Despite representing wind-heavy district, new majority leader likely to oppose PTC extension — source

Source: Nick Juliano, E&E reporter • Posted: Monday, June 16, 2014

The impending promotion to House majority leader for Rep. Kevin McCarthy, the California Republican with a moderate reputation on energy policy who represents one of the windiest districts in the country, would at first seem like good news for clean energy supporters hoping to extend a key renewable electricity tax break at the end of this year.

Not so fast. A source close to McCarthy told Greenwire he is not in favor of renewing the production tax credit, which expired at the end of last year. Extending the $23-per-megawatt-hour credit has been the top priority for wind, geothermal and other energy companies that warn their businesses could collapse without the credit.

McCarthy is expected to formally be elected as majority leader Thursday, a snap election among House Republicans that follows the swift downfall of Rep. Eric Cantor (R-Va.), who lost a primary election Tuesday in one of American history’s most stunning upsets and promptly announced his decision to step down from leadership at the end of July. Rep. Pete Sessions (R-Texas), the House Rules Committee chairman, had planned to challenge McCarthy for the job but announced last night that he was withdrawing from the race.

Currently in his fourth term, McCarthy, 49, joined the Republican leadership team as chief deputy whip in 2009 and is on track to make the quickest rise to majority leader.

McCarthy has been a point person on energy issues for House Republicans since they took control of the lower chamber in the 2010 elections. A few months after the GOP claimed its majority, McCarthy launched the House Energy Action Team (HEAT), a messaging group, along with Energy and Commerce Chairman Fred Upton (R-Mich.) and Natural Resources Chairman Doc Hastings (R-Wash.) (E&ENews PM, May 4, 2011).

McCarthy’s district has among the most energy diversity and activity of any represented by a member of Republican leadership.

It is home to the windswept Tehachapi Pass and includes one of the nation’s largest wind farms in the Alta Wind Energy Center, whose capacity exceeds 1,500 megawatts. A slice of the Bakersfield-area district also is pocked with oil wells drilling into the San Joaquin Basin, the state’s most prolific reserve. And it includes a variety of power plants, including a number of natural gas plants, the largest with a capacity of 965 MW, as well as several hydro facilities, a handful of solar arrays, two coal plants and one wood-fired power plant. Some of the best potential solar energy in the country also falls within the boundaries of California’s 23rd District.

HEAT helped to draft many of the energy bills that would pass the House since Republicans took the majority. Most of the chamber’s focus has been on controversial issues such as approving the Keystone XL oil sands pipeline, expanding oil and natural gas drilling on public lands, and reducing the reach of regulatory agencies like U.S. EPA. But a handful of broadly bipartisan energy efficiency bills also have passed the House this year.

Still, none has cleared the Senate, where procedural disputes have sunk even broadly popular bills in recent months. Tensions are likely to remain high beyond this year regardless of who holds the majority in the upper chamber, and the de facto 60-vote requirement to enact any substantial legislation means gridlock should continue to be the dominant theme on Capitol Hill.

McCarthy also is a critic of EPA policies, including its efforts to address climate change, and he is not afraid to wade fairly deep into the regulatory weeds to address issues that affect his constituents. Earlier this week, McCarthy led a bipartisan delegation of Central Valley lawmakers in requesting EPA to declare the ongoing California drought an “exceptional event” that is preventing the region from complying with air quality standards for fine particulate matter.

“While we understand that the ‘exceptional events’ provision of the Clean Air Act does not exclude data obtained from one single meteorological event involving stagnation or lack of precipitation, we believe the current drought emergency in California represents a multitude of events over a significant duration that would qualify under most interpretations as exceptional,” the lawmakers wrote Monday in a letter to EPA Administrator Gina McCarthy.

PTC’s fate likely tied to broader deal

Even without McCarthy’s opposition, PTC supporters faced an incredibly steep climb to win an extension for the credit, which is one of about 50 “tax extenders” that expired at the end of last year. A Senate bill to reinstate the lapsed extenders is stalled amid partisan procedural squabbling, while House Republicans are pursuing a much narrower approach that would make permanent just a few of the tax credits while letting most lapse, including the PTC and incentives for alternative fuels and energy efficiency.

In past years, McCarthy has been a key ally in the wind industry’s efforts to extend the PTC, which was created in 1992 and has been extended a year or two at a time at numerous points since then, lapsing for an extended period just a few times.

In 2012, before the PTC won an extension as part of the “fiscal cliff” deal reached at the end of that year, McCarthy said at a public forum that Congress “should” extend the credit (Greenwire, June 20, 2012).

But now, the source close to McCarthy says, the congressman believes the wind industry has relied on government help for long enough and should be able to stand on its own. There have been some hints recently of McCarthy’s evolving position. For example, a spokesman told National Journal in December that McCarthy supported the efforts of Ways and Means Chairman Dave Camp (R-Mich.), who proposed cutting the credit as part of his comprehensive tax reform proposal.

“I think there is a time when it gets phased out,” McCarthy told CQ last month. “We’ll look at all the extenders. We’ll see where we are. There comes a time where you say something is temporary. And there comes a time to stop it.”

Industry lobbyists say that the PTC’s prospects are primarily tied to the broader political dynamics in Washington, regardless of any individual member’s position, and that no action is expected until a post-election lame-duck session in any case. A key variable is whether Republicans take the Senate in November and whether there is a legislative vehicle on which tax extenders could hitch a ride. Last time around, it was the fiscal cliff bill to prevent income taxes from rising on millions of individuals, but this year there is no similarly significant piece of must-pass legislation on the horizon.

The best prospects are appropriations legislation — assuming Congress just passes a short-term continuing resolution to get past the election — or potentially a transportation bill. There also is some hope that House Republicans could be persuaded to accept the entire Senate extenders bill to avoid ending those incentives they support, such as the research and development tax credit or more generous expensing. But that would be a break with precedent as extenders typically do not move on their own.

Tying extenders in with other legislation can complicate efforts to handicap its passage, and it is still too soon to declare the PTC dead for this year, supporters say. Indeed, despite his stated support in 2012, McCarthy voted against the fiscal cliff bill that would have extended the credit, citing other tax increases contained in the legislation.