Energy Update: Week of August 23

Friends,

No full update today even though the House returns but I still wanted to drop you a short note to mention a few good items and events that will interest you.

The House is back early from recess today and will be taking up a major procedural vote on pushing forward with Democrats’ $3.5 trillion budget plan, the bipartisan infrastructure deal and a voting rights bill this evening. The House Rules Committee meets at 11:00 a.m. and should give us some signals according to Liam. (I have his full update at the BOTTOM.)

Speaker Pelosi isn’t showing her cards on her moves but pressure is mounting from both sides.  Her latest “Dear Colleague” suggests that if they adopt the budget resolution and swiftly move in reconciliation, the bipartisan bill would go into effect on 10/1. Some fuzzy calendar math here, but clearly trying to dangle the prospect of a near term vote on the BIF to win over the moderates.  Speaking of them, Reps. Carolyn Bourdeaux, Ed Case, Jim Costa, Henry Cuellar, Jared Golden, Vicente Gonzalez, Josh Gottheimer, Kurt Schrader and Filemon Vela all weighed in with an op-ed in the Washington Post saying “this once-in-a-century infrastructure bill does just that: It meets the actual moment we are in. It is bipartisan at a moment when we are deeply divided. It will add jobs, build the economy, fix our crumbling infrastructure and help tackle climate change.”

And Reps. Kathy Castor (D-Fla.), Debbie Dingell (D-Mich.), Steven Horsford (D-Nev.) and Sean Casten (D-Ill.) hold a news conference today at 4:30 p.m. on investments in infrastructure and the environment at the House Triangle.

DOE’s Turk Talks Hydro Power – Tomorrow is (August 24) is National Hydropower Day and DOE Deputy Secretary David Turk will participate in an interview with the National Hydropower Association's President and CEO Malcolm Woolf about hydropower’s role in a clean energy economy. The interview will be available to watch on NHA’s website or on any of its social media platforms. 

Forum to Look at Hydrogen – On Thursday 9:00 a.m., the Center on Global Energy Policy and the Global CCS Institute will host a discussion that will bring together experts in technology, policy, and finance to address how hydrogen can rapidly provide commercial energy services across key sectors (power, transportation, industry, and buildings). The event will feature a keynote address and a short presentation by project co-leads, former DOE official Julio Friedmann, now at the Center on Global Energy Policy at Columbia SIPA, and Global CCS Institute’s Alex Zapantis.

API Report Highlights Impact of NatGas, Oil on COVID Recovery – API has released a new analysis of the natural gas and oil industry’s impact on the U.S. economy and highlighted its importance to the nation’s post-pandemic recovery. The industry is a driver of every sector of the U.S. economy, supporting 11.3 million total American jobs in 2019 across all 50 states. The industry’s total impact on US GDP was nearly $1.7 trillion, accounting for nearly 8% of the national total in 2019.

Biofuels Quotas Expected Soon – Getting constant pressure from biofuels advocates in Congress, the EPA told lawmakers to expect a White House review of its plan for quotas for how much biofuel must be blended into gasoline soon.  Efforts to set new requirements have been stalled for months as the administration navigates competing demands from Democratic allies -- including senators representing rural, biofuel-producing states, as well as those with major oil refining assets back home and labor leaders. EPA is likely to formally propose new rules in the next few weeks.

Regan to Speak at RFF – Maybe, we will get a sense of EPA’s direction NEXT MONDAY at 3:30 p.m. when EPA Administrator Michael Regan speaks at Resources for the Future for a Policy Leadership Series event. During this wide-ranging conversation, RFF will discuss the role of economic analysis in informing environmental rulemaking and policy, regulations for greenhouse gas emissions under the Clean Air Act, EPA’s approach to environmental justice considerations, and more. RFF President and CEO Richard G. Newell will sit down with Administrator Regan to talk through these key issues and discuss the goals he has set during his first year as the head of EPA.

Chatterjee Set Date to Leave – That same day (next Monday) FERC Commissioner Neil Chatterjee is stepping down, according to his post on Twitter last week.  His term formally expired back in June, but could remain on the Commission until either a replacement is found or the year ends. “I will continue to carry out my responsibilities until that date. Serving on the Commission has been the honor of a lifetime,” he wrote.

Eilperin Named WaPo Deputy Climate Editor – Finally, CONGRATS to our friend Juliet Eilperin, who in an announcement from editor on Friday, was named deputy climate and environment editor.  In her new role, Juliet will oversee coverage of the struggle to manage a changing climate, with a special focus on efforts – in Washington and around the world – to transform our fossil fuel-dependent economy and rein in greenhouse gas emissions. She also will coordinate with desks across the newsroom to cover extreme weather and other destructive manifestations of global warming.  

The NCAA field hockey season opens up this weekend and just an update on my daughter Hannah for all of you who have heard about her over the years. While she is no longer playing, she now umpiring and opens up this weekend at Boston College, big-timing her old man who is headed to Bucknell.

We are around if you need anything.  Our team is paying close attention to any moves the House is making on the budget and the Senate-passed bipartisan infrastructure package. 

Call with questions,

Frank Maisano

202-997-5932

 

The Big Picture

An otherwise quiet recess week is punctuated by the ongoing procedural standoff in the House between a rogue group of 9 moderate Democrats and the majority’s leadership, which is backing progressive demands to advance reconciliation legislation before considering the Senate-passed bipartisan infrastructure bill. For now, the House remains intent on returning next week to adopt the budget resolution and take up voting rights legislation, though those plans could change depending on the whip count. At any rate, with a September 15^th soft deadline, committees in both chambers  will spend the coming weeks crafting legislative recommendations that will be incorporated into the eventual reconciliation package.

Looking Ahead: Dual Track Collision Course

After a flurry of letters in the wake of last week’s Senate vote laid out mutual threats and demands, political chicken in the House entered a quieter phase, with neither side showing signs of yielding, but no meaningful escalation in tactics or rhetoric. Speaker Pelosi reiterated her plans in multiple letters to her colleagues affirming their strategy, and suggesting a path forward that could allow moderates to save face. Leadership’s bid to elide the tension, since backed by the White House, is centered around a procedural effort to tie together the various threads before the chamber via the Rules Committee. While the precise structure of the rule remains unclear, and could include various contingencies, the general idea would be to turn the vote into one that can be said to advance both the infrastructure bill (IIJA) and the budget resolution, a carrot paired with a political stick—the specter of voting against the party’s prized voting rights legislation (H.R. 4). The House would then proceed to vote on the budget resolution and H.R. 4, respectively, but not bipartisan bill.

For their part, the self-styled Moderate Nine re-affirmed their previous demand to pass the infrastructure bill first, even as members sought to differentiate themselves with more nuanced stances on the budget resolution and the reconciliation process. Meanwhile, the moderate holdouts got reinforcements from groups like the U.S Chamber of Commerce, which is running digital ads thanking them, as well as direct cover from the centrist group No Labels, which is running ads praising the “unbreakable nine.” The Blue Dog Caucus also weighed in with an endorsement of the bipartisan bill, urging leadership to allow a standalone vote “without delay.” Should they indeed stand their ground in the face of leadership and White House pressure, a feat that would require at least four of the nine to break ranks, one question is whether the moderates choose to make their point on the procedural vote, or support the rule while voting against the budget resolution itself.

So how could this play out? First, and most likely at this point, the moderates win some sort of last-minute concession, public or private, that allows them to declare victory and support the resolution. That could come in the form of assurances related to the House calendar (a September infrastructure vote?), or policy priorities in the context of reconciliation (e.g. SALT for Gottheimer, step up for Costa). The catch for Gottheimer and company is that caving at this juncture likely makes them less credible in the home stretch, meaning they had better make this opportunity count. The least likely outcome would be a public about-face by leadership that allows for the bipartisan bill to go first. Why? They simply don’t have the votes, and a last-minute stand by moderates only reinforces the progressive sense that they can’t be trusted without mutually assured destruction. And while there are dozens of Republicans who could support IIJA in a vacuum, they won’t support the bill so long as it remains linked to the reconciliation effort, nor would Speaker Pelosi put herself in the position of relying on the minority. If the standoff can’t be resolved privately, Pelosi will have to choose whether to call moderates’ bluff—a difficult call for a Speaker whose proud ethos is “I don’t go to the floor and lose”—or change tacks and delay the vote.

Monday passage of the rule would allow them to adopt the budget resolution itself on Tuesday before departing for the remainder of recess to hammer out details on the reconciliation package. A failed vote, or a delayed one, which further cloud the path forward.

Key Variables on the Horizon          

Sequence: Our previous discussions of sequence have always been about the two tracks—how would the respective bills be considered and in what order. Now the question revolves around the reconciliation process itself. Ordinarily the House goes first, thanks to Constitution’s origination clause, though its initial draft is often cast aside given the Senate’s role as the lowest common procedural and political denominator. And for now, House leaders like Budget Chairman John Yarmuth have indicated that the House intends to lead the dance. But the House was also supposed to go first on the budget resolution, a plan that was foiled by moderate resistance to taking a difficult vote on a plan that would just be watered down by the Senate. The same dynamic could be repeated here, with progressives eager to improve their negotiating leverage with the Senate, but vulnerable centrists reluctant to support a bill that will inevitably be pared back. Should the House pass its version of a bill in short order, that could allow for a near-term vote on the IIJA; if they yield to the Senate, progressives are likely to keep the hostage all the way to the end.

Overall Timing: A September 15^th deadline for committees is likely to set up October floor consideration at the earliest, certainly for the Senate, and in all likelihood for the House as well. Even if the process moves forward relatively smoothly—no certainty given the current standoff—the balance of the month will be dominated by the various legislative cliffs facing Congress at the end of the fiscal year. For now, the best indicators we have are the committee markups that have begun to percolate. While they are subject to slip, numerous House committees have floated their intention to approve their components when Congress returns the week of September 13^th. (Formal markups will require the budget having been adopted, underscoring the stakes of the current game of chicken.) With even ratios at the committee level, the Senate is likely to once again bring its package straight to the floor. While the goal will be to finish the package by the end of October, the likelihood of intra-caucus, intra-cameral haggling leaves the path and the pace uncertain. With no true legislative forcing mechanisms on the horizon after September 30, look for Thanksgiving as a potential calendar-driven backstop. A short term CR (and highway bill patch?) would likely place the next legislative waypoint in mid-December, which, together with a looming election year, would provide a strong incentive to wrap up in time for the holidays.

Double Dipping: In a letter to his Democratic colleagues backing the Leadership strategy on the budget resolution, House Transportation & Infrastructure Chairman Pete DeFazio made news twice over, all but acknowledging that the House won’t alter the bipartisan bill as passed by the Senate, while indicating his intention to revisit many of its hard infrastructure elements via reconciliation, a violation of the deal made by the White House with the Senate Group of 20. He further floated the idea of including earmarks from the House-passed INVEST Act, a decision that would surely run into Byrd Rule questions in the Senate. Neither seem likely to come to fruition, but given his jurisdiction—and the $60 billion he was handed in the reconciliation instructions—DeFazio’s comments can never be ignored.

Still on the Radar

-Inter-cameral/Intra-caucus Tensions (8/13): No sooner was the budget resolution adopted in the Senate than Senator Joe Manchin released a statement indicating that while he voted to advance the process, and “discuss the fiscal policy future of this country,” he has “serious concerns about the grave consequences” of Congress passing a $3.5 trillion bill. The statement, which echoed an earlier sentiment from fellow bipartisan group member Kyrsten Sinema, served to underscore the concerns of progressives whose mistrust of the centrist wing are driving their blockade of the bipartisan bill, and provides useful context for the progressive power play mentioned above. The resolution of this standoff is unclear, but the fundamental fact is that Democrats currently do not have the votes for the bipartisan bill, and no amount of threats or hostage taking by moderates will change that. Republican centrists could theoretically make up the difference, but with 49+ progressives pledging to oppose such a vote, it is nearly impossible to imagine sufficient GOP crossover, even in the unthinkable event Speaker Pelosi would rely on them. The path forward is less about sequence at this point, and more about allowing these members to save face, whether by assuring them of a future vote, or by making concessions related to their reconciliation concerns (e.g. Gottheimer and SALT.) If they can’t find an off-ramp, the House would be forced to post-pone the 8/23 vote, as Democrats can only afford to lose three votes. Expect the budget to be adopted without much drama, but the broader questions remains: if not $3.5 trillion, how high are Democratic moderates willing to go; what do they mean by “paid for;” and will that be good enough for their progressive counterparts? 7/30 Update: Amid the unqualified triumph in the Senate this week, one ominous social media exchange hinted at the political perils that await in the House. Responding to Senator Sinema’s qualified endorsement of the $3.5 trillion Senate budget resolution—she will vote to advance the process, but opposes a package of that magnitude—Rep. Alexandria Ocasio-Cortez fired back on Wednesday, tweeting “good luck in tanking [the reconciliation bill] while presuming you’ll survive a 3 vote house margin,” underscoring the progressive angst the bipartisan bill will face in the lower chamber. Nor is the bitter sentiment limited to The Squad—House Transportation and Infrastructure Chairman Pete DeFazio has been on a public rampage against the BIF, demanding a formal conference to bridge the differences with his surface transportation bill, which is poised to serve as the bipartisan legislative vehicle. And while the open fighting is currently between the House and Senate, there is a sizable faction of moderate Democratic majority makers who will want to see the bipartisan bill passed as is. Once the bill arrives in the House, Speaker Pelosi will have to decide whether to stick to her guns—refusing to move the bill until the Senate sends over a reconciliation bill, a process that is likely to take well into the fall—or hand the Biden administration (and her most vulnerable members) a marquee win. How she chooses to proceed may have profound implications for the size, scope, and speed of the eventual reconciliation package.

 -Surface Transportation (8/13): Absent an about face by Pelosi, which in turn would require the intervention of President Biden, the only near-term path for enacting the IIJA would be a late September vote related to the expiration of the current surface transportation bill. While it remains unlikely given progressive mistrust and determination to maintain their leverage in reconciliation, the mid-September drafting deadline opens up a scenario where a combination of good faith built by the budget resolution vote, and comfort with the committee product could intersect with the need to reauthorize the highway program. In some ways adopting IIJA could be easier than a short term extension that gets wrapped up in shutdown/debt limit politics. 7/9 Update: In addition to funding the government, Congress must reauthorize the highway program by September 30^th, creating a legislative forcing mechanism for the bipartisan deal, which would include a long-term surface transportation reauthorization. Should the bipartisan agreement fall apart for any reason, Congress will have to find a way to kick the can.

-Debt Limit (8/13):  Following consistent warnings from Leader McConnell, Democrats considered adding, but ultimately opted against, instructions that would allow them to raise the debt ceiling unilaterally, setting up showdown with Republicans at the end of September. In a show up support for McConnell’s position, 46 GOP Senators signed a letter affirming that they “will not vote to increase the debt ceiling” as part of any vehicle. While there are creative ways to structure a vote that could elide this pledge (as has occurred in previous standoffs), Democrats’ power to amend the budget resolution at any time is a reason to think Republicans are not bluffing. The coincidence of the debt limit fight with the need for a continuing resolution to fund the government sets up the possibility of a shutdown in addition to the specter of default.  7/23 Update: Republican Leader Mitch McConnell warned Democrats this week that they should not expect any GOP votes to raise the debt limit once it is re-instituted at the end of the month. Noting their unilateral spending plans, McConnell suggested that they should lift the limit via reconciliation. (As noted in previous analysis below, this is possible, but would require Democrats to put a formal number on the increase, playing into Republicans' preferred narrative on runaway spending and deficits.) Ultimately the decision is up to Schumer, who is likely to try and attach the debt limit measure to must-pass legislation to fund the government in September. McConnell's warning comes as Secretary Janet Yellen sent a letter to congressional leaders warning them that the so-called X-date is uncertain, and that they should not risk the full faith and credit of the United States on political brinkmanship. 7/9 Update: Back in 2019, Congress suspended the debt ceiling for two years as part of a broader bipartisan budget deal. The limit will be reinstated on August 1, introducing another political hot potato to an already-complicated summer agenda. Congress could re-suspend the debt limit as part of an end of summer government funding measure—a continuing resolution is required by September 30 to avert a shutdown—but that would require GOP cooperation. Democrats could choose to increase the limit as part of a reconciliation bill, but would have to actually raise the number in a way that incorporates their multi-trillion dollar spending ambitions.