By Kennedy Maize
“Dog’s dinner” is a Britishism signifying something messy, chaotic, badly organized. The massive legislation Congress passed, and the president signed into law on Independence Day, has all those attributes.
That’s particularly true for the energy provisions, which include a whole lotta fakin’ goin’ on. Overall, the energy provisions are bad for the nation. They could have been worse, and some represent no change at all, designed to look like action.
Going in, the GOP energy mavens in the administration and Congress were huffing and puffing about total, complete, burn-to-the-ground repeal of the Biden administration’s hated Inflation Reduction Act (IRA). That didn’t happen, although Congress did damage, particularly to solar and wind.
A New York Times detailed summary of the new law noted that it contains “Phase down tax credits for low-emissions electricity sources like wind, solar, nuclear and geothermal power. New restrictions on the use of components from China.”
The newspaper’s commentary notes, “Senators negotiated changes to the bill that would ease this move by allowing wind and solar projects to claim the credit as long as they either begin construction within a year of the law’s enactment or come online before the end of 2027. Nuclear, geothermal or battery projects would have more time. They also removed a controversial tax for projects that have ties to Chinese firms. It is unclear how the changes will affect the provision’s savings.”
Much of the Biden approach relied on production tax credits (PTCs) and investment tax credits (ITCs). A good summary of what Congress did to those comes from Princeton’s energy policy guru Jesse Jenkins in a series of Twitter postings.
For wind and solar, Jenkins observes that the “wind PTC was fully expired prior to passage of IRA. Projects commencing between 2022-2025 will get it.”
The solar ITC “was phasing down through end of 2023. Projects commencing 2022-2023 get 30-50% credit.” Also, “an ITC for storage & nuclear remains in place for a decade, which didn’t exist before IRA and also applied to geothermal, fission and any other carbon-free generation.”
The IRA created an advanced manufacturing tax credit which did not exist before Biden. The credit “remains in place” in the Trump iteration.
Jenkins’s bottom line: “Keep in mind that these tax credits were all either short-term or didn’t exist before the Inflation Reduction Act. In any prior Congress, a four-year extension (and in many cases expansion) of these credits would have been hailed as a major victory. And several entirely new credits persist. Were others cut shorter than planned? Yes. But did they run far longer than without IRA? Yes.”
It could have been far worse. During the Senate debate, a provision for confiscatory excise taxes on solar and wind projects appeared in the 900+page bill, from unknown sources. NBC News reported, “In an unusual twist, Republican senators insist they don’t know how or why the tax was inserted into the bill they’re rushing to pass. No senator is taking credit or defending it.”
Elon Musk, now anathema in Trump world, denounced the tax. He tweeted that the tax is, “Utterly insane and destructive. It gives handouts to industries of the past while severely damaging industries of the future. A massive strategic error is being made right now to damage solar/battery that will leave America extremely vulnerable in the future.” It soon disappeared, replaced with the PTC and ITC extensions that Jenkins described.
The final bill contains some provisions that are entirely vacuous, primarily aimed at the Interior Department’s Bureau of Land Management. They call for ending the Biden moratorium on new coal leases, authority Interior Secretary Doug Burgum already has. It also provides for lower royalty payments on coal coming from federal leases. This is also already in Interior’s arsenal. In August 2021, E&E News reported, “For the third time in recent months, the Interior Department has lowered a coal company’s royalty fees to encourage it to continue mining publicly owned coal.”
The Trump bill also kills Biden’s $7,500 tax credit for “made-in-America” electric vehicles. Trump has said he loathes EVs, although he turned the White House south lawn into a new car lot for Musk’s Tesla cars when he and Elon were pals. One wonders if Trump actually paid for the red Model S that he “bought” on the spot. There’s good reason to expect he didn’t.
The new law replaces that EV credit with a $10,000 tax deduction for purchase of any “made-in-America” new car. Presumably that includes EVs. No doubt the auto industry and its financial, accounting, and marketing finaglers will figure out how to factor that into the sticker price.
One long-time conservative target for elimination at the Department of Energy is what has been an aggressive Loan Programs Office. Project 2025 called for it to be vaporized. Jenkins observes that the “Loan Programs Office survives with significant funding authority.”
For years, conservatives have criticized federal energy subsidies of all shapes and sizes. The new law creates a new federal subsidy, a 2.5% production tax credit for U.S. metallurgical coal. Met coal, aka “coking coal,” is a specialty product with chemical and physical characteristics useful when cooked in a low oxygen environment for making pig iron. It is specified as part of the advanced manufacturing tax credit provision.
Met coal is located primarily in West Virginia and Alabama and produced in underground mines. China is the world’s largest met coal producer, using all of it domestically. The U.S. is the second largest producer, some 67 million tons in 2023, with 51 million tons exported at a premium price far higher than domestic steam coal. The administration named met coal a “critical mineral” in April for no apparent reason.
There are no clear fingerprints on the met coal subsidy, although Burgum recently visited a large Alabama producer, Warrior Met. Joe Craft, CEO of West Virginia met producer Alliance Resource Producers, has been a major contributor to Trump. Craft’s wife Kelly was Trump’s first-term U.S. Ambassador to Canada and U.S. Ambassador to the United Nations.
Jenkins commented on the coal gimme, “The new coal subsidy is temporary (only lasts for production through 2029), and is so small (2.5%) it won’t make a lick of difference for investment in new mining. It is PURELY A GIVEAWAY to a few coal mining companies (like Alliance Resource Partners & its CEO Joe Craft). Straight up cash payoff.”
A final thought on the process. The House was a dead letter. They slaved over a bill to get to a narrow vote to send something to the Senate. Then rolled over, paws in the air, when the Senate bill came back. They could just as easily have passed a single sheet of paper with the words, “A Bill,” and left it to the Senate at that.
And at end, the House’s obsequiousness revealed the House Freedom Caucus for what it truly is, a cowboy epithet: All hat and no cattle.
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