Stars were aligned for exports, renewables deal

Source: Geof Koss, E&E reporter • Posted: Monday, January 4, 2016

Could Congress do it again?

With the president’s signature barely dry on a historic legislative compromise giving both parties major energy wins, pundits and Capitol Hill staffers this week said it’s tough to assess whether the agreement lifting the crude oil exports ban and extending key renewable tax credits for five years was a one-off event or a formula for bipartisan success going forward.

“It’s hard to tell,” Joe McMonigle, a former chief of staff at the Energy Department under President George W. Bush, said during an interview yesterday of the prospects for a repeat performance. “I do think there were a lot of stars aligning with this.”

Now a senior analyst for the Potomac Research Group, McMonigle had been bullish for months on the prospects for a deal on crude exports, which he said came together in part because of record-low gasoline prices, mounting layoffs in the domestic drilling sector, the Iran nonproliferation deal and the iron will of Senate Minority Leader Harry Reid (D-Nev.) (E&E Daily, Dec. 17).

Others say the exports-renewables deal serves as a reminder of what Congress can do when properly motivated.

“Just because the American body politic suffers extreme partisanship, it doesn’t mean there aren’t deals to be had, right?” said Paul Bledsoe, a former climate adviser in the Clinton White House who now runs Bledsoe & Associates LLC, a strategic communications firm focused on climate and energy policy. “I mean, there’s actually many bipartisan deals to be had. It’s been so long since we’ve been able to pull them off.”

Whether an encore energy deal is in the cards remains to be seen, but observers on all sides of the debate agree that the timing of recent events, as well as a deep-seated desire by both parties to pursue legislative priorities that appeared suddenly within reach, were major factors in securing an agreement.

But even the alignment of competing political interests in and of itself isn’t enough to assure success, said Alex McDonough, who as Reid’s senior policy adviser on energy and the environment worked 19 straight days this month to see the exports deal to fruition.

“Anytime there’s something big that somebody wants to get done, the other side sees it as leverage to try to get their priorities,” McDonough told Greenwire last week. “Ninety to 95 percent of the time, it doesn’t work. But when you have such big chunks out of both sides wanting to get something done, you know, sometimes it comes together.”

Leveraging opportunity

In the omnibus deal, both parties took advantage of the political dynamics afforded by the end-of-year legislative crush.

Democrats saw Republicans’ desire to end the crude export ban as leverage to push a top legislative priority: winning long-term extensions of the renewable production and investment tax credits (PTC and ITC) that have been key to growth in the wind and solar sectors for years.

McMonigle said lifting the ban was an exclamation point for Republican leaders anxious to show a major policy victory on an issue that the White House had previously threatened to veto.

“What can you point to policywise for a big win?” he said. “And the crude exports ban being lifted is a big win.”

Emphasizing the point, House Speaker Paul Ryan (R-Wis.) this week touted crude exports as a major victory for his side.

“We think we got good victories for the energy markets,” Ryan told conservative radio host Hugh Hewitt. “Having the oil export ban lifted permanently, it’s like having 100 Keystone pipelines.”

Democrats said Republicans showed their cards on exports last month when Senate Majority Leader Mitch McConnell (R-Ky.) made a last-minute push to repeal the ban in the bipartisan transportation bill. That effort fell apart but revealed how badly Republicans wanted the ban repealed — a change that was widely backed among the various GOP factions and one that would help smooth over conservative grumbling over the massive omnibus and tax spending package being negotiated behind closed doors.

Democratic aides said Reid made clear that Republicans, after trying to “jam it” in the highway bill, would have to come to the table and bargain for it in the sole remaining must-pass bills of the year: the omnibus and tax extenders package.

Reid also made clear that he would drive a hard bargain for a repeal. “We couldn’t lift the ban unless we did something strong for renewables,” said one Democratic staffer.

While the conventional wisdom held that Democrats had the upper hand during the tough export negotiations, McMonigle said Republicans also leveraged Democrats’ desire for renewable incentives to their own advantage.

“The Democrats really wanted to get tax extenders, and this window was closing for them,” he said. “The crude export ban was a good thing for renewable extenders; I don’t think it would have been possible but for having something big being lifted.”

While there was plenty of grumbling among conservatives over the five-year extensions of the PTC and ITC secured in exchange for lifting the ban, Republicans say the writing was already on the wall for the tax credits, which enjoy backing among many GOP members from regions with a heavy solar and wind presence, and were inevitably going to be extended with Democrats’ support.

“We were going to lose on renewable credits anyway by virtue of geography and politics,” a GOP aide said, noting that many Republicans on the Senate Finance Committee supported extensions.

Having a Republican-led Congress made a difference because a Democratic Senate would never have risked alienating environmentalists by floating a repeal desperately sought by the oil lobby, the aide added.

“The environmental left has such strong presence on their side, it took the Republican majority and the leverage brought by the Republican majority to cut this deal,” the staffer said.

‘A negotiating posture’

Sen. John Hoeven (R-N.D.) told Greenwire last week that Republicans were confident they had won the exports debate on the merits, setting the stage for negotiations that led to repeal.

“I think by doing our homework and bringing out the information, that this is vitally important for our economy, for jobs, tremendous number of jobs across our country, for national security, energy security, with what’s going on in the world, a recognition that people don’t want to go back to being dependent on the Middle East, and the fact that it does benefit consumers at the pump, I think they came to the recognition that this is something that we’re going to win on,” he said of Democrats.

Bledsoe said it became “increasingly clear that the Democrats didn’t really care about the crude export ban.”

“It was just a negotiating posture,” he said this week. “There’s no ideological opposition to it.”

McMonigle said environmentalists’ focus on the Keystone XL pipeline and other matters may have unwittingly helped set the stage for the repeal agreement.

“They didn’t pay attention to crude exports, and I think that was just because people didn’t think it could get done,” he said. “I think they totally got caught off guard. A lot of people did.”

A Republican aide said the relative speed with which the exports debate unfolded was a “tactical consideration” that played into GOP hands by marginalizing environmentalists. “They thought this was a year or two away,” the staffer said.

After weeks of back-and-forth on a multitude of issues, the agreement unveiled and quickly passed last week ended the 40-year-old export ban, while extending the green tax credits sought by Democrats — but with “phaseout” provisions backed by Republicans. The omnibus also eschewed major policy riders pressed by Republicans — which Democrats say disappeared in part because of the leverage they wielded on oil exports. Republicans insist that exports were negotiated separately from the omnibus riders.

Democrats say they secured a key win for renewables at a crucial time — implementation of U.S. EPA’s Clean Power Plan, which is expected to further boost demand for wind, solar and other clean energy sources.

“I don’t think we would have done very much for wind or solar without this,” said one Democratic aide.

Republicans say the deal adds to the number of policy wins they’ve notched after regaining control of both chambers, noting that a three-year extension of the expired Land and Water Conservation Fund included in the omnibus cleared the way for Senate approval of the stalled overhaul of the Toxic Substances Control Act.

Bledsoe said the agreement falls short of sending the long-term policy signals that clean energy investors have clamored for, noting that when the smoke clears, fossil fuel tax benefits will remain on the books while the green incentives will phase out.

Nonetheless, he said the hard-fought deal marked an achievement for Republicans and Democrats alike.

“On balance, you have to say that both sides got significant policy and political benefit,” Bledsoe said.

He added that the agreement may also signal a thaw in the partisan fighting over energy.

“Wind and solar are not boutique sources anymore; they’re demanded equally in red and blue districts,” Bledsoe said.