THE PLOT THICKENS – TAX CREDITS TO PASS, HOUSE DEMS PUNT DRILLING TO NEXT PRES

As if the financial crisis wasn’t enough drama for one week – make that one life – the House Democrats just raised the stakes in the energy game. Bigtime. And with their move, the outcome of the November 4 election became yet more crucial.

It had looked like a great day. The Senate passed Renewable Energy and Job Creation Act of 2008 (H.R. 6049), the tax extenders package, 93-2, as if they never had an objection to the New Energy incentives.

Nothing, of course, could be further from the truth. The Senate repeatedly rejected the idea of extending the array of New Energy tax credits included in the package. The Senate’s amiability begged the question: What about the House of Representatives? The House’s approval is necessary before the bill can go to President Bush.

In watching the House of Representatives, it is always wise to remember something Will Rogers said: “This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer.”

As if to ease the last bit of pressure, the White House announced early in the day President Bush will reverse his earlier opposition and sign the bill into law if the House passes it.

The President’s reversal could be attributed at least in part to the compromise negotiated by Senate Finance Committee Chairman Max Baucus (D-Mont) and Senate Finance Committee Ranking Member Charles Grassley (R-Iowa). The compromise, now approved by the Senate, funds the tax credits only partly with budget monies from oil industry tax breaks (and partly with charges on foreign bank investments).

Senate Majority Leader Harry Reid (D-Nev) suggested in his speech closing the process on the tax extenders package that the House should not hesitate over questions about whether the budget monies designated in the Senate bill to pay for the package meet the “pay-go” standard requiring measures the House passes to be fully funded.

Senate Majority Leader Reid: ``Don't send us back something else..It will not pass. If they try to mess with our package, it will die.''

House leaders indicated no problem with Reid’s warning. It looked like H.R. 6049 was going to sail through. It seemed too good to be true.

Time to remember Will Rogers and check the hammer.

Sure enough, House leaders were thinking about something entirely different: Offshore drilling.

House Republicans were unsatisfied with the drilling provision in the version of H.R. 6049 sent to the Senate last week but accepted it to move the tax package. Now stripped of any drilling provision by the upper body, House Republicans have no objection to the bill.

Winning offshore drilling rights, however, remains at the top of their agenda.

The quarter-century-long moratorium preventing offshore drilling expires October 1. (Check the ticking clock at Institute for Energy Research) Normally, the House would extend the moratorium by incorporating it along with all the other ongoing legislation sustained and funded at the end of each session by a continuing resolution. Not this time.

House Republicans have for months demanded expanded drilling rights. Their hue and cry of “drill, baby, drill” has convinced the public, all concrete facts to the contrary not withstanding, that expanded drilling will favorably affect gas pump prices.

Democrats are caught between the popularity and pointlessness of drilling.

Republicans intend to dispatch the tax extenders package unencumbered. But if the Democratic majority refuses to allow the moratorium on drilling to expire, the Republicans have threatened to block the continuing resolution and force a shut down of government.

The Democrats have apparently decided on a bold and dramatic response: Instead of taking on the Republicans now and risk being blamed for a government shutdown, they will allow the drilling moratorium to expire and let drilling to within 3 miles of shore on all U.S. coasts become legal – unless the next President reinstates the moratorium.

The stakes for the November 4 election, already enormous, become thereby even moreso.

Representative David Obey (D-Wis), Chairman, House Appropriations Committee: "At least temporarily, the moratorium is lifted. This next election will decide what our drilling policy is going to be…"

The environmental wing of the Democratic party is fuming.

Politically, however, this is a smart risk for the Democrats. Nothing is lost if Senator Obama wins the election. He can sign the moratorium back into place. Even if he loses, Democrats will still come out of the election with stronger majorities in both houses and recapture some degree of control on the issue.

In addition, shifting the circumstances like this will take an important talking point away from Republicans and motivate one of the most passionate and activist segments of the Democratic base. That should improve both Obama's chances and the chance for stronger Democratic Congressional majorities.

Meanwhile, the tax extenders package and its New Energy tax credits will likely go through without contention.

Unless adamant environmentalist Democrats or fiscally hard line Republicans decide to challenge Majority Leader Reid on his warning not to alter H.R. 6049 and send it back to the Senate.

Check the hammer.

click to enlarge

Oh, about those tax credits in the tax extenders package...

The 8-year extension of the solar energy industry’s investment tax credit (ITC) gives a long-term boost to that industry.

The 1-year extension of the wind energy industry’s production tax credit (PTC) keeps that booming industry’s growth tentative but gives it a lifeline to a new administration in 2009.

The 2-year extension for other forms of power generation is widely regarded as a major boost to New Energy.

Tax credits for energy efficiency measures and for plug-in hybrid electric vehicles add greatly to H.R. 6049's value.

Tell the House they’re going in the right direction by passing H.R. 6049 at the American Wind Energy Association’s POWER OF WIND or the Solar Energy Industries Association’s TAKE ACTION.

Senate Passes Energy Tax Bill Offering Solar Industry a Boost
Daniel Whitten, September 23, 2008 (Bloomberg News)
and
House Democrats to Let Ban on Drilling Expire; Senate Approves $100 Billion Tax Break
Paul Kane, September 24, 2008 (Washington Post)

WHO
U.S. Senate and U.S. House of Representatives; Rhone Resch, President of the Solar Energy Industries Association (SEIA); The Next President of the United States

WHAT
Having been passed by the Senate, the Renewable Energy and Job Creation Act of 2008 (H.R. 6049), which extends and funds the vital New Energy tax credits, now goes before the House for final approval before going to the President.

click to enlarge

WHEN
- The final showdown is expected Wednesday, September 24.
- Congress hopes to adjourn for the election season on September 26.
- The first presidential debate is also September 26.

WHERE
- The action will be in the U.S. House of Representatives.
- With the expiration of the moratorium, offshore drilling will be legal to within 3 miles of the coast in all federal waters.

WHY
- H.R. 6049 includes:
(1) a 1-year extension of the wind energy industry’s production tax credit (PTC),
(2) a 2-year extension of a production tax credit for biomass, geothermal, hydrokinetic and some forms of solar,
(3) an 8-year extension of the solar energy investment tax credit (ITC),
(4) $2.5+ billion in tax credits for pilot carbon capture and sequestration (CCS) projects, (5) authorizes the National Academy of Science to assess IRS incentives’ impacts on greenhouse gas (GhG) emission abatement,
(6) allows tax credits for cellulosic ethanol and biodiesel production and a tax credit for the purchase of a plug-in hybrid electric vehicle,
(7) includes tax credits for the continuing redevelopment of the World Trade Center area, (8) approvesw $3 billion in bonds and tax credits for efficiency and GhG abatement projects and construction,
(9) includes a package of extensions on tax breaks for teachers, veterans, hurricane victims and IRS sting operations.
- H.R. 6049 is funded by shifting budget monies from 2 major sources, tax benefits previously allowed for the oil and gas industry and revenues from taxation of “offshore” bank accounts
- Provisions for offshore drilling in House legislation, if considered at all, will be considered in separate legislation.

Will the drilling resume? (click to enlarge)

QUOTES
- Rhone Resch, President, SEIA: ``It is the most significant legislation ever introduced in Congress for solar…It will provide a stable market for businesses to grow over the next 10 years.''
- John Boehner (R-Ohio), Minority Leader, House of Representatives: ''Lifting these outdated bans is a long-overdue but crucial step toward American energy independence…"
- Drew Hammill, spokesman, Speaker of the House Nancy Pelosi (D-Calif): "The White House made it clear that any new drilling provision was a non-starter…"