The Nickel Report

While the election results are not yet final, this article will proceed from the assumption that former Vice President Biden will become President in January and that Republicans will win at least one of the two U.S. Senate seats in Georgia to be decided by runoff, and thus will have a majority in the U.S. Senate.

At this time, here’s what we know:

Of the four House races not yet determined, Republicans lead in all four.  However, in three of the races the margin is less than 500 votes.  Regardless of which party wins these four seats, the majority-minority split in the House will be the closest in 20 years.  The Senate majority also will be narrow.  This sets a circumstance in which legislation that comes to the floor of the House and Senate is likely to avoid or carefully manage controversial issues.

Climate change presently is at the center of energy and environmental policy.  The issue itself has become somewhat less controversial, but policies to address it no less so.  It was the centerpiece of the Biden campaign’s environmental agenda.  While it would be hard to argue that the election provided a mandate to the incoming Administration to act on climate change, with the issue polling low in voter issue priorities, it is widely expected to be a driving force in a Biden Administration’s environmental and energy policies.

But with narrow margins in Congress in the coming two years, what can be accomplished in the way of energy and environmental legislation generally, and on climate change in particular?  Where can there be agreement?

Before turning to next year, there is unfinished energy and environmental business still pending this year.  House and Senate negotiators are working to determine whether an agreement can be reached on non-controversial provisions from the House energy bill, H.R. 4447, and the Senate energy bill, as represented by the draft released in the spring of 2020 by Senate Energy and Natural Resources Committee Chairman Lisa Murkowski (R-AK) and committee Ranking Democrat Joe Manchin (D-WV).  Many of the provisions in these bills have environmental dimensions.  If this effort is successful, it will address some of the issues below.

Issues on which we expect there can be agreement, whether in an energy bill before the end of this year, or through legislation in the coming Congress, include the following.

Carbon Capture Utilization and Storage (CCUS) – CCUS is a key mechanism to reduce carbon dioxide emissions.  In September, International Energy Agency Executive Director Fatih Birol said that without CCUS, “our energy and climate goals will become virtually impossible to reach.”  Areas on which there is bipartisan agreement include the following:

• • Extending the Section 45Q tax credit deadline for projects to begin construction beyond December 31, 2023. The Internal Revenue Service has yet to issue final rules on how the Section 45Q tax credit is to be interpreted and implemented.  Many projects reportedly have been waiting on final rules before proceeding.
  • Enhancing Department of Energy (DOE) CCUS programs to provide additional funding, put additional focus on large-scale pilot demonstrations, and assure that the program covers a variety of emitting sources. Senator Manchin is the lead sponsor of legislation in the Senate to accomplish this.

Energy Storage – As electric generation in the U.S. continues to evolve toward increasing amounts of generation from intermittent resources, such as wind and solar, energy storage takes on great significance.  Far more quickly available energy, including from storage, becomes necessary to make up for times when power is not available (or less available) from intermittent sources.  Areas of potential agreement include:

• • Establishing a Public Utility Regulatory Policies Act Section 111(d) standard requiring States to consider incorporating energy storage into supply-side resource planning.
  • Providing federal grants for energy storage projects.
  • Updating current authorizations for energy storage research and development.

Energy Efficiency – There is broad support for expanding programs to encourage energy efficiency.  However, Congress will have to find a way to navigate opposition to provisions in the Portman-Shaheen energy efficiency bill.  Some constituencies oppose the federal government establishing model building energy codes.  Building codes generally are set by State and local governments, many adopting model codes established through stakeholder processes, which take into account a variety of factors during the development process.

Hydrogen – Releasing hydrogen and capturing carbon is a key way to make cleaner use of fossil fuels, and using renewable energy to separate hydrogen from oxygen via electrolysis is a key way to make renewable energy better available when needed.  At present the former is expensive; the latter more so.  DOE currently administers a research and development program regarding hydrogen production, delivery, infrastructure, storage, fuel cells, and end uses.  There is intensifying advocacy to disqualify hydrogen derived from fossil fuels as “clean.”  Areas of potential agreement include:

• • Incorporating hydrogen into existing program authorizations to provide clearer authority for the federal government to support hydrogen research and development in future activities, including programs related to CCUS.
  • Encouraging deployment of hydrogen refueling equipment and infrastructure for hydrogen vehicles.

We also expect the House of Representatives in particular to focus on a federal clean energy standard next year, which would require utilities to provide an increasing portion of electricity to customers from clean energy sources. A clean energy standard will be difficult to pass through the Senate, but nonetheless the House may focus on it to bring greater public attention to climate issues and support the Biden administration’s regulatory agenda for carbon reductions.

[1] The one House independent, Rep. Justin Amash (MI), generally votes with Republicans.

[2] The two Senate independents, Senator Bernie Sanders (VT) and Senator Angus King (ME) caucus with the Democrats.