CLIMATE:

Conrad, Gregg warn against using budget bill to move cap and trade

The leaders of the Senate Budget Committee yesterday warned the Obama administration against pursuing the filibuster-proof budget reconciliation measure as a strategy for moving climate change legislation.

Chairman Kent Conrad (D-N.D.) did not explicitly say that using reconciliation is not an option for moving cap-and-trade legislation. But he warned White House Office of Management and Budget Director Peter Orszag that such a path contained several pitfalls.

One of those, Conrad said, is the so-called Byrd rule, which prohibits the Senate from using reconciliation to move "extraneous" matters. "We've been told by parliamentary experts that if one tried to write comprehensive legislation using reconciliation, the legislation, once the Byrd rule had been applied, would look like Swiss cheese," Conrad said.

The "extraneous matters" are defined under the Budget Act, but its practical implementation remains the subject of interpretation by the presiding officer of the Senate with consultation from the parliamentarian. Any senator can raise a point of order against a provision if he believes it violates the Byrd rule, which can then only be waived by a 60 vote majority.

From a political standpoint, Conrad indicated that a number of senators who are on the fence or close to it when it comes to climate change legislation may jump ship if they stand to lose the opportunity to influence the legislation. "There an awful lot of senators who are on the margins of this issue who would be very concerned if their leverage was reduced by that mechanism," Conrad said.

Conrad's warnings were echoed by Budget Committee ranking member Judd Gregg (R-N.H.), who said many lawmakers would be uncomfortable with moving such sweeping legislation by using the budget process.

"It would be an act of violence against the system here in the Senate," Gregg said of any efforts to move either climate change or health care legislation in such a manner. "You're probably not even going to be able to get where you want to go if you did that."

Gregg then went one step further, saying the administration's refusal to take reconciliation off the table would also hamper any future effort to pick up Republican support for cap-and-trade legislation should a reconciliation gambit fail.

"The fact that the administration hasn't taken that off the table probably undermines the ability to draw in people ... who have all been sponsors in the past of initiatives in the area of limiting emissions because we'll be concerned if we step into this exercise we'll be blindsided with reconciliation," Gregg said. "There's no point of stepping into the exercise if we're going to be shut down in our ability to influence it."

Gregg has familiarity with the matter. In 2005, when Gregg chaired the Budget Committee in the GOP-led Congress, Republicans sought to use budget reconciliation to open the Arctic National Wildlife Refuge to oil drilling. The effort came close to succeeding but collapsed in the House when GOP moderates joined Democrats in opposition.

But Gregg said climate legislation -- which he called a "national sales tax on energy" -- is a different story. "ANWR was not an all-encompassing event that was going to affect every American in a dramatic way," he said.

Senate Majority Whip Dick Durbin (D-Ill.) said earlier in the day that while reconciliation is a possibility for moving a cap-and-trade bill, no decision had been made. Conrad also said earlier this week any decision was a "long way" off.

For his part, Orszag said the administration does not favor the reconciliation strategy but would not rule it out. "We would prefer not to start there, but we're not to taking anything off the table at this point," he stated.

Budget process in trouble?

Conrad also indicated that the budget process as a whole was perhaps on shakier footing than some realized as quite a few lawmakers have told him that they could not support the document as it is currently written.

"Every time I go to the floor another colleague comes and sits down besides me and says, if this is in, don't count on my vote," Conrad said. "I've had enough colleagues now tell me that about enough provisions in this budget to absolutely assure that we can't pass a budget."

Conrad said he told his colleagues at a caucus meeting earlier in the day to not "draw lines in the sand" on the budget but said the administration would need to do likewise. "Anybody that thinks it's going to be easy getting the votes on a budget with the conditions that we face is smoking something," he said.

For instance, Conrad pointed in particular to some of the cuts in agriculture subsidies proposed under the budget blueprints as one item that could cost the administration votes.

Conrad, GOP says changes may be needed to cap-and-trade

Regardless of what strategy the Obama administration and Senate Democratic leaders use to try to move the bill, Conrad and several other Budget Committee members -- particularly on the Republican side of the aisle -- said the climate change proposal needed significant changes if it has any hope of making it through the Senate.

Conrad pointed to his home state and the oil and gas companies and utilities that are based there as one example of the kind of industries that may need some kind of concessions. "I find it unlikely that climate change legislation will pass that doesn't have some allocations reserved for especially hard hit industries," he said. "I think that's just a reality."

Republicans on the panel also argued the Obama administration made a strategic mistake by including the large amount of cap-and-trade revenue -- $646 billion over 10 years -- in their budget proposal. "There are a lot folks that believe that climate change is real, that C02 emissions are heating up the planet and we need to find a solution," said Sen. Lindsey Graham (R-S.C.). "But your $646 billion revenue stream, I think assumes some things that are too far, too fast.

"I think you've done a lot quite frankly to damage the ability to find common ground on climate change," Graham told Orszag.

One politically difficult item Graham cited is the call for cap-and-trade revenue to help pay for a tax credit for middle income workers. "You've probably thrown an issue into the climate change debate that has not existed and that effectively destroyed the ability to solve the problem," he said.

And Graham raised the issue of the Obama administration's plan to auction off 100 percent of the carbon credits, saying it would pave the way for hedge funds and others to drive up the costs.

Orszag said a "secondary trading market" would likely occur regardless of what percentage of permits are auctioned off and that the matter could be handled through proper oversight. "It's not really a question of whether the permits are auctioned or not, it's whether there's secondary trading occurs," Orszag said. "And there will be secondary trading to provide liquidity to the permit market."

Senior reporter Ben Geman contributed.