Budget

Dorsey & Whitney's Lorenzen says Obama proposal defines energy, climate debate ahead of 2016 elections

How critical is additional fiscal 2016 funding for U.S. EPA to the implementation of the Clean Power Plan? During today's OnPoint, Thomas Lorenzen, a partner at Dorsey & Whitney and a former assistant chief in the Environment and Natural Resources Division at the Department of Justice, discusses his expectations for congressional support of the climate and energy aspects of President Obama's fiscal 2016 budget proposal.

Transcript

Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Thomas Lorenzen, a partner at Dorsey & Whitney and a former assistant chief in the Environment and Natural Resources Division at the Department of Justice. Tom, it's great to have you back on the show.

Thomas Lorenzen: Nice to be back.

Monica Trauzzi: So, Tom, President Obama released his new budget proposal this week, and the Clean Power Plan clearly remains a key focus for this administration with additional funding for EPA and climate-specific initiatives. The president proposes a budget increase for EPA in fiscal year 2016. How critical could that extra funding be to the success of the Clean Power Plan?

Thomas Lorenzen: That extra funding is quite critical. EPA is essentially operating right now at levels that it was seeing in 2009 and earlier. So they've been flatlined for a lot of years. The additional $500 million that EPA is seeking in this budget will help them. There is additional money that the president is asking for, another $239 million, that would be specifically targeted to implementation and development of the Clean Power Plan. That is not likely to get through Congress, but it's a good starting point for a conversation.

Monica Trauzzi: And then there's also this clean power state incentive fund that would help states go even further than what EPA has proposed in the Clean Power Plan. How likely is it that something like that would receive support from Congress, considering how intense the debate is already over just the Clean Power Plan targets?

Thomas Lorenzen: Four billion dollars. That's the sum that the president is asking for for that state support for implementation of the Clean Power Plan and going beyond it. That's a very attractive pot of money for many states who want to do things, so there -- I think that this money was put there, or this request was put there very specifically to entice the states. But Congress is adamantly opposed to the president's Clean Power Plan, and I don't expect them to go anywhere near this in terms of adopting it.

Monica Trauzzi: As far as DOE goes, their budget there, there's an emphasis on clean energy technologies and a shift away from fossil energy. How might that fare with this Congress?

Thomas Lorenzen: Some of that might fare well. There are a number of incentives that are put into this budget. Again, this is a discussion starting point, but between the monies that are set aside for DOE to fund various research-and-development initiatives and monies that are set aside for various agencies to do things like climate resilience, those are all designed to attract Republicans who are looking for ways to help grow the economy.

Monica Trauzzi: Despite falling oil prices and an industry that faces potentially negative economic impacts resulting from those prices, the new budget would remove over $40 billion in tax breaks from the oil and gas industry. Does that jibe with the administration's plans for offshore oil and gas development and this focus on an all-of-the-above energy strategy and overall energy independence?

Thomas Lorenzen: There's been a lot of discussion for a number of years about whether those tax subsidies are really necessary anymore. Even with falling oil prices, the view of the administration is that the oil and gas industries are quite profitable and they don't really need those tax breaks to thrive. So we'll see if that -- if we get some pushback from the oil and gas industry saying, "Hey, now with oil down below $50 a barrel, we're really not in the same position we were in before." But the president is looking for sources of income to fund some of these other initiatives. He's got to get it from somewhere, so this is one of the attractive places for him to get it from.

Monica Trauzzi: And on the flip side, the wind and solar industries get a boost in the president's plan with the reinstatement of the wind PTC and solar investment credit, and this just comes a couple weeks after the president said how strong the wind and solar industries are in his State of the Union address. Will these industries falter without the support that he's proposed?

Thomas Lorenzen: They won't falter. They're doing very well with renewable energy portfolio requirements in the various states with the Clean Power Plan and just natural development of clean energy resources. But what the president wants to do is expand the growth of those industries, push them along further and faster, and that's why he set aside, I think, $7.4 billion for research and development in new wind, solar, geothermal and other technologies.

Monica Trauzzi: Last year the president made a $3 billion pledge to the Green Climate Fund, and in this budget, he's asking Congress for the first $500 million of that. DO you expect they'll give their support for this international venture?

Thomas Lorenzen: I don't think so. Again, I think that this Congress is focused on reducing deficits. They've already indicated today, in response to the president's budget, that that is going to be their focus. Expect to see them cut those funds, perhaps to zero, perhaps to something a little bit above, but to focus at home. And expect them also to go after EPA's budget.

Monica Trauzzi: Right. And so next week we'll begin to see Congress take up the proposal with a series of hearings as they hear from various agency officials on the budget requests. How do you see those hearings going, and overall where do you see this proposal going?

Thomas Lorenzen: I see this proposal as largely going nowhere. This is an opening salvo in what's going to be a long discussion between Congress and the president. I think this is really a way of framing a debate for 2016. So I would expect the Republicans, in an attempt to show that they can govern according to their principles, to propose cuts to EPA's budget, to zero out most of these items, to perhaps fund some of the ones that are designed to help industries grow. As I said, the climate resilience issues that are in here, some of the research-and-development funds might be there. Most of the other things, probably not.

Monica Trauzzi: All right. Interesting stuff. We'll end it there. Thank you for coming on the show.

Thomas Lorenzen: Thank you for having me.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]

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