Beltway Roundup: Looking Through the Fog of Election Year Politics

By Jeff Genzer

Congress and the administration are continuing their election year stalemate. It is now clear that Congress will not act on final appropriations bills before the election. Now the debate is how long a continuing resolution will last and at what funding levels. It is possible that the continuing resolution will last beyond mid-November, to March 2013, in exchange for a funding level for discretionary spending of $1.047 trillion (the funding level in the 2011 Deficit Reduction bill) versus the $1.028 trillion contained in the House-passed budget resolution for FY2013.

The House Subcommittee on Labor, Health and Human Service, Education and Related Agencies Subcommittee and the Senate Appropriations Committee, have now acted on the Labor, Health and Human Services bills for FY2013, and the overall funding level for the Low Income Home Energy Assistance Program would be $3.471 billion for FY2013. As noted in the previous Beltway Roundup, the House has passed its version of the FY2013 Energy and Water bill, which would cut the Weatherization Assistance Program to a level of $54 million (from $174 million in FY2011 and $68 million in FY2012), and the State Energy Program (SEP) would only receive $25 million (down from $50 million in FY2011 and FY2012). The Senate committee version of this bill would provide $145 million for Weatherization and $50 million for SEP. The President’s request for Weatherization was $139 million, and the request for SEP was $49 million in FY2013. A big new concern was revealed in late July when the Defense Department announced a revised estimate of $10 billion for modernizing the nuclear arsenal (up from the original price tag of $4 billion). This is significant for Weatherization and SEP because the nuclear programs are also included within the $30 billion Energy and Water bill.

Beyond the short-term appropriations issues for FY2013, Washington, D.C. is waiting for a lame duck session of Congress after the election that will have to face a number of difficult challenges. How they are addressed will be determined by the election. In early January 2013, the so-called sequester would take effect, which would cut $109 billion roughly equally from domestic and Defense programs. An alternative passed by the House would protect Defense spending and cut entitlements and domestic discretionary spending. That option has not been considered by the Senate. This sequester was required in the 2011 Deficit Reduction bill, though it was assumed that the issues would be resolved so that this cut would not occur. This could mean additional cuts beyond the regular appropriations bills of as much as 9%. Congress passed legislation in July requiring the Obama administration to explain specifically how the sequester would be applied to specific programs.

The Bush-era tax cuts also expire on December 31. Approximately 70 tax provisions expired at the end of 2011 or will expire at the end of 2012, including a number of energy tax provisions, such as the Production Tax Credit for wind energy that is worth approximately $0.02 per kilowatthour. Comprehensive tax reform is a possibility in 2013. Chairman Dave Camp (R-MI) of the House Ways and Means Committee is moving forward with a blueprint for tax changes. The federal debt limit will also need to be increased early in 2013. Other than that, not much pressure.

On the legislative front, there has been a great deal of committee work in both the House and Senate, and the House has moved forward with a number of bills. The House bills essentially would expand both onshore and offshore drilling, including not only the Gulf Coast and Alaska but also the East and West Coasts. The House bills would also limit the authority of the Environmental Protection Agency to issue rules and roll back some of the rules that have already been promulgated.

There are some areas where Congress appears interested in moving energy legislation. For example, a bipartisan bill passed the House in July that would streamline hydroelectric power licensing and permitting (H.R. 5892). A similar bill passed the Senate Energy and Natural Resources Committee in April 2011 (S. 629).

On cybersecurity, although visions for this legislation differ (such as how “mandatory” it should be), there is an increasing understanding that we are vulnerable. This concern includes the utility sector. A Senate bill was scheduled to be debated the week before the August recess, though opposition to S. 3414 by the Chamber of Commerce could be significant. The House passed its version of the bill in April (H.R. 3523).

There is some hope that bipartisan bills on energy efficiency that passed the Senate Energy and Natural Resources Committee—the Shaheen (D-NH)/Portman (R-OH) bill (S. 1000) and the Bass (R-NH)/ Matheson (D-UT) bill (H.R. 4017), which finally had a hearing before the House Energy and Power Subcommittee in July—could be passed when energy legislation is considered in 2013. The SAVE Act, which would include consideration of energy costs in real estate appraisals, also has bipartisan support.

The House Energy and Power Subcommittee moved a bill during the week of July 23 to eliminate the Department of Energy’s Loan Guarantee program, in light of the Solyndra bankruptcy. In addition, there are continuing efforts to approve the KeystoneXL pipeline before the election. The Farm Bill (H.R. 6083/S. 3240) could have significant energy impacts as well, with the House proposal gutting mandatory spending on the energy title, including biofuels, energy efficiency, and renewable energy, whereas the Senate bill would continue to support these energy programs. A short-term farm bill extension may be included in a drought relief package in the near future. It is difficult to envision an energy bill passing in the short term because of the diametrically opposed positions of the parties on energy issues. Late last year a pipeline safety bill passed Congress, so there is still some hope that energy issues could be addressed, but election year politics prevent a clear view through the fog.