Energy & Environment — Schumer sets up reconciliation vote

by Rachel Frazin and Zack Budryk - 08/04/22 7:42 PM ET

A reconciliation vote is coming, stipulations in the Democrats’ EV tax credits may make it hard for vehicles to qualify and Manchin joins Republicans in voting against Biden permitting regulations.

This is Overnight Energy & Environment, your source for the latest news focused on energy, the environment and beyond. For The Hill, we’re Rachel Frazin and Zack Budryk. Someone forward you this newsletter? Subscribe here.

Climate, tax bill could pass this weekend

Senate Majority Leader Charles Schumer (D-N.Y.) announced that the Senate will begin consideration of a $740 billion budget reconciliation package that would reform the tax code and tackle climate change on Saturday afternoon, setting up a weekend of around-the-clock votes.

“For the information of Senators, the Senate will next convene on Saturday at noon. The next vote will be at 12:30 p.m. on Saturday, on a motion to discharge a nomination. We expect to vote on the motion to proceed to the reconciliation legislation on Saturday afternoon,” Schumer announced on the floor.

We’re in for a long weekend: If a majority of senators vote to proceed to the legislation, they will then debate for up to 20 hours before holding an open-ended series of votes, known as a vote-a-rama, before a final up-or-down vote, which is now expected Sunday or perhaps early Monday morning.

The announcement signals that Schumer expects Sen. Kyrsten Sinema (D-Ariz.) to vote with all 49 other members of the Senate Democratic Caucus to proceed to the legislation, the Inflation Reduction Act, which would spend $369 billion on an energy and climate program and spend more than $300 billion to reduce the deficit.

The Congressional Budget Office estimates the legislation will reduce the deficit by roughly $100 billion over the next decade.

Sinema is still negotiating to make changes to the legislation, according to people familiar with the discussion, but it appears Schumer is optimistic he can strike a deal with her before the package comes to final vote on the floor.

Fine print could kneecap EV tax credits

Democrats’ push to boost electric vehicles could be hobbled by some of the protectionist supply chain provisions they included as requirements to get electric vehicle tax credits.

The credits were included as part of the climate deal reached between Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Charles Schumer (D-N.Y.), even after Manchin had expressed some skepticism about them.

In order for consumers to receive the full $7,500 for the purchase of a new electric vehicle, a portion of the minerals in that vehicle’s batteries will need to be extracted or refined from countries with free trade agreements with the United States.

Part of the credit is also tied to a percentage of battery components being manufactured in North America

Experts and industry players have indicated that these provisions — particularly the critical minerals piece — represents a high bar and may hamper electric vehicle adoption in the short term.

John Bozzella, president and CEO of the Alliance for Automotive Innovation, said companies are working to bring more of their supply chain to the U.S. but that “it’s also a change that doesn’t happen overnight.”

“A likely result of this bill (as currently constructed) is that a significant number of consumers will not be able to take advantage of this credit in the early years when it is needed the most,” Bozzella said in a statement.

Electric vehicles have been a central component of Democratic plans to combat climate change, and EV tax credits were included in various iterations of President Biden’s Build Back Better package.

The specifics: The Manchin-Schumer bill gives tax credits worth up to $7,500 to consumers to incentivize the purchase of new EVs, but half of those credits — amounting to $3,750 — is dependent on where the minerals in its batteries come from.

The legislation mandates that 40 percent of the value of the minerals used in the electric vehicles’ batteries are extracted or processed in countries where the U.S. has a free trade agreement, and that ratchets up over time.

For 2024, it increases to 50 percent, and 80 percent of the minerals used must come from these countries by 2027.

Does anybody actually benefit right away? An auto industry source told The Hill they believe there are currently no electric vehicles on the market that meet this requirement.

The U.S. has free trade agreements with some major mineral producers like Australia and Chile, but doesn’t have any such agreement with other major producers like China, Russia and the Democratic Republic of the Congo.

“The numbers that they quote in there are very high and very soon,” said Morgan Bazilian, a public policy professor at the Colorado School of Mines.

“Will those targets become a hindrance or an obstacle to the adoption of electric vehicles with those targets? Yes, if they are adhered to precisely and exactly,” he said.

GOP holds vote to nix Biden environmental rule

In a Republican-led push, the Senate on Thursday voted in favor of reversing a Biden administration rule that sought to strengthen environmental reviews.

The legislation passed 50-47, with Democratic Sen. Joe Manchin (W.Va.) joining Republicans in voting for it.

Sen. Dan Sullivan (R-Alaska.) introduced the resolution in mid-July with the co-sponsorship of every Senate Republican. The Alaska senator explicitly framed the resolution as an effort to put Senate Democrats on record.

“There won’t be any hiding from this vote. It will be very interesting to see who my Democratic colleagues stand with. I know who I stand for: the men and women who build our country,” he said in a statement last month.

Wait…how did Republicans get a vote? Most Republican priorities are not brought to the Senate floor, as Democrats hold the majority. In fact, most partisan legislation is prevented by the filibuster, which blocks most measures that cannot get 60 votes.

However, Thursday’s vote used a special process called the Congressional Review Act (CRA), which is specifically used to undo regulations put forward by the federal government.

The CRA operates under different rules than a typical vote. A petition signed by just 30 senators can discharge a CRA resolution for Senate consideration. CRA resolutions are also not subject to a filibuster.

Yet, the resolution still faces an uphill battle, both in the House and at the White House. CRA resolutions also require the president’s signature, and President Biden is unlikely to sign a resolution undoing the actions of his own administration.

Often these resolutions are used to undo midnight regulations from prior administrations. Democrats used such measures in 2021 to undo three Trump-era rules.

The reconciliation rub: The resolution comes as Manchin separately pushes for permitting reform changes that advocates fear could weaken the environmental review process in favor of speeding up infrastructure projects.

Manchin made a deal with Senate Majority Leader Charles Schumer (D-N.Y.) to pass such measures in exchange for his support on a major climate and tax bill.