only after the budget negotiations have concluded (hopefully before Tuesday, August 2nd).  Please email frenkil@efficiencylaw.com for further details.

A key issue for the following proposals is whether Congress will require a “one-in/one-out”-style policy such that budget offsets will be required for any legislation that would cost the Federal Government money.

• Energy Extenders Bill: This bill, which would address tax-code provisions set to expire at the end of the calendar year, would likely include the production tax credit (PTC) for wind and solar development, along with various infrastructure credits for alternative fuels and vehicles (speaking of alternative vehicles, don’t hold your breath for Congress to pass the Natural Gas Bill, aka the latest “Pickens Plan”)

• EPA and DOE Funding: Expect budget battles related to DOE’s clean energy budget and particularly the EPA’s climate change program.  Spending caps under the new budget regime would likely make it impossible to enact a market-based approach to controlling greenhouse gases anytime soon.

• Clean Energy Standard (CES): While Senator Jeff Bingaman (D-NM) has not yet introduced his proposal to require retail distributors of electricity to purchase a minimum level of renewable energy sources, Senator Richard Lugar (R-IN) has offered an alternative to Senator Bingaman’s expected bill.  However, the CES has thus far gained little traction in the Congress and will likely not do so, if at all, until after the 2012 election.

• Ethanol Tax Credit: Since Senator Feinstein’s (D-CA) amendment to repeal a key ethanol tax break successfully passed in the Senate last week with 73 votes, she has been working with pro-ethanol senators Amy Klobuchar (D-MN) and John Thune (R-SD) to develop a compromise bill that would eliminate the controversial tax break but provide new benefits for biofuel infrastructure.

• Additional Energy Proposals before the House Energy and Commerce Committee:
  • Expedite permitting for energy projects in Alaska
  • Expedite permitting of the XL Keystone pipeline, which Majority Leader Eric Cantor (R-VA) expects to reach the House floor in July

• Additional Energy Proposals before the Senate Energy and Natural Resources Committee:
  • Establish a Clean Energy Development Bank to foster the deployment of low-carbon technologies
  • Promote the development and deployment of electric and other electric fuel vehicles and infrastructure
  • Encourage the development of small modular reactors, which may be a safer way to develop nuclear power in a post-Fukushima landscape
  • Improve the federal government’s energy efficiency
  • Repeal the “section 526” prohibition on government purchase of fuels with high carbon content