Tax credit cuts could spoil an even more important clean energy goal

Yahoo

3 days ago

As budget negotiations grip the US Congress, some lawmakers are already looking ahead to the next big energy fight, one with even higher stakes for clean energy and the AI power race: Permitting reform.
Bipartisan discussions 'are being seeded now' on the scope of a bill that could speed up approvals for new grid lines and pipelines, and restrict the use of litigation to block such projects, Rep. Scott Peters (D-Calif.) told Semafor, and could lead to draft legislation 'pretty quickly' once the budget talks conclude. But the appetite for compromise on permitting will depend on the outcome of the budget: Democrats may feel burned by tax credit cuts, and Republicans may be able to score some permitting wins without a separate compromise bill.
So far, preliminary hearings on the subject this year have shown 'the consensus around developing bipartisan permitting reform legislation,' Sen. Shelley Moore Capito (R-W.V.), who chairs the upper chamber's Environment and Public Works Committee, told Semafor. 'I continue to work with my colleagues across both chambers to make our permitting and environmental review processes more efficient, predictable, and transparent, so that we can complete projects of all types.'
As much as clean energy companies would like to keep their current tax benefits, slow permitting bureaucracy and legal entanglements are still the biggest bottlenecks for the industry and its fossil fuel competitors: The existence of hypothetical tax credits is no use if projects can't get built to tap them.
The budget reconciliation bill that passed the House of Representatives last week included provisions for fossil projects to pay a fee to jump ahead of the permitting queue, but stricter rules in the Senate about what exactly can be included in a budget bill mean those provisions are likely to get dropped, analysts say. Budget reconciliation was never going to be an effective forum for permitting reform; a bipartisan bill is still the only way to make the necessary changes, and make them stick.
'Everything the Trump administration can do or has done on permitting is prone to reversal,' said Xan Fishman, senior managing director of the energy program at the Bipartisan Policy Center think tank. 'After reconciliation, everyone will look around and say, 'We still need permitting reform'.'
Conditions are favorable for a deal that builds on the one advanced last year by Sens. Joe Manchin (now retired) and John Barrasso (R-Wyo.). Key committee leaders, including Reps. Brett Guthrie (R-Ky.) and Bruce Westerman (R-Ark.) in the House and Sens. Capito and Martin Heinrich (D-N.M.) in the Senate, have expressed interest in prioritizing a permitting deal. The center of gravity has shifted from the Senate's Energy and Natural Resources committee, where Manchin sat, to Capito's Environment and Public Works committee, where issues around environmental impact statements and judicial rules can be more readily addressed.
While some Republicans are pushing to break off chunks of permitting in smaller bills, such as a 'permit-by-rule' bill passed by the House Oversight committee last week, a spokesperson for Peters said that the goal is still 'a bigger more comprehensive product' that can address the full laundry list of permitting issues.
Even if the permitting measures that Democrats oppose are struck from the budget bill, later negotiations could still get dragged down by the tax credit cuts. Sen. Brian Schatz (D-Hawaii) told Politico that the Inflation Reduction Act and permitting reform were always meant to be linked, and that it's a 'fantasy' to suppose one could proceed without the other.
'If all the IRA tax credits are gutted,' Fishman said, 'there's a risk Democrats will question why they should work on permitting at all, if this stuff isn't going to get built anyway.'
Meanwhile, he said, the fact that components of permitting reform remain spread across the jurisdictions of numerous committees is 'the major structural challenge for a deal.'
The fate of IRA tax credits now hangs with a few key senators. Ones to watch, Heatmap reported, include Lisa Murkowski (R-Alaska) and John Curtis (R-Utah).