The budget-slashing mentality permeating the halls of Congress is forcing lawmakers and lobbyists to get creative when it comes to financing energy projects.
The political viability of any one particular idea notwithstanding, the wheels are desperately turning, and members are throwing out a myriad of ideas — new and old — to see what might stick.
“If we’re not creative now, we’re headed towards a very rough patch,” said Richard Kauffman, chairman of Levi Strauss & Co. and a participant in the nonprofit Coalition for Green Capital, a group of businesses, investors and attorneys that advocates investments in renewable energy and efficiency projects.
Popular programs offering cash grants and loan guarantees to renewable and other advanced energy projects are set to expire this year, and other production and investment tax incentives for wind and solar may run out as well in the near term. These industries are going to need some type of continued assistance to help President Barack Obama keep his pledge to create and sustain hundreds of thousands of green jobs.
It’s not just emerging energy sources that are in need of a financing makeover and are ripe for the chopping block. Backers of decades-old corn ethanol have been scrambling to save federal dollars meant to help increase its market base and transition to greener, plant-based alternatives.
The head of the green capital coalition — former Federal Communications Commission Chairman Reed Hundt — has spearheaded the idea of creating an energy independence trust where creditworthy projects can receive low-cost financing via borrowing 10-year debt from the Treasury.
The idea is basically a mesh between the government-run Export-Import Bank and independent, federally charted but privately run organizations like the Red Cross and Boy Scouts, he said. It would allow for private capital and ideally provide a cushion against defaulting on the debt and not have the federal government take all the risk, like with the housing crisis.
“We want the bank to take the risk in the projects. We don’t want the debt to be guaranteed by the federal government,” Hundt said. “There just aren’t many people in Congress that want any more federal guarantees.”
The idea is a loose variation of a “green bank” — which House Democrats approved in 2009 as one solely financed by the federal government and have been set up in varying forms in states like Connecticut.
Senate Energy and Natural Resources Committee staffers are working on setting up a new Clean Energy Deployment Administration that would essentially be a hybrid between traditional Energy Department loan guarantees and revolving loan funds.
Like revolving loan funds that can recycle a pool of money if it is paid back, CEDA could charge fees for the more speculative piece of the loans and which could then be used to support other lending. But despite bipartisan support, its price tag — while expected to be a bit lower than the previous 10-year $9.6 billion Congressional Budget Office estimate — could be its undoing.
Also on the infrastructure bank side, but broader than just energy projects, is a proposal from Sens. John Kerry (D-Mass.), Mark Warner (D-Va.), Kay Bailey Hutchison (R-Texas) and Lindsey Graham (R-S.C.). The U.S. Chamber of Commerce and AFL-CIO have endorsed the bill, which would use $10 billion in federal seed money to eventually spur $640 billion in private investments on roads, energy and water projects.
The bill is different from an Obama administration plan — introduced as legislation by Senate Commerce, Science and Transportation Committee Chairman Jay Rockefeller (D-W. Va.) — which bases the bank out of the Transportation Department and focuses on highways.
Senate aides say they hope the Kerry-led effort is considered as an amendment to the highway reauthorization bill expected to move later this year in the Senate.
“It’s a smart approach,” said Jason Grumet, president of the Bipartisan Policy Center. “The challenge is finding the first $10 billion.”
Republicans and Democrats are taking a careful glance at linking new oil and gas drilling to the financing of renewable energy projects, an idea that has plenty of pitfalls but also potential for breakthrough.
One plan from Rep. Devin Nunes (R-Calif.) involves holding a “reverse auction” to provide a dedicated funding source for renewable energy power sources. Backers of the projects would bid for a share of the money, with the lowest bidders winning.
“This does make sense for those that want to make cuts to the federal budget because it doesn’t cost anything,” Nunes said recently. There’s also “a lot of interest in it because I think most folks see the likelihood of those tax extenders for solar and wind being extended as pretty low.”
Nunes’s idea, however, is tied to the issue of new oil drilling offshore and in Alaska’s Arctic National Wildlife Refuge, a politically perilous notion, to say the least.
From the same family tree as Nunes’s measure comes from one from Reps. Tim Murphy (R-Pa.) and Tim Walz (D-Minn.). They want to funnel as much as $3.7 trillion from new oil and gas lease revenue over the next 20 years into roads, bridges, sewer systems, clean energy technologies and paying off the national debt.
This idea has won kudos from the American Petroleum Institute, Bipartisan Policy Center, International Brotherhood of Boilermakers and Nuclear Energy Institute.
“I think there is a chance,” Grumet said. “It’s one of the ideas that in two sentences generally convey the meaning. It’s an idea that on first blush that people like, which is a heck of lot better place to start the conversation than a lot of ideas being promoted today.”
“When I talk to members, they’re a quick sell on this,” Murphy told POLITICO. “We’re not raising taxes. We’re not borrowing money.”
Murphy said House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) has pledged it will be the subject of a future hearing. Murphy also said he handed the president a note about his bill during a White House visit earlier this month, which prompted an administration aide to get in touch seeking more information. “That’s a good sign” he said.
Meanwhile, some old ideas refuse to die, like the carbon tax.
The Peterson Institute for International Economics recently queried six think tanks — liberal and conservative — on their debt-reduction ideas. The majority — including the Center for American Progress and American Enterprise Institute — included instituting a carbon tax.
“You’re going to see more support for action in that regard than we’ve ever seen before,” said Dan Weiss, senior climate fellow at the Center for American Progress. “Now, will that be put in any legislative vehicles that will move in the 112th Congress? That is not likely.”
Grumet’s group considered the carbon tax in its ideas on budget reform but ultimately opted to leave it out. Even so, the former Obama 2008 campaign adviser said he thinks it could be in the discussion if negotiations continue after the next presidential election.
“We’re looking at the possibility of significant broad-based tax reform as a major initiative in 2013,” he said. “And if a carbon tax was the seventh-most-controversial provision in that package, I think it would have a decent change of passage.”
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