What to Watch This Week 

• Infrastructure Amendment Process. With the bipartisan infrastructure package—the Infrastructure Investment and Jobs Act—now finalized, the Senate has proceeded to an open amendment process, which is expected to consume a great deal of floor time in the coming days. Read the State of Play to learn more.
• Budget Reconciliation. The second half of the Democrats’ plan to enact President Biden’s legislative agenda is a $3.5 trillion budget reconciliation package that will contain the progressive priorities that would otherwise not secure bipartisan support. Since announcing unanimous support from Senate Budget Committee Democrats weeks ago, however, no text has been introduced for the reconciliation instructions. With Senate Majority Leader Chuck Schumer (D-NY) looking to advance the budget resolution shortly after approving the infrastructure package, the budget resolution text could be unveiled this week.
• August. The Senate is currently scheduled to be in session through Aug. 6. However, Senate Majority Leader Schumer (D-NY) has vowed to keep the chamber in Washington until both the bipartisan infrastructure package and the budget resolution are approved. With only days until the scheduled break, it is unlikely the Senate will be able to complete both tasks on time.

Latest Developments

• House Democrats Dueling Over Dual Track. Progressive House Democrats have said they will oppose the bipartisan infrastructure package without movement on budget reconciliation. But moderate House Democrats have said they may not vote for budget reconciliation without movement on the bipartisan package. With Speaker Nancy Pelosi (D-CA) only able to lose a handful of Democratic votes, just a few defections could cause problems for budget reconciliation and the infrastructure package.

STATE OF PLAY

On Friday, July 30, Brownstein published an alert summarizing select provisions in a draft version of the $1.2 trillion bipartisan infrastructure package that was circulating among lawmakers.

Since then, Senate lawmakers unveiled text for the Infrastructure Investment and Jobs Act (IIJA). On Aug. 1, Senate Majority Leader Chuck Schumer (D-NY) filed a substitute amendment with the final language of the infrastructure bill, replacing the vehicle on which cloture was filed. The full Senate will now have an opportunity to modify the substitute amendment through an open amendment process. Individual amendments require 60 votes to be adopted unless no one objects to closing debate. Few amendments are expected to pass.

The Brownstein Tax Policy Team has updated its bill summary to reflect various changes to the bill. Major changes include:

• The removal of unemployment insurance program integrity measures;
• The removal of a provision adjusting the qualifying advanced energy project credit (I.R.C. Sec. 48C); and
• The addition of two new bond provisions.

It is unclear why a provision expanding I.R.C. Sec. 48C, a priority for Sen. Joe Manchin (D-WV), was removed. The next avenue for lawmakers to advance this provision will likely be through budget reconciliation.

Click here for a summary of topline funding for various priorities in the IIJA, a section-by-section summary of the pay-fors and other select provisions, and a timeline for next steps.

LEGISLATIVE UPDATES

A report on the latest intel and proposals as lawmakers start to outline a legislative framework for Build Back Better legislation.

Tax and Finance Update

JCT Scores IIJA. On Monday, Aug. 2, the Joint Committee on Taxation (JCT), released an estimate for the revenue provisions within the bipartisan infrastructure package. It found that the following provisions would generate $53.51 billion over ten years:

• Information reporting for brokers and digital assets: $27.97 billion
• Termination of employee retention credit for employers subject to closure due to COVID-19: $8.22 billion
• Chemical Superfund – Extension and modification of certain excise taxes: $14.45 billion
• Extension of interest rate stabilization: $2.87 billion

The following provisions, by contrast, are estimated to result in a revenue decline of $2.448 billion:

• Modification of tax treatment of contributions to the capital of a corporation: -$1.25 billion
• Private Activity bonds for qualified broadband projects: -$566 million
• Increase in national limitation amount for qualified highway or surface freight transportation facilities: -$516 million
• Carbon dioxide capture facilitates: -$116 million

Even with the JCT score, some senators may still be waiting for the Congressional Budget Office to release its score of the bill. That will contain a more comprehensive look at the bill and will contain the revenue effects of the extension of customs user fees, in addition to scores for the COVID-19 funding rescissions, unemployment insurance and dynamic scoring.

Neal Talks Budget Reconciliation Priorities. On Friday, July 30, House Ways and Means Committee Chair Richard Neal (D-MA) participated in a press conference during which he reiterated some of his priorities for the forthcoming $3.5 trillion budget reconciliation package.

Neal first said he would be looking to ensure funding for Internal Revenue Service (IRS) enforcement that was dropped from the bipartisan infrastructure package would be included in reconciliation. In his remarks, Neal said, “I can guarantee you that IRS enforcement is going to be in the next package.” Neal did not specify if he would seek the $40 billion initially agreed to by the bipartisan infrastructure negotiators or if he would try and attach the $80 billion proposed by the Biden administration. Regardless of the amount he plans to include, the provision will likely be challenged as to whether it adheres to the Byrd Rule and other guidelines for budget reconciliation.

In addition to IRS enforcement, Neal underscored his support for making permanent the additions to the Child Tax Credit enacted under the American Rescue Plan Act (ARPA, P.L.117-2).

Infrastructure Updates

Commerce to Consider Transportation Nominees. The Senate Committee on Commerce, Science and Transportation will meet tomorrow morning to consider the following nominations:

• Jennifer L. Homendy to chair the National Transportation Safety Board;
• Karen J. Hedlund to be a member of the Surface Transportation Board;
• Robert C. Hampshire to be an Assistant Secretary of Transportation; and
• Carol A. Petsonk to be Assistant Secretary of Transportation.

The panel is expected to favorably report all four nominees to the full Senate for final consideration, which will likely take place after the August recess.

House Passes DOT Funding Bill. Included in the appropriations minibus that passed the House on July 29 was the funding bill for the Department of Transportation (DOT) for fiscal year (FY) 2022. The legislation would authorize $107.5 billion for the Department of Transportation in mandatory and discretionary funding for FY2022, a $19 billion increase from FY2021 and $18.7 billion higher than the sum the White House requested. The measure would also provide:

• $61.9 billion for the Federal Highway Administration; 
• $18.9 billion for the Federal Aviation Administration; 
• $15.5 billion for the Federal Transit Administration; 
• $4.1 billion for the Federal Railroad Administration; 
• $2.7 billion for Amtrak; 
• $1.3 billion for the Maritime Administration; 
• $1.2 billion for National Infrastructure Investments (RAISE/TIGER/BUILD); and
• $886 million for the Federal Motor Carrier Safety Administration. 

The Senate Appropriations Committee has not yet released any FY2022 funding bills; the appropriations process will resume after the August recess and continue into the fall.

Green Energy Updates

General Energy Updates

Energy Provisions in Bipartisan Infrastructure Package. On Sunday, the final text for the bipartisan infrastructure package was released. Sen. Joe Manchin’s (D-WV) $110 billion Energy Infrastructure Act (S.2377) is included in the package, with $105 billion paid for. The bill would provide $100 million for wind demonstration projects, $84 million for geothermal demonstration projects and $80 million for solar technology demonstration projects established by the Energy Act of 2020. Over $9.5 billion would be provided for clean hydrogen, including $8 billion for four regional clean hydrogen hubs; $500 million for a clean hydrogen manufacturing and recycling program; and $1 billion for a demonstration, deployment and commercialization program to reduce the cost of clean hydrogen production from electrolyzers. For carbon capture and sequestration, the package allocates $900 million for carbon dioxide transportation, $3.5 billion for four regional carbon capture hubs, and authorizes the Department of the Interior to permit carbon storage in the Gulf of Mexico. A $2.5 billion revolving loan program for new transmission lines or upgrades to existing lines is also included. Among the package’s pay-fors are a $6 billion sale from the Strategic Petroleum Reserve and $13 billion from “reinstating certain Superfund fees.”

House Passes Appropriations Minibus. On Thursday, the House voted 219-208 to approve a seven-bill appropriations package for FY2022, which includes the Energy and Water appropriations bill and the Interior, Environment and Related Agencies appropriations bill. The Energy-Water bill would provide $45.1 billion for the Department of Energy, which is $3.2 billion more than FY2021 enacted levels but $1 billion lower than President Joe Biden’s request. $14.5 billion would be provided for clean energy research and innovation within the department, including $7.3 billion for the Office of Science; $3.8 billion for the Office of Energy Efficiency and Renewable Energy; $1.7 billion for the Office of Nuclear Energy; $820 million for the Office of Fossil Energy and Carbon Management; $600 million for the Advanced Research Projects Agency-Energy (ARPA-E); and $267 million for the Office of Electricity. The bill would also provide $177 million for cybersecurity, energy security and emergency response activities; $8.7 billion for the Army Corps of Engineers; and $1.9 million for the Bureau of Reclamation. The Interior-Environment bill would provide the Department of the Interior with $15.6 billion, which is $2.3 billion above FY2021 enacted levels but $240 million below the Biden administration’s request. The bill would provide $1.6 billion for the Bureau of Land Management, $1.9 billion for the Fish and Wildlife Service and $3.5 billion for the National Park Service. $223.9 million would be provided for the Bureau of Ocean Energy Management, which includes $45.82 million for the Renewable Energy Program, representing a $17.35 million increase over FY2021 enacted levels. The Environmental Protection Agency (EPA) would be provided $11.3 billion, which is $2.1 billion above FY2021 levels and $111 million above the administration’s request. $248 million would be allocated for environmental justice activities, representing a $235 million increase over FY2021 enacted levels.

Schumer, Pelosi Vow Climate Action in Reconciliation Bill. Senate Majority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA) promised to include ambitious climate change provisions in Democrats’ $3.2 trillion reconciliation package, though they offered few details. Schumer promised “bold and comprehensive” investments in climate action, noting that the provisions in the reconciliation bill and the bipartisan package combined would provide the largest-ever investments in climate change and environmental justice. Pelosi gave a similar message, indicating that the party is in a good place to deliver on climate goals in the reconciliation package.

House Approves Bill to Block Nord Stream 2 Sanctions Waiver. On Wednesday, the House voted 217-212 to pass legislation to fund the State Department, which contains a provision blocking President Joe Biden’s authority to waive sanctions against the Nord Stream 2 pipeline. The provision was added to the appropriations bill earlier this month in an amendment sponsored by Rep. Marcy Kaptur (D-OH), which was approved by the House Appropriations Committee by voice vote. “We’re hoping that the administration will hear our strong signal and will prioritize European energy independence as part of its portfolio as it moves forward,” Kaptur said at the time. Sanctions against the natural gas pipeline were first established by the fiscal year 2020 National Defense Authorization Act. 

Infrastructure Cybersecurity Hearings. Biden administration officials testified before House and Senate committees on Tuesday to discuss cybersecurity threats to pipelines and the electric grid. Senate Commerce Committee Chair Maria Cantwell (D-WA) urged the administration to take further action to protect critical infrastructure during a hearing on pipeline cybersecurity, describing the White House’s response so far as “insufficient.” Sen. Marsha Blackburn (R-TN) expressed concern that the Transportation Security Administration’s (TSA) recent cybersecurity directives were too burdensome, as companies would need to replace a large amount of equipment. In response, TSA Administrator David Pekoske said critical infrastructure operators could come up with alternative ways to secure their systems under agency supervision. The House Oversight Subcommittee on National Security also held a hearing to discuss ways to defend the U.S. electric grid against cyber threats. Members focused on the vulnerabilities presented by large power transformers and expressed concern about the lack of federal cybersecurity standards for power distribution systems. Chair Stephen Lynch (D-MA) expressed frustration when witness Joseph McClelland of the Federal Energy Regulatory Commission (FERC) did not answer any questions regarding power distribution because the commission is exploring expanded mandates.

Haaland Pressed by Manchin Over Oil and Gas Moratorium. In a Tuesday hearing on the Interior Department’s FY2022 budget, Senate Energy Committee Chairman Joe Manchin (D-WV) questioned Interior Secretary Deb Haaland on the Biden administration’s moratorium on new oil and gas leases for public lands. Manchin brought up the point that it is “now into the early summer timeline when we were told the review would be completed” and added that “we need a plan to move forward for responsible oil and gas leasing both onshore and offshore.” Haaland did not lay out a specific timeline but said that the review “should be out very soon.” Sen. Lisa Murkowski (R-AK) also asked Haaland about the pause, stating that she hopes that the secretary can “sense the frustration in anticipating this and wondering when we will be able to expect you to be in compliance with the judge’s order,” referencing an injunction against the pause issued in June. 

Administration May Pay Fishing Industry to Offset Offshore Wind Impacts. The federal government is considering a plan to make payments to the commercial fishing industry as a way to accommodate for business losses as a result of the expansion of offshore wind, according to reports. The reports come after a letter was sent earlier this month from nine coastal states urging the federal government to address potential damage to fisheries from the development of large-scale offshore wind projects. The letter asked the Biden administration to create “mitigation frameworks for demonstrated negative impacts” on fisheries. All projects on federal lands offer compensation where impact cannot be avoided through the National Environmental Policy Act. Amid these reports, Vineyard Wind said it wants to “continue to engage with all the stakeholders including state and federal agencies, fishermen, and other developers as the conversation evolves to ensure the best outcome” according to a statement put out on Wednesday. 

DOJ Confirms Kim as Environmental Division Lead. On Tuesday, the Senate confirmed Todd Kim to serve as the head of the Environment and Natural Resources Division at the Justice Department. Kim has a strong government background, serving as the first solicitor general of Washington, D.C. from 2006–2007 and most recently as deputy general counsel at the Energy Department since the beginning of the Biden administration. Senate Judiciary Chair Dick Durbin (D-IL) commented that “what the division needs now is a leader who will bring back integrity, expertise, and a renewed commitment to enforcing our nation’s environmental and natural resources law” in reference to Kim. Prior to his position at the Energy Department, Kim was a partner at Reed Smith LLP.

EPA Pressed on California Waiver. In a push to have the Biden administration reinstate a waiver that allows California to mandate emission-free vehicles, 113 House members and 26 senators joined together on letters backing the waiver to EPA Administrator Michael Reagan on Tuesday. The waiver would also enforce tight limits on greenhouse gasses from vehicle tailpipes. Lawmakers are citing pressing climate threats as the reason to take swift action. Under the Clean Air Act, California has special power to set air pollution policies that are more restrictive than the federal government’s. The letter sent Tuesday notes that “By enabling states to adopt standards to protect residents’ public health and welfare, the waiver has spurred significantly greater innovation and development of cleaner vehicle technologies.” House Energy and Commerce Chair Frank Pallone Jr. (D-NJ) and Senate Environment and Public Works Chairman Tom Carper (D-DE) both signed as leads on the letter.

Survey Shows U.S. Opposition to Living Near Renewable Projects. A new survey backed by the National Science Foundation has found that more than 75% of the U.S. public is opposed to living within a mile of wind and solar projects. The survey polled 4,500 people living in the U.S., Ireland and Germany and found that U.S. respondents expressed significantly less acceptance of living near large-scale renewable sites compared to their Irish and German counterparts. Less than 25 percent of U.S. respondents said they would accept a solar project located within a mile from home while nearly 74 percent of German and 42 percent in Ireland said they wouldn’t mind a solar project within less than a mile from home. Researchers conducting the survey have suggested that part of the U.S. response is due to the general abundance of space Americans are used to. Results also suggest that opposition to local projects usually had to do with whether or not people thought them to be economically viable.

Energy Tax Updates

Energy Sector Innovation Act. On July 27, Reps. Tom Reed (R-NY) and Jimmy Panetta (D-CA) reintroduced the Energy Sector Innovation Act (ESIC) in the House, and an identical bill was introduced by Sens. Mike Crapo (R-ID) and Sheldon Whitehouse (D-RI) in the Senate. This legislation would allow up to a 40% flexible investment tax credit (ITC) or 60% production tax credit (PTC) for low market penetration technologies. The bill would also phase out credits as technologies mature, group technologies into cohorts as determined by the Department of Energy, and provide flexibility for unforeseen clean energy technologies to be eligible for ESIC.

“ESIC will incentivize technology-wide clean energy innovation so new, clean technologies can rapidly scale up and compete independently in the market,” said Crapo. “Moreover, ESIC automatically scales down credits as technologies’ market penetration ramps up, so taxpayer dollars do not subsidize market-mature technologies.”

Affordable EVs for Working Families Act. On July 29, Sen. Dianne Feinstein (D-CA) introduced the Affordable EVs for Working Families Act which would provide individuals who buy preowned electric cars with a tax rebate of up to $2,500. The current tax credit allocated up to $7,500 but provides no incentive to purchase used electric cars. This credit would apply to electric cars that are at least two years old and cost less than $25,000, and will gradually phase down for buyers making more than $75,000 annually.

BUILDING BACK BETTER PROPOSALS AT A GLANCE

Over the course of the next few months, members will introduce numerous pieces of legislation, with the hopes that their proposals will be considered for inclusion in the next package. While significant developments are discussed in the legislative updates section, click here for a running list of other relevant legislation introduced this week.

ACTIVITY THIS WEEK

Click here to view congressional activity for the week.