Issues to be on the lookout for during the lame duck session

Once the polls close on November 8th, Congress will enter what is known as the lame duck session. This is the period after elections before the next Congress begins, when the current Congress — composed of some Senators and Representatives who lost elections — will continue to legislate. The 114th Congress will have 16 days in session following the elections this year. The following is a preview of a few of the energy-related issues that may arise.

Federal Spending

On December 9th, the current Continuing Resolution expires (the CR is the short-term funding bill passed at the end of September that kept the government funded). Authorizing funding for the federal government after December 9^th is the only must pass legislation for the remainder of the 114th Congress.

This year-end deal is nothing new, as Congress has frequently resorted to last minute omnibus legislation: the last ten fiscal years have resulted in some combination of a CR and an omnibus spending bill. Instead of passing 12 individual appropriations bills — as is intended by law — omnibus bills combine all 12 into one massive bill. However, these types of bills frequently result in bad policy as negotiators leverage brinksmanship to push otherwise politically unpopular policies, forcing members to vote on a broad package as opposed to debating individual policies on a case-by-case basis. In fact, just last year Congress passed a massive omnibus bill that resulted in a costly five-year extension of the wind production tax credit (PTC) and solar investment tax credit (ITC), a three year extension of the Land and Water Conservation Fund (LWCF), and failed to block funding for the wasteful Green Climate Fund (GCF). This was all traded to lift the ban on oil exports. Ultimately, this bargain was a bad deal for the American people. Lifting the export ban was good policy and was bound to happen, as domestic oil production continues to rise. However, trading extensions of the PTC, ITC, and LWCF, as well a deposit into the GCF in exchange for lifting the export ban is a bad deal.

This is a perfect example of why year end lame duck spending bills are bad for the American people. Fortunately, Speaker Ryan has floated the idea of moving smaller “minibus” spending bills instead. While there is still potential for bad policy, such as another tax extenders deal, there is a lesser risk of Congress selling the farm for one or two good provisions. However, it will be imperative to monitor the situation to block wasteful spending, such as funding the GCF.

Tax Extenders

Last year’s last-minute spending bill included an extension of the wind PTC and solar ITC, as well as a separate, larger tax extenders bill (the PTC and ITC hitched a ride on the spending bill to be offset by the oil exports provision). All told, these provisions cost nearly $24 billion. Yet immediately after passage of both the spending and tax bills, Senate Minority Leader Harry Reid noted that several tax extenders had been left out of the package due to what he called a “drafting error.” These included several Section 48 energy credits dealing with small wind facilities, geothermal heat pumps, fuel cell facilities, and combined heat and power properties. There has been discussion that these extenders could be tacked onto any spending bill, just like last year. These subsidies shouldn’t be given the green light just because Senator Reid claims they were accidentally “left out” of last year’s spending bill.

These tax extenders should not be renewed, whether it be in an omnibus, a minibus, or as a standalone tax bill (which is unlikely). As has been observed over and over, the argument that tax credits, such as subsidies like the PTC, boost industries falls flat. The PTC does help the wind industry, but at the cost to the rest of America. As Warren Buffet explained, “on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.” If the only reason to build something is to get tax credits, then it doesn’t make economic sense.

All signs point to a tax extenders package being introduced soon after Congress reconvenes after the elections. Congress should recognize that these tax credits do far more harm than good, all at the taxpayers’ expense. They should allow these tax credits to expire at the end of this year.

Energy Bill Conference

Conference work on a comprehensive energy bill began months ago. Yet the process has been slow, as both chambers and parties pushed this effort down on the list of priorities. As this multiyear effort for major energy legislation has reached its final stage, the prospects of passage during lame duck look increasingly unlikely. Negotiators will need to work through a number of complex issues such as LNG terminal and pipeline permitting reform, energy subsidies, grid modernization, forestry and hunting provisions, and energy efficiency policies, to name a few. Negotiating these issues in earnest will take lots of time, and the legislative calendar only provides for roughly 16 legislative days after the elections. Thus far, there have been few substantial agreements in the conference meetings, as other priorities and campaigns have taken up most of the time.

As we’ve noted before, one significant hang-up continues to be the permanent reauthorization of the LWCF. The LWCF essentially provides funds for agencies to continue purchasing private lands and adding to federal land holdings. This means less private and more federal lands, particularly in western states. Again, this program was reauthorized for three years in last year’s omnibus, but several Senators demand permanence. The issues with this policy are numerous, including the fact that relinquishing Congressional review and oversight is generally bad practice and a principle of poor governance.

Unless the conference committee and their staffs can resolve this impasse, as well as a host of other policy differences, an agreement on an energy package during the lame duck session remains a long shot. However, it is likely that this legislation, either the current House and Senate bills or some variation of these bills, resurfaces in the 115th Congress.

Conclusion

Lame duck sessions always offer the risk of poor policy being pushed through due to a lack of accountability. The deadline for must pass legislation, such as funding bills, further complicates the situation. It is imperative to stand for free-market principles in this period and promote policies that ensure reliable and affordable energy.