When is an Energy Bill not an Energy Bill?

when it’s election year theatrics, that’s when.

For those of us with short memories, here’s a reminder of a time—not so very long ago—when legislators introduced energy bills with the actual idea of passing them and implementing good policy.  Perhaps they tried too hard and too many times last year and this, so that—as when you bang your head against a wall over a long period of time—it felt good just to stop.

And what a simple thing it was, that they were trying to do: extend and improve the investment tax credits (ITC) that were successful in helping ordinary people get their power from the sun instead of from coal and gas.  Many of them in Congress tried, eight or more times over twelve to eighteen months, just to keep a good idea going.  Many others blocked the bills, claiming that if these credits led to significant savings then there was no need to fund them through taxes;  some of them actually meant it. 

A certain mulish stubbornness became apparent as time went on, with the sponsors of these bills introducing successive versions almost identical to their ill-fated predecessors.  And as energy prices rose at ever-steeper rates, the affair began to resemble Bizarro World, that planet in the DC Comics’ Superman series where all that was good was suppressed and everything negative was celebrated.  For despite protestations from both sides of the aisle that they really really wanted to extend the tax credits, funds that could have gone to finance essential investment in clean, distributed energy went instead to the oil and gas industry, in the shape of taxpayer subsidies to companies already enjoying historic profits.

Now, with Congress back in session but with mere weeks to run before their status as lame ducks commences, one would think the fast-approaching expiry date for the tax credits (December 31) would concentrate legislators’ minds on practical solutions.  And we may yet be pleasantly surprised.  There are several vehicles, in both House and Senate, that could carry the ITC forward.  From last to first:

• There’s what’s known as the Continuing Resolution, which is meant to fund government agencies if no appropriations bill has been passed by September 30th.  By definition, this would be one of the latest, if not the latest, bill to be passed in a calendar year;  without it, non-essential functions of the government would cease at year’s end.  The sense of legislative panic that often accompanies a Continuing Resolution could extend to accommodate the ITC, if they were a part of the bill.
• There’s a general tax extenders package that may come from the Senate and that would extend all tax provisions scheduled to expire at the end of the year.  It was just such a bill, however, that failed to include the ITC at the end of 2007.
• Another possibility is the much-touted second part of the economic stimulus package.  While it would be logical for the ITC to be considered an ‘economic stimulus’, it’s also the case that they were dropped from part I of the package earlier this year.

But very much more on the front burner than these bills are actual energy packages currently being molded into shape by the Senate Finance Committee and, separately, by House Democrats.  The latter is known as the ‘all of the above’ bill because it’s said to contain:

• A lifting of the moratorium on drilling in certain OCS areas and the ANWR;
• Cuts in subsidies for the oil and gas industry;
• Increases in royalties to be paid by oil companies for new drilling;
• production tax credit and investment tax credit extensions for renewables;
• a credit for plug-in hybrid vehicles;
• A 15% nationwide Renewable Electricity Standard (RES);
• Energy efficiency improvements in building codes;
• Funding for mass transit;
• Funding for R&D into carbon capture and sequestration;
• Release of oil from the Strategic Petroleum Reserve (SPR).

It might also be known as the ‘election year theatrics’ bill, since few Hill insiders expect it to survive on the hostile floor of the Senate.  It contains provisions that are known to be ‘poison pills’ to Senate Republicans, e.g., perceived punitive treatment of oil and gas companies, a national RES, and funding for mass transit.  So the question must be asked: was it House leadership’s intent to pass a comprehensive energy bill or simply to put the Senate minority in the position of voting against a bill containing offshore drilling and SPR relief measures—and this in the immediate run-up to thirty-five Senate elections?

If the former, then in finally extending the ITC, Democrats may have to endure the wrath both of environmental groups and the oil lobby, but will have appeased the more numerous voices calling (for questionable reasons in our opinion) for increased drilling.  If the latter, then the exercise as a whole may sacrifice the ITC and other valuable provisions on the altar of election-season one-upmanship.

At the other end of the Capitol building, Senators Baucus and Grassley of Finance have put forward a $40 billion ITC extension package, also to be offset by oil and gas industry taxes.  This is a cleaner, simpler bill than the House version, and also contains ITC extensions to be offset by oil and gas subsidy repeals.  That’s right, it’s exactly the kind of package that has died many times before in the Senate, but we’re told that Senate leadership is on board with the attempt and could well bring their respective caucuses along with them.  But this bill also contains non-energy-related tax extenders that are only partially paid for, and an AMT patch that isn’t offset at all;  so is this a good faith Senate effort to resolve the impasse, or a way of forcing the House either to vote for unpaid-for benefits or to vote against ITC extensions?

Or is it, after all, election year theatrics?