‘No sacred cows’ for energy in reform talks

Source: Geof Koss, E&E News reporter • Posted: Friday, October 27, 2017

Top lawmakers say they’re hearing plenty from industry sectors and interest groups on energy tax breaks ahead of next week’s House release of the broad overhaul that will dominate the fall agenda.

With yesterday’s House passage of the Senate budget resolution, the table is set for the long-anticipated push for the first comprehensive reform of the tax code since 1986 (Greenwire, Oct. 26).

Under the budget reconciliation process, the tax overhaul will be able to bypass a Senate filibuster and clear the chamber by a simple majority.

House Ways and Means Chairman Kevin Brady (R-Texas) plans to release his plan Wednesday, with what he said yesterday will be a multiday markup scheduled to start the following Monday, Nov. 6.

“This is a huge day for the American people,” Brady told reporters after yesterday’s vote. “Congress has delivered on a budget that creates a runway for the first comprehensive reform of the U.S. tax code in 31 years.”

The Senate is expected to unveil its own bill after the House completes its markup, and Majority Leader Mitch McConnell (R-Ky.) is already threatening to keep the chamber in session Thanksgiving week to finish it.

“He’s serious,” Senate Majority Whip John Cornyn (R-Texas) said yesterday. “We need to get the tax bill out of the Senate by Thanksgiving.”

The contents of the House bill remain in flux — and a closely guarded secret — but are causing widespread anxiety among interest groups.

“We have heard from many in the energy sector that are concerned,” Senate Energy Chairwoman Lisa Murkowski (R-Alaska) told E&E News this week. “They’re letting us know their level of priority.”

She cited the oil and gas industry’s intangible drilling costs and the oil depletion allowance — both deductions that Democrats have targeted for years — as examples of specific policies sparking concerns.

“My hope is that the efforts that we put in place to reduce the corporate level, that that’s going to help those within the industry overall,” Murkowski said, adding that she’s approaching the reform push with an open mind.

“I have not set down any markers,” she said. “I am very much in the early stages of saying, ‘OK, what is being considered?'”

Cornyn, a longtime ally of the oil and gas industry and member of the Finance Committee, said everything in the code will be under review, including the oil depletion allowance.

“My view is we’re going to look at all of those, in order to get rates low for everybody,” he told E&E News. “There are no sacred cows, so we are going to look at all of them.”


Still, groups and advocates are drawing battle lines over breaks for fossil fuels and clean energy sources.

Cornyn said there’s “a lot of misunderstanding” over the oil and gas industry’s tax breaks, which he noted are in line with manufacturing incentives available to other businesses.

Sen. Bill Cassidy (R-La.), a member of both the Energy and Finance committees, said he, too, is hearing plenty from companies in his oil- and gas-rich state on taxes.

“There’s a big push for expensing — obviously, much of what goes into energy involves expensing,” he told E&E News.

Cassidy declined to discuss in detail his own tax priorities but acknowledged “there’s a couple things that are sacrosanct.”

He suggested that retaining intangible drilling costs is one such item.

“If the president is about economic growth, the only thing that rescued the country during the Obama years was the job growth related to domestic energy production,” Cassidy said.

“So I do think consistent with the thrust of what the president wants to do, domestic energy production should be a top priority.”

The renewables question

Democrats are expected to press to retain or expand breaks for clean energy sources wherever possible.

The leaders of the Sustainable Energy and Environment Coalition — a bloc of several dozen House Democrats — wrote Brady this week seeking a meeting to discuss the tax package.

Brady said yesterday he is in discussions with Ways and Means top Democrat Richard Neal of Massachusetts over the format of the markup, signaling he wants to provide Democrats with the opportunity to offer their ideas. And there’s bipartisan backing for renewables and clean energy breaks.

Sen. Chuck Grassley (R-Iowa), a backer of biofuels and wind energy, made clear this month that he expects the production tax credit to remain on the books until it expires in 2020 (Greenwire, Oct. 18).

A bipartisan group of House and Senate lawmakers earlier this week reintroduced legislation that would extend master limited partnership tax treatment to clean energy sources (E&E Daily, Oct. 26).

Murkowski, who co-sponsored the MLP bill, said this week she favors extending the investment tax credits for a host of renewable energy sources that were inadvertently left out of the 2015 deal that extended and phased down breaks for wind and solar.

“If we’re going to be fair here, it seems to me that we should take care of the orphan tax credits, too,” she said.

Senate ‘spinach’

While President Trump traveled to Capitol Hill on Tuesday to rally Senate Republicans around tax reform, that discussion did not delve into specifics.

Asked afterward whether Trump drew any “red lines,” White House legislative director Marc Short told reporters only that Trump has “been clear about wanting to make sure the corporate rate stays at 20 percent.”

Cornyn told reporters yesterday that Finance Committee deliberations are focused on offsets, which he termed “the spinach.”

“I think the advice that we’re hearing from everybody is to keep your powder dry, this is going to be a package, and don’t take yourself off the playing field by saying that one thing has to be in there or not in there that you’re not going to participate,” Cornyn said.

The slim margin of victory in the House yesterday on the budget, which passed 216-212, illustrates the challenges that lie ahead for Republicans. Many who voted against the plan did so to protest a proposal to eliminate the popular state and local tax deductions.

Brady said yesterday that negotiations are also ongoing with the White House over possible changes to caps on 401(k) retirement plans, which Trump ruled out earlier this week but still remain in play.

Neal, the top Ways and Means Democrat, told reporters this week that Republicans have “a real revenue problem” in paying for rate reductions.

“When you go through the tax system, and you touch one part of the tax system, it’s like squeezing toothpaste with the cap on,” Neal said. “There are unintended consequences.”

Rep. David Schweikert (R-Ariz.), a Ways and Means member, conceded the point yesterday, describing the tax bill as a work in progress.

“Every time I make a slight change here, the math over here changes,” he told reporters. “One little adjustment here has a whole cascade effect on lots of other parts.”

Reporters George Cahlink and Nick Sobczyk contributed.