Bush Administration Threatens Veto of House Clean Energy Bills

Two House bills, if passed, would redirect subsidies and close royalty loopholes for oil and gas industries to provide tax incentives, bonds and R&D investments for clean energy technologies, increase energy efficiency standards, create green jobs and direct the federal government to be a leader in reducing energy use and greenhouse gas emissions.

Two important clean energy packages scheduled to head to the House floor tomorrow have been threatened with presidential veto, according to a Bush Administration "Statement of Administration Policy" released today (pdf).

The Bush Administration describes the two clean energy bills as implementing "unnecessary and duplicative new Federal energy efficiency and R&D bureaucracy and global climate and worker training programs" and "strongly opposes" provisions in the bill that would redirect subsidies and close loopholes currently enjoyed by the oil and gas industries.

H.R.3221, the New Direction for Energy Independence, National Security, and Consumer Protection Act contains a package of clean energy legislation that would increase R&D investments in clean energy technologies, raise efficiency standards for appliances and lighting, and direct the federal government to become a leader in reducing energy use and greenhouse gas emissions, among other provisions.

H.R.2771, the Renewable Energy and Energy Conservation Tax Act, is a companion tax package that would expand tax incentives and bonds for renewable energy, energy efficiency and renewable fuels as well as incentives for consumers to purchase plug-in hybrid electric vehicles and energy efficient appliances.

To pay for the package of clean energy incentives, the two bills would repeal approximately $16 billion in tax breaks for oil and gas companies and close a tax loophole that, according to House Speaker Nancy Pelosi, "allows big oil and gas companies to game the system by understating their foreign oil and gas extraction income." H.R.2771 also closes the so-called “Hummer” Tax Loophole that provides an extra tax incentive for businesses buying luxury SUVs, while exempting vehicles that are used for legitimate business purposes.

The two bills are very similar to H.R. 6 passed by the House during the "First 100 Days" push. H.R. 6 went on to the Senate where the version passed out of the Senate in June failed to include the tax provisions (see previous post). The two new bills are the House leadership's second attempt to get a strong package of clean energy incentives into Conference Committee with the Senate and eventually onto President Bush's desk, forcing him to sign the legislation or make good on veto threats.

A summary of both clean energy bills can be found at House Speaker Nancy Pelosi's website.

According to Speaker Pelosi:

"This legislation [H.R. 3221 and H.R. 2771] puts us on a path toward energy independence, strengthens national security, grows our economy and creates new jobs, lowers energy prices, and begins to address global warming. It does so by investing in the future. Specifically, we will invest in new energy technologies and innovation to create new jobs; improve energy efficiency for a wide range of products, lighting and buildings; make the federal government a leader in reducing energy usage and greenhouse gas emissions; and strengthen research and diplomatic efforts on climate change to protect our planet."

Not so, according to President Bush, who's Statement of Administration Policy says:

"The stated goal of energy reform by the new majority in the House of Representatives was "to achieve energy independence, strengthen national security, grow our economy and create jobs, lower energy prices, and begin to address global warming." The Administration is disappointed that the House has produced no such legislation, and instead is planning to consider H.R. 2776 and H.R. 3221, two bills that are not serious attempts to increase our energy security or address high energy costs. In fact, the combination of these two bills will result in less domestic oil and gas production, higher taxes to disadvantage a single targeted industry, and duplicative energy efficiency and R&D efforts that are largely underway already.""

According to the statement,

Because H.R. 2776 and H.R. 3221 fail to deliver American consumers or businesses more energy security, but rather would lead to less domestic oil and gas production, higher energy costs, and higher taxes, the President’s senior advisors would recommend that he veto these bills.

Although the President's statement plays lip service to renewable energy and conservation and touts the $12 billion of investment "in clean, safe advanced energy resources" made under the Administration's watch - mostly to 'clean coal,' hydrogen and advanced nuclear energy technologies it should be noted - the specific complaints with the two House clean energy bills outlined in the administration statement center around the bill's impacts on the oil and gas industries.

The administration complains that repealing tax incentives and subsidies for oil and gas industries - or "raising taxes" as the administration describes it - would "lead to higher energy costs to U.S. consumers and businesses" and "puts U.S. industries at a disadvantage to their foreign competitors."

The administration also "strongly opposes language that would force holders of certain deepwater oil and gas leases issued in 1998 and 1999 ... to either renegotiate the terms of the leases, pay an excessive fee, or face being barred from future oil and gas leasing in the Gulf of Mexico."

In a simple drafting mistake that has cost the U.S. government billions of dollars, more than 1,000 Clinton-era leases for deep water oil and gas drilling in the Gulf of Mexico failed to include provisions that require companies to share a portion of the revenue they receive from the sale of oil and gas produced on federal lands when prices reach a certain level. These royalty payments are standard in most federal leases and ensure the government a cut of the profit when oil prices soar as they have in recent years.

The fix proposed by H.R. 3221 would reinstate the royalties on Gulf oil and gas production when prices rise to a level - over $34.73/barrel for oil and $4.34 per million Btu for gas - where proponents of the bill argue incentives are not necessary to encourage exploration. Holders of the Clinton-era leases would be required to re-negotiate the lease terms to include the royalty provision or be banned from bidding on future Gulf exploration leases. Fixing the mistake in the old leases is expected to raise over $6 billion in revenue over the next 10 years.

H.R. 2771 would also end a special manufacturing tax deduction for oil and gas companies enacted by Congress in 2004. The deduction reduces the effective corporate tax rate for U.S. oil and gas production to 32% from the 35% standard for other manufacturing industries. The Democratic bill would bump the rate for the oil and gas sector back up to the normal 35% rate, raising another $8-10 billion in revenue.

The revenue raised by these two provisions would be pumped into tax incentives and bonds for renewable energy, efficiency, biofuels and plug-in hybrid electric vehicles as well as investments in research and development of innovative clean energy technologies contained in the two clean energy bills.

The administration statement also says President Bush "strongly opposes" provisions in Title VII of H.R. 3221 which the administration claims "would have a significant negative impact on current Federal efforts to increase traditional and renewable domestic production."

While Title VII does include some provisions for studying and recommending efforts to reduce impacts of wind power development on wildlife and birds - a provision that as far as I know is not opposed by the American Wind Energy Association - the bulk of Title VII focuses on ensuring greater accountability for oil and gas companies drilling on public lands and also includes the provision fixing the Gulf oil and gas royalties problem discussed above and it is presumably these provisions that have drawn the administration's ire.

Finally, the Bush Administration "strongly opposes" provisions in both bills that would require companies to pay workers prevailing wages if they receive federal tax incentives authorized under the clean energy bills.


Apparently harnessing and promoting American innovation to increase our energy independence and start on a path to a new, clean energy future while creating thousands of new jobs, reducing American's energy bills and slowing rising greenhouse gas emissions doesn't pass muster with the Bush Administration, so long these efforts are funded by removing billions of dollars of taxpayer-funded subsidies for his friends in the oil and gas industries - even while they are enjoying record profits.

And god forbid we require companies to pay workers prevailing wages if they want to enjoy federal tax beaks! That's downright un-American!

The message the Bush Administration sends in this Statement of Administration Policy seems perfectly clear to me: President Bush is on the side of oil and gas special interests, is fine with paying workers below prevailing wages and will stifle efforts to advance American energy independence, build a new energy economy and tackle climate change, even if those efforts are supported by a majority of United States Congress and the American people.

We've all known Mr. Bush is to put it nicely particularly chummy with his old oil and gas industry friends (others might say he's "in the oil and gas industry's pockets"), but I'm not sure there's ever been a clearer statement of where his loyalties lie than this latest Statement of Administration Policy!

This is simply despicable.

I hope the House calls President Bush's bluff and passes the two clean energy bills tomorrow.

Let Mr. Bush explain to the American people why, after Congress finally passes bi-partisan legislation to address rising energy costs, increase American energy independence, create a new energy economy thousands of new jobs and take a first step towards solving the Climate Crisis, he decided to veto the bill in order to protect an industry recording obscene and record profits while American's pay an arm and a leg at the pump.

Go for it Mr. President...