What to watch as Senate takes up reconciliation bill

By Geof Koss, Nick Sobczyk, Emma Dumain, Manuel Quiñones | 11/29/2021 06:45 AM EST

Democratic Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona.

Senate Energy and Natural Resources Chair Joe Manchin (D-W.Va.) and Sen. Kyrsten Sinema (D-Ariz.) at the Capitol. Francis Chung/E&E News

Now that the bipartisan infrastructure bill is law and the House has passed a $1.7 trillion budget reconciliation package, the Democrats’ agenda is squarely in the Senate’s hands, with Sens. Joe Manchin and Kyrsten Sinema playing deciding roles.

The chamber will inevitably tweak — and potentially shrink — the reconciliation bill before final passage in December if Majority Leader Chuck Schumer (D-N.Y.) gets his wish. The House will then have to ratify whatever the Senate produces.

Schumer’s timeline is ambitious. Lawmakers next month also have to address coming fiscal deadlines. The government’s spending authority runs out Friday. The debt ceiling is also a looming concern.

Sen. Amy Klobuchar (D-Minn.) said on ABC’s "This Week" she was confident budget reconciliation would be done by Christmas. "I am," she said. "Sen. Manchin is still at the negotiating table, talking to us every day, talking to us about voting rights, getting that bill done, restoring the Senate. He’s talking to us about this bill."

Sen. Bill Cassidy (R-La.), on the same show after Klobuchar, called it "a bad, bad, bad bill."

For months, Democratic leaders have sought a deal with with Senate moderates. House progressives wanted assurances before moving forward. But in the end, Manchin of West Virginia and Sinema of Arizona — who appear willing to scrap the process if they don’t get their way — may get the last word.

Here are issues to watch:

1. EV credits

The House and Senate are also still negotiating over tax incentives for electric vehicles, a major focus of Biden’s infrastructure agenda and one that has wide support within the Democratic Party.

However, the House’s inclusion of a $4,500 bonus credit for cars and trucks assembled within the U.S. by union workers remains a notable sticking point.

Manchin, who chairs the Energy and Natural Resources Committee, has questioned the union bonus. His home state of West Virginia is home to a manufacturing facility owned by Toyota Motor Corp., which opposes the bonus for union-made EVs.

Rep. Dan Kildee (D-Mich.), who helped write the union provision, said that while talks are ongoing, Manchin is not “in a position where he gets to have everything.”

“It’s a little difficult for me to accept some of his criticism on behalf of Toyota when people I represent make cars that we’ve never been able to sell in Japan,” Kildee told E&E News earlier this month.

“They use every tool they can to close their markets," said Kildee. "And then all we’re trying to do is say that we need an even playing field for the workers. Toyota has unions everywhere except the United States.”

Toyota’s opposition to the EV credit also drew a blistering response from the Center for American Progress and leading environmental groups earlier this month.

Kildee declined to discuss what a potential compromise would look like. “We have some ideas,” he said. “I’d like to hear if he’s open to some of them.”

House Ways and Means Chair Richard Neal (D-Mass.) said the EV bonus is but one of several pending issues on which Democrats hope to find compromise with Manchin.

“We’ll give Sen. Manchin a chance,” Neal told E&E News earlier this month.

Another hurdle for the EV bonus provision are international trade deals, which generally limit government subsidies that favor domestic commodities. Already, Mexico and Canada have hinted the union bonus may run afoul of the United States-Mexico-Canada Agreement (USMCA) — the successor treaty to the North American Free Trade Agreement negotiated by the Trump administration (Climatewire, Nov. 18).

Kildee, a member of the Ways and Means Committee that oversees trade policy, said he was more concerned about Canada’s concerns because of supply chain issues but dismissed Mexico’s critiques.

“Until Mexico fully implements the provisions under USMCA, it’s pretty hard to accept criticism from them,” he said. “I mean, they still have phony labor unions, so they’ve got a long way to go before they’re on any moral high ground.”

2. Methane fee

The reconciliation bill’s methane fee — the sole remaining punitive measure to reduce greenhouse gas emissions — could also be subject to some debate as it moves through the Senate.

Democrats struck a compromise on the policy last month at the behest of Manchin and Texas House moderates. The “Methane Emissions Reduction Program” would pair a fee on emissions of oil and gas facilities, rising to $1,500 per ton in 2023, with $775 million in grants and loans to help the industry slash methane.

But it remains a tough pill to swallow for the Texas moderates representing oil and gas interests, given an active lobbying campaign against it by the American Petroleum Institute, and it’s not clear yet that Manchin has signed off.

Rep. Henry Cuellar (D-Texas) said this month he plans to continue lobbying Manchin to nix the provision.

Senate climate hawks are pushing to add a separate carbon fee to the package, but that’s another area where they could face an uphill climb with Manchin.

3. Drilling reforms

The House-passed reconciliation bill will come to the Senate with a provision that would repeal language from the Republicans’ 2017 tax law — which was also advanced through the reconciliation process — that opened up the Arctic National Wildlife Refuge to oil and gas drilling. Democrats are now seeking to close the area to energy exploration in the name of environmental protection.

While Manchin was opposed to including the ANWR allowance in the 2017 measure, that same year he supported stand-alone legislation sponsored by his close friend Sen. Lisa Murkowski (R-Alaska) that would have had the same effect. It’s not clear yet where Manchin will come down this time around (Greenwire, Nov. 15, 2017).

Manchin has, however, expressed sympathies for raising the royalty fees for both onshore and offshore oil and gas drilling on federal lands for the first time in 100 years, which is also addressed in the House bill (Energywire, Sept. 16).

The royalty rate increases are part of a suite of other major reforms to the federal fossil fuel leasing program that would cumulatively raise $2.3 billion in new revenue, according to a recent Congressional Budget Office estimate (E&E Daily, Nov. 18). It would include establishing a new minimum bid for lease sales and ending noncompetitive leasing.

These policy proposals are opposed by most Republicans and industry representatives, but were buttressed by a report on oil and gas drilling released by the Interior Department on Friday.