A BBB hedge in Biden's budget

Mar 29, 2022

Presented by Chevron

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With help from Kelsey Tamborrino, Alex Guillén and Josh Siegel.

QUICK FIX

— President Joe Biden's budget has its eye toward a possible BBB rebirth, while building off of the bipartisan infrastructure package.

— The House Budget Committee kicks off a series of hearings on the budget request today.

— The solar industry isn't holding back its frustration with the administration's circumvention investigation into solar parts from Southeast Asia.

HAPPY TUESDAY! I'm your host, Matthew Choi. Congrats to Bill Birsic of Sen. Roger Marshall's office for knowing Russian Foreign Minister Sergey Lavrov's first diplomatic posting was in Sri Lanka. For today: Who was the first king of Lesotho? Send your tips and trivia answers to mchoi@politico.com. Find me on Twitter @matthewchoi2018.

Check out the POLITICO Energy podcast — all the energy and environmental politics and policy news you need to start your day, in just five minutes. Listen and subscribe for free at politico.com/energy-podcast . On today's episode: Why Commerce's imports probe could upend the solar industry.

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The Permian Basin in Texas and New Mexico is one of America's most prolific oil and natural gas resources. By the end of this year, we plan to increase Chevron's Permian oil and natural gas production by 10% while continuing to reduce our operations' carbon and methane emissions intensities.

Driving The Day

BUDGET WITH SOME WIGGLE ROOM: President Joe Biden has big climate and clean energy spending goals for the next fiscal year, with bumped up spending figures in his latest budget request for the departments of Energy and Interior, as well as EPA and programs mitigating the effects of climate change. The request, which came out Monday, builds on a lot of the priorities enumerated in last year's bipartisan infrastructure package.

But it also saves some space for a revived Build Back Better package, with a reserve fund to account for future negotiations. Many climate-focused Democrats aren't giving up hope on the $550 billion in climate spending in the stalled BBB, with members making their pitches for individual programs during a Senate Environment and Public Works Committee hearing last week and Senate Energy Chair Joe Manchin reportedly kicking discussion back up on possible paths forward.

Though the administration initially hoped for a BBB that would reduce the deficit, the White House kept the reserve fund deficit neutral to be as flexible as possible with whatever comes out of Congress. Speaking with reporters Monday, Office of Management and Budget Director Shalanda Young wouldn't get into the details of what that framework might be, saying an "easy way to not get anything done is to negotiate in public." She also didn't confirm when asked if the White House had been engaged in any discussions.

As for what is clear, Biden's budget request includes $48.2 billion in discretionary funding for the Energy Department (a 7 percent increase from the fiscal 2022 omnibus), $18 billion to shore up the country's defense against climate change and an almost 25 percent increase in Interior spending from the omnibus. EPA would also get a 25 percent boost relative to the omnibus, with $11.9 billion. (Click on the links for breakdowns of each department from the POLITICO Energy team.)

The EPA spending would help support the agency's freshly released strategic plan for 2022 through 2026, which restores a focus on climate change that had been scrubbed completely from the prior plan issued under the Trump administration. The plan has four main principles: "follow the science," "follow the law," transparency and, for the first time, "advance justice and equity."

The Nuclear Regulatory Commission is also seeking $929.2 million for fiscal year 2023. A majority of the NRC's budget comes from license fees paid directly to the Treasury, and the nuclear agency said Monday it expects to recover $792.2 million through those fees. That leaves $137 million for its net appropriations request for 2023 — a $6 million increase over the $131 million the agency received as part of the 2022 omnibus after offsetting revenues.

Of course, the budget request is largely aspirational, and the exact spending figures will have to churn through the political meat grinder of Capitol Hill. It'll also be subject to a fresh assessment this summer with inflation estimates taking into account the Russian invasion of Ukraine, Council of Economic Advisors Chair Cecilia Rouse told reporters Monday.

For an overview of the entire budget proposal, the POLITICO policy staff has you covered. And for how the budget request colors the upcoming midterms, take a read from POLITICO's Jennifer Scholtes.

Related: "Biden's budget a 'peace offering' that could restart stalled economic agenda," via POLITICO's Laura Barrón-López.

SUBSCRIBE TO NATIONAL SECURITY DAILY : Keep up with the latest critical developments from Ukraine and across Europe in our daily newsletter, National Security Daily. The Russian invasion of Ukraine could disrupt the established world order and result in a refugee crisis, increased cyberattacks, rising energy costs and additional disruption to global supply chains. Go inside the top national security and foreign-policymaking shops for insight on the global threats faced by the U.S. and its allies and what actions world leaders are taking to address them. Subscribe today.

On the Hill

IN COMMITTEE TODAY: The House Budget Committee has the first of a handful of hearings centered on Biden's budget request today, with OMB Director Young set to testify.

Over in the House Energy and Commerce Committee , the Environment and Climate Change Subcommittee will discuss opportunities for federal assistance updating drinking water infrastructure today. The committee will go into the new funding included under last year's bipartisan infrastructure package for the drinking water state revolving funds and other mechanisms for boosting drinking water infrastructure, including lead pipe removal and PFAS clean up. The package included an almost 70 percent increase in funding for the state revolving funds over previous levels.

The House Natural Resources Subcommittee on Water, Oceans and Wildlife also has a meeting today, zeroing in on three conservation-centered bills: The Red River National Wildlife Refuge Boundary Modification Act (H.R. 6427 (117)), the Keep America's Refuges Operational Act (H.R. 6734 (117)) and the Advancing Human Rights-Centered International Conservation Act ( H.R. 7025 (117) ).

Around the Agencies

HERE COMES THE SUN REACTIONS: The Biden administration said Monday it would kick off a circumvention investigation into solar modules from Cambodia, Malaysia, Thailand and Vietnam. U.S.-based solar manufacturer Auxin Solar called for the probe into whether imports from the countries are being used to avoid duties on imports from China, and the Department assessed that Auxin "properly alleged the elements necessary for a circumvention determination."

But solar developers warned the probe would deal a devastating blow to the industry by effectively freezing development in the U.S. solar industry and costing thousands of jobs.

Edison Electric Institute President Tom Kuhn in a statement said the initiation of the inquiry will ultimately "impede the nation's clean energy transition and increase costs for electricity customers." Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, told Kelsey the group anticipates the decision will wipe out a record year of deployment and will decrease U.S. solar energy jobs by about one-third.

On a call with reporters, American Clean Power Association CEO Heather Zichal, who also served under the Obama administration, said the group had been hopeful given the Biden administration has positioned itself as a champion of clean energy. "As someone who spent many years in the room as these decisions get made and these policies get implemented, I understand how difficult it can be to get them correct and the serious consequences of what happens when the government gets it wrong," she said. "Well, today we are profoundly disappointed to report that the government has gotten it wrong."

Craig Cornelius, chair of the board at ACP, said the decision was at odds with the administration's backing for the clean energy tax credits currently stalled on the Hill, which he called the "most elegant design" of a clean energy economy in over two decades. "That dissonance between the intelligent concept of integrated tax incentives to expand our clean energy economy in the tax credit legislation that's moving through Congress versus this petition from a single company, which this administration didn't ask for, could not be louder," he told reporters.

Sen. Sheldon Whitehouse (D-R.I.) made a similar point Monday. "I hope my colleagues will see this decision as reason to double down on passing significant climate legislation that accelerates America's renewable energy market and creates more well-paying domestic jobs," he told POLITICO's Josh Siegel.

The move was expectedly cheered by Auxin, whose CEO said in a statement he was "grateful" to Commerce officials for recognizing "the need to investigate this pervasive backdoor dumping and how it continues to injure American solar producers." It was also cheered by some lawmakers, including Rep. Bill Pascrell (D-N.J.), a member of the Ways and Means Committee, who called it "a good start" as the administration "must be relentless in stopping the Chinese government's bad acts and bad acts by Chinese companies and their accomplices." Read more on the decision from POLITICO's Kelsey Tamborrino.

A message from Chevron:

In the courts

SCOTUS EYES STATE WATER AUTHORITY FIGHT: The Supreme Court could decide any day now whether to reinstate the Trump administration rule that limited states' ability to use their authority under Section 401 of the Clean Water Act to block energy projects. A judge last year vacated the rule and sent it back to EPA for reconsideration, and the 9th Circuit last month declined to overturn him. A coalition of states and oil, gas and hydropower industry groups last week took their plea to the Supreme Court , effectively asking it to reinstate the Trump rule even while the Biden administration works on a rewrite.

Both the Biden administration and a coalition of blue states, tribes and environmental groups on Monday filed briefs urging the high court not to get involved. "Applicants have not demonstrated that they will suffer irreparable harm if the 1971 certification rules remain in effect during the relatively brief period while EPA conducts its new rulemaking," the Justice Department wrote, adding that agencies have readjusted to the prior policy and forcing yet another shift so soon "would cause substantial disruption and disserve the public interest."

Coincidentally, EPA on Friday sent its proposed revised rule, Reg. 2040-AG12 , to the White House for review, setting up the rule for release later this spring.

Beyond the Beltway

OPEC STAYS OUT OF IT: OPEC has no intention of drastically increasing output to replace Russian oil exports, Reuters reports citing anonymous sources close to the discussions. Though Western countries including the United States have implored the cartel to ramp up its production for months to help cool high crude prices, it has stayed consistent on its gradual output increases of 400,000 barrels per day each month.

Starting in May, that increase will go up to 432,000 barrels per day, Reuters reports, but that figure comes from recalculated reference production levels, not at the behest of Western consumers. OPEC+, which includes Russia, naturally is disinclined to acquiesce to the West's demands if it comes at Russia's expense, and the core members of the cartel have shown they are not keen on antagonizing Moscow. Read more from Reuters.

TICKER WATCH: The cost of crude fell drastically on Monday following announcements that China would be undergoing another round of lockdowns due to the latest Covid variant. Falling from a Friday settlement price of $113.90, U.S. benchmark WTI crude dropped by more than $10 on Monday afternoon before settling at $105.96.

"There was some hope that China this time around would not go through a lockdown, but the message from the country is that that's out of the question," Natasha Kaneva, J.P. Morgan's head of global commodities research, told The Wall Street Journal. "I think the market is definitely afraid of what is coming next." Read more from the Journal on Monday's prices.

NO RUBLES FOR YOU: The G-7 will not be paying for Russian gas in rubles, thank you very much. German Economy Minister Robert Habeck rebuffed Russian President Vladimir Putin's demand for payment in the ailing Russian currency as a "unilateral and clear break fo the existing agreements" and a sign that Putin had his "back against the wall." Habeck had previously decried the Russian demands as breaking contracts, but Monday's announcement included the backing of the world's top 7 liberal economies. Read more from Deutsche Welle.

STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.

The Grid

— "For Japan's Leader, Russian Gas Is Also a Hometown Affair," via The Wall Street Journal.

— "Misinformation is derailing renewable energy projects across the United States," via NPR.

— " Biden: 'Not walking anything back' on unscripted Putin comments," via POLITICO.

THAT'S ALL FOR ME!

A message from Chevron:

Balancing energy security, costs, and the need to reduce emissions have become an increasingly important part of the energy conversation at home and abroad. In the Permian Basin, we plan to increase oil production by 10% in 2022 while continuing to reduce both carbon and methane emissions intensities. And in the years to come, we expect to grow our Permian production beyond 1 million barrels of oil equivalent per day. Every day, we look for opportunities to make our own environmental footprint smaller as we strive to produce energy that Americans—and customers throughout the world—can count on. Find out more.