Climate hawks on and around Capitol Hill accustomed to seeing Republicans thwart their agenda have found a new roadblock in Democratic Sen. Joe Manchin III of West Virginia.
Environmentalists knew they would face challenges winning Manchin's support for the $3.5 trillion budget reconciliation package that Democrats can pass only if all 50 of their senators vote yes.
Manchin and Sen. Kyrsten Sinema, D-Ariz., have complained the House version of the package costs too much and would raise taxes too high on wealthy Americans and corporations.
And Manchin, who has investments in the coal business and is a top recipient of campaign contributions from utilities and fossil energy companies, has said since the package was being formed in July that the direction of elements under consideration relating to fossil fuels was “very, very disturbing.”
A list of conditions, obtained by Politico, that Manchin outlined before voting to start the process gives fresh insight into what he will and won't support. It also underscores the hurdle the coal-state lawmaker poses to a transformational climate bill. A Democratic aide confirmed the authenticity of the list.
Prominent among the conditions is that the Senate Energy and Natural Resources Committee he chairs have “sole” jurisdiction over drafting proposals for a federal clean energy standard.
The House package would create a $150 billion program at the Department of Energy to prod the power sector to generate electricity from non-emitting sources like solar and wind. To do so, DOE would pay electric utilities for increasing their use of zero-emission sources and fine competitors that don’t.
Gas or coal, which still dominates Appalachia, could qualify if their emissions could be trapped through carbon capture – a relatively nascent technology to trap greenhouse gas emissions before they enter the atmosphere.
Because the provision is fuel-agnostic and leaves carbon capture as a possibility, it appears to check off at least two boxes on Manchin's list — that it be “fuel neutral” and that “CCUS be included” in energy policy. CCUS is the acronym for “carbon capture utilization and storage,” referring to trapped emissions processed and used in secondary products or stored permanently.
Manchin, whose office did not respond to a request for comment, has been hesitant to accelerate the national transition, in electricity generation, from fossil fuels such as natural gas to zero-emission sources.
He has long supported the view of Republican lawmakers and those from fossil-fuel dependent states like West Virginia that energy legislation should include “all energy sources.”
“I believe that natural gas has an important role in the energy transition,” Manchin said at a Sept. 28 hearing. He has also questioned the proposal to pay utilities to switch to renewables when many are already doing so, adding that a swift transition could make electric grids less reliable.
“If we give them and pay them incentives to basically change their portfolio by 2030, reliability will be the loser," Manchin said, referring to arguments that even with new energy storage technologies, wind and solar power are not available 24 hours a day, seven days a week.
Seventy-six percent of new electricity generation that came online in the U.S. last year was either wind or solar power, according to the Energy Information Administration.
In his statement of conditions, Manchin wrote that if “tax credits for solar and wind are included and extended, then fossil tax credits are not repealed.”
He identified two examples. One is the “intangible drilling costs” provision that allows those companies to immediately deduct a portion of their costs and the other is the “enhanced oil recovery” provision that allows companies to receive a tax credit for pumping oil and gas that cannot be recovered by gravity or water.
Environmental groups have called for the elimination of such tax breaks, a position favored by lawmakers such as Senate Finance Chair Ron Wyden, D-Ore., who has his own proposals to overhaul the tax code and roll back provisions that favor oil and gas companies.
“America’s tax code is rigged in favor of dirty fossil fuels and Big Oil,” Wyden wrote on Twitter in April.
House Ways and Means Chairman Richard E. Neal, D-Mass., has proposed leaving a number of oil and gas tax breaks alone, but says he does favor proposals such as using the reconciliation package to reinstate a Superfund tax on the industry.
The House Natural Resources Committee included in its portion of the reconciliation package a list of increased royalty rates and new fees on oil and gas operations on public lands. Manchin’s statement of principles did not specifically address those issues.
Energy industry support
Manchin's defense of oil and gas tax breaks puts him at odds with many Democratic colleagues.
In an interview, Sen. Debbie Stabenow, D-Mich., noted that she’s working on a variety of climate proposals, including an initiative with Manchin related to clean manufacturing tax credits. But she said she’s against preserving tax breaks for oil and gas companies.
“I'm not interested in rewarding oil and gas companies who have had 100 years of tax benefits when we weren't providing other benefits to other types of energy," she said.
For the 2022 election cycle, Manchin is the No. 1 recipient among all lawmakers of campaign contributions from the coal mining, mining, natural gas transmission and distribution and oil and gas industries, according to Open Secrets, a nonpartisan group that tracks money in politics.
He is the No. 2 recipient in Congress of contributions from electric utilities.
Manchin is financially linked to coal extraction. In addition to plots of land, real estate and private businesses, the senator owns shares of Enersystems, a Fairmont, W.Va., coal brokerage firm described in his latest available financial disclosure statement as a “Contract services and material provider for utility plants.”
For 2020, Manchin reported $491,949 in income from Enersystems. The company is valued between $1 million and $5 million, according to the disclosure.
Another Manchin condition: “Vehicle and fuel tax credits shall not be limited to electric vehicles — they must include hydrogen.”
President Joe Biden and leading congressional Democrats want to increase deployment of electric vehicles by building a national network of charging stations, funding improvements in the technology involved and electrifying bus fleets.
Manchin argues that if Democrats use the reconciliation package to further promote electric vehicles, they need to do the same for cars and trucks that run on hydrogen fuel cells.
Such vehicles don’t produce tailpipe greenhouse gas emissions, but the process for producing the hydrogen in their fuel cells requires electricity.
Critics say that even if that electricity comes from renewable sources, the overall process is less efficient than it is for electric vehicles. For now, much of that hydrogen would likely be produced using natural gas or coal to provide the electricity.
Proponents of the technology hope breakthroughs will improve hydrogen’s efficiency. And Manchin has touted research at West Virginia University to that end.
But Julie McNamara, a senior energy analyst with the Union of Concerned Scientists, wrote in December that the idea of hydrogen as an alternative to fossil fuels relies on carbon-free generation of the hydrogen, which is far from certain.
“The overwhelming majority of hydrogen in use today is produced via an emissions-intensive, fossil fuel-based approach, and there are a multitude of cost hurdles, resource constraints, and pollution-heavy alternatives standing in the way of such a pivot to green,” McNamara wrote.