Republicans will take over control of the House of Representatives in 2023. What does this mean for energy policy? Let’s discuss.
There are two major areas in which Republicans could have an impact on energy policy when they assume control of the House.
One of those is the Inflation Reduction Act (IRA) of 2022. A long-standing problem in energy policy is that projects take many years to complete, so the industry needs more long-term certainty about energy policy in order to decrease project risks.
Derisking Energy Projects
Political risk is a perpetual issue with fossil fuel projects. A perfect example is the Keystone XL Pipeline. The regular change of control between Democrats and Republicans over the past decade constantly changed the outlook for the project. This substantially increases the risks of expensive projects that take a long time to complete. President Obama slowed it down, President Trump tried to speed it back up, and then President Biden ultimately canceled the permit for the project.
Renewable energy projects are similar. Over the years, Congress has granted tax credits for renewable energy, and allowed them to expire. This process repeated several times, which creates long-term uncertainty for project developers.
Despite its name, the IRA — which passed without a single Republican vote — was really more of a climate change bill. For renewable energy advocates, it held out the promise of ending the cyclicality of support for renewable energy. It would bring long-term certainty to wind and solar development, which would ease the ability to these projects to get financed.
Republicans have repeatedly blamed President Biden’s policies for driving up energy costs. One of those policies they blamed was the IRA, which Republican Congressman Chip Roy said needed to be repealed “On day one” of Republican control of the House.
Nevertheless, the IRA is a large, complex piece of legislation. There are provisions in the bill that are attractive to Republican constituents. That, in part, is why many experts believe a repeal — at least within the next Congressional session — is unlikely.
Alex McDonough, a Pioneer Public Affairs partner who helped lobby for passage of the IRA, was quoted in an article in Utility Dive on why he thinks repeal is unlikely. Comparing and contrasting to previous Republican attempts to overturn the Affordable Care Act (ACA), McDonough said:
“The ACA … lent itself to being a little more of a discrete target. The difference here is you have programs and incentives that are broadly appealing and are very different. You have incentives for large-scale wind and solar development, you have carbon capture and storage, you have hydrogen, which is a big priority for diverse industries, you have nuclear reactor tax credits, incentives for hydropower, and that’s just on the energy side … and the list really just goes on. I think that will help insulate this bill from one targeted attack, because so many people are ready to defend it.”
Further, the IRA provides a rallying cry for Republicans, upset with high inflation. If they can’t repeal it, they can still campaign against it, while blaming the bill for high energy costs.
Ensuring Energy Independence
The second major thrust of Republican efforts will revolve around American energy independence. Current Minority Leader (and prospective Majority Leader) Kevin McCarthy (R-Calif.) has indicated that ensuring American energy independence and reducing energy prices would be among the first acts by the next Congress.
Speaking to reporters, Cathy McMorris Rodgers (R-Washington) said “We need to return to American energy independence and bring down gas prices, and that’s unleashing American energy.”
To achieve these objectives, Republicans have floated proposals to restore approval of the Keystone XL pipeline — which President Biden rejected — and to streamline liquefied natural gas (LNG) export projects.
However, any legislation passed by a Republican-controlled house would still need to pass a Senate controlled by Democrats, and would also be subject to veto by President Biden. So, although Republicans are certain to hold hearings about energy policy, the most likely outcome over the next two years is a stalemate on energy issues.
There is some room for compromise, but House Republicans can’t pass into law anything that Biden doesn’t support, and Biden can’t get his priorities passed without Republican support in the House.