Warming Up for Battle

By Steve Kopperud, Policy Directions, Inc.

I once had a boss who said giving speeches in the country on “what’s going to happen in Washington” is the easiest thing in the world. “You can predict $10 corn and $20 beans, and by the time your plane lands in Washington, everything’s changed and no one remembers what you said anyway.”

So, in the spirit of “no one will remember anyway,” and since I’m writing this column during the first week in November and you’re reading it some time in December, I’m going out on the proverbial limb and make some hopefully educated “predictions” as to where we’ll be when you’re savoring these pearls.

The big question today – the day after the Democrats lost the governors’ races in Virginia and New Jersey – is what message the GOP pickups across the country send to congressional leadership and their current list of legislative priorities. While House Speaker Nancy Pelosi (D-CA) points at a single House seat win in New York as confirmation of her mandate to lead, Senate Majority Leader Harry Reid (D-NV) began hanging crepe on whether he can pull off health care reform this year – “You can’t hold us to a schedule,” he said – and as I’ll explain a bit later, the Senate climate change bill is in for anything but smooth sailing.

It’s important to keep in mind how Congress thinks and reacts. First and foremost, in the minds of all members of Congress is the need to get reelected. Secondly, members of Congress are not notoriously brave souls. This means politically contentious, publicly controversial, and expensive issues are generally dealt with in years in which there is no congressional election. Also, history tells us the party in power following a presidential election generally loses seats in the subsequent midterm election. Next year brings us such a midterm election. This is in large part why the Obama administration, Pelosi, and Reid have been pushing like freight trains to get health care, climate change, food safety, and a whole raft of lesser issues done this year rather than next. They can sense the softening of congressional backbones.

Now to the issues at hand. On extension of the biofuels tax credits, including the $1 per gallon credit for animal- and soy-based biodiesel, I predict we will see an extension bill by December, a subset of a much broader tax bill that will be cobbled together at the eleventh hour. The reason we haven’t seen an extenders package yet has less to do with the worthiness of the tax credit, more to do with the press of other business, and everything to do with biomass fuels and alternative energy sources being critical to the Obama administration’s energy position. Whether we’ll see a shift from a blender’s tax credit to a producer’s tax credit and whether it will be a four-year extension instead of yet another one-year extension is the political crapshoot.

The National Renderers Association and National Biodiesel Board are in sync on calling for the producer’s tax credit and a four-year run, but the House Ways and Means Committee is going to let the Senate Finance Committee put together the tax extenders package and the challenge is whether the Senate can convince the House these biofuels tax extensions and their redefinition is worth the heavy lift.

The alternative fuels mixture tax credit – worth 50 cents a gallon to qualified companies – is also up for renewal, but its fate is not as certain as the biodiesel tax credit. Initially, the credit given to companies that produce a qualified by-product used to replace diesel fuels, or which can be sold to replace diesel fuels, was complicated because the paper industry took advantage of the tax credit, citing use of its so-called “black liquor” pulp by-product burned in boilers and generators. When it was revealed the paper industry was collecting hundreds of millions – some say billions – of dollars from the tax credit and the credit’s Senate authors reminded the Internal Revenue Service the credit was designed to stimulate new alternative fuels, multiple Senate pledges to end the credit for black liquor were laid on the table.

But as always happens in Washington, it couldn’t be that simple. Now, the House health care reform package carries a provision to cut off the paper industry’s eligibility for the black liquor credit and use the savings as an “offset” to the $1 trillion-plus cost of the health care package. Representative Chris Van Hollen (D-MD), who came up with the offset plan, tried to expand the credit to other plant-based endeavors but was unsuccessful. Representative John Dingell (D-MI) has also offered language to include biofuels in the health care package, further complicating this scenario and likely leading to an expulsion of all fuel-related language from the health care debate.

Climate change legislation will not be enacted until 2010. I’m pretty confident in this prediction since in the first week of November, Senator Barbara Boxer (D-CA), chair of the Senate Environment and Public Works Committee, marked up her carbon dioxide/cap and trade draft legislation with no Republicans participating in the process. Committee rules say she can report the bill out of her committee with just Democrat votes, but she can’t amend or change the bill being marked up without at least two GOPers at the table. So, her effort was essentially for nothing as she’s already acknowledged her original bill needs fixing and none of that repair took place. The Republicans refused to participate because they say the costs of the bill have not been fully revealed (an Environmental Protection Agency assessment of the bill was so quick and dirty as to be useless) and they want to see the effort scaled back to ensure rural America – read “food production” – does not take a disproportionate cost hit when the programs are rolled out.

Five other Senate committees have to review the Boxer bill now that her committee is finished. The Senate Agriculture Committee, says its chair, Senator Blanche Lincoln (D-AR), will do more than just review the bill, it will change the bill as deemed necessary to protect agriculture. Senator Debbie Stabenow (D-MI), a member of the ag panel, is the unlikely author of language to carve out offsets for which agriculture would be eligible in trying to curb greenhouse gas emissions. Add the fact that every Senator from every state that either produces coal or is reliant on coal-generated electricity hates the Boxer bill and you have a pretty good idea why it’s going to take months, not weeks, to get this bill to the floor of the Senate, let alone reconcile it with the much-criticized House version and get that compromise to the president’s desk.

Food safety legislation is also a toss-up. New Senate Health, Education, Labor, and Pensions (HELP) Committee Chair Tom Harkin (D-IA) has ceded leadership of health care reform to Senator Chris Dodd (D-CT), so as newly minted HELP helmsman, Harkin is looking for legislation to work on. Mid-November saw a markup of Senate Bill 510, the Richard Durbin (D-IL)/Richard Burr (R-NC) bipartisan Food and Drug Administration reform bill, but Senate floor action and House/Senate reconciliation will take several weeks.

So there you have it. Expect to see in 2010 versions of the above-mentioned legislation, but likely with little resemblance to the sweeping proposals now on the table. As one veteran Washington reporter said to me the other day: “2009 is just the warm-up; 2010 is the real battleground.”

View from Washington – December 2009 RENDER | back