The following is a memorandum from Henry Waxman (D-CA). Representative Waxman is the Ranking Member of the House Committee on Energy and Commerce. Here is one take–from a leading House Democrat–on possible outcomes of the November election. [Please comment and send us more points of view to post!] See the entire Memorandum here with footnotes.
MEMORANDUM
August 13, 2012
To: Members of the Committee on Energy and Commerce
Fr: Henry A. Waxman, Ranking Member
Re: Ryan Budget’s Cuts to Clean Energy Programs
On Saturday, Mitt Romney selected Rep. Paul Ryan as his running mate. The Republican budget authored by Rep. Ryan passed the House on March 29, 2012, with no Democratic votes. This memorandum provides information on the Ryan Budget’s impact on key energy programs.
This proposed budget would have significant impact on Department of Energy (DOE) programs. It would cut billions of dollars of funding for the development of clean energy, eliminate DOE loan programs that have helped support over 60,000 jobs, and maintain nearly $40 billion in tax subsidies for oil and gas companies. The Ryan budget would:
- Cut overall energy discretionary spending by 57% in 2013, forcing major cuts in DOE’s Office of Energy Efficiency and Renewable Energy and derailing efforts to increase energy efficiency and develop wind, solar, geothermal, and other clean energy sources.
- Halt DOE’s Advanced Technology Vehicle Manufacturing (ATVM) program and loan guarantee programs authorized under sections 1703 and 1705 of the Energy Policy Act of 2005. These programs – which have supported the development of plug-in hybrid vehicles and electric vehicles and helped U.S. renewable energy companies compete globally – have supported an estimated 60,000 jobs over the last three years.
- Repeal borrowing authority for DOE’s Western Area Power Administration Transmission Infrastructure Program, which is working to modernize the electrical grid in order to promote energy and cost-saving choices for consumers, reduce emissions, and foster the growth of renewable energy sources.
- Retain billions of dollars in oil industry tax subsidies, including oil and gas company tax preferences worth $38.6 billion over 10 years.
The remainder of this memorandum provides additional detail on the Ryan budget and its impact on energy programs.
I. THE RYAN BUDGET REDUCES SUPPORT FOR ENERGY EFFICIENCY AND RENEWABLE ENERGY INITIATIVES.
While the House Republican budget does not detail funding levels for specific programs, it proposes slashing discretionary spending on energy programs by 57% in 2013. Even if the cuts were distributed evenly across the full range of energy programs, the impact on energy efficiency and renewable energy initiatives would be severe. The rhetoric and illustrative examples used in the Ryan budget suggest that clean energy programs would likely be targeted for even more draconian cuts.
Cutting the budget of the Office of Energy Efficiency and Renewable Energy by more than half would derail efforts to make wind and solar power cost competitive with fossil fuels, to generate 20% of U.S. electricity from wind by 2030, to expand geothermal generation capacity, and to help entrepreneurs break ground on several next-generation biorefineries. Cuts of this size would also cripple efforts to retrofit tens of thousands of residential homes to save consumers money and conserve energy, to make the commercial building sector 20% more efficient by 2022, and to develop transformational manufacturing processes and materials technologies that advance the clean energy economy by increasing industrial and manufacturing energy efficiency. Initiatives to improve the fuel economy of vehicle combustion engines and reduce the cost of electric vehicle batteries would also face significant cuts.
II. THE RYAN BUDGET CUTS THE ADVANCED TECHNOLOGY VEHICLE MANUFACTURING LOAN PROGRAM.
The House Republican Budget targets the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program as an illustrative policy option for cuts under the heading, “Rescind Unobligated Balances in DOE’s Green Subsidies and Loan Portfolio.” The bipartisan program was signed into law by President Bush in order to help auto companies finance the production of energy-efficient vehicles and spur private investment. The FY 2009 Continuing Resolution appropriated $7.5 billion in credit subsidy funding to support $25 billion in ATVM loans.
By supporting permanent manufacturing jobs, the program revitalizes communities experiencing stagnant economic growth. To date, the ATVM program has supported 38,700 jobs through loans to five companies operating 20 projects.
The ATVM program has helped fund the development of plug-in hybrid vehicles and electric vehicles where private financing was unavailable. Projects are reviewed by DOE on a competitive basis and must go through a “rigorous financial, legal and technical review process.” DOE ensures that each project meets the statutory requirement of a “reasonable prospect of payment.”
Examples of ATVM loans include:
- Tesla – DOE has provided $465 million to Tesla Motors, supporting 1,500 permanent jobs in California. The loan will avoid 26,000 tons of carbon pollution annually, the equivalent of taking 5,000 cars off the road. The loan will support the development of two plants to develop the Tesla Model S, as well as battery packs and electric drivetrains.
- The Vehicle Production Group LLC – DOE has provided $50 million to the Florida-based company, supporting 900 jobs. The loan will avoid 9,000 tons of carbon pollution annually, the equivalent of taking 2,000 cars off the road. DOE funding will support the modernization of facilities in Michigan in order to produce advanced high-strength steel.
In February 2011, the Government Accountability Office (GAO) issued a report assessing the program’s performance. GAO concluded: “In making its first loans, the ATVM program has injected significant funds into the U.S. automotive industry for promoting improved fuel efficiency of conventional vehicles and encouraging the development of vehicles with newer technologies that rely less, or not at all, on petroleum.”
The ATVM program has broad support. The Chamber of Commerce has opposed elimination of the program, and Chairman Upton supported and voted for the ATVM program in 2007. Chairman Upton also wrote to Secretary Chu in July 2010, along with a group of bipartisan lawmakers, urging “prompt completion and consideration of loan applications” from his home state and noted “[f]or America’s auto industry to continue its global leadership into the 21st Century, we must foster the American manufacture of fuel-efficient vehicles for the mass market.”
III. THE RYAN BUDGET RESCINDS FUNDING FOR LOAN GUARANTEES FOR ENERGY EFFICIENCY AND RENEWABLE ENERGY PROJECTS.
DOE’s Loan Guarantee Program Office provides and manages loan guarantees for clean energy projects awarded under section 1703 and section 1705 of the Energy Policy Act of 2005. The House Republican Budget proposes to de-fund this program by rescinding unobligated balances in 2013.
Innovative renewable energy projects are eligible to receive loan guarantees under the program. The program is funding one of the world’s largest wind farms, the world’s largest concentrated solar generation project, and the world’s largest solar power plant. To date, the program has supported six power generation projects that are already complete and nine projects that are sending power to the electricity grid. For example, the loan guarantee office administered a $117 million loan guarantee to build a wind farm in Hawaii that will supply clean electricity to more than 7,500 households. Not only did the project employ hundreds of workers during construction, it relied on wind turbines that were built in Cedar Rapids, Iowa, and featured an energy storage system supplied by a company in Texas. In total, this loan guarantee fed a supply chain that reached 104 U.S. businesses in 21 states.
The loan guarantee program helps U.S. manufacturers compete with China and other countries that are heavily subsidizing their renewable energy industries. Between 1995 and 2010, the share of photovoltaic cells and panels manufactured in the United States dropped from over 40% to just 6%. Since 2005, China’s market share has increased from 6% to 54%. In 2010, the China Development Bank provided more than $30 billion in loans to Chinese solar manufacturers. Chinese manufacturers also benefit from “free or subsidized land from local governments, extensive tax breaks and other government assistance.”
On January 31, 2012, the White House released a detailed analysis of the DOE loan guarantee portfolio, conducted by financial executive Herbert Allison. This analysis of all DOE loan guarantees found that the portfolio had effectively managed risks and was expected to cost taxpayers approximately $2 billion less than initially anticipated.
IV. THE RYAN BUDGET ELIMINATES SUPPORT FOR GREEN TRANSMISSION PROJECTS
The House Republican Budget calls for the repeal of borrowing authority for the Western Area Power Administration’s (WAPA) Transmission Infrastructure Program. WAPA, a power marketing administration within DOE, was provided $3.25 billion in borrowing authority under the Recovery Act to modernize the electrical grid in order to promote energy and cost-saving choices for consumers, reduce carbon pollution emissions, and foster the growth of renewable energy sources like wind and solar. With the Recovery Act borrowing authority, WAPA can borrow funds from the Treasury Department to “finance, facilitate, plan, construct, operate, maintain, and study the construction of new or upgraded transmission lines and related facilities for the delivery of power generated by renewable energy resources.”
Three WAPA projects are currently underway: (1) the Montana-Alberta Tie Ltd.; (2) the TransWest Express, which spans from Wyoming to Nevada; and (3) Electrical District No. 5 to Palo Verde Hub in Arizona.
The Montana-Alberta Tie transmission line will enhance the development of wind power in Montana, powering up to 300,000 homes with wind energy. The TransWest Express transmission line will deliver 3,000 megawatts of renewable energy from Wyoming to the Desert Southwest, supporting roughly 2,000 jobs. And the Palo Verde project, a 109-mile transmission line, will increase the delivery of solar power to consumers in Arizona, southern Nevada, and southern California.
In response to a committee vote by Republicans to repeal WAPA, Democrats on the House Natural Resources Committee wrote that repeal would “destroy jobs, and in the long-term … undermine the American companies and workers competing with China in the high-tech economic sectors of the 21st Century.”
IV. THE RYAN BUDGET MAINTAINS NEARLY $40 BILLION IN TAX BREAKS FOR BIG OIL
While the Republican budget imposes massive cuts on DOE’s programs to encourage the development of renewable energy and other innovative technologies, the budget does nothing to reduce billions of dollars of tax subsidies currently going to oil and gas companies that are earning record profits.
As part of his FY 2013 budget request, President Obama has proposed eliminating $38.6 billion worth of oil and gas company tax preferences over ten years, including the enhanced oil recovery credit and percentage depletion for oil and natural gas wells. Percentage depletion allows oil companies to deduct the costs of an oil or gas well on a favorable basis.
In 2011, the largest five oil companies made a combined total of $137 billion in profits, a 75% increase from 2010. As of December 2011, these five companies were maintaining $58 billion in cash reserves.
According to an analysis by the Center for American Progress, eliminating oil and gas tax preferences could pay for: (1) the salaries of 36,000 high school teachers; (2) Pell Grants for more than 500,000 college students; or (3) 67,000 home solar energy systems, which would reduce carbon dioxide pollution by 175,000 metric tons annually.
Instead of making important investments in clean and renewable energy, the Ryan budget retains these multi-billion tax breaks for oil companies that are earning record profits.