Lawmakers seek way out of appropriations, tax extenders morass

Source: Nick Juliano, E&E reporter • Posted: Friday, November 21, 2014

While political drama over the Keystone XL pipeline and President Obama’s impending immigration announcement have captured most of the public attention on Capitol Hill since lawmakers returned last week, negotiations are continuing behind the scenes over legislation to keep the government running and renew dozens of lapsed tax incentives for renewable energy and other businesses.

Resolution of the tax and spending debates is unlikely until at least next month, but discussions remain ongoing over several areas that sharply divide House and Senate majorities, including renewable energy tax breaks and appropriations riders that would limit U.S. EPA rules.

None of the energy-environment disagreements rises to the level of the current divide over immigration, on which Obama is expected to announce a proposal that would allow some people in the country illegally to stay and rank-and-file Republicans are agitating to shut down the government to stop him. But a split on those issues persists between Democrats, who do not relinquish their Senate majority until January, and Republicans, who currently control the House.

“If we have an omnibus, obviously there will be a struggle in negotiations there on a whole variety of these issues, but they’re not of the magnitude, obviously, of what we’re talking about here” on immigration, said Rep. Tom Cole (R-Okla.), a senior appropriator who is close to House leaders. “Those are the kinds of differences that can be accommodated or that one side or the other can concede on. This is something that’s much bigger, much more public and much more difficult to handle.”

The biggest question currently circling on Capitol Hill is what happens when the continuing resolution funding the government expires Dec. 11. Appropriations Committee members and party leaders on both sides of the Capitol say they are pursuing an omnibus bill that would fund the government through the remainder of fiscal 2015, but a growing bloc of conservative members is pushing for another short-term CR to give Republicans more leverage in the immigration fight next year.

Retiring Rep. Jim Moran (Va.), the ranking Democrat on the Appropriations Subcommittee on Interior, Environment and Related Agencies, said appropriators are negotiating the details of an omnibus in case enough support exists to fund the government for the rest of the fiscal year. But he said discussions were falling victim to GOP demands for policy riders.

“They’re going nowhere. Because there are … some people on the Republican side right now who want to use it as an instrument to beat up on EPA,” Moran toldĀ E&E Daily. “That fight is real, and as long as they’re insisting on putting them on, there’s no reason why we shouldn’t stick with a CR.”

A GOP committee aide said everything included in the individual appropriations bills drafted on either side of the Capitol earlier this year is within the scope of the negotiations and that Republicans were hoping for at least some riders to end up in the final package.

The House’s Interior spending bill, which passed committee but never was considered on the floor, would have blocked EPA rules limiting power plants’ greenhouse gas emissions and determining what streams and wetlands within the jurisdiction of the Clean Water Act, among other measures (E&ENews PM, July 15). A House energy and water spending bill that passed this summer would have prioritized spending on fossil and nuclear programs over renewable energy or efficiency and targeted other aspects of the Obama administration’s climate policy (E&E Daily, July 11).

Senate subcommittees drafted Interior and energy spending bills that were more reflective of Democratic priorities, but neither received a vote in the full Appropriations Committee or on the floor this year.

Rep. Ken Calvert (R-Calif.), who chairs the House Appropriations Interior Subcommittee, said he was hopeful that the two sides would be able to come to an agreement on an omnibus spending bill for the year.

“I think that’s the best thing for the country, is for us to get an omnibus where the departments know how they can operate, they can put together budgets and do what they need to do,” he said. “It’s difficult to operate under continuing resolutions, so we need to get back to regular order.”

Tax showdown looms

On the tax front, Congress also is working to reach a deal on a package of temporary tax breaks that expired at the end of last year, collectively known as “tax extenders.” A key sticking point has been the fate of the production tax credit (PTC), which conservative groups have been agitating to eliminate but which continues to enjoy strong support from Democrats and some Republicans hailing from windy states.

The Senate Finance Committee passed a bill that would retroactively extend all 56 expired tax breaks, including about a dozen energy incentives, for two years — through the end of 2015. The PTC, which primarily supports wind energy, carries the largest price tag of any of the energy extenders, at $13 billion over a decade, and has found itself the target of outside groups, including Americans for Prosperity and the American Energy Alliance, which have ties to the Koch brothers.

Republican leaders don’t seem to be eager to go to war over the PTC this year but are looking for options to compromise that could appease anti-PTC forces without threatening the underlying package. One option that began floating earlier this month, which was reported elsewhere yesterday, would provide a one-year extension that would last just through the end of this year.

Lobbyists tracking the process say that would do nothing for the wind industry, given the long lead time to begin building projects, and likely would run into resistance from other business groups, as well. A senior Republican on the tax-writing Ways and Means Committee said last week that the approach would not provide industries with the reassurances they are looking for.

“It would be a big mistake to only extend for the current year and not go forward, creating a whole new level of uncertainty,” Rep. Kevin Brady (R-Texas) toldĀ E&E Daily.

House Republicans would like to see several of the extenders made permanent, such as the research and development tax credit, and negotiators are considering a range of options, including potentially pairing a few permanent breaks with temporary extensions for the rest of the package, Brady said.

Sen. Ron Wyden (D-Ore.), who chairs the Finance Committee, said his stance in the negotiations remains the bill that passed out of his committee last summer, known as the “Expire Act” (S. 2260). Finance ranking member Orrin Hatch (R-Utah) said he, too, would prefer a two-year extension, but acknowledged that negotiations were ongoing.

“Right now, it’s in flux, and I can’t tell you what’s going to happen,” Hatch told reporters yesterday.

Sen. John Thune (R-S.D.) said he hoped to see the PTC extended this year and reiterated his call for a longer-term approach to phase out the credit over a number of years.

“We’ve got to come up with a more long-term, permanent strategy on this,” he said. “I’ve laid that out, so we’ll see where it goes.”

Negotiators are expected to continue talking over the coming days and weeks, but Obama’s prime-time address to the nation tonight could have more of an effect on Congress’ agenda than any particular legislative disagreements. Republicans leaders have warned that an executive order on immigration would “poison the well” for any other bipartisan accomplishments over the next two years.

“Immigration is about to blow all of this up,” said one tax reform lobbyist close to House GOP leaders.