With help from Kelsey Tamborrino, Annie Snider and Josh Siegel.
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— Senators are having bipartisan meetings with the parliamentarian this week on Democrats’ reconciliation package, but legislators are still far apart on key climate issues.
— The Biden administration outlined its regulatory goals for next year, which includes additional efforts to rollback Trump-era rules, in its Unified Agenda Friday.
— The administration faces a deadline this week to unveil its plan for the regulation that governs lead in drinking water systems.
HAPPY MONDAY! I’m your host, Matthew Choi. NRDC’s Ed Chen gets the trivia for knowing the Taklamaken is the largest desert in China, and gets bonus points for pointing out that the Gobi desert is technically larger but not entirely in China. For today: Which conquistador led the Spanish conquest of the Inca Empire? Send your tips and trivia answers to [email protected]. Find me on Twitter @matthewchoi2018.
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BYRD IS THE WORD: The Senate is poised to begin bipartisan meetings with the parliamentarian this week, where both parties will haggle over what provisions belong in the budget reconciliation bill and what provisions violate the Byrd rule that restricts measures that do not directly affect spending or revenues.
Ahead of the clash, the Senate Finance Committee unveiled updated text Saturday for its portion of the bill. The panel has jurisdiction over the package of clean energy tax credits that comprise the largest portion of the bill’s climate provisions. The committee “made targeted improvements to the Build Back Better Act, and is ready to move forward in this process,” Chair Ron Wyden (D-Ore.) said in a statement, but they still don’t resolve some of the highest-profile, lingering disagreements on the climate front.
The draft Finance text includes some notable changes from the version the House passed in November. But Senate Democrats have so far avoided any major tweaks to the electric vehicle tax credit that has caught both Sen. Joe Manchin and our neighbors to the North’s attention, or to the carbon capture tax credit that some Democrats are eyeing (though sources following the negotiations tell ME that senators, including Manchin, continue to negotiate a compromise that would make the credit more accessible. Wyden said conversations over the text are “continuing.”)
While the changes unveiled Saturday were largely technical, they did offer a significant victory for the hydropower industry, which had so far largely been left out of the package. The text eliminates a half-credit reduction under current law for hydropower projects under the production tax credit and expands the investment tax credit to include environmental improvements to hydroelectric dams.
Other tweaks include an expansion of the PTC to include brownfields as a qualifying energy community and the exclusion of forested lands. The bill also now ties the termination of the ITC for transmission projects to when facilities begin construction, rather than when they are placed in service, providing a longer on-ramp, and it also expands eligible components for the advanced manufacturing production credit to include solar tracker components, inverters and offshore wind-related vessels. The phase-out for the advanced manufacturing credit would also be delayed by two years. Democrats narrowed the definition of sustainable aviation fuel, as well, and tweaked the definition of clean hydrogen so that retrofitted facilities may qualify as newly placed in service.
What about us? The Finance panel tweaked language to its “book income” minimum tax on large corporations, offering companies with pensions special protections. That change is likely to raise some eyebrows among the clean energy crowd, where companies and trade associations have called on tax writers to provide an exemption for renewable energy project accelerated depreciation, or else risk slowing deployment and increasing cost. They argue a failure to do so would increase the cost of projects by 15-20 percent and mean the loss of 130 gigawatts of clean energy deployment over the next decade. With the pension concerns addressed, expect the pressure to increase from clean energy groups raising the question, “What about us?”
Also worth noting, a carbon tax is absent from the draft Senate Finance bill, an unsurprising development that all but closes the door on efforts by Wyden and committee member Sen. Sheldon Whitehouse (D-R.I.) to add the long-elusive policy. Whitehouse has claimed 49 senators support the idea of including a carbon tax in Democrats’ climate and social spending legislation, but the one senator in question, Manchin, is unlikely to come around to the idea. Most House Democrats also prefer not to insert a new tax at this late stage.
THE BIDEN ADMINISTRATION’S REGULATORY TO-DO LIST: The Office of Management and Budget revealed the administration’s key regulatory goals for 2022 on Friday under its Unified Agenda. The laundry list of action items include further rollbacks of Trump-era actions and other self-imposed targets. Pro’s Energy team broke down some of the biggest items for the key agencies.
EPA plans to devise new emissions rules for the energy and transportation sectors, as well as potentially a new update to the particulate matter standard. The agency will also work on new biofuel blending targets for 2023 and beyond, as well as new proposals on definitions for Waters of the U.S. protections and first steps toward declaring PFOA and PFOS as hazardous substances under Superfund.
The Interior Department hinted it has its eyes set on updating royalty, fees, rents and bonding requirements for oil and gas leasing, development and production on federal land. It also will be looking at safety regulations for offshore oil rigs as well as regulations for renewable transmission.
The Energy Department unveiled lengthy plans for energy efficiency, including revising or replacing Trump-era rules that efficiency advocates have panned as out of line with Biden’s environmental agenda. The Unified Agenda also indicated DOE was mulling changes to regulations for the Title XVII loan guarantee program operated by the Loan Programs Office as well as a rule that would amend the president’s power to approve transmission line construction across international borders.
And FERC is pushing ahead on proposed rules offering incentives to utilities to voluntarily make investments in strengthening their cybersecurity as well as a rule that would increase the frequency under which the North American Electric Reliability Corporation must report on performance to FERC. The commission also plans to finalize a rule intended to improve the safety of hydropower projects.
MOMENT OF TRUTH ON LEAD: This is the week the Biden administration will have to present its plan for the regulation that governs lead in drinking water systems, which the Trump administration revamped. Biden’s EPA put the Trump-era rule on ice for six months, with Thursday representing their deadline for finalizing a path forward if they don’t want the Trump rule to spring into effect.
The Trump-era regulation represented a mixed bag for public health advocates. Former EPA Administrator Andrew Wheeler touted it as a major win for communities, and greens welcomed its requirements for mapping lead service lines and tightening testing requirements. But they objected to the fact it didn’t lower the “action level” at which utilities must begin replacing lead service lines because of elevated levels in tap water samples, and slowed the rate at which water systems that exceed that action level have to undertake replacements.
Biden water officials have spent the past six months pondering what to do and meeting with affected communities to hear their thoughts. Options before the agency include: Letting the Trump rule stand as-is, scrapping it and starting over, or taking a narrow approach, leaving some portions to stand and revising others. Outside observers largely put their money on the last option, since an overhaul could slow down efforts to put to use the influx of funds from the infrastructure bill.
“At least let the inventory go in there. We’re getting all this money now – the $15 billion. People need to know where to spend it,” argued Betsy Southerland, a former top EPA water staffer now with the Environmental Protection Network.
TURNING OFF THE TAP FOR OVERSEAS FOSSIL FUELS: The U.S. will stop financing for most overseas fossil fuel projects, the Biden administration said in a cable to its diplomatic posts last week. The policy covers future fossil fuel projects and provides exemptions if agencies make a compelling enough case for carbon-intensive infrastructure projects that would otherwise not be built or would require more than $250,000 in federal financing, Pro’s Zack Colman reports after reviewing the diplomatic cable.
The administration wrote the policy “is to ensure that the vast majority of U.S. international energy engagements promote clean energy, advance innovative technologies, boost U.S. cleantech competitiveness, and support net-zero transitions, except in rare cases where there are compelling national security, geostrategic, or development/energy access benefits and no viable lower carbon alternatives accomplish the same goals.”
The administration has been moving in that direction for some time now. Biden pledged to end most overseas oil and gas finance during the U.N. climate conference in Glasgow last month. Read more from Zack.
SPR RELEASE THIS WEEK: The Energy Department announced Friday it will release 4.8 million barrels of oil from the Strategic Petroleum Reserve to Exxon Mobil as part of its plans to unleash 50 million barrels to help cool down fuel prices. Exxon Mobil will get the oil as part of a swap, meaning the oil giant will have to replenish the federal stock later down the line. The administration is also lining up a further 18 million barrels for sale this Friday. Ben Lefebvre has more for Pros.
HAALAND IN FOR MINING: Interior Secretary Deb Haaland seemed to get behind domestic mining of critical minerals to bring home the supply chain of electric vehicle parts. Speaking at the Western Governors Association meeting in California late Thursday, Haaland said “of course, it’s absolutely imperative that if we’re looking for a way forward that we can do it here in this country.” Critical minerals needed for EV and energy storage parts are largely sourced in countries with dubious human rights records, such as China and the Democratic Republic of the Congo. The Interior Department stressed that any domestic extractions should be done with thorough community engagement and “the highest environmental, labor, and sustainability standards.” Ben has more for Pros.
— “Japan to skip carbon tax in fiscal 2022 reform package,” via The Japan Times.
— “GM Plans More Than $3 Billion for Electric-Vehicle Projects in Michigan,” via The Wall Street Journal.
— “FirstEnergy, Marion County coal plant admit bad deal for ratepayers already facing high energy burden as Manchin profits,” via The Charleston Gazette-Mail.
THAT’S ALL FOR ME!