[Senate Hearing 117-361]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-361

                CLIMATE CHALLENGES: THE TAX CODE'S ROLE
                  IN CREATING AMERICAN JOBS, ACHIEVING
  ENERGY INDEPENDENCE, AND PROVIDING CONSUMERS WITH AFFORDABLE, CLEAN 
                                 ENERGY

=======================================================================

                                HEARING

                               BEFORE THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION
                               __________

                             APRIL 27, 2021
                               __________


                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                     
                                     

            Printed for the use of the Committee on Finance
            
                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
48-510-PDF                WASHINGTON : 2022             


                          COMMITTEE ON FINANCE

                      RON WYDEN, Oregon, Chairman

DEBBIE STABENOW, Michigan            MIKE CRAPO, Idaho
MARIA CANTWELL, Washington           CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey          JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland         RICHARD BURR, North Carolina
SHERROD BROWN, Ohio                  ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado          PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania   TIM SCOTT, South Carolina
MARK R. WARNER, Virginia             BILL CASSIDY, Louisiana
SHELDON WHITEHOUSE, Rhode Island     JAMES LANKFORD, Oklahoma
MAGGIE HASSAN, New Hampshire         STEVE DAINES, Montana
CATHERINE CORTEZ MASTO, Nevada       TODD YOUNG, Indiana
ELIZABETH WARREN, Massachusetts      BEN SASSE, Nebraska
                                     JOHN BARRASSO, Wyoming

                    Joshua Sheinkman, Staff Director

                Gregg Richard, Republican Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee 
  on Finance.....................................................     1
Crapo, Hon. Mike, a U.S. Senator from Idaho......................     3

                               WITNESSES

Walsh, Jason, executive director, BlueGreen Alliance, Washington, 
  DC.............................................................     5
Pope, Maria M., president and CEO, Portland General Electric, 
  Portland, OR...................................................     6
Brill, Alex, resident fellow, American Enterprise Institute, 
  Washington, DC.................................................     8
Sunday, Kevin, director, government affairs, Pennsylvania Chamber 
  of Business and Industry, Harrisburg, PA.......................    10

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Brill, Alex:
    Testimony....................................................     8
    Prepared statement...........................................    53
    Responses to questions from committee members................    61
Crapo, Hon. Mike:
    Opening statement............................................     3
    Prepared statement...........................................    63
Pope, Maria M.:
    Testimony....................................................     6
    Prepared statement...........................................    64
    Responses to questions from committee members................    65
Sunday, Kevin:
    Testimony....................................................    10
    Prepared statement...........................................    66
    Responses to questions from committee members................    80
Walsh, Jason:
    Testimony....................................................     5
    Prepared statement...........................................    80
    Responses to questions from committee members................    89
Wyden, Hon. Ron:
    Opening statement............................................     1
    Prepared statement...........................................    90
    ``U.S. Energy and Climate,'' Rhodium Group, April 20, 2021...    91

                             Communications

American Chemistry Council.......................................    99
American Petroleum Institute et al...............................   100
American Public Gas Association..................................   103
Associated Builders and Contractors..............................   105
Carbon Capture Coalition.........................................   112
Center for Fiscal Equity.........................................   115
Citizens' Climate Lobby..........................................   121
Fermata LLC (d/b/a Fermata Energy)...............................   126
Independent Petroleum Association of America.....................   129
Industrial Energy Consumers of America...........................   133
National Association of Royalty Owners, Inc. (NARO)..............   134
National Energy and Fuels Institute..............................   136
Natural Gas Vehicles for America.................................   140
National Stripper Well Association (NSWA)........................   145
Paper Recycling Coalition........................................   149
Permian Basin Petroleum Association..............................   152
Resources for the Future.........................................   155
Zero Emission Transportation Association.........................   163

 
                   CLIMATE CHALLENGES: THE TAX CODE'S
                    ROLE IN CREATING AMERICAN JOBS,
       ACHIEVING ENERGY INDEPENDENCE, AND PROVIDING CONSUMERS WITH
                       AFFORDABLE, CLEAN ENERGY

                              ----------                              


                        TUESDAY, APRIL 27, 2021

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:05 
a.m., via Webex, in the Dirksen Senate Office Building, Hon. 
Ron Wyden (chairman of the committee) presiding.
    Present: Senators Stabenow, Cantwell, Menendez, Carper, 
Cardin, Brown, Bennet, Warner, Whitehouse, Hassan, Cortez 
Masto, Crapo, Grassley, Thune, Portman, Toomey, Scott, 
Lankford, Daines, Young, and Barrasso.
    Also present: Democratic staff: Robert Andres, Professional 
Staff Member; and Joshua Sheinkman, Staff Director. Republican 
staff: Gregg Richard, Staff Director.

   OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM 
             OREGON, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. The Finance Committee meets this morning for 
its first hearing on the climate crisis in 12 years. It comes 
right on the heels of President Biden's announcement of an 
ambitious new climate goal, cutting emissions at least in half 
by the end of the decade, compared to 2005 levels.
    The target comes with big challenges, starting with energy-
related emissions, as well as transportation. The reality is, a 
debate on energy and transportation is largely a debate on tax 
policy. That puts our committee in the driver's seat when it 
comes to job-creating legislation that addresses head-on 
existential challenges. The energy tax code in America is a 
cluttered, outdated, old heap of more than 40 different tax 
breaks for energy sources and technologies, including clean 
energy and transportation. And most of those incentives are 
temporary, and that keeps clean energy businesses and workers 
living in an uncertain state of limbo.
    On the other hand, at the base of the system are centuries-
old permanent tax breaks for oil and gas companies. No 
uncertainty for them. They get guaranteed benefits funded by 
American taxpayers each year. At a time when Oregonians and 
Americans everywhere are routinely clobbered by the disastrous 
effects of the climate emergency, it is important to be clear 
about what this broken crazy-quilt of energy taxes means in 
practice.
    Under the laws on the books, taxpayers in America are 
subsidizing the climate crisis. That is what it means when 
fossil fuel interests get special permanent breaks above and 
beyond what is available to everybody else. There is a taxpayer 
subsidy for mega-storms and terrible floods along our 
coastlines and waterways. There is a taxpayer subsidy for 
massive wildfire infernos bigger than any decades ago. There is 
a taxpayer subsidy for wintertime bouts of extreme cold that 
send the privileged fleeing to tropical resorts, while their 
neighbors freeze to death in their homes. What is worse, 
taxpayers are also on the hook for much of the cleanup after 
those disasters strike.
    Last week I introduced the Clean Energy for America Act 
that would throw the old set of more than 40 tax breaks in the 
dust bin. This bill now has more than two dozen Senate 
sponsors, and would replace the old hodgepodge of tax breaks 
with a new set of three incentives: one for clean energy, one 
for clean transportation, and one for energy efficiency. We 
believe this is the right policy because the emissions-based 
approach also can work hand-in-glove with the smart, fresh 
ideas that several other members on the Finance Committee are 
going to discuss today.
    In terms of tax certainty and predictability, it would 
level the playing field for everybody. It would be a job-
creating free-market competition to get to net-zero carbon 
emissions. Clean energy producers and businesses that focus on 
cutting-edge transportation would no longer have to worry about 
their tax incentives disappearing because Congress is in yet 
another deadlock.
    The bill helps to supercharge innovation in clean 
transportation and energy storage. That is a big reason why a 
new coalition is lining up behind the Clean Energy for America 
Act. You have folks from the environmental community--the 
Environmental Defense Fund, the Sierra Club, the Natural 
Resources Defense Council--folks from our union groups led by 
the building trades--the Edison Electric Institute, 
representing utilities of all sizes. They have all announced 
their support for the Clean Energy for America Act. It is a new 
coalition for a new day.
    There is a big opportunity in the months ahead to pass this 
legislation, along with investments that have powered the 
United States over the last century. It is essential to make 
sure that nobody is left behind in the process of tackling the 
challenges in moving to clean energy.
    The Clean Energy Act for America is the right approach for 
high-wage, high-skilled jobs. It is the right approach for 
addressing the existential threat of the climate emergency. It 
is the right approach for promoting innovation and competing 
with companies in China and around the world.
    If the Congress does not work hard to create these jobs in 
America, other countries are going to grow at our expense. And 
to be clear, under the Clean Energy for America Act, what 
matters, what the bottom line is, is reducing emissions. A 
nuclear plant, or a gas- or coal plant that fully captures its 
emissions would qualify for the same amount as a wind or solar 
farm. The goal here is not to pick winners or losers, it is to 
reduce carbon emissions, and do it in a way that drives 
investment in jobs.
    Today is an important day for the Finance Committee. We 
appreciate our excellent witness panel for joining us, and 
let's now turn to Senator Crapo.
    [The prepared statement of Chairman Wyden appears in the 
appendix.]

             OPENING STATEMENT OF HON. MIKE CRAPO, 
                   A U.S. SENATOR FROM IDAHO

    Senator Crapo. Thank you, Mr. Chairman. Thanks for holding 
this timely hearing.
    The tax code, as you said, plays an important role in the 
economy and jobs in the energy sector. Energy incentives have 
the potential to grow our economy and create jobs, if executed 
properly. A number of energy-related policy areas have the 
potential for bipartisan agreement, and I look forward to 
working with Senator Wyden to develop that agreement.
    While there are not a lot of specifics on President Biden's 
energy tax credits in the American Jobs Plan, he is clearly 
proposing to increase the corporate and international tax rates 
and penalize the oil and natural gas industry through the tax 
code. We must understand the impact of this proposal on the 
10.9 million American jobs in the oil and natural gas 
industries. They pay on average seven times the Federal minimum 
wage. I look forward to hearing from our witnesses their policy 
expertise and their understanding of how President Biden's 
proposal will either grow or shrink good-paying American energy 
jobs.
    Prior to the pandemic, the United States was experiencing 
one of the strongest economies in decades. With the Tax Cuts 
and Jobs Act in place and an agenda focused on smart 
regulation, we saw progress for all Americans, including record 
low unemployment rates for African Americans, Hispanics, and 
others; 50-year lows in overall unemployment; robust wage gains 
skewed toward lower-wage earners; and record high household 
incomes followed by record low poverty.
    Considering offsetting the cost of energy provisions with a 
corporate tax rate increase or increasing international taxes, 
especially during a pandemic, is counterproductive and a non-
starter on my side of the aisle.
    It will be increasingly challenging to return to an economy 
as robust as we saw before the pandemic with endless streams of 
tax hikes and actions by the administration such as revoking 
the permit for the Keystone XL Pipeline. The Biden 
administration's revocation of the presidential permit for the 
Keystone XL Pipeline was short-sighted and eliminated over 
1,000 jobs, the majority of which were unionized. I am willing 
to work on constructive proposals to modernize and innovate our 
Nation's energy production, while not adversely affecting the 
millions of good-paying American jobs and the existing energy 
sources necessary for a comprehensive, affordable, and reliable 
domestic energy network.
    We should discuss ways to improve and potentially expand 
incentives to increase domestic energy production and 
manufacturing. However, it is important that we also consider 
the effectiveness of existing incentives.
    Congress should not be picking winners or losers every year 
when temporary credits expire. We must assess whether these 
credits continue to be necessary, or whether they have served 
their intended purpose of incentivizing growth and investment. 
Yet we continue extending credits to technologies that have 
achieved a significant market presence in the United States, an 
inefficient use of taxpayer dollars.
    While I support Congress taking a neutral approach to 
energy tax credits, we must consider whether some of these 
technologies continue to require assistance and ensure we are 
designing the tax code to be fair and effective. Our tax code 
should incentivize 
technology-wide clean energy innovation, helping to bring 
breakthrough power generation to deployment until it can 
compete independently in the market.
    My technology-inclusive bipartisan energy tax proposal, the 
Energy Sector Innovation Credit, or ESIC, legislation would 
accomplish this by working with experts at the Department of 
Energy, national labs, and other stakeholders to target tax 
credits for innovative, clean technology industries. In 
addition, ESIC would implement a credit phase-down system based 
on market penetration, systematically reducing credits as 
technologies increase their market share, instead of allowing 
Congress to pick winners and losers. I thank Senator Whitehouse 
for leading this proposal with me in the Senate.
    Mr. Chairman, I look forward to working collaboratively 
with you through the committee process to strengthen U.S. 
energy competitiveness by rapidly scaling and diversifying 
innovative clean energy technologies.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Crapo appears in the 
appendix.]
    The Chairman. I thank my Northwest colleague. And I want 
everybody to understand that I think there is an opportunity 
for the members of this committee to come together. The bottom 
line has to be reducing carbon emissions. That is something 
that I think Americans in every nook of this cranny care deeply 
about, and I look forward to working with my colleague on it.
    The first witness is going to be Mr. Jason Walsh, executive 
director of the BlueGreen Alliance. Our next witness, from my 
hometown, will be Ms. Maria Pope, the president and chief 
executive officer of Portland General Electric. Our third 
witness will be Mr. Alex Brill, resident fellow at the American 
Enterprise Institute. Our final witness will be Mr. Kevin 
Sunday, who is director of government affairs for the 
Pennsylvania Chamber of Business and Industry.
    We thank all of our witnesses. As is customary, your 
prepared statements will automatically be made part of the 
record. And if you can summarize your views in 5 minutes, that 
would be good.
    Mr. Walsh, please proceed.

    STATEMENT OF JASON WALSH, EXECUTIVE DIRECTOR, BLUEGREEN 
                    ALLIANCE, WASHINGTON, DC

    Mr. Walsh. Thank you, Chairman Wyden and Ranking Member 
Crapo, distinguished members of the committee. My name is Jason 
Walsh. I am the executive director of the BlueGreen Alliance, a 
national partnership of labor unions and environmental 
organizations. On behalf of my partners and the millions of 
members and supporters they represent, I want to thank you for 
convening this important hearing.
    It is our belief that Americans should not have to choose 
between good jobs and a clean environment. We can and must have 
both. We are in a unique moment to address the climate crisis 
and create good jobs as we work to rebuild our economy and 
recover from the COVID-19 pandemic.
    The Federal tax code is vital to supporting clean 
technology deployment. We can also use it to ensure equity in 
the transition to a clean economy by maximizing the benefits of 
job growth in that economy for all American workers, and for 
communities disproportionately impacted by pollution, de-
industrialization, and job loss from incumbent energy sectors.
    The science is unambiguous that our climate is in crisis, 
and action is required. We have to get to net-zero emissions by 
2050 and ensure we are solidly on that path by 2030.
    Clean energy investments will be central to accomplishing 
our climate goals. These investments already spur economic 
growth and significant job creation across this country. At the 
same time, not enough of the new jobs that have been created in 
the clean energy economy are high-quality family-sustaining 
jobs. We need to do better.
    As we continue to use the tax code to catalyze necessary 
investments in clean technologies and energy efficiency 
nationwide, we must ensure that these investments translate 
into strong domestic supply chains, high-quality jobs, and 
accessible pathways into those jobs, including for workers who 
have historically been under-represented in the energy economy.
    To this end, we would like to make three recommendations to 
the committee, which I elaborate on in my written testimony.
    First, Congress should extend and strengthen clean energy 
tax credits, including those for onshore and offshore wind, 
solar energy, clean transportation, grid modernization, and 
energy efficiency. Congress should couple these tax credits 
with standards that ensure the use of domestic clean and safe 
materials, made by law-abiding corporations throughout the 
supply chain, and support employers that adopt high-road labor 
practices including prevailing wages, protection against worker 
misclassification, and the use of registered apprentices and 
community benefit and project labor agreements.
    We look forward to working with this committee on Chairman 
Wyden's Clean Energy for America Act, which outlines a very 
promising technology-neutral approach to clean energy tax 
policy that would reward carbon abatement and spur the 
deployment and innovation of low- and no-carbon technologies. 
Importantly, this bill includes prevailing wage and registered 
apprenticeship utilization standards.
    Second, Congress should invest directly in manufacturing 
and clean energy supply chains. Policies that increase the 
demand for clean technology must go hand in hand with direct 
investments to support and grow American manufacturing. 
Congress can help accomplish these goals by renewing and 
robustly funding the Advanced Energy Projects Tax Credit, 48C. 
We think 48C can also be strengthened along the lines of the 
American Jobs and Energy Manufacturing Act sponsored by 
Senators Stabenow and Manchin, in which qualifying projects 
must meet key labor standards and are targeted to support 
investments in the communities that have lost jobs in 
manufacturing, mining, or power generation.
    Congress can also adapt the 45M technology production tax 
credit to fund domestic production of strategic clean energy 
and vehicle component technologies. Upholding such a PTC with 
other manufacturing and deployment incentives would help 
reverse decades of disinvestment, offshoring, and inconsistent 
manufacturing policy that has weakened the competitive edge we 
once held in clean tech manufacturing.
    Third, Congress should support a job-sustaining transition 
to clean vehicles. Consumer incentives stand to play a 
significant role in shaping the shift to electric vehicles and 
the manufacturing jobs and community impacts of that 
transition. The existing 30D consumer tax credit should be 
updated to support domestic assembly, domestic content, and 
high-road labor standards.
    The structure of the credit must help retain and grow the 
next generation of high-skilled, family-supporting jobs in the 
U.S., and support the growth of domestic electric vehicle 
production and supply chains.
    In closing, let me reflect on the reason this committee is 
gathered here today, which is to discuss the tax code's role in 
creating American jobs, achieving energy independence, and 
providing consumers with affordable clean energy. I am here to 
argue that we can achieve all of these policy goals, while also 
ensuring that workers are paid fair wages; that we support and 
grow American manufacturing; and that communities that have too 
often been left behind in our economy can share fully in the 
benefits of clean air, clean water, and middle-class-supporting 
jobs.
    Thank you for the opportunity to speak to you today.
    [The prepared statement of Mr. Walsh appears in the 
appendix.]
    The Chairman. Thank you very much, Mr. Walsh. And I would 
just like to note for the record that the BlueGreen Alliance 
was for coalition building before anybody knew it was cool. And 
I thank you very much, and we look forward to working very 
closely with you.
    Our next witness will be Ms. Maria Pope, president and 
chief executive officer of Portland General Electric.

STATEMENT OF MARIA M. POPE, PRESIDENT AND CEO, PORTLAND GENERAL 
                     ELECTRIC, PORTLAND, OR

    Ms. Pope. Thank you, Chairman Wyden, Ranking Member Crapo, 
and members of the committee. I am honored to testify today on 
the critical issues of climate change, jobs, and effective 
clean energy tax policy.
    Climate change is having very real global impacts, and 
greenhouse gas emissions must be dramatically reduced on an 
economy-wide basis. It will take all of us working together to 
make a difference.
    Portland General Electric is a fully integrated utility. We 
serve roughly half of all Oregonians and three-quarters of the 
State's industrial and commercial activity. We share our 
customers' and our communities' vision for a clean, reliable, 
and affordable energy future. We have ambitious climate goals 
to reduce greenhouse gas emissions associated with the power we 
serve customers by at least 80 percent by 2030, with an 
aspirational goal of zero greenhouse gas emissions by 2040.
    We are not alone in our emissions reduction work. The 
Edison Electric Institute's members, representing the Nation's 
investor-owned utilities, are collectively on a path to reduce 
their emissions by at least 80 percent by 2050, and many 
companies are pledging even faster, more aggressive timelines.
    As of year-end 2019, the U.S. power sector has reduced its 
CO2 emissions by 33 percent below 2005 levels. 
Advancements in policy, regulations, and technology are needed 
to meet these emissions goals, while maintaining reliable 
service at reasonable prices.
    According to the Intergovernmental Panel on Climate Change, 
we have a decade to make significant progress to curb 
greenhouse gas emissions. Utilities, or any sector of our 
economy, cannot achieve these ambitious goals alone. The 
climate crisis will require substantial investments and Federal 
policies that serve everyone equitably, maximizing both 
benefits to customers and the deployment of a wide variety of 
clean energy resources.
    The right technology-neutral incentives will accelerate 
this transition and activate all players to make significant 
investments. To move forward with speed requires new thinking, 
which is exactly what we see in the Clean Energy for America 
Act.
    Chairman Wyden, I want to thank you and your team for this 
thoughtfully crafted bill. The legislation provides tax 
incentives to address many of these issues, and motivates 
everyone, utilities and independent developers alike, to 
transform how electricity is generated and used.
    Portland General Electric enthusiastically supports this 
bill, and we urge its enactment. Critical to PGE and the 
utility industry is the optionality between production and 
investment tax credits, while also allowing utilities to opt 
out of normalization requirements from the new energy storage 
credits.
    These provisions ensure that the full benefits of tax 
incentives are passed through to customers, and that regulated 
utilities will not be disadvantaged, leveling the playing field 
to accelerate deployment and ensure affordability for all 
customers.
    Along with affordability, preserving reliability is 
essential. Dispatchable clean resources will play an important 
role. So will a smarter grid that can harness electricity from 
wind, solar, and other resources when they are available, and 
store that energy for when it is needed.
    We appreciate that Chairman Wyden's bill provides tax 
incentives for stand-alone energy storage facilities and new 
clean resources that provide important capacity. Additionally, 
the option to elect direct payment of these credits enables 
broader use and lower costs, savings that can be passed 
directly on to customers.
    The legislation requires that eligible facilities must be 
built by workers who are paid prevailing wages. We value our 
partnership with labor, including the IBEW, and PGE supports 
this requirement.
    I am pleased that the BlueGreen Alliance is here to discuss 
their perspective. Today the transportation sector is the 
largest source of greenhouse gas emissions. The bill's clean 
transportation credits enable transformational change, 
encouraging purchase of electric vehicles and investments in 
critically important charging infrastructure.
    Mr. Chairman, I would like to express my appreciation for 
your thoughtful legislation. Your long-term technology-neutral 
approach enables all parties' participation in the path to 
decarbonization. This is vital as we work together to bring 
about change.
    Chairman Wyden, Ranking Member Crapo, committee members, 
thank you for your time. I look forward to working with you as 
you craft these essential policies. Thank you.
    [The prepared statement of Ms. Pope appears in the 
appendix.]
    The Chairman. Thank you very much, Ms. Pope. And what is 
little known is our wonderful Oregon witnesses at these 
hearings have to be up very early in the morning in order to 
participate, and we very much appreciate PGE's focus not just 
on being here today, but on a relentless assessment that this 
ball game is all about reducing carbon emissions. And I know we 
will have some questions for you in a moment.
    Our third witness will be Mr. Alex Brill, resident fellow 
at the American Enterprise Institute.

           STATEMENT OF ALEX BRILL, RESIDENT FELLOW, 
         AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC

    Mr. Brill. Thank you, Chairman Wyden, Ranking Member Crapo, 
and members of the committee. My name is Alex Brill, and I am a 
resident fellow at the American Enterprise Institute.
    Thank you for the opportunity to testify at today's 
important hearing on the tax code's role in our country's 
pursuit of clean energy and energy efficiency.
    Let me begin my remarks with a comment on jurisdiction. As 
others have noted as well, it is my strongly held view that 
lawmakers' interests in curbing CO2 emissions and 
addressing climate change are best handled through policy that 
can be adopted by this committee. Other committees may have 
energy in their names, and important agencies may have 
regulatory authority over these issues, but the tax-writing 
committees--the Senate Finance Committee and the House 
Committee on Ways and Means--are uniquely situated to drive 
market-oriented change that reduces carbon emission and 
encourages innovation in low-carbon, renewable, and energy-
efficient technologies.
    The tax code is a powerful tool. Time and again, taxes have 
been shown to affect decision-making by businesses and 
individuals. For this reason, basic principles of tax policy 
argue for a broad-based, simple, transparent tax system that 
treats like activities alike and keeps tax rates as low as 
possible.
    There are exceptions to these principles. Tax policy can be 
effective at intervening when markets are imperfect, and energy 
is one such example. Because the environmental and economic 
costs of carbon emissions are not reflected in private 
transactions between producers and consumers, it is appropriate 
that policy-makers use the tax code to encourage clean energy 
and energy conservation.
    The historical approach has been to enact tax preferences 
to encourage specific forms of clean energy or to encourage 
specific types of energy efficiencies. But tax subsidies can 
be, and often are, costly, complicated, overly narrow, overly 
generous, and non-neutral in a technological sense. It is 
simply impossible to appropriately and efficiently subsidize 
every energy-saving tool or activity. Most subsidies are 
temporary, and this creates costly uncertainty for many 
taxpayers.
    The better option from an economic policy perspective may 
carry some political baggage. I am here today to encourage the 
committee to give it fair consideration. A price on carbon, or 
a fee on polluters, a carbon tax, whatever it is called, is a 
superior policy to subsidies. Now I would also note that these 
approaches are not mutually exclusive.
    A carbon tax is technology-neutral and encourages shifts 
away from carbon-intensive sources of energy while encouraging 
energy efficiency and conservation, as well as research and 
development in new technologies. It is the climate policy 
endorsed by thousands of economists, both Democrats and 
Republicans, including four former Federal Reserve Board 
Chairmen, 28 Nobel laureates in economics, and 15 former Chairs 
of the White House Council of Economic Advisers. Most recently, 
it has earned the support of the business community as well.
    A carbon tax would increase the rate of return on energy 
efficiency upgrades, encourage the utilization of more fuel-
efficient vehicles, reduce miles traveled, and drive many, many 
small and modest adjustments in the choices made by consumers, 
manufacturers, and others on energy consumption. And revenues 
from a carbon tax can be used to avoid other tax increases or 
to offset other taxes that are more distortionary.
    Speaking of tax increases, let me conclude with a final 
observation. The tax policy least likely to promote economic 
growth and competitiveness in the United States is an increase 
in the corporate tax rate to 28 percent. Such a change would 
raise the cost of capital for all corporations, widen the 
disparity between debt and equity financing, and place the U.S. 
first among OECD nations in the combined State and Federal 
corporate marginal tax rates.
    A carbon tax could raise the same amount of revenue while 
avoiding all these pitfalls, and efficiently and effectively 
reduce CO2 emissions.
    I urge you to give it a fair look, and I look forward to 
your questions.
    [The prepared statement of Mr. Brill appears in the 
appendix.]
    The Chairman. Thank you very much, Mr. Brill. I know we are 
going to have questions for you in a moment.
    Our final witness will be Mr. Kevin Sunday, director of 
government affairs for the Pennsylvania Chamber of Business and 
Industry.

   STATEMENT OF KEVIN SUNDAY, DIRECTOR, GOVERNMENT AFFAIRS, 
 PENNSYLVANIA CHAMBER OF BUSINESS AND INDUSTRY, HARRISBURG, PA

    Mr. Sunday. Thank you, and good morning. Thank you, 
Chairman Wyden, Ranking Member Crapo, honorable members of the 
committee. I appreciate the opportunity and privilege to appear 
before you this morning.
    My name is Kevin Sunday, director of government affairs for 
the Pennsylvania Chamber of Business and Industry. Our State is 
blessed in many respects to be a microcosm of the United 
States, whether that is over urban split, or average age, 
income, education, and political affiliation, but where we are 
not average is on energy.
    Pennsylvania is the number two State for natural gas 
development, energy production, and nuclear power and is the 
biggest power producer on the country's biggest grid. Our 
companies are up to the task to meet the many challenges of the 
21st century, but meeting those challenges means not fighting 
climate change with one hand tied behind our back.
    If the United States is going to succeed, it will do so 
because it leverages our State's workforce, infrastructure, and 
human capital in our energy and manufacturing sectors, 
including nuclear, natural gas, and carbon capture.
    So we encourage you to work towards a durable, bipartisan 
policy that makes it easier to build things again in this 
country and that leverages our strengths. But we have little 
confidence that Federal policy, established through executive 
action or partisan reconciliation, would not simply just run 
roughshod over our State's energy economy, an energy economy 
that led by prolific production from natural gas and through 
competitive markets to lower energy costs by the billions for 
families and businesses in Pennsylvania and the United States.
    Air quality has continued to improve dramatically in our 
State, and since 2005 Pennsylvania has reduced CO2 
emissions more than any one other State--as EPA officials 
recently noted--in large part because of markets. The 
nationwide 2030 goals of the Obama administration's Clean Power 
Plan have already been achieved. And in part due to 
Pennsylvania's resource base, reducing emissions and sending 
power prices in the PJM grid down to generational lows, no 
country has a story to tell like that of the United States when 
it comes to reducing energy costs and emissions, while growing 
the economy.
    The U.S. lapped the European Union in growth over the past 
decade and a half while reducing emissions more. Our energy 
prices are much lower, and we have an abundance of resources 
that are lowering our geopolitical risk and that of our allies. 
But we cannot take the success for granted.
    Tax policy that discourages continued investment and growth 
into our States' energy, commodities, and manufacturing sectors 
will be a drag on the national economy as a whole. As various 
reports noted, the Tax Cuts and Jobs Act significantly improved 
the international competitiveness of the United States. In its 
wake, companies invested in their facilities and workers. In 
fact, in Pennsylvania, wages went up across all occupations by 
double digits, with the biggest gains coming from the bottom 
quartile of workers.
    This is indicative of the fact that the burden of tax 
policy is ultimately shouldered by workers, and policy-makers 
should take care that the tax policy does not further cost us 
jobs or raise energy costs for families and businesses. In just 
1 year, the pandemic and associated response measures cost our 
State a decade's worth of job growth.
    Our industries, particularly those working in energy and 
infrastructure, need long-term certainty. Such certainty will 
be certainly eroded if Federal officials follow up on 
generational tax and regulatory reform with even more sweeping 
mandates and regulations in the other direction in short order.
    Tax increases on their face are chilling to investment, but 
so is establishing the precedent that there will be massive 
changes to tax and regulatory policies following every election 
cycle. If in fact it truly is the case that there is a desired 
outcome for a cleaner and more efficient economy--and that is a 
goal we share--we are not going to reach that goal by pairing 
the highest corporate rate in the developed world with the 
slowest, most bureaucratic, most expensive infrastructure 
build-out regime.
    Too often, whether it is due to the National Environmental 
Policy Act, or spurious litigation from third parties, or 
States obstructing federally approved infrastructure, it is 
taking entirely too long to build things in this country. 
Neither will be well served by tariffs and trade policies that 
raise costs across the supply chain.
    In closing, our State's success and programs and policies 
at the Federal level have helped the United States keep costs 
low, produce massive economic growth, become energy 
independent, and lead the world in reducing greenhouse gas 
emissions. There is more work to be done, to be sure. So let's 
come together and produce durable, effective bipartisan energy 
and environmental policy that keeps the United States in a 
flagship position in an increasingly challenging and dynamic 
global marketplace.
    I thank you for the opportunity to appear before you today 
and look forward to answering any questions you may have. Thank 
you.
    The Chairman. Thank you very much, Mr. Sunday.
    [The prepared statement of Mr. Sunday appears in the 
appendix.]
    The Chairman. Now let me start with you, Ms. Pope. The 
President committed our country to reducing carbon emissions 
more than 50 percent below 2005 levels by 2030. This is an 
ambitious target, but in line with what the science says is 
needed to avert a climate disaster.
    My take is that the lynchpin here is the power sector. To 
meet the President's goal, America will need to reduce carbon 
emissions from the power sector by 80 percent in the next 
decade.
    Now, we are obviously digging in to how the tax system 
affects this, and my view is, the combination of certainty with 
flexibility, putting a system in place that provides long-term 
certainty to businesses, while simultaneously providing the 
flexibility to innovate and to make the best clean energy 
investments, is what we are going to need.
    In your view, what would be the most helpful tax policies 
to put that 80 percent target in reach for you and other 
utilities?
    [Inaudible.]
    The Chairman. Ms. Pope, you are on mute.
    Ms. Pope. I beg your pardon. Thank you, Chairman Wyden.
    The Chairman. Thank you.
    Ms. Pope. Let me just start over again. You are absolutely 
right. To meet these ambitious goals, we are going to need the 
certainty and the flexibility that you are talking about.
    Certainly it is going to take us a number of years to get 
Portland General Electric to 80-percent reductions by 2030, and 
then the more ambitious net-zero goals. But we need to make 
investments in clean, renewable technologies consistently, and 
the well-designed tax incentives like those in your Clean 
Energy for America Act will give us that long-term certainty 
and flexibility to accelerate the energy transition and 
activate all players for that investment.
    So for us, it is particularly important that we have 
technology-neutral incentives that encourage and reward 
innovation that really works. Our customer mix, and all of the 
regions across the country's utilities, are diverse. And the 
widest set of solutions is needed to meet the broader sets of 
demands for the entire country.
    It is critical also that all parties are able to fully 
utilize tax credits. So for us to work together on these 
ambitious goals, we are going to need to be able to have a 
choice between production tax credits and investment tax 
credits, and the normalization alternative for the energy 
storage investment tax credits.
    It is especially important to utilities that we are able to 
participate in these credits effectively and level the playing 
field. Affordability passed directly on to customers is top of 
mind as we work towards a clean energy future. It is going to 
take all of us working together. So thank you.
    The Chairman. Reducing carbon emissions from the power 
sector by 80 percent in the next decade is clearly going to be 
ambitious, but we are committed to working with you and others 
to get there, as without it, there is a climate catastrophe, 
and we cannot have that.
    Now let's move to Mr. Walsh. I want to talk about this 
argument that if you move to a clean energy economy, somehow 
you are throwing in the towel on good jobs. I am going to 
submit for the record now an independent analysis from the 
Rhodium Group that shows that a clean energy plan like mine 
would create nearly 600,000 new jobs, more than eight times as 
many as might be lost in fossil fuels over the next decade.
    [The report appears in the appendix beginning on p. 91.]
    The Chairman. Now, Mr. Walsh, in your testimony you say 
that the real issue is ensuring more good-paying jobs. And I 
note that you call for applying Federal labor standards to 
areas like tax incentives, which is similar to what I have 
proposed.
    What in your view--because we are talking about the real 
world--is the impact of these kinds of provisions for workers? 
And what else should the Congress be looking at to make sure 
that jobs are high-quality and well-paid?
    Mr. Walsh. Thank you, Mr. Chairman. I think provisions in 
labor standards like the ones you included in your technology-
neutral bill make it much more likely that the wages that are 
paid on these projects building out this infrastructure pay 
family-
supporting wages and benefits and give workers a voice on the 
job.
    So including standards like prevailing wage and registered 
utilization is key. There are other standards to include as 
well. And I would argue for domestic content standards as well 
to make sure that we capture the whole manufacturing supply 
chain benefit of these kinds of investments.
    The Chairman. Now, one other question for you, if I might, 
Mr. Walsh. We held a hearing on U.S. manufacturing in the 
committee here recently. It was a hearing on incentives for 
domestic manufacturing, and there was enormous interest among 
committee members, broad bipartisan interest. And clearly the 
climate crisis is wreaking havoc from storms and fires and 
droughts. But it also provides an opportunity for the country 
to reclaim the mantle of manufacturing and technological 
leadership through investments in clean energy.
    We had a leader from the Steelworkers, Donnie Blatt, argue 
at the March hearing that this is not an abstract issue of 
global power; it is a real challenge in American communities 
every single day for American workers.
    Your organization has been putting a lot of time into this 
issue. What would be the one or two policies, let us say, in 
the interest of brevity, that you think are most important to 
make sure the clean energy revolution is a catalyst for 
American manufacturing?
    Mr. Walsh. Thank you for the question. In terms of one or 
two policies, I would say we need to come at this from both the 
supply and the demand side. So on the demand side, ensuring 
that domestic clean energy products and materials and 
components are manufactured in this country by tying clean 
energy tax credits to domestic content incentives. And then on 
the supply side, ensuring that domestically manufactured 
components receive tax credits that directly support the build-
out and retooling of domestic manufacturing.
    There are ways to do that and examples that we have from 
48C potentially also, and adapting the 45M tax credit. And we 
would love to explore those with the committee.
    The Chairman. All right; let's go to Senator Crapo next.
    Senator Crapo. Thank you, Chairman Wyden.
    First to you, Mr. Brill. A number of companies and 
organizations have made reduced or zero-carbon commitments by 
2050, and some by 2030. However, global and national emissions 
goals will be hard to achieve until the technologies essential 
to meet them, many of which currently do not exist, are 
developed and deployed.
    Can you speak to our current energy technology landscape 
and how energy innovation will play a key role in significant 
decarbonization?
    Mr. Brill. Thank you, Senator Crapo. As we work towards 
reduced carbon emissions in the United States, both the 
increased utilization of existing technologies is important--
that is, wind and solar that we know today, geothermal, and 
others--but over the longer term and the medium term, new 
technologies, some which may exist in a lab or some which may 
not exist at all, will be increasingly important, both here in 
the United States and globally.
    This involves both developing those technologies which are 
new and innovative ways to generate energy without carbon 
emissions, but also to do that in a cost-effective way, to 
bring down the costs of those new technologies over time. 
Policies, whether they be R&D-focused, or the carbon pricing 
that I suggested, all of these will encourage private-sector 
activity in the development of these new technologies which are 
necessary, both here and around the world.
    Senator Crapo. All right; thank you.
    And, Mr. Sunday, like Pennsylvania, my State of Idaho has a 
rich history with nuclear energy development and deployment, 
particularly because of the Idaho National Lab's leadership in 
nuclear energy R&D. Currently, nuclear energy provides roughly 
20 percent of our electricity and is the largest clean energy 
source in the United States.
    Do you think we can meet our clean energy targets without 
continued investment and R&D in nuclear power? And can you 
speak to the benefits that nuclear power provides not only for 
clean energy production, but also for providing reliable 
baseload power and grid reliability?
    Mr. Sunday. Thank you for the question, Senator. And no, I 
do not think we can meet our goals without nuclear power, and I 
am not aware of a credible international commission forecast 
that does not have a role for nuclear power moving forward.
    In terms of the benefits, according to the National 
Association of State Energy Officials' jobs report, nuclear 
pays the highest hourly average wage of all energy resources. 
And within our State, the PJM grid, but for the maintenance 
outages every 18 to 24 months, nuclear is going to operate 24/7 
regardless of weather conditions. And it has the benefit of 
storing fuel onsite. So it is very unlikely to ever have a 
disruption. It is a fuel source that is safe, it is reliable. 
We have a strong vendor and supply chain base in Pennsylvania, 
and our leading universities, like Carnegie Mellon and Penn 
State, are continually producing world-class nuclear 
engineering graduates who are looking for opportunity now and 
in the future.
    Senator Crapo. Well, thank you. I think nuclear energy 
needs to be one of the key parts of our national energy policy 
in achieving these laudable goals.
    My final question, back to you, Mr. Brill, is on the 
capital gains rate increase that we expect to be proposed by 
the President in his speech tomorrow night, and has already 
been proposed, frankly.
    On April 25th, The Wall Street Journal editorial board 
responded to talk about raising the top tax rate on capital 
gains to 43.4 percent, with a headline that read ``The dumbest 
tax increase.''
    The most important reason to tax capital investment at low 
rates is to encourage savings and investment. Consumption--
buying a car or a yacht--faces a sales tax, but not a Federal 
tax. But if someone saves income and invests in the family 
business or stock, he or she is smacked with another round of 
tax. If you tax something more, you get less of it. Tax capital 
income more, and you get less investment, which means less 
investment to improve worker productivity and thus smaller 
income gains over time.
    My question to you is, why is it important to have a low 
capital gains rate to encourage investment and growth? And what 
do you think of the trial balloon to raise the top rate on 
capital gains almost double?
    Mr. Brill. Thank you for your question, Senator. The 
capital gains tax rate has bounced around over time, but 
economists know that, in terms of long-term economic growth, it 
is important in our country, or in any economy, to constantly 
invest and grow the capital stock.
    The capital gains tax rate works counter to that objective. 
In particular, raising the capital gains tax rate to 40 or 43 
percent would encourage what is known as lock-in. It would 
discourage investors from reallocating capital into more 
productive ways. It is probably counter to our objectives to 
move towards cleaner energy. It is also counter to the 
objective for achieving capital deepening, a larger capital 
base here in the United States, which is good for productivity 
and good for workers' wages.
    Senator Crapo. Thank you. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Crapo. And next we have--
with their hectic schedules, next will be Senator Stabenow. And 
Senator Stabenow has been the leader of the green manufacturing 
effort with Senator Manchin and Senator Daines.
    Why don't you go ahead, Senator Stabenow?
    Senator Stabenow. Well, thank you so much, Mr. Chairman. 
And I first just want to thank you for this really important 
hearing. And I am proud to be a co-sponsor of your Clean Energy 
for America Act, which I think is so significant.
    And before asking a question--I know, Mr. Chairman, you 
have heard me say this before, but whenever we talk about 
winners and losers, I just have to go back to 1914 when Henry 
Ford and Thomas Edison in Michigan first started out making an 
automobile and tried to have it battery-operated, and it was so 
difficult with all the challenges on range and a whole host of 
things. And 2 years later, Congress decided to put its full 
weight on tax policy behind oil and gas in 1916, and basically 
gave robust tax credits that ended up essentially in no-
interest loans, and 100 years later, they are still winning.
    So we did actually, in our tax policy, pick winners and 
losers. And I really appreciate that you are just simply trying 
to level the playing field. And maybe we will get back to what 
Henry Ford and Thomas Edison actually envisioned over 100 years 
ago.
    There is no question that when you think about the climate 
crisis, we have unprecedented challenges. But what is exciting 
is the fact that we have great economic opportunities as well. 
And that is really what we are talking about here.
    We have some catching up to do on clean energy 
manufacturing. We know, as our other hearings have shown--I 
mean, today China holds 75 percent of the world's manufacturing 
capacity for lithium ion battery cells and builds over 70 
percent of the solar panels. And the current semiconductor 
shortage shines a light on the threat that supply chain 
vulnerabilities pose to U.S. global competitiveness.
    But we know we can change that, and that is what this is 
really all about. So, Mr. Walsh, thank you for the BlueGreen 
Alliance's work for so many years. I remember when you first 
got it started, and I have been a strong supporter the entire 
time.
    Thank you for endorsing the American Jobs and Energy 
Manufacturing Act, which, as you indicated, is a bipartisan 
initiative with Senator Manchin and Senator Daines. And we 
really believe that the 48C program can once again drive 
investments in clean energy manufacturing.
    And also, before asking you to respond, Mr. Walsh, I think 
it is important to know--and I am really pleased to be working 
with our chairman on the production tax credit for domestic 
production of batteries, semiconductors, solar cells. I 
wondered if you could speak to why we need to be providing 
incentives, not only investments in new and retooled 
manufacturing plants, which I think is critical, but also a tax 
incentive for each unit produced.
    And what would be the implications of providing an 
investment tax credit only, but not a production tax credit, 
for manufacturing?
    Mr. Walsh. Thank you for the question, Senator Stabenow, 
and thank you very much for sponsoring the American Jobs and 
Energy Manufacturing Act. We were proud to endorse it.
    As you know, that is a 30-percent investment tax credit, 
which was created to re-equip, expand, and establish domestic 
clean energy transportation grid technology manufacturing 
facilities. We particularly appreciate the way in which you 
provide incentives in that legislation to site facilities in 
communities that have suffered whole economy job loss and 
deindustrialization. We think that is a critical equity 
consideration. 48C is incredibly important. It has historically 
been successful in generating investments in new facilities and 
equipment. It has been less successful in generating large-
scale investments and the durable incentives necessary to grow 
domestic manufacturing supply chains over the long term.
    So production tax credits like 45M can fill this gap and 
provide enough security in terms of demand for investors to 
create the kind of large-scale facilities that are not only 
necessary to meet our climate ambitions, but to keep us 
globally competitive.
    As you know, these are big capital expenditures. Investors 
are going to need that certainty, and they are going to need 
some assistance. And we view an investment tax credit and a 
production tax credit as complementary to achieving those 
goals.
    Senator Stabenow. Thank you. And, Mr. Chairman, I know we 
have a number of members who are all balancing schedules, so I 
will not ask another question. But I have many questions and 
appreciate the panel, including the 30B consumer incentives 
that are so important on the front end on electric vehicles, 
and I look forward to working with you and with everyone as we 
move what I think is a very exciting economic opportunity 
forward.
    It is a win/win on how we address the climate crisis, and 
also create jobs. So thank you.
    The Chairman. Thank you, Senator Stabenow. And we look 
forward to working with you on greening up manufacturing and 
getting that win/win.
    Our next panel member to ask questions will be Senator 
Carper, who is also chairman of Environment and Public Works. 
He has his hands full. We appreciate him.
    Senator Carper. Mr. Chairman, thanks so much. This is a 
terrific hearing, with terrific witnesses, and I am grateful to 
both you and the ranking member.
    The ranking member raised the issue of nuclear. My wife and 
I usually come home after church on Sunday mornings, and the 
first thing we do is go to the kitchen and fix breakfast. And 
we had breakfast with a guy named Fareed Zakaria. And this last 
Sunday he spent the last 4 minutes of his show talking about 
nuclear, just providing advice, unsolicited advice, about 
nuclear.
    Anyway, he provided some friendly advice to President Biden 
that he should not dismiss and lose sight of what nuclear is 
already doing in terms of providing carbon-free electricity, 
and the future that it might provide with advanced technology. 
So I just leave that with my colleagues.
    I am going to send around a copy of his 4-minute close on 
his show to our colleagues and just ask you to take a look at 
it, if you will.
    I would thank all the witnesses for joining us today. This 
could not be more interesting, more important, more timely. 
Last week our President celebrated Earth Day by committing the 
United States to becoming 50-percent cleaner in terms of 
greenhouse gas emissions by the end of the decade.
    Through my work on this committee, and as chairman of the 
Senate Environment and Public Works Committee, I remain 
committed to passing laws that would drive down dangerous 
emissions and clean energy costs for consumers, help tackle the 
climate crisis head-on, and support economic growth in this 
country.
    Today, clean energy investment and production tax credits 
have been indispensable tools in driving clean energy and 
economic growth in our country. But to me, with our ambitious 
climate goals, we can do better, and indeed we must do better.
    That is why I was delighted to join our chairman again in 
introducing the Clean Energy for America Act, and I was 
particularly pleased that this year's legislation draws on a 
number of common-sense policies that some of our colleagues and 
I have co-authored this year. The Save America's Clean Energy 
Jobs Act, which I introduced with Senator Whitehouse and 
Senator Heinrich, will provide temporary refundability for 
clean energy credits.
    Clean energy developers are currently unable to access tax 
equity financing as a result of the pandemic, leaving clean 
energy projects frozen and unable to break ground. 
Refundability of these credits will provide efficient access to 
capital that will immediately help facilitate job creation in 
the clean energy sector, all while contributing to more 
reliable power, cleaner air, and a true win/win/win situation.
    Question: Ms. Pope, would you share with us, please, your 
thoughts on how refundability of these credits could lead to 
increased clean energy innovation and capital employment, as 
well as to more good-paying jobs? Ms. Pope, please.
    Ms. Pope. Senator, thank you. And thank you for your 
question and your leadership on this issue, as well as your 
leadership on the nuclear issue.
    Your legislation recognizes near-term challenges that many 
projects face in terms of a direct-pay option. The short-term 
nature is helpful, but longer-term it would be more helpful if 
there was more certainty.
    Direct-pay lowers the project costs, and these are savings 
that can be directly paid to customers. And as you know, there 
is transition in the work we have to do that is very 
significant. So keeping customer prices low is very important.
    But it also frees up capital to invest in additional clean 
energy projects. These investments, as has been noted, will 
result in additional jobs. Direct-pay's impact on innovation 
lowers project costs, and, when combined with technology-
neutral credits, gives us the ability to innovate and choose 
technologies that best maintain a reliable and affordable 
energy grid.
    Given the investments that are needed in the next decade in 
order to reach the aggressive greenhouse gas emission reduction 
goals that the President, Congress, and we at PGE share, as do 
many other utilities across the country, it is going to take 
even longer-term direct-pay options such as that proposed by 
Chairman Wyden.
    But thank you so much for your support of the direct-pay 
option.
    Senator Carper. Thanks, Ms. Pope.
    Mr. Chairman, I think I am probably close to out of time, 
but I would like to ask one last question for the record, if I 
could.
    Mr. Brill laid out a thoughtful endorsement of implementing 
a technology-neutral carbon tax to address global warming. I am 
going to ask, for the record, for the reaction of our witnesses 
to what he had to say. Is this a fool's errand? Is this 
something that we ought to get serious about? And if you could 
just respond to that for the record.
    I think I have one more minute. If I can, I will ask a 
quick question. It is a question of Mr. Walsh, please, and it 
deals with the 30C tax credit for vehicle charging and 
refueling stations. The transportation sector generates about 
29 percent of our carbon emissions, the highest source of 
carbon emissions in our country, global emissions. To clean up 
our transportation sector, we need cleaner vehicles powered by 
sources other than oil, and we can't have clean vehicles 
without clean vehicle fueling infrastructure. We've got to have 
both.
    That is why I recently introduced the Securing America's 
Clean Fuels Infrastructure Act with Senator Richard Burr, our 
colleague on this panel, along with our colleagues Senator 
Cortez Masto and Senator Stabenow.
    This legislation will improve and expand the 30C tax 
incentive for investments in clean vehicle infrastructure, like 
electric vehicle charging stations and hydrogen fueling 
stations. And this legislation is complementary to broader 
efforts in the EPW Committee, which I chair, to decarbonize our 
transportation sector. This infrastructure is necessary for the 
success of our American automakers and for the widespread 
adoption of cleaner vehicles. That's why the major automakers, 
along with the fuel cell and electric vehicle infrastructure 
sector, support the legislation.
    The question for the record for Mr. Walsh: Mr. Walsh, can 
you speak for us--on the record--to the importance of tax 
policy that supports the deployment of clean vehicles and clean 
vehicle infrastructure?
    Thank you all for coming today, and for responding to our 
questions, and your willingness to respond to a few more for 
the record. Thank you so much.
    The Chairman. Thank you, Senator Carper.
    Senator Grassley?
    Senator Grassley. Thank you, Mr. Chairman.
    Green energy, of course, is music to my ears. I am the 
father of the wind energy tax credit, and 30 years have proven 
it to be a very successful initiative.
    Now on a different note, leading to a question for Mr. 
Brill, I often hear my Democrat colleagues complain about 
companies paying zero taxes. However, oftentimes the reason a 
profitable company pays no tax is they are eligible for tax 
incentives such as green energy incentives.
    Recently, there have been proposals from both sides of the 
aisle to make incentives in green energy essentially refundable 
by providing a direct-pay option. This option is included in 
the chairman's technology-neutral proposal.
    I do not necessarily object to direct-pay. It might make 
sense in certain circumstances, but in light of my colleague's 
concern about a company paying zero tax, my question for Mr. 
Brill is, couldn't a direct-pay option result in companies 
having a negative tax liability, that is, receiving a tax 
refund in excess of taxes paid?
    Mr. Brill. Thank you for the question, Senator. The answer 
is, certainly yes, the direct-pay option is only useful or 
effective in the cases where there is no other tax liability. 
So it, by definition, would increase the number of firms paying 
no, or in fact negative tax rates. These two issues are, just 
as you are suggesting, certainly in conflict: to be concerned 
about businesses in particular years not paying Federal income 
tax and then, at the same time, promoting policies that would 
exacerbate that reality.
    The truth is that it is quite normal and natural in many 
instances for firms not to pay corporate income tax, even if 
they are showing book income. That is a result of a sound 
corporate income tax system involving net operating loss 
carried forward and carried back, and is not necessarily 
something that policy-makers should be concerned with.
    The proposal is to create minimum taxes for certain 
businesses that do not pay tax when they report income, which 
is in effect bringing back the alternative minimum tax in 
another form, something that is not good, I think.
    Senator Grassley. You are getting into my next question, 
Mr. Brill, so stay there. Due to the concerns for a company 
reducing their tax liability to zero, President Biden has 
proposed a new 15-percent corporate minimum tax based on book 
income. Of course, book income generally does not reflect tax 
incentives.
    So, Mr. Brill, for some companies, wouldn't a book tax 
effectively remove the benefit of green energy incentives, thus 
undermining the legislative intent of those provisions?
    Mr. Brill. It very well could, Senator; you are correct. 
The minimum tax that President Biden has proposed, if fully 
implemented as it is being described, would negate many of the 
provisions that are also being advocated and proposed. And so, 
they work at cross-purposes, for sure.
    Senator Grassley. The next question will be for Mr. Walsh. 
President Biden's infrastructure program calls for over $174 
billion in consumer rebates for electric vehicles. However, the 
Energy Information Administration projects that in 2050, 81 
percent of the new vehicle sales will still be gas-powered or 
flex fuel. Biofuels are the only option to make significant, 
immediate carbon reductions on the cars that are on the roads 
today.
    So, Mr. Walsh, would you agree that the investment should 
also be made in biofuels infrastructure to maximize carbon 
reductions in the near future?
    Mr. Walsh. Thank you for the question, Senator Grassley. As 
a coalition of a bunch of different partners, we have typically 
not taken positions on biofuels. But let me talk to some of our 
partners and get back to you on that one.
    Senator Grassley. Well, thank you very much. And then also 
for you, Mr. Walsh--and this will have to be my last question--
the United States only comprises one-sixth of all global 
greenhouse gas emissions, and the international demand for 
energy is rapidly growing.
    As you mentioned in your testimony, the United States has a 
significant number of manufacturing facilities specializing in 
wind energy. One of those is in my State of Iowa.
    How can the United States support more exports of our clean 
energy production and other technologies to meet global demand 
for alternative energy?
    Mr. Walsh. We can support the wind industry and other clean 
technology industries with a range of both tax policies and 
direct investments. And doing so, we would argue--to the points 
you make--would make them competitive to capture market share 
in what will be one of the most important global economic races 
of this century.
    So we would be strongly supportive of that.
    Senator Grassley. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Grassley.
    Senator Cantwell?
    Senator Cantwell. Thank you, Mr. Chairman, and thanks for 
this important hearing. It is ironic that over in the Energy 
Committee we are having a discussion about carbon production on 
public lands. And I think there is an important nexus here.
    I know one of the speakers was saying how this is the 
committee of jurisdiction on important incentives, but over 
there we are not really charging the right royalty response to 
the impacts of carbon pollution on public lands. If we did, and 
took into consideration their true impact, we would generate 
billions in royalties.
    So maybe Mr. Walsh would have a second to respond to that. 
But generally, I am here to continue to talk about the price on 
carbon--you know, making sure that we move forward. Senator 
Hatch and I, in 2007, did the first tax incentive, $7,500 for 
electric vehicles. So just think about that. That was 2007. And 
now look at where we are today with the plethora in the 
marketplace of many electric vehicles, and in some States even 
like mine, moving forward on trying to create all-electric 
markets by a certain time period.
    So one of the issues I think that we have to address is, 
about 5 percent of our vehicles represent 23 percent of the 
emissions, and that is heavy-duty trucks. So thank you, Senator 
Wyden, for your legislation.
    But I want to hear whether either Mr. Brill or others 
support a 30-percent ITC, investment tax credit, on heavy-duty 
trucks, so that we can get that aspect, which is again 
disproportional to the amount. They might be 5 percent of the 
vehicles, but they are 23 percent of the emissions.
    So can we--and should we--tackle that next? And obviously I 
would like to hear people's views on why setting a price on 
carbon--Senator Collins and I had a cap and dividend bill. So 
we were trying to send the right market signals and give time 
for the market to adjust. So I see now where chambers of 
commerce and people like AEI and others are saying, ``Yes, that 
is right. We need this price signal.''
    So I am not talking about--I am asking the AEI witness to 
comment about why predictability is so important. But first, 
Mr. Walsh, if you wanted to comment on public lands and why a 
30-percent ITC on heavy-duty trucks is important?
    Mr. Walsh. Thank you for the question, Senator. I mean we 
are, I think, supportive of getting a fair return for taxpayers 
in terms of royalties from extraction on public lands. I'm 
happy to follow up with you on that, to get into a little bit 
more detail.
    On trucks, we would have to look at the specifics of an 
investment tax credit on trucks, but conceptually that is going 
to be incredibly important. We are already on, I think, a clear 
pathway with passenger cars. We have some more work to do to 
get there with trucks. And we would welcome an opportunity to 
talk with you and your staff about that.
    Senator Cantwell. Well, I think the technology is there. 
And just like with everything, nonrefundable engineering costs 
are costly things that drive or prohibit the market. And what 
we found with the tax credit for automobiles is that it really 
accelerated in just a short period of time, and look at where 
we are. And that is the whole point. I think that is what we do 
best, frankly. I think we incent things that take some of those 
costs off the table to make the manufacturing market go faster 
than it might normally, when otherwise the cost of the cars is 
prohibitive and they cannot get the market up and running.
    So anyway, Mr. Brill, on the larger question about AEI and 
chambers of commerce looking for a focused approach, and why 
that is better and predictable----
    Mr. Brill. Thank you very much, Senator. As I mentioned in 
my written testimony, numerous economists across the political 
spectrum have, for a long time, advocated for a price on 
carbon. And as you noted, more recently the business community, 
BRT, the Chamber of Commerce, API, and others have also joined 
in that view.
    A price on carbon is a very broad-based strategy for 
addressing climate emissions, as opposed to the narrow approach 
of a specific subsidy or a targeted tax credit. For that 
reason, it works through a myriad of channels. It encourages 
both the innovation of new technologies, encourages consumers 
to alter their behavior to reduce energy consumption overall, 
and encourages the deployment of existing technologies.
    It is my view--and I think the view of many who say this 
from an academic perspective, as well as now from a business 
perspective--that this broad-based approach is a durable policy 
and one that could lead to the increase in deployment of the 
technologies we know, as well as the development of the 
technologies that we cannot yet even imagine.
    Senator Cantwell. Thank you. And, Mr. Chairman, I just 
would be remiss if I did not reiterate my interest in--look, I 
think we have to work across global markets on these issues. I 
think we must engage other countries, big markets that are big 
CO2 polluters, and get them to join us on pledges to 
drive down the price on products that are going to help us deal 
with carbon emissions.
    I think the more we create that global market, the better 
we create the opportunities for our U.S. products as well. So 
anyway, thank you for this important hearing, and I certainly 
support your legislation that was just recently introduced, as 
a broad way to incent generation of more carbon-free energy. 
Thank you, Mr. Chairman.
    The Chairman. Thank you. I would note the fact that in 
2007, once again, you were ahead of the times with Senator 
Hatch on electric vehicles, and so we appreciate all the 
leadership.
    Next is Senator Menendez.
    Senator Menendez. Well, thank you, Mr. Chairman.
    In a newly released study by the largest reinsurance 
company in the world, it found that climate change would cost 
the global economy 18 percent of GDP by 2050, including 10 
percent of U.S. GDP.
    While some have said that transitioning to renewable energy 
is too expensive, or that it kills jobs, with every passing day 
and every passing disaster it becomes more and more clear that 
the cost of inaction is far higher than the cost of creating a 
modern, sustainable clean-energy economy.
    So, Mr. Walsh, will the transition to a clean energy 
economy, coupled with strong coordination with our global 
partners to combat climate change, be beneficial for our 
economy and our Nation in the long run?
    Mr. Walsh. Thank you for the question, Senator. I think it 
would. And actually the first analysis I would point to is one 
by the Rhodium Group that Senator Wyden entered into the record 
at the start of this hearing, which shows net job creation of 
roughly 600,000 jobs annually over a 10-year period. That is 
only looking at decarbonizing the electricity sector. Obviously 
we have to do this economy-wide. Bottom line, we are going to 
have to manufacture and install and operate and maintain an 
enormous amount of new generation capacity, along with 
transmission lines and energy storage, to make that possible. 
And that will create an enormous number of jobs.
    I think the bigger challenges will be, one, ensuring that 
these jobs are high-quality and accessible and across the full 
value chain, including manufacturing; two, targeting 
investment, and the jobs it creates, to parts of the country 
where that investment in job creation has lagged to date; and 
three--which is very much related to two--ensuring that workers 
and communities that have relied on fossil energy sources are 
not left behind.
    Senator Menendez. Absolutely. So we use our tax code to 
incentivize private-sector investment in areas that fit the 
public good. And I think we have established that acting on 
climate is an economic imperative, and that our continued 
reliance on fossil fuels not only harms public health and our 
environment, but also our economy--and that clean energy 
technologies have the potential to create millions of good-
paying jobs right here at home.
    Yet, the United States continues to subsidize the fossil 
fuel industry to the tune of billions of dollars every year. 
Instead of moving us in the right direction, my Republican 
colleagues used the 2017 tax bill to give even more handouts to 
big oil.
    I previously introduced the Close the Big Oil Tax Loopholes 
Act to try to correct some of these taxpayer subsidies to 
corporate polluters, and I am working towards reintroducing 
that legislation. I know the chairman has worked to incorporate 
some of these principles into his Clean Energy for America Act 
as well, which I support, and I hope we can work together to 
move the pertinent parts of the tax code in the right 
direction.
    And speaking of the right direction, last year PSE&G, the 
parent company for New Jersey's largest electricity utility, 
announced that it was divesting its fossil fuel assets. At the 
same time, they maintained a 25-percent stake in the Ocean Wind 
project in Federal waters off of our State.
    Ms. Pope, as companies like yours face decisions on 
decarbonization going forward, in order to ensure a smooth 
transition, how vital is it that the tax code catches up to 
current market trends?
    Ms. Pope. Thank you, Senator. It is definitely time to 
update the tax code to match current demand with new 
technologies, flexibility, and long-term certainty. The 
technology-neutral approach does this, and it does not pick 
winners or losers, or lock in specific technologies, but it is 
a good way to encourage innovation and incent clean energy 
deployment.
    Your example of PSE&G's offshore wind is a great one. And 
certainly that long-term tax policy is critical to utilities 
that routinely engage in long-term planning and invest in long-
lived assets, 20 to 40 years or more.
    Tax incentives also help keep customer prices affordable, 
especially when designed to ensure that the full credits reach 
customers. Tax policy needs to be paired with continued Federal 
funding for research, development, and deployment of emerging 
technologies, including the offshore wind that you were talking 
about, but also renewable hydrogen, long-term storage, and 
smart grid advances.
    So thank you.
    Senator Menendez. Thank you. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Menendez.
    Senator Thune is next.
    Senator Thune. Thank you, Mr. Chairman. Good morning, and 
thank you to all the witnesses for your testimony.
    On President Biden's first day in office, he issued an 
executive order canceling the permit for the Keystone XL 
Pipeline. The decision led to the loss of good-paying jobs in 
South Dakota and across the country and set the Nation back in 
terms of modernizing our energy infrastructure.
    Even the Canadian Prime Minister, a member of the liberal 
party, supported the pipeline and included it in Canada's clean 
energy roadmap.
    The pipeline's operator committed to operate Keystone with 
net-zero emissions by 2030 and pledged to invest $1.7 billion 
on solar, wind, and battery power to operate the pipeline. This 
would have ranked the operator among the highest corporate 
backers of renewable energy purchases directly supporting the 
green energy agenda.
    Since the executive action, the President has proposed 
trillions of new taxpayer dollars to address infrastructure and 
the climate, but the $9-billion pipeline project would have 
helped benefit both of those areas and added thousands of 
American jobs.
    Mr. Sunday, if our Nation wants to maintain its place as an 
economic superpower, will we need to modernize both 
conventional energy infrastructure and the build-up of low-
emissions energy projects?
    Mr. Sunday. Thank you for your question, Senator.
    Yes, absolutely. As a recent report from Columbia 
University said--while it is counter-intuitive--the most 
efficient and cost-
effective way to reach climate goals is going to be to continue 
to invest in our gas infrastructure. Along with that, I would 
encourage continued reforms and streamlining and certainty on 
siting interstate energy projects like the one that you 
referenced.
    Senator Thune [off mic]. That chill other large-scale 
private investments that are both good for American energy 
security and for the environment.
    Mr. Sunday. I apologize, Senator. You were on mute the 
first half of that question.
    Senator Thune. I am off mute. So just tell me how it is 
that preventing such projects as Keystone chill other large-
scale private investments that are both good for America's 
energy security and the environment.
    Mr. Sunday. The infrastructure space has a decades-long 
timeline for certainty in making estimations on if the 
investment makes sense. If we enter this frame where the only 
period of time you know that you might have certainty is over 
the next couple of years, capital is not going to be interested 
in investing in the type of projects that we are actually going 
to need to meet energy demand now and into the future.
    Senator Thune. The U.S. has moved from being a net importer 
of most forms of energy to a declining importer and, as of 
2019, a net exporter of energy, a truly remarkable 
transformation.
    U.S. oil production and natural gas production hit record 
highs in 2019, and today our country is the largest producer of 
natural gas in the world. Much of this progress, of course, has 
come from American innovation in extractions from 
unconventional formations such as shale, and a policy and a 
regulatory environment that encourages growth.
    Mr. Brill, how would raising the corporate tax rate by a 
third, and eliminating all fossil fuel tax incentives, impact 
America's energy security? And would such policies increase the 
costs of energy consumption for Americans?
    Mr. Brill. Thank you, Senator Thune. Raising the corporate 
tax rate, as has been proposed by President Biden, from 21 
percent to 28 percent, or even from 21 percent to 25 percent, 
raises the cost of capital, raises the cost of new investments 
for all corporations, including energy corporations, including 
clean energy corporations and businesses trying to develop new 
clean energy, as well as existing businesses working in the 
natural gas space, which are relatively low-carbon technology, 
and other industries as well.
    This has a myriad of adverse consequences. This is bad for 
our U.S. economy from an international competitiveness 
perspective, but it is bad from an energy perspective with 
respect to those businesses that are trying to make investments 
here in the United States.
    And so this policy works at cross-purposes to the overall 
objective, I think of this hearing, and I think of the 
objective of energy security and clean energy in the United 
States.
    Senator Thune. Anybody on the panel can respond to this, 
but one concern I have about the proposed carbon fees or other 
emission-based proposals is that we first have to have an 
accurate count of emissions.
    South Dakota is a leader in clean energy in terms of wind, 
hydroelectric, and biofuels, yet we face obstacles like the EPA 
using outdated greenhouse gas modeling for ethanol, which cuts 
fuel emissions by roughly half. Biodiesel cuts emissions by 70 
percent, and advanced biofuels, when paired with CO2 
storage, could approach carbon-negative territory.
    How do we ensure that we are accurately accounting for the 
real emissions of all sources to ensure that we have a level 
playing field when it comes to these incentives? Anybody? And I 
know I am out of time, so whoever wants to take that one.
    [Pause.]
    The Chairman. Senator Thune, could we take that one for the 
record?
    Senator Thune. No one wants to answer it, evidently, so, 
yes, that is fine, Mr. Chairman.
    The Chairman. I thank my colleague.
    Senator Portman?
    Senator Portman. I appreciate you fitting us all in.
    First of all, I appreciate the witnesses. Some of you 
talked about permitting today, and one of the things that 
concerns me is that it takes so long to permit a project, and 
it is so darned expensive.
    In your testimony, Mr. Sunday, you talked about that and 
the need for reform. Back a few years ago, former Senator 
Claire McCaskill and I offered legislation called the Federal 
Permitting Improvements Hearing Council, called FAST-41 because 
it was in the FAST highway bill. And the AFL-CIO Building 
Trades Council, as well as a lot of business groups, supported 
it. And it has worked. It saved large infrastructure projects 
well over a billion dollars. By the way, a bunch of these 
projects were clean energy projects, including hydro on the 
rivers in Ohio.
    And so my question for you is, should we be doing more of 
that? My concern is that it sunsets. This bill sunsets the 
Council in 2022. Are you aware of this FAST-41 proposal 
project, Mr. Sunday? And would you support lifting the sunset 
so it can continue?
    Mr. Sunday. Thank you, Senator. Absolutely. We appreciate 
your leadership on this issue. The business community is behind 
it, and we would certainly support its extension. We have seen 
FAST-41 permitting help get some very important Pennsylvania 
energy infrastructure projects built more efficiently, 
including a pipeline that is helping gas get exported to 
developing worlds to help them meet their energy needs and 
reduce security risks.
    The fact that you mentioned the reduced statute of 
limitations and time for environmental reviews, that has helped 
collect capital on the ground and put people to work in this 
country. So, we appreciate your leadership on this issue.
    Senator Portman. Great. Well, I would hope that, no matter 
what we do, we extend FAST-41 and ensure that we can have the 
Federal dollar stretch further by reducing the costs and the 
time for permitting.
    Ohio is one of these energy States, like Pennsylvania, Mr. 
Sunday, where we have a lot of manufacturing. We also have a 
lot of coal and natural gas. We have nuclear. We have 
renewables. We have solar, wind, hydro.
    The fossil fuels, though, the natural gas in particular, we 
are going to need to continue in our energy mix for some time 
as a reliable and affordable baseload energy source. Because of 
this, I think carbon capture is absolutely critical. And you 
know, for our Nation to reduce emissions along the lines that 
are being talked about is absolutely essential, without 
undercutting our economy.
    Carbon capture and direct-air capture facilities are 
costly. They are very expensive--and up to a billion dollars, 
as an example, at a power plant. And I think there is an 
opportunity for us to use the tax code more here.
    We have 45Q, which is the tax credit which we just extended 
for an additional 2 years in our 2020 year-end spending bill. 
That is an important incentive. I continue to work with Senator 
Bennet--who is on the committee--on carbon capture through our 
Carbon Capture Improvement Act, which allows the use of private 
activity bonds. And I like the private activity bonds in part 
because they are an incentive for private investment as well 
for creating efficiencies for the government.
    Mr. Brill, are you aware of our carbon capture legislation 
that uses private activity bonds, as was used in the 1970s for 
scrubbers? And how do you feel about that? And, Mr. Sunday, can 
you share the similarities to Ohio and can you comment on that 
as well?
    Mr. Brill. Thank you, Senator Portman. Broadly speaking 
from a technology perspective, carbon capture, I think, is 
critically important going forward, because we are going to 
continue to have forms of energy that do contain some carbon 
emissions, such as natural gas, and so really to capture that 
is a critical way to get to lower emissions overall and 
eventually perhaps to net-zero.
    So, carbon capture is critically important, and as you 
noted, is expensive. R&D in this area to help bring down those 
costs will be important. And the development of a price on 
carbon will be important to make adjustments for carbon 
emissions which are captured.
    And of course, as you noted, other strategies such as the 
private activity bonds, 45Q, or reforms to those provisions, 
may also encourage the deployment of carbon capture.
    Senator Portman. Mr. Sunday, any comment?
    Mr. Sunday. Thank you, Senator. Yes, as I mentioned in my 
opening statement, no State but one reduced emissions. Ohio is 
number one. So I know we compete on a lot of fronts, but this 
is certainly one area where our States should work together, 
given shared energy interests, the shared pipeline 
infrastructure, similar geologies. We have some projects in the 
beginning stage on carbon capture. It certainly makes sense to 
continue to pursue that. There is no real reasonable scenario 
that we meet net-zero by 2050 without continued investment into 
carbon capture.
    Senator Portman. But we think these private activity bonds 
are an effective way to finance it. We also finance direct air 
capture facilities in our new version of the legislation. So we 
look forward to working, Mr. Chairman, with the committee on 
that. And thank you for letting me ask questions.
    The Chairman. Thank you, Senator Portman.
    Let me also just say to colleagues, under the Clean Energy 
for America Act, a gas or coal plant that fully captures its 
emissions would qualify for the same amount as a wind or solar 
farm, because this bill is all about reducing emissions. So I 
appreciate my colleague's questions on this.
    Senator Toomey, you are next.
    Senator Toomey. Thank you, Mr. Chairman.
    You know, the 2017 tax reform was guided by an underlying 
theory in terms of the design on the business side of that. The 
idea was, if we would lower the after-tax cost of investing 
capital, we would have an increase in invested capital. And it 
is invested capital that makes workers more productive, and we 
said that if we do this, we are likely to get that investment, 
and the results will be more income for workers as well as an 
accelerated growth in our economy. This is exactly what 
happened.
    Mr. Sunday, as you mentioned in your testimony, in the wake 
of the TCJA, Pennsylvania companies in particular invested in 
their facilities and their workers. From 2016 to 2020, 
Pennsylvania alone added over 238,000 jobs. Median wages grew 
by 13\1/2\ percent. In some sectors like the chemical plant 
operators and natural gas power plant operators, wage growth 
was 34 percent and 20 percent respectively.
    The fact is, by January 2020, in the wake of our tax 
reform, we had the strongest economy of my lifetime. We were at 
full employment. We had more job openings than people looking 
for jobs. The poverty rate was at a record low. African 
American unemployment was at an all-time record low. Wages were 
growing for everyone, but they were growing fastest for the 
lowest-income workers, so we were narrowing the income gap as 
well.
    And now, shockingly, what the Biden administration and many 
of my Democratic colleagues want to do is reverse the policies 
that got us there, unwind the tax reform that gave us the best 
economy of my entire lifetime.
    So, Mr. Sunday, could you comment on how you think 
Pennsylvania businesses and workers would be affected if the 
Biden tax increases went into effect?
    Mr. Sunday. Thank you for the question, Senator, and thank 
you for your leadership on tax reform and all the work you have 
done on behalf of our State over these many years.
    We cannot lose sight of the fact that Pennsylvania has the 
second highest CNI tax in the country. We have unfair treatment 
of NOLs. Layer all that on top of raising the Federal rate, and 
keeping in place all the base broadeners that were part of 
TCJA, and suddenly, not only does America have the highest 
corporate rate in the world, Pennsylvania is 10 points higher 
than that and we become a very uncompetitive place to do 
business.
    We just saw that we are losing a congressional seat. I do 
not think that unfair, unattractive measures or policies are 
going to do anything to reverse that type of population and 
investment loss.
    Senator Toomey. Yes, I would just strongly stress, it would 
be okay to get back to the best economy of my lifetime. That 
would be a good thing to aspire to. Maybe keeping in place the 
policies that got us there would be a good idea.
    Speaking of which, in your testimony, and just a moment ago 
with Senator Portman, there was a discussion about 
CO2 emissions. According to the data I have seen, 
the U.S. as a whole has brought its CO2 emissions 
down. We have been doing that steadily. And by 2019, our 
CO2 emissions were back to the level they were at in 
1992, in absolute amounts. On a per capita basis, we had 
brought the CO2 emission level down to the level of 
1950.
    Now we all know what did that. It was natural gas replacing 
coal as a source of electricity. And Pennsylvania has led the 
way; together with Ohio, we are the two top States in 
CO2 emission reductions. Pennsylvania is an energy 
powerhouse.
    Could you give us some sense of your view on how central a 
role natural gas has played in the Pennsylvania economy, but 
also in America achieving this remarkable success in reducing 
the level of CO2 emissions at a rate faster than 
most people thought even possible?
    Mr. Sunday. Sure. Over the last decade, we have seen an 11-
fold increase in natural gas production in Pennsylvania, and 
that has brought utility bills down by the billions, and 
aggregate electricity prices in PJM are at generational lows. 
That is more money that folks had to save and meet their 
budgets, low-income folks in particular who were spending 10 to 
15 to 20 percent of their budget on utility bills. A lot of 
breathing room there.
    We have seen manufacturers in our State invest in combined 
heat and power projects to reduce costs, enhance output, add 
shifts. One consumer packaged goods plant in the Northeast went 
from one of the most expensive plants in that company's 
footprint to meeting a net revenue raise on energy because they 
can now sell power back to the grid. It has been a total game 
changer for our economy and the environment.
    Senator Toomey. And I will close with this, Mr. Chairman. 
All the while this has been happening, since 2010, from 2010 to 
last year, Pennsylvania's power sector emissions have declined 
by 36 percent. It is really a remarkable story of the success 
of natural gas. Thank you.
    The Chairman. Thank you, Senator Toomey.
    Senator Cardin?
    Senator Cardin. Mr. Chairman, first I want to thank you for 
your leadership on the legislation that you have introduced. We 
do need a level playing field. We do need predictability. We do 
need a rational basis for how we provide, in the tax code, for 
our energy sources, and I think you have given us a template. 
And I just really want to first thank you for your leadership 
on this issue.
    I do want to acknowledge several of the witnesses. Their 
comments have been what I agree with. Ms. Pope said we need a 
level playing field, and I could not agree more that we do need 
a level playing field on energy.
    And, Mr. Brill, I appreciate your comments in regards to a 
carbon tax. I do think that is the clearest, easiest way that 
we can reward clean energy, and we incentivize the private 
sector to do what is right. So I think that is extremely 
important.
    And then Senator Crapo asked the questions of Mr. Sunday in 
regards to nuclear power, which I agree with. I am a Democrat. 
He is a Republican. We need nuclear power. It is 20 percent of 
our electricity today. It is a carbon-free, basically, source 
of energy.
    So, until we can get to that level playing field, nuclear 
power is at a disadvantage in that it does not have a 
production tax credit, or an investment tax credit. The cost of 
power today makes it very difficult to modernize our nuclear 
power plants without some form of a tax credit.
    So we are looking at a production tax credit in this 
Congress as a way of leveling the playing field on nuclear 
power. So I wanted to give Ms. Pope, and perhaps Mr. Brill, an 
opportunity to respond as to, on at least the current basis, 
what we need to do to encourage the modernization of our 
nuclear power plants.
    Ms. Pope. Thank you, Senator. Additional tax policies that 
enable the continuation of the country's nuclear plants are 
critically important if we are going to achieve the 2030 and 
2035 goals.
    Existing nuclear is an important carbon-free resource that 
today, as you know, makes up 20 percent of the country's energy 
supply, and, it is clear, a much higher percentage of the clean 
energy supply for the country. But new nuclear is going to take 
investments. It is going to take investments that have 
certainty. We obviously know the complexity. It is going to 
take investments for partnering with Idaho National Labs and 
other labs that are part of DOE. It is going to take credits. 
And that's why the discussion we have had today, with regards 
to tech-neutral incentives that allow for all participants to 
be able to participate equally and allow people to be able to 
use investment tax credits, is so timely. Most importantly, 
policy-makers need to make sure that everyone is able to access 
these credits, and that we have a normalization fix for all 
participants, particularly utilities, most of which operate 
many of the nuclear plants in the country.
    Senator Cardin. Thank you. Mr. Brill, do you want to add 
anything?
    Mr. Brill. Yes; thank you, Senator Cardin. I would note, I 
would agree with you and others who have talked about the 
importance of nuclear power as a consistent and reliable source 
of energy in the United States. Consistent with my testimony, a 
price on carbon would likely extend the life of the existing 
fleet or stock of nuclear power in the United States and get to 
new investments in nuclear power that will allow new 
technologies, new research, and regulatory changes that will 
facilitate and bring down the cost of those new investments as 
well.
    Senator Cardin. Thank you. I want to mention one other 
area, and that is conservation. Conservation, conserving 
energy, is a win/win/win for everyone. And our tax code needs 
to be sensitive on how we can use it to encourage conservation. 
We were able to get section 179B, which allowed for the energy 
efficiencies of our buildings, to be made permanent, but there 
are still areas where we could vastly improve the tax code as 
it relates to the conservation of energy in our buildings under 
section 179B.
    There are other sections of the tax code that can encourage 
conservation and reduce the amount of energy use, which would 
be friendly towards our climate and reduce greenhouse gas 
emissions.
    So, I just really want to put on the table that one of the 
areas that I think is low-hanging fruit is to improve the 
provisions we have in our tax code as it relates to conserving 
the use of energy. We can do that in the auto industry in 
electric vehicles. We can do that in so many different areas, 
and I applaud the chairman for his leadership in this area, and 
the other members of our committee, as we work together to 
develop an energy policy.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Cardin. You are the first 
to explicitly mention conservation, and we appreciate it.
    Our next two Senators will be Senator Cassidy and Senator 
Brown. And, colleagues, we are going to try to keep this moving 
even though we have a vote.
    Senator Cassidy?
    Senator Cassidy. Thank you, Mr. Chairman. Thank you for 
being here. Thank you all for being here.
    Mr. Sunday, I am always struck when people talk about 
things like intangible drilling costs as being some big bailout 
for a super major, but as you and I both know, they do not 
qualify for the intangible drilling cost deduction. Is that 
correct?
    Mr. Sunday. That is my understanding. It is more limited to 
the independents.
    Senator Cassidy. And it is only 1,000 barrels a day, which 
for ExxonMobil is, one, they do not qualify, but, two, it would 
not be very important in their overall production.
    Now that would be very important for the small, independent 
producer who diversifies, if you will, prevents the monopoly of 
the super majors and the larger independents. So how essential 
is such a thing for that smaller producer who is creating such 
prosperity for working Americans in your State?
    Mr. Sunday. Thanks for the question, Senator. Our natural 
gas producers have been a huge win for the economy and the 
environment, but it is a challenged price environment because 
of infrastructure constraints and regulations. So the folks who 
are still able to sustain are those independents, but their 
business structure is such that 80, 85 percent of their capex 
is intangible drilling costs. That is what we quote for that 
industry and other industries----
    Senator Cassidy. Let me stop you, because I have limited 
time. So the point is, there are all these folks who are 
providing great-paying jobs for working Americans, great-paying 
jobs that have persisted despite the pandemic, they are 
dependent upon this particular provision which does not go to 
ExxonMobil, but does go to these very small companies in some 
cases, and they are the ones providing this employment. I want 
to make that point.
    Mr. Brill, I am always interested in the carbon tax because 
it seems as if it leaves various things out. By the way, I 
think philosophically you and I are in agreement on many 
things. But we know--let's just be honest: we are not going to 
have battery production on the scale that is required for this 
vision of the administration for at least a decade, if not a 
lot longer.
    And we also know that currently most of the batteries are 
produced in China, where they use coal as feedstock. And the 
cobalt is mined in the Congo, with abhorrent conditions, a very 
energy-intensive process. And I have read that if you take into 
account the mining of the cobalt, the processing in China, and 
the shipment of the battery to the U.S., the amount of savings 
in life-cycle costs on global greenhouse gas emissions is 
minimal, and perhaps even nonexistent.
    So as we do a--and by the way, hear that: it is minimal or 
nonexistent. So everybody who looks at EVs as kind of the 
savior of the environment is looking at U.S. emissions. They 
are not looking at global greenhouse gas emissions. And if we 
had more time, we could develop that further.
    Mr. Brill, though, in your carbon tax, are we not 
effectively out-sourcing the carbon relief to China and India, 
et cetera, unless we are going to put in place a border 
adjustment tax which takes into account the mining of the 
cobalt with the equipment that is used in the Congo, the 
shipping cost to China, the concrete that is laid in China, et 
cetera? Is that practical?
    Mr. Brill. Thank you for your question, Senator. You are 
absolutely right that in a well-designed carbon tax there needs 
to be a border adjustment mechanism that would exclude the tax 
on U.S. exports of carbon-intensive goods and impose that tax 
on imports of goods containing carbon from other countries.
    That policy is something that tax lawyers and tax 
economists have thought about a lot, and it can protect the 
U.S.'s competitiveness----
    Senator Cassidy. I accept--we both accept the need for the 
border adjustment tax. Is it practical, if you are going to 
have heavy equipment in the Congo which is going to be, you 
know, scraping this out of the ground, putting it in a diesel-
spewing truck to take it to the port to ship it to China, with 
a 50-percent coal-fired energy source, and then shipped over 
here, not to mention the fact that the factories in China are 
made with lots of concrete and other vessels, other trucks 
spewing diesel? How practical is it to have a VAT which totally 
captures all of that?
    Mr. Brill. My view, Senator, is that it is definitely 
possible to capture most of the trade in carbon emissions from 
the----
    Senator Cassidy. Just for a second, Mr. Brill; everything 
is possible. Is it practical?
    Mr. Brill. Yes.
    Senator Cassidy. I mean, are we really going to get the 
diesel truck that is 20 years old in the Congo bringing the 
stuff made by child labor to the port?
    Mr. Brill. I am not suggesting that it can capture 100 
percent of the carbon emissions involved in trade, but I do 
believe that one can practically design a policy that captures 
the vast majority of trade in carbon emissions----
    Senator Cassidy. I am over time, but I will say that it is 
in the interest of our trading partners to bury those costs. 
And so I do think the practicality of it may be subject to 
definition. But thank you all for your testimony.
    The Chairman. Thank you, Senator Cassidy.
    Next will be Senator Brown. I am going to run and vote, and 
Senator Crapo will keep this hearing moving, and I will vote 
and be right back.
    Senator Brown. Thank you. Thank you, Chairman Wyden and 
Senator Crapo.
    Mr. Walsh, the Banking and Housing Committee, which I 
chair, last week had the pleasure of hearing from Zoe Lipman of 
BGA. We talked about the potential for my State as the Nation 
shifts to a low-carbon economy. Mr. Walsh, where do you see the 
most potential job growth in domestic manufacturing?
    Mr. Walsh. Well, I think--thank you for the question, 
Senator. I think certainly in component parts and assembly of 
EV vehicles, there is an enormous amount of work to be done. We 
have talked a little bit about how the tax code could be used 
to support EV production in this country. We also have direct 
investment via the Department of Energy programs that we can 
use.
    I think we need to reflect on the fact, which has been 
commented on, that China controls roughly 60 percent of EV car 
production, roughly 70 percent of battery cell production. That 
was not accidental. That was the result of focused industrial 
policy which included roughly $60 billion worth of investment 
from the Chinese Government.
    I think we also have the ability to make key material like 
steel and cements in lower-carbon ways. And I think this is an 
area where we have a lot of work to do. We have been doing a 
bunch of work with different policy models that can, I think, 
better reward U.S. manufacturers vis-a-vis our international 
competitors.
    I think it is worth noting that every kind of steel made in 
China has roughly twice the embodied emissions compared to the 
steel made in the United States. So I think if we can have 
policy designed that actually takes that into account, we are 
going to set up U.S. manufacturers of a wide range of materials 
that are the fundamental building blocks of this country and 
the world.
    Senator Brown. Well, you talked about the existing 
industrial policy in China, and I would add, lack of industrial 
policy in the United States, coupled with Presidents of both 
parties from George Bush the first through Donald Trump, and a 
trade policy and a tax policy that undermined our efforts.
    You note that the union density in the traditional energy 
sector likely accounts for the wage differential between it and 
the renewable sector. Why are we seeing this? How do we 
increase wages in solar and wind, whether it is in the factory, 
or whether it is in the field?
    Mr. Walsh. Yes. I think there are a couple of reasons. One 
of the reasons is that one of the most important deployment 
drivers of clean energy technologies like solar and wind has 
been the tax code. And we have, at least historically, not 
included labor standards or domestic content standards in our 
clean energy tax incentives. We think that needs to change to 
level that wage gap and that union density gap. And Senator 
Wyden's bill, I think, shows us a good first step.
    Senator Brown. So if I could interrupt, Mr. Walsh, in other 
words, you do not provide clean energy tax incentives without--
or energy tax incentives, period--without some kind of labor 
standards, and some kind of domestic content standards?
    Mr. Walsh. That is what we believe, Senator. I think it is 
also worth noting that that alone is not enough, that we need 
to fundamentally rebalance power between workers and their 
employers in this country. We need to support and reinforce 
workers' ability to organize amongst themselves, to 
collectively bargain with their employers for better wages and 
benefits and working conditions.
    The PRO Act is, I think, a very important piece of 
legislation that our coalition, all of our partners, support. 
And we are hoping to see support from the U.S. Senate of the 
PRO Act, because that, to our minds, is critical as we build 
out this clean energy economy, but also important to addressing 
what is fairly profound income inequality in our economy as a 
whole.
    Senator Brown. Thank you. And the BlueGreen Alliance has 
partnered with many Ohio and other Appalachian stakeholders on 
opportunities to clean up the legacy of extractive industries.
    What sort of work--and I see Senator Bennet, who is going 
to be in the same meeting I am in on the Child Tax Credit in a 
moment--what sort of work needs to be done there?
    Mr. Walsh. Well, we have a lot of cleanup that needs to be 
done. Just in looking at abandoned mine lands, some estimates 
go as high as $20 billion of cleanup costs.
    This is heavy construction work. It is moving a lot of 
earth. With prevailing wages, we think these jobs can support 
middle-class jobs and careers and, importantly, can be an 
important source of job creation in parts of the country that 
have been hurt economically by the transitions going on in our 
energy economy.
    So we are extremely supportive of cleanup, both on 
abandoned mine lands, but also on brown fields, on Superfund 
sites, and oil and gas wells as well. The job-producing 
potential is really significant.
    Senator Brown. Thank you, Mr. Walsh.
    Senator Crapo [presiding]. Thank you very much.
    Next is Senator Lankford, and he will be followed by 
Senator Bennet.
    Senator Lankford. Thank you very much. Let me ask a couple 
of questions.
    Mr. Sunday, I want to first start with you, talking about 
tax policy on this. Europe, and Germany in particular, is 
losing some of its energy independence of late by trying to be 
more dependent on Russia and the Nord Stream 2 pipeline for 
natural gas. That is an enormous geopolitical shift that will 
have very long-term effects on Western Europe.
    We in the United States started exporting natural gas half 
a decade ago, specifically dealing with the geopolitical 
importance of that, and also dealing with the carbon issues of 
trying to be able to reduce carbon usage around the world by 
using cleaner natural gas for energy around the world.
    So geopolitically, it is important. In other ways it is 
important as well. The reason I want to talk about that is, one 
of the key issues is the intangible drilling costs on that, 
with just normal operating costs for oil and gas and for their 
production. There has been conversation about that.
    Mr. Sunday, what would that mean to lose intangible 
drilling costs, both geopolitically for us and our energy 
independence domestically, as well as just in tax policy?
    Mr. Sunday. Thanks for the question, Senator. It would 
incredibly disadvantage the producers that are still able to 
operate here in Pennsylvania. That would translate to reduced 
production, fewer jobs, and a reduction in the LNG exports to 
countries, as you mentioned, in Southeast Asia, India--and it 
would increase their geopolitical risks and our ability to 
shrug off geopolitical turmoil in the Gulf.
    Senator Lankford. So let me ask the same type of question. 
Enhanced recovery has been a process that has been around for a 
while. It has been very important to actually reduce our 
footprint.
    Mr. Sunday, do you want to give any additional details on 
enhanced recovery, what that could mean to be able to reduce 
our carbon footprint?
    Mr. Sunday. Sure. I think if the goal is reduced emissions, 
you want to get the most molecules out of the ground with the 
least surface activity possible. So that is certainly something 
that we would want to continue to support, if that is our goal.
    Senator Lankford. Thank you for both of those.
    Mr. Brill, I want to ask you about the wind production tax 
credit. The issue is not whether we should engage in wind. Wind 
is a great source of energy around the country. It is an 
effective piece of energy, when the wind is actually blowing, 
to be able to engage in that.
    My question is, we still continue to put billions of 
dollars into the wind production tax credit as a specific set-
aside to incent new construction on that. It obviously changes 
the formula of the price for wind compared to everything else. 
But it seems to be something that should be fading. There is a 
lot of great wind production out there. It is very efficient. 
But we are doing it the same way, though, that we have done it 
now for 30 years.
    Is it effective to continue to do the same credit over and 
over again, even when wind is no longer a startup entity?
    Mr. Brill. Thanks for the question, Senator. It is true 
that the technology has advanced by leaps and bounds over the 
last few decades, and the price of wind energy has plummeted 
over this same period of time. Depending on how one does the 
calculations, it is often cost-competitive even without the 
subsidies.
    The subsidies, of course, further encourage additional 
investment and additional deployment of a carbon-neutral source 
of energy, and there are climate and economic advantages to 
that. But continuing a strategy of large subsidies for all 
clean energy will become increasingly costly over time as we 
continue to transition towards lower carbon emissions. And so 
therefore, the cost of these policies, I think, should be 
carefully examined.
    Senator Lankford. Thank you.
    Ms. Pope, I want to ask you specifically about an issue 
that I do not think you were directly affected by, but 2 months 
ago, obviously, we had a really deep cold snap that came across 
the central part of the United States. I was in that. Southwest 
Power Pool had a pretty dramatic shift during that time period, 
as we saw a lot of wind towers that froze up. Our solar panels 
were all covered in deep snow. A lot of our natural gas 
facilities that were active in gas processing froze up in the 
central part of the United States. There was a pretty dramatic 
set of issues there, and it seemed to cascade.
    Part of the challenge is, we are trying to go through this 
to continue to be able to focus on energy diversity. Some of 
the tax incentives, when you put those in place, obviously 
capital runs towards where it is going to get the greatest 
return. That has been wind, and that has been other things, 
which again, in my part of the country in Oklahoma, you know, 
wind comes sweeping down the plain and we actually turn wind 
towers with it and make energy out of it. It has been great as 
a source. But the question becomes over-reliance, and on peak 
days, what that really means, that over-reliance.
    How can tax policy actually push us in our energy diversity 
area so that we over-create some areas and under-supply others? 
And so on peak days hot and cold, we need to mix that. How do 
you balance that out in your own portfolio?
    Ms. Pope. Thank you very much for the question.
    First of all, in Oregon and across the Pacific Northwest, 
we saw tremendously harsh weather, particularly the last 2 
weeks of February. And at Portland General Electric in 
particular, we had more than half of our customers lose power 
during that time. And we spoke with Chairman Wyden, as well as 
many others, while getting that power restored.
    One of the things that happened during those significant 
ice, wind, and snow storms in our part of the country, was the 
generation continued to produce, whether that be wind, whether 
that be solar, whether that be hydro, or whether that be 
thermal resources.
    One of the reasons for that is that those resources are all 
constructed for the weather conditions that we have in the 
Pacific Northwest on the hottest days of the year, and on the 
very, very coldest days of the year. The storms that we were 
impacted by were probably one-in-40-year events. So I am very 
aware of the reliability issues and the problems for all of our 
customers and community members and your constituents when 
there is not power, particularly during this pandemic.
    As we look forward to how to incent diversity across all of 
our resources, it is something we feel very strongly about, and 
it is one of the reasons that we really like the tech-neutral 
aspects of Chairman Wyden's proposals--and most importantly, 
that all participants, utilities and independent power 
producers alike, can participate.
    And thirdly, I say that to balance renewables--wind, solar, 
hydro, as well as others--Portland General Electric, as well as 
many utilities in the west, belong to the Energy Imbalance 
Market. And we work with each other to lower the costs of 
renewables, to be able to use the maximum amount of renewables 
across a much wider geography of the entire west.
    So, through a variety of mechanisms, I think there is a 
real opportunity to expand the use of renewables in a reliable 
and low-cost fashion. Thank you.
    Senator Lankford. Thank you, Mr. Chairman.
    Senator Crapo. Thank you.
    Senator Bennet?
    Senator Bennet. Thank you, Mr. Chairman. Can you hear me?
    Senator Crapo. Yes.
    Senator Bennet. Thank you. Thank you for running an 
excellent hearing, and thank you to the witnesses for your 
testimony.
    Ms. Pope, cleaning up electricity generation is critical to 
meeting our climate goals, as we have discussed this morning. 
It is responsible for 30 percent of the greenhouse gas 
pollution in this country.
    Clean electricity will also be critical to reducing 
emissions in other sectors, like transportation. And while we 
have made important progress already without new policy, the 
electric power sector is poised to reduce emissions roughly 45 
percent below 2005 levels by 2030.
    Analysis after analysis shows that this sector is where the 
fastest and cheapest opportunities to cut emissions remain. 
These studies also show we need to reduce emissions from 
electricity by at least 80 percent below 2005 levels by the end 
of the decade to reach our economy-wide climate targets.
    I was really encouraged to see a group of leading power 
companies, including yours, Ms. Pope, recently release a letter 
calling for a new policy to limit electricity sector emissions 
to that level nationwide. And as we have heard, Portland 
General Electric recently upgraded its corporate greenhouse gas 
reductions goal, pledging to reduce emissions 80 percent by 
2030. At the same time, your company has supported public 
policy efforts both in Oregon and federally that would provide 
certainty around the emissions reductions necessary from both 
the power sector and economy-wide.
    Can you talk about the role of policy frameworks that limit 
carbon emissions from electricity such as the clean electricity 
standard like the one currently under consideration in the 
Oregon legislature, and how they can be a critical complement 
to Chairman Wyden's tech-neutral bill and help ensure we meet 
our climate goals?
    Ms. Pope. Thank you. And first of all, Senator Bennet, let 
me mention that one of the reasons that we have been successful 
in achieving the goals that we have, and being able to set more 
aggressive goals as we go forward, is the utility sector across 
the United States works closely together, shares best 
practices. In particular, your State of Colorado and how you 
manage wind energy that integrates that resource not only from 
the IOUs, but from your public power participants in the State, 
has been an example to us for many years. So, thank you.
    We believe very strongly that State policy and Federal 
policy need to work hand in hand with one another. And we view 
these as complementary to help us move faster and meet all 
needs.
    We have seen in the past that when there is a disconnect 
between Federal and State policies, it can be challenging for 
utilities, particularly those that operate in different States 
and different parts of the country, and we do not move as fast 
toward a clean energy future.
    So having more certainty is important, as well as having 
tech-neutral approaches, and allowing all participants to be 
able to work collaboratively together as we do this important 
work to get an 80-percent reduction from the electric sector, 
so that our broader economy can hit 50-percent reductions by 
2030, and then go beyond with more technology advancements to 
2035 and 2040.
    Senator Bennet. Thank you for that.
    Mr. Chairman, I cannot see a clock, so I do not know what I 
have left.
    Senator Crapo. You have about a minute and a half left.
    Senator Bennet. Excellent.
    So, Mr. Walsh, workers in communities in coal-dependent 
regions across our country are struggling to make ends meet. 
And in order to safeguard our environment, health, and economy 
we need to transition to cleaner sources of energy to achieve 
net-zero emissions by 2050, and we need to do this, as you have 
said, while ensuring there are good-paying jobs for energy 
workers. We need to support communities that rely on local 
government revenue from fossil fuels to support core services 
like education, water, and public safety. I have in mind places 
like Craig, CO, in my own State.
    Mr. Walsh, in terms of tax policy, what lessons should 
Congress learn from experiences in States or cities--or even at 
particular facilities--about how to support workers and 
communities in transition, especially in rural communities like 
Moffat County, or like Craig, CO?
    Mr. Walsh. Thank you for the question, Senator. I mean, I 
think we can start by learning from your State of Colorado, 
where we see a great example of a coordinated whole-of-state-
government approach to using public investment to support 
workers and communities in the coal economy, Craig and Moffat 
County being a big part of that in northwest Colorado.
    I think they would be the first to tell us, though, that 
States cannot do this by themselves; that they need the Federal 
Government as a partner, and a whole-of-government approach 
from the Federal Government. You note ways in which we can 
potentially use the tax code. We have already talked a little 
bit about how legislation can target new investment in 
manufacturing and infrastructure to communities that have been 
disrupted by coal economy transition. The 48C proposal from 
Senator Stabenow and Senator Manchin is one such example.
    You do flag, though, the importance of local tax revenue 
that comes from facilities like coal power plants and coal 
mines. I think this is something we really need to explore. I 
think, as a coalition, we would be very interested in working 
with you and other folks on the committee to figure out how we 
can most reasonably help local and State and tribal governments 
replenish revenue they have lost when, for example, a coal mine 
or power plant closes.
    I think there is a strong role in that for this committee, 
and the Federal tax code.
    Senator Bennet. I agree with that. Thank you, Mr. Chairman.
    Senator Crapo. Thank you.
    And next is Senator Daines.
    Senator Daines. Thanks, Senator Crapo.
    Instead of investing in Colstrip and the high-paying jobs 
it creates, PG&E and the Pacific Northwest owner have done 
everything they could to avoid investing in the plant. It is in 
part because of the State-wide carbon-free mandates in Oregon 
and Washington, and early closure of Colstrip will have huge, 
huge impacts on the communities, on jobs, and reliable baseload 
power in the region.
    It is one thing to be forced to close because of State 
policies. It is another to actively advocate for them.
    Ms. Pope, has PG&E been party to any communication directed 
to the Washington utility commission urging the immediate 
closure of Colstrip?
    Ms. Pope. Thank you, Senator Daines. We reflect, as an 
Oregon utility, the values of our customers, and the values of 
the community leaders in the State in which we serve and 
operate.
    As for the operation at Colstrip, we have been an owner of 
that facility since its inception, and are committed to doing 
the right thing for our employees, for the community of 
Colstrip, and for the environment.
    We are working collaboratively with the----
    Senator Daines. Ms. Pope, the question was, has PG&E been a 
party to any communication directed to the Washington utility 
commission urging the immediate closure of Colstrip?
    Ms. Pope. We have not engaged with the Washington utility 
commission. We are governed by the Oregon utility commission.
    Senator Daines. But I asked Washington or Oregon. So 
Oregon, you have?
    Ms. Pope. Our Oregon commission, we have a utility 
regulation. It includes not having coal in our customer rates 
by 2030.
    Senator Daines. But regarding the Oregon utility 
commission, you have been a part of urging the immediate 
closure of Colstrip with the Oregon utility commission?
    Ms. Pope. We haven't. We are working collaboratively with 
stakeholders to figure out a solution that reflects the values 
of Oregon customers, community leaders, and others across the 
State, as well as customer prices, making sure that we are 
doing the right thing for the employees of Colstrip, working 
collaboratively with other owners in our contractual 
relationships there, as well as the communities in Montana that 
have supported the facility for the decades it has been 
operating.
    Senator Daines. So, regarding serving your customers, as 
you know, the Pacific Northwest has a looming capacity shortage 
with a possibility that baseload power will not be able to meet 
peak demand. We saw this happen, of course, in California last 
summer.
    Would extending and expanding clean energy credits address 
that problem? Or would it make it worse due to the intermittent 
energy and decreased baseload?
    Ms. Pope. As we look forward to a clean energy future, we 
look to using technology to integrate new sources of renewable 
energy like battery storage, also traditional storage of pumps, 
hydro, as well as others. We also are working to ensure that we 
have distributed energy resources. That will allow us to more 
flexibly manage load and customer usages so that we are able to 
take advantage of the diverse set of energy resources--wind, 
solar, hydro, and others. In particular, we are looking at 
investments in the State of Montana around wind energy and 
solar energy.
    Senator Daines. So I know Oregon's legislature is 
considering a bill to require PG&E to service Oregon customers 
with 100-percent clean energy by 2040, I believe. Is that 
something your company supports?
    Ms. Pope. We have been in dialogue with the parties with 
regard to legislation currently in front of the Oregon 
Legislature on both the House and the Senate side.
    Senator Daines. So PG&E relies on Colstrip to reliably 
serve the load. The economics of operating the plant have been 
changed in part by renewable tax subsidies. If that continues, 
Colstrip's continued operation could be put in jeopardy. This 
would result in displacement of an entire community, and remove 
from the region a facility that has served to maintain grid 
reliability.
    The question is, what do you think we should do as part of 
this legislation to enable PG&E to exit Colstrip while enabling 
others to continue to own and operate the plant to supply, 
certainly a State like Montana, and aid regional grid 
stability?
    Ms. Pope. So, there are a number of owners in the Colstrip 
facility that have different interests, and some interests that 
are aligned. In working through the contractual relationships, 
with both its owners and its operators, finding a workable 
solution for the plant is important.
    We will make sure that we do the right thing by the plant's 
employees--who have worked there for a long time--as well as 
the operations, the environment, and the community of Colstrip. 
As you note, two of the units have already closed, and we have 
worked collaboratively as those costs have been incurred by the 
other co-
owners of the other units. And we have continued to meet 
regularly to discuss the operations of the facility.
    Senator Daines. Thanks, Ms. Pope.
    Senator Crapo, thanks; I am out of time.
    Senator Crapo. Thank you. Next is Senator Casey, and he 
will be followed by Senator Young, if he is able to get back, 
and Senator Warner.
    Senator Casey?
    Senator Casey. Senator Crapo, thanks very much. I will have 
a question, I hope, for both Mr. Walsh and Mr. Sunday.
    Mr. Walsh, I wanted to start with you. In your written 
statement, you noted how important it is that we seek out ways 
to build career pathways in order to increase access to clean 
energy jobs. I agree, and I know a lot of people do as well. 
And at the same time, we have to look to address the climate 
crisis, as well as addressing the economic and jobs crises that 
we are confronting right now.
    We must also prioritize training and skill development 
opportunities. So obviously, this has to include pathways to 
good jobs, and I believe one of the best pathways to a good job 
is union jobs for new workers, as well as workers seeking new 
opportunities within the energy sector.
    I have a Civilian Conservation Corps proposal that I have 
been working on. While it is not limited to energy jobs, it 
prioritizes opportunities for a Civilian Conservation Corps 
member to not only obtain short-term employment, but also to 
gain both skills and connections as well as opportunities that 
will help them set up for the long term.
    So here is the question. As we look to advance policies, 
including through the tax code, that will expand the clean 
energy sector, what steps should we be taking to ensure that 
training programs--whether it is registered apprenticeships or 
career apprenticeship programs--what steps should we be taking 
to ensure that we are focused on the broader goal of creating 
new clean energy jobs?
    Mr. Walsh. Thank you for the question, Senator Casey. We 
agree that unions and the registered apprenticeship and union-
affiliated training programs they create with their signatory 
employers, are a key pathway to doing that.
    You mentioned your Conservation Corps proposal. That, for 
example, could be used as a pathway into registered 
apprenticeship programs. The key is to make sure that we have 
incentives within our tax credits to actually leverage those 
existing assets, right? So, for example, Senator Wyden's 
inclusion of registered apprenticeship utilization in his bill 
is a way to do that.
    We have other ways to do that as well. We can incent or 
require project labor agreements which come with them. 
Typically a large project has a very sophisticated plan on not 
only the use of registered apprentices on those projects, but 
then the pathway that usually starts with a pre-apprenticeship 
program, often based in a local community so that folks 
actually have the skills they need to get into those 
apprenticeships and therefore earn a pathway to what ultimately 
becomes a career-track middle-class job.
    So I think intentionality about the standards we apply to 
tax credits is the key, and we look forward to working with you 
and working with this committee to expand on some of the good 
first steps that Senator Wyden has made in including registered 
apprenticeships and prevailing wages in his legislation.
    Senator Casey. Mr. Walsh, thank you very much.
    I will move to Mr. Sunday with regard to kind of three 
interrelated issues: methane, jobs, and infrastructure. In your 
testimony, you refer to the need to take steps to both reduce 
methane emissions from natural gas, but also the potential that 
it has. Methane, as we know, is a terribly powerful greenhouse 
gas. Its effect on climate change is more than 30 times greater 
than that of CO2 when averaged over a 100-year time 
period--and even greater when considered over the first 20 
years after it is emitted.
    We know that in my home State of Pennsylvania, this 
opportunity is a real win/win to help address methane leaked 
from natural gas production, but also to protect and create new 
jobs at the same time we are addressing the climate.
    You know the significance of pipeline infrastructure in 
this question, so I guess I would just ask you to speak to the 
economic opportunity for a State like ours with regard to 
further investment in methane leak detection and repairs at all 
stages, and whether this is a good opportunity to create good-
paying jobs in taking steps on lowering emissions?
    Mr. Sunday. Thanks for the question, Senator. I think you 
have the upstream stage where drillers are committing to 
corporate stability goals, the same with the pipeline. On the 
utility side, with the infrastructure, we have to figure out a 
way to repair some of those leaks and aging mains and not sock 
rate-payers. And then we cannot forget about the contributions 
from methane from abandoned oil and gas wells, which, as you 
know, some estimates say that several hundred thousand of them 
are scattered across the State. We need to find a viable way to 
get those things plugged.
    Senator Casey. Thanks very much.
    Senator Crapo. Next is Senator Young. Is he back? Senator 
Young, are you here?
    [No response.]
    Senator Crapo. I see Senator Warner----
    Senator Warner. Yes; thank you, Senator Crapo, and my 
apologies to Senator Young. Thanks for this hearing. I am going 
to have a couple of questions for Mr. Walsh.
    Here in Virginia, we are taking bold steps to modernize our 
energy economy, particularly through the development of 
offshore wind. The Commonwealth is currently in the midst of 
developing a 2.6-gigawatt commercial offshore wind project in 
Federal waters. And that will be the first in Federal waters. 
It will be, when fully operational, capable of providing clean 
renewable energy to about 650,000 homes. As I mentioned, it is 
currently the largest project in Federal waters.
    The Global Wind Energy Council has said that the outlook 
for wind energy is going to ramp up exponentially. As a matter 
of fact, it is looking at 13,000 megawatts in 2024, and over 
20,000 megawatts in 2025. All this is good news. But that also 
means there is more competition for capital. There is going to 
be a lot more focus here.
    Mr. Walsh, what can this committee and the administration 
do to make sure that the United States is more successful in 
both attracting domestic and international capital? And how can 
we make sure that we maintain that supply chain?
    One of the things we are trying to do in Virginia is make 
sure that some of those wind turbines are actually made in 
Virginia, as they will help produce wind for Virginians and 
others. But can you help address that question around supply 
chain? And since Senator Crapo did not mute himself and is 
over-talking, I am going to probably get an extra 30 seconds or 
so out of that.
    Senator Crapo. Thanks for letting me know, Mark. I will 
mute myself.
    Senator Warner. Mr. Walsh, can you take that question on 
the supply chain and wind?
    Mr. Walsh. Yes. Thank you for the question, Senator. We 
agree with you that the economic potential of offshore wind is 
truly dramatic. And we have a great example from the first 
grid-connected offshore wind farm in this country, in Block 
Island off of Rhode Island, of how unionized craftspeople from 
a whole set of building trades under a project labor agreement 
built that wind farm.
    The only place where it fell short--and this gets to your 
question--is in the materials and the technologies that were 
actually used for the wind turbines. The nacelles came from 
France. The towers came from Spain. And the blades came from 
Denmark.
    We can do better than that. One of the ways to do that is 
to include domestic content incentives or requirements in our 
offshore wind production tax credit. Another way to do that is 
on the supply side, because to make the kind of components for 
offshore wind that are going to be necessary, size and scale 
are enormously important. There are going to be big capital 
expenditures going into that, for example, to make one of those 
blades by domestic manufacturers. And we think we are going to 
need some supply-side help for U.S. manufacturers to actually 
become competitive in what will be an enormously important 
economic opportunity.
    You have seen the data that we have. The National Renewable 
Energy Laboratory estimates that the Atlantic coast States 
could create roughly $200 billion in new economic 
opportunities.
    So we want to make sure that we capture those benefits, not 
just on the installation and operation and maintenance--those 
are important--but also in the manufacturing supply chain as 
well.
    Senator Warner. Well, as we get into that, one of the 
things that we need to guarantee is that there is going to be 
that domestic demand. And as you may be aware, we got approved 
in Virginia, but there are a lot of other offshore projects 
stacking up in terms of getting through the approval process. 
We want to make sure these are all environmentally sound, but 
if we do not have a faster approval process, we do not--there 
was so much dismantling done in the previous administration. 
And just the administrative oversight, if we do not get these 
projects approved on a timely basis, we are not going to have 
the kind of guaranteed domestic generation that will then move 
some of those European companies to say, well, you know, we 
need to actually build some of those turbines and blades here 
in the United States.
    In the last 24 seconds, can you speak to that issue of 
getting this approval process speeded up a little bit?
    Mr. Walsh. We completely agree with you. Efficiency and 
transparency in permitting are going to be really important, as 
well as fully attending to environmental mitigation issues. I 
mean, we have had direct conversations with Director Leftin at 
BOEM. I think she shares that vision and is committed to making 
sure that BOEM uses all the resources at its disposal to make 
sure that that permitting is done in an expeditious and 
thorough way.
    As you note, capital expenditures are going to be 
absolutely reliant on that kind of certainty. Otherwise, we are 
not going to see manufacturers and developers and other 
businesses in the value chain make the kind of investments 
necessary to capture this economic opportunity.
    Senator Warner. And that is, again, why I think--I know my 
time has expired--but that is why I think, again, my Republican 
colleagues, this is an area where I think there was agreement 
that we need a faster regulatory review and approval process. 
And BOEM needs the resources to get that done.
    Thank you, Senator Crapo.
    Senator Crapo. Thank you, Senator Warner.
    And I do see Senator Whitehouse. Senator Whitehouse, you 
are next.
    Senator Whitehouse. Thanks, Senator Crapo. I appreciate it. 
And thanks to all the witnesses.
    Since Mark raised the question of BOEM, let me just flag 
that one of the reasons Rhode Island got steel in the water and 
electrons on the grid first is because we did two very smart 
things that had not been done before. One was, we got a very 
robust data plan together so that everybody knew who was doing 
what in the waters where the siting was to take place. And the 
second was, we front-loaded the use conflicts, and we got those 
resolved, or minimized, at the very get-go. And BOEM, despite 
that, has not learned that lesson yet.
    And so, Mr. Walsh, I would urge you, and Mark, and 
everybody else, to join me in pushing that BOEM require 
applicants, when they come in with these projects, to have done 
a conflicting use survey, and report to BOEM what conversations 
they have had with the other users so that you do not end up 
with warfare breaking out between conflicting users that could 
have been headed off, and instead slows things down.
    So I will just flag that issue, because I think we have 
real common cause there.
    Some background on this. You know, I think the fossil fuel 
industry has known for decades about this problem. They have 
had every chance to deal responsibly with the pollution. We 
could have robust technologies in place for dealing with 
carbon, but instead the industry chose to set up front groups, 
and traffic in lies, and attack the real scientists, and use 
immense amounts of dark money to influence politics. In effect, 
they ran a big covert operation against their own country to 
try to prevent the action that we are trying to push for now. 
And I think they need to be held accountable for that, plain 
and simple.
    Moreover, the rest of corporate America--there has been a 
lot of talk about how the rest of corporate America supports a 
lot of what we are talking about, kind of. I mean, they do when 
they are meeting BRT and CLC, but when they come to this 
building, when it is their lobbyists and their trade 
associations, that support has evaporated.
    So please, nobody watching this should think that there is 
effectual corporate support, particularly for carbon pricing, 
in Congress right now. They just are not doing it. And I do not 
know if it is because the CEOs do not know what their posture 
is, or because they want to stick with the trade associations 
who have been so much trouble, but whatever it is, the effect 
is, there is simply no real business pressure for carbon 
pricing at this point.
    And the last point I would make is, you cannot talk about 
natural gas emissions without talking about methane. And 
methane has been a nightmare, and the industry has been very 
sloppy about reporting and has backed away from commitments to 
report. So we have a lot of work to do to get the methane 
problem solved, and I think there are a lot of jobs in solving 
the methane problem.
    So let me turn to just a couple of quick questions. One is 
to Mr. Brill. Mr. Brill, the IMF has put the subsidy for fossil 
fuel in the United States at $600 billion--billion--per year, 
which obviously includes the negative externalities and not 
just the direct subsidies we are addressing today.
    Is that an economically correct way to look at the subsidy 
for fossil fuels, the IMF way?
    Mr. Brill. Well, I would not attribute that subsidy to the 
industry. I would agree that there are negative externalities 
associated with emissions, and that is the reason why a carbon 
tax can help move the economy, the energy economy, away from 
fossil fuels and towards alternative energies and clean 
energies.
    Senator Whitehouse. And you are aware of the IMF report 
that puts the number at $600 billion with----
    Mr. Brill. I have not seen that report.
    Senator Whitehouse. Okay; take a look.
    I think Mr. Sunday, Mr. Brill, and Mr. Walsh, all their 
testimony supported carbon capture and removal. I would love to 
offer Ms. Pope the chance to make it unanimous. And I would 
note that it is hard to get much carbon capture and removal 
going if just dumping it into the atmosphere is free. There is 
not much of a revenue proposition for carbon capture and 
removal until there is a price on emissions. And so I think 
those of us who support carbon capture and removal as an 
essential way to safety in all of this need to think about it 
in those terms.
    Mr. Brill, would you agree with that? And, Ms. Pope, how do 
you feel about carbon capture and removal?
    Mr. Brill. I would agree, yes.
    Senator Whitehouse. Ms. Pope?
    Ms. Pope. And, Senator, yes, we would agree. We also 
believe that we need to have a combination of policies.
    Senator Whitehouse. Yes, there is no single--it is silver 
buckshot, not silver bullet, I think is the way to describe it.
    Lastly, Mr. Brill, you talk about making progress globally. 
With a price on carbon, that would be consistent with global 
progress, you say, but it would also facilitate global progress 
through border adjustments, because nothing is easier to 
reconcile in a border adjustment than international prices on 
carbon. Isn't that true?
    Mr. Brill. I'm sorry? I do not understand the question, 
Senator.
    Senator Whitehouse. Like if different countries have 
completely different regulatory systems for regulating carbon 
emissions, that makes it hard to figure out, at the border, who 
should pay what. But if one country has $100 per ton and the 
other has $50 per ton, figuring out what the border adjustment 
should be gets a lot easier.
    Mr. Brill. Absolutely. Many of our regulatory policies are 
not and cannot be border-adjusted, but a carbon tax can be 
border-
adjusted. And your point is absolutely correct.
    Senator Whitehouse. And that is how you get to global 
progress. Thank you very much, everybody. Great hearing. Much 
appreciated.
    Senator Crapo. Thank you, Senator Whitehouse.
    Next is Senator Young. Is Senator Young back?
    [No response.]
    Senator Crapo. I will just explain to the witnesses. We 
have a series of votes going on, so members are having a hard 
time getting back.
    I see the chairman is back now.
    Senator Young is next, and then I will turn the gavel back 
over to the chairman.
    The Chairman. Thank you, Senator Crapo, and there is a vote 
on.
    Senator Young?
    Senator Young. I am headed to vote. Thank you, Mr. 
Chairman. Very well-engineered and choreographed.
    Well, I thank our witnesses for joining us today. And it is 
really important we hold this hearing today, so I commend the 
chairman for doing that.
    Despite being considered a promising carbon alternative for 
years now, hydrogen has not seen national investment like other 
nationally important renewable energy sources. In the meantime, 
innovators have been expanding the uses of hydrogen, while 
global investors have directed over $100 billion toward 
hydrogen infrastructure.
    To ensure that the United States is rightly leveraging this 
resource, last week I reintroduced a piece of legislation, the 
Hydrogen Sustainability and Utilization Act, along with Senator 
Whitehouse. The bill would incentivize investment in hydrogen 
energy infrastructure by adding hydrogen to the list of 
renewables that qualify for the renewable electricity 
production tax credit.
    Mr. Walsh, it is estimated that the growth of hydrogen 
infrastructure could generate 700,000 jobs in the next 10 
years. Now, as we look forward to rebounding from the economic 
impact of this global pandemic, do you believe that hydrogen is 
a worthy Federal investment?
    Mr. Walsh. Thank you for the question, Senator Young. 
Hydrogen is, I think, enormously important as an energy 
carrier. It is also extremely intriguing for a number of other 
reasons. I will just cite steelmaking, given the State that you 
represent. Hydrogen is actually being used as a reductant--not 
in this country, because we do not have a policy regime in 
place to actually support that--but as a reductant for 
steelmaking over in Europe right now.
    So there are a number of really interesting uses for 
hydrogen. I think it is particularly interesting to look at 
ways in which we can produce free hydrogen, using renewable 
energy sources that are otherwise curtailed in off-demand 
cycles to create the hydrogen in clean ways.
    So I think this is an issue that we would be very 
interested in talking with you further about. The other benefit 
of hydrogen, of course, is that it allows us to use some of our 
existing infrastructure in lower-carbon, or even zero-carbon 
ways, if done right. And I think that is another benefit that 
we need to look at as well. There is a set of safety and co-
pollutant issues associated with hydrogen that I think need to 
be looked at very, very carefully, but I know that is something 
that you would welcome looking at as well.
    Senator Young. You are correct, sir. Thank you for your 
fulsome response.
    We will leave behind the hydrogen for a moment, and I will 
pivot to another topic, which is renewable energy incentives. 
And I am looking for the time clock here. Okay. This is always 
a challenge when we are remotely asking questions, so I want to 
be sensitive to that.
    Renewable energy incentives, particularly within the tax 
code, often have unintended consequences. For example, nearly 
two-thirds of solar panel production occurs in China, with many 
more companies sourcing inputs from Communist China.
    With an expansion of demand for more solar panel 
installation, this means that Americans will have to rely on 
Chinese manufacturing in order to increase utilization of solar 
energy.
    Of course, reshoring solar panel manufacturing is one 
option, but it will be very capital-intensive and time-
consuming. The disadvantages of relying on China for the supply 
chain are multi-fold. Let me just move forward to some 
questions for Mr. Brill.
    Mr. Brill, to what extent should we be concerned about the 
level of dependence on China in our renewable energy supply 
chains? And what is the role of the Federal Government in 
supporting domestic reshoring without causing even more market 
disruptions?
    Mr. Brill. Thank you, Senator Young, for your question. I 
think it is important that the United States has a diversified 
supply chain with respect to renewable energy. And so to the 
extent that--that does not necessarily mean that all of our 
renewable energy needs to be manufactured here in the United 
States, but to the extent that we are relying on a single 
country, and particularly a country with which we have an 
adverse relationship, that does put at risk that supply chain.
    Bringing some of that manufacturing onshore or ensuring 
that other countries are capable and active in the production 
of solar panels or other technologies, I think, is to our 
advantage.
    Senator Young. Yes, sir. Well, thank you for the concise 
response. I just add, as I pass it back to the chairman, that I 
think the Federal Government should examine the effects of 
increasing our dependence on China before launching a sweeping 
policy to further incentivize the use of renewable energy 
sources.
    The Chairman. I thank my colleague. And I also want to note 
that his interest in hydrogen is well-taken. And hydrogen would 
get the same kind of treatment as wind and solar with respect 
to this effort to reduce emissions. And I thank my colleague.
    Senator Cortez Masto?
    Senator Cortez Masto. Thank you, Mr. Chairman. And thank 
you to the panel members. This is a great discussion. I am one 
who believes we have to invest in building and modernizing our 
infrastructure to meet the demands of tomorrow with the 21st-
century technology. And I think it is going to be key. 
Otherwise, we are going to be left behind.
    I want to talk a little bit about the EV infrastructure. 
And I apologize if this question has already been asked. I know 
I have had other hearings and had to go vote, but let me just 
say I am very proud of Nevada. It is leading the way in 
electric vehicle innovation production, and I am proud to 
support that, first by joining my colleagues in signing on to 
the Securing America's Clean Fuels Infrastructure Act to 
provide incentives to support building the infrastructure that 
is necessary to support Americans as they move toward electric 
vehicles. I even have some bills that focus on incentivizing 
that new modern technology.
    But, Ms. Pope, let me start with you. How can bills like 
these, and the Clean Energy for America Act, support the growth 
of EV infrastructure to make drivers' commutes cleaner and more 
fuel-
efficient, while also driving our global economic 
competitiveness?
    Ms. Pope. Thank you. There are three main areas that would 
make a significant difference. The first is charging 
infrastructure, making sure that all participants can 
participate in building out charging infrastructure.
    The second is overall utility infrastructure, what the 
industry tends to call ``make ready,'' and that is ensuring 
that we have the right equipment in the distribution system all 
the way to the charging area.
    And then the third is really around clean energy and being 
able to charge the vehicles when the wind is blowing and the 
sun is shining, to make sure that we are maximizing the use of 
renewables.
    We can also then begin to use the batteries in the vehicles 
to return energy back to the grid for stability. So the 
benefits to the transportation sector also accrue to the 
utility customers overall in making a stronger, more resilient 
grid.
    Portland General just launched a partnership with Daimler 
North America on an electric island charging area for--and 
Senator Cantwell will appreciate this--for heavy-duty trucks, 
medium-duty trucks, buses for our local transit authority, as 
well school buses. And that was done just last week, and there 
is tremendous growth in this area. So thank you.
    Senator Cortez Masto. Well, thank you. And I see that in my 
own State. Most people do not even know where Lovelock, NV is. 
But I'll tell you what, if you have an electric vehicle and you 
are traveling across Interstate 80, you know Lovelock, NV, 
because there is a charging station there.
    And I think it is so important that we make these 
investments now in the infrastructure that is necessary to 
utilize the technology that is going to bring us to a cleaner 
environment as well.
    Let me ask this: future investments in our transmission 
system must prioritize strategic choices that maximize 
distribution for the consumers and businesses that will rely on 
it.
    So, Ms. Pope, do you have any thoughts on how Congress can 
clearly define and target transmission investments?
    Ms. Pope. Sure. And before I answer your question on 
transmission, I do want to acknowledge that many of the 
batteries that are used across the entire west, in fact across 
the entire country, are manufactured in Nevada. And I have 
visited that facility.
    Senator Cortez Masto. Thank you. Thank you for highlighting 
that. We are very proud. And that is what I say: Nevada is 
primed with its innovation on this new technology really to 
create jobs, lead in this technological age, and contribute 
economically and reduce our carbon footprint. I am very proud 
of all of the work everyone in Nevada has done here, including 
the private sector that has been instrumental in this 
innovation space.
    But, please, go ahead.
    Ms. Pope. And with regard to transmission, as we look at 
the lowest-cost resources that are renewable, generally they 
are very large and they are away from the areas where most 
electricity is used in urban centers and whatnot. So 
transmission is absolutely critical. And as you know, across 
the west and across the rest of the country, we have not kept 
up with our transmission investments.
    As we change our sources of electricity, it will be 
important that we also invest in transmission to deliver it. 
And so whether that is, to take an example, a transformation 
within many States in the west, including Montana, there will 
need to be additional transmission built, but we can also 
leverage existing transmission. And some of the transmission 
projects in Nevada are particularly important in terms of 
stability of the grid. So, thank you.
    Senator Cortez Masto. Thank you. I know my time is up. 
Thank you, Mr. Chairman. Thank you to the panelists.
    The Chairman. Thank you, Senator Cortez Masto.
    Senator Hassan?
    Senator Hassan. Well, thank you, Mr. Chair and Ranking 
Member Crapo, for holding this hearing. And thank you to our 
witnesses for testifying today.
    I wanted to start with a question to you, Ms. Pope. The 
year-end relief package contained my bipartisan bill to 
increase access to capital for residential and commercial 
energy storage projects. I am also a supporter of bipartisan 
efforts led by Senator Heinrich and others to strengthen tax 
incentives for energy storage.
    Ms. Pope, how do battery storage incentives help improve 
the reliability of the electrical grid and cut costs for 
consumers?
    Ms. Pope. Thank you, Senator Hassan. Battery storage is an 
absolutely critical component to the future of the reliability 
of our systems, both connected with the generation by 
renewables, as well as for reliability of the distribution 
system when connected with substations, as well as in 
individual homes for reliability and resilience. And if you 
look at the grid of the future, we will be able to store solar 
and wind energy for use during times when the wind is not 
blowing and the sun is not shining, and be able to have truly a 
bi-directional integrated, much more reliable grid.
    For example, Portland General Electric, together with 
NextEra Energy Resources, just brought online the wind portion 
of the 
largest-scale solar/wind/battery storage facility in eastern 
Oregon. And what that does--to the prior discussion on 
transmission--is it allows us to utilize better the 
transmission that goes across the State on more of a 24/7 basis 
when you otherwise would not be generating, because that 
storage has been able to store the solar. And in the future, 
with Chairman Wyden's bill, we would also be able to store the 
wind. So it is a very, very important component as we move 
forward, and technology is moving very quickly.
    Senator Hassan. Thank you for that answer.
    I want to move now to Jason Walsh. Mr. Walsh, I have 
introduced bipartisan, bicameral legislation, along with 
Senator Collins, to modernize and expand energy efficiency tax 
incentives.
    The energy efficiency sector is one of the largest clean 
energy employers, with millions of workers spread out across 
every State. Our bills would expand tax credits for homeowners 
who upgrade appliances, and improve incentives for building new 
energy efficient homes.
    Can you comment on how promoting energy efficiency can 
simultaneously create high-quality jobs, reduce homeowners' 
energy bills, and help fight climate change?
    Mr. Walsh. Thank you for the question, Senator.
    Well, you are right. It does all of those things. It is a 
triple win. The only thing I would add to the very useful way 
you framed the question, which I completely agree with, is 
that, if you look at the U.S. energy employment report, energy 
efficiency jobs are the biggest source of clean energy economy 
jobs in our entire economy.
    There is a ton of good building trades work in particular 
that is done on energy efficiency, as we move to more fully 
deploy energy efficiency resources across the country and 
across the economy in multiple sectors. The job growth 
potential is really significant. We obviously care a lot about 
the quality of those jobs and access to those jobs. But energy 
efficiency is enormously important, and I am really glad you 
asked the question and are such a champion on energy efficiency 
issues.
    Senator Hassan. Thank you very much. I have another 
question.
    I have additional legislation, the Net Meter Act, that 
would support the renewable energy market by helping States 
expand net metering programs. Net metering allows consumers and 
businesses to reduce their electric bills by compensating them 
for renewable energy that they produce and return to the grid.
    So, Mr. Walsh, can net metering complement our efforts to 
fight climate change by strengthening solar and wind tax 
incentives?
    Mr. Walsh. I think it can, Senator. We have done 
comparatively little work on net metering, but on the 
legislation you mentioned, we would be happy to talk with you 
further and work with you further on that.
    Senator Hassan. Thank you very much.
    The last question is to you, Mr. Walsh. The tax code 
currently hands numerous special tax giveaways to big oil, 
including special deductions for oil drilling.
    How do these special tax giveaways for big oil hurt our 
efforts to combat climate change, including good-paying clean 
energy jobs?
    Mr. Walsh. Senator, we do not take a position on those tax 
credits. We are much more focused on the affirmative tax 
credits that can be made, that invest in energy efficiency and 
new renewable energy generation, and doing so in an equitable 
way.
    Senator Hassan. Well, I thank you for your care with that 
answer. I suggest that those tax credits should be eliminated 
as we transfer to clean energy tax incentives. Thank you.
    Mr. Walsh. Thank you.
    The Chairman. Thank you, Senator Hassan.
    Senator Barrasso?
    Senator Barrasso. Well, thanks so much, Mr. Chairman, and I 
appreciate you taking the time to hold the hearing and involve 
so many of us.
    America is energy-independent right now. Our Nation reached 
that goal through the hard work of hundreds of thousands of 
American workers. Securing energy independence provides all 
Americans with a safer and stronger future. That is why I am 
baffled, really baffled, by the efforts of President Biden and 
his supporters in Congress to destroy entire industries in 
America, and to force tens of thousands of America's fossil 
fuel energy workers into the ranks of the unemployed.
    I continually hear the administration tell oil rig workers, 
coal miners, pipeline workers, that they can simply get new 
jobs building solar panels. Shortly after President Biden took 
office, John Kerry said the Biden administration policies will 
give these workers, in his words, better choices.
    In 2019, the average salary of solar panel technicians was 
about $30,000 a year less--$30,000 a year less--than the 
average salary of workers in oil, gas, coal, in all those 
industries. That is even if these green jobs even exist.
    To that point, The Washington Post fact checker took a look 
at what John Kerry had said. They said he was offering--Kerry 
and the administration were offering false hope with a 
misleading use of statistics.
    America needs all of the energy. We need the solar. We need 
the wind. We need the oil. We need the gas. We need the coal. 
We need the uranium for nuclear power. We need it all. And the 
demands for energy in this country are going to continue to 
increase.
    Choosing to use the tax code to intentionally destroy 
America's fossil fuel industry, to hurt our economy, to force 
more American workers to lose their jobs, and to strengthen the 
economic power of the government's of China, Venezuela, Iran, 
and Russia, is a path I will not go down.
    Today at the Energy Committee hearing, where I am the 
ranking member, Joe Manchin and I were talking with those 
people who were there to testify. Senator Murkowski from Alaska 
said that right now Russia is providing more energy to the 
United States than is Alaska. What is that going to make 
Americans feel if they hear that that is a result of the Biden 
administration?
    So for me the choice is easy. I am going to continue to be 
on the side of, and support America's fossil energy workers, 
their families, their communities, all of the things related to 
it.
    So a question for Mr. Sunday. Following up with Senator 
Lankford's question to you, Chairman Wyden's tax proposal 
released last week includes several provisions I think are 
harmful, that are going to raise costs for businesses and for 
consumers. The provisions threaten the jobs of tens of 
thousands of American workers.
    One of these provisions is the elimination of the 
percentage depletion allowance for oil and gas and coal 
operations. The allowance has been in the tax code since 1926. 
The percentage depletion allowance is available to businesses 
engaged in extraction operations. That is sand, gravel, 
granite, marble, coal, borax, sulfur, gold, copper, silver, and 
oil and gas. But for oil and gas operators, the allowance is 
available to the smallest, usually family-owned oil and gas 
companies that usually employ anywhere from 10 to 15 workers.
    Large integrated companies cannot claim the deduction. And 
a producer can only claim the allowance for the first 1,000 
barrels of oil or gas equivalent produced a day. So you can 
take a look in comparison of the big oil companies that can 
produce 370 net oil barrels a day.
    What people do not often realize is that the royalty owner 
can also claim the percentage depletion allowance on their tax 
return. Well, the owners are a diverse group, from the 
professional investor, to a retiree, a rancher, farmer, people 
who receive some little extra income each month to help with 
ongoing bills. Often, but not always, the payments are small.
    So I was talking to a royalty owner who mentioned his most 
recent oil royalty payment for production on land that he owned 
was about $120 for 2 months of royalties--period. He does not 
take advantage of the percentage deduction allowance, but 
eliminating the allowance will likely result in the well that 
he has had, which has been producing for nearly 40 years, to be 
shut down.
    The royalty payment is going to disappear. No question, 
American workers are going to lose their jobs. So the question 
is, what in your opinion will the economic impact be of 
eliminating the percentage depletion allowance, particularly as 
it affects your independent producers, as well as individual 
royalty owners?
    Mr. Sunday. Thank you. And in the commodities space, we are 
talking percentage of the depletion. Everywhere else it is 
expensing and depreciation, and we have bipartisan support for 
that. So this is not special in the oil and gas industry, it is 
just different terminology.
    Making it harder to drill for the commodity that we need to 
sustain our modern economy is just going to raise costs on 
households and consumers, and leave local governments with 
fewer revenues for things like conservation in Pennsylvania. 
There are billions of dollars that come into State government 
because of energy development, and the less we drill, the less 
we are going to have that type of revenue in the State.
    Senator Barrasso. So with the elimination of this long-time 
business deduction, is it likely to consolidate more control or 
less control of oil and gas markets into the hands of the 
large, integrated oil and gas companies?
    Mr. Sunday. I think it is fair to say you would see 
continued pressure on the independents.
    Senator Barrasso. And in the long run, if an industry 
consolidates into only a handful of companies, what is the 
economic impact for consumers?
    Mr. Sunday. I would venture to say they would lose out in 
that situation, sir.
    Senator Barrasso. Mr. Chairman, I assume my time is about 
up. I do not really see a clock on the screen.
    The Chairman. Yes. Does my colleague have anything else he 
wanted to talk about? Your time is up.
    Senator Barrasso. If my time is up, no; thank you, Mr. 
Chairman.
    The Chairman. Okay.
    So 2\1/2\ hours into the hearing, I want to close with what 
I believe is the clean energy lodestar for our times: a job-
creating, free-
market competition to get to net-zero carbon emissions.
    Now, over the last nearly 3 hours, Senators asked about 
natural gas, coal, nuclear, conservation, hydrogen, the list 
goes on and on. And as we wrap up, I want to make it clear that 
all of those sources, when they capture emissions, fully 
capture emissions, they would qualify just as wind and solar do 
under my legislation.
    In my view, that makes sense for the times, even though to 
pick up on Senator Barrasso's last comments, nobody would have 
contemplated something like this as necessary way back in 1926.
    Now, committee members have brought up a number of areas 
where they have interests. I think that they are compatible 
with the legislation that I have authored, and I would just 
wrap up by way of saying that writing legislation is about 
bringing Senators together. We are going to do everything we 
possibly can to do that. But what is non-negotiable is just 
saying that this can wait, because that is something, given 
what scientists are saying, our country cannot afford.
    So I want to thank all our guests. A special commendation 
to Ms. Pope, because not only was it very helpful to have her 
testimony, but she got up before all of us in order to be here, 
and we thank her for it, because she is home in Oregon.
    And my final comment is just to remind Senators they have 1 
week to submit questions for our witnesses. With that, the 
Senate Finance Committee is adjourned. And I thank all of our 
guests.
    [Whereupon, at 12:34 p.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


          Prepared Statement of Alex Brill, Resident Fellow, 
                     American Enterprise Institute
    Chairman Wyden, Ranking Member Crapo, and members of the committee, 
my name is Alex Brill, and I am a resident fellow at the American 
Enterprise Institute, a public policy think tank here in Washington, 
DC. Thank you for the opportunity to testify about the tax code's role 
in our country's pursuit of clean energy. The views and opinions I 
offer today are mine alone and do not represent those of my employer or 
necessarily those of my colleagues at AEI.
                              introduction
    Today's hearing addresses a timely and important topic: the tax 
treatment of energy. A broad, efficient, technology-neutral tax policy 
geared toward encouraging less energy consumption and more renewable 
energy production is critical to ensuring a reduction in CO2 
emissions. The US tax code has long encouraged the use of clean and 
renewable energy, as well as energy conservation and efficiency, with 
policies dating back to the Energy Tax Act of 1978. Unfortunately, a 
scattershot approach to tax policy aimed at reducing U.S., reliance on 
fossil fuels--whether in pursuit of energy independence or to address 
concerns about climate change--has led to a complex and convoluted tax 
code.

    Over the years, Congress has enacted dozens of deductions, credits, 
exclusions, and other favorable tax policies to incentivize a broad 
array of renewable energies (wind, solar, geothermal, biomass, etc.); 
structural efficiency technologies (residential energy efficiency 
upgrades, commercial energy efficiency investments, etc.); and low-
carbon transportation (plug-in vehicles, electric motorcycles, 
alternative fuels, vehicle refueling facilities, etc.). In some cases, 
policies encourage additional investment in existing technologies, 
foster demand for and broader adoption of clean energy, and incentivize 
research and development. In other cases, policies may be little more 
than windfall gains for manufacturers of existing products.

    As Congress considers the role of tax policy in addressing our 
climate challenges, I encourage members to consider options that 
simplify the tax code with respect to energy, avoid the economic 
distortion of provisions that are not technology-neutral, and adopt a 
broad-based and fiscally responsible approach.
                          trends in energy use
    In broad terms, the United States is becoming more energy-efficient 
relative to gross domestic product (GDP), and the energy consumed in 
the United States results in significantly less CO2 
emissions per BTU than in the early 2000s. Total energy consumption has 
been relatively constant in the last two decades and CO2 
emissions from the energy sector peaked in the United States in 2007. 
From that year through 2019, the US economy grew 22 percent in real 
terms while the amount of CO2 emitted per unit of energy 
fell more than 14 percent (EIA, 2021). Recent data from the Energy 
Information Administration (EIA) indicate that energy-related 
CO2 emissions in the United States fell an additional 11 
percent in 2020. This was due in part to the pandemic and recession (in 
particular a decline in transportation-
related energy consumption), but in large part to a decline in 
CO2 intensity from less coal and more natural gas and 
renewable energy use (EIA, 2021).

    In addition, from 2007 to 2019, the amount of energy per dollar of 
GDP dropped more than 30 percent, as the service sector grew faster 
than the goods-producing sector (EIA, 2021). In other words, our energy 
sector has become significantly less carbon-intensive, thanks to the 
decreasing share of coal and increasing share of natural gas and 
renewable energies, and the U.S. economy has become less energy-
intensive.

    Figure 1 illustrates these trends. The first panel presents total 
U.S. energy consumption, which fluctuated between approximately 94 and 
101 quadrillion BTUs from 2000 to 2019. The second panel illustrates 
the decline in the carbon intensity of the energy that is consumed in 
the United States, a ratio that was relatively constant through 2007 
but has since steadily declined 14 percent. The third panel presents 
the overall upward trend of the U.S. economy, and the fourth panel 
plots 
energy-related CO2 emissions as a share of GDP. Since 2000, 
the U.S. economy's CO2 emissions dropped from nearly 450 
million metric tons per trillion dollars of GDP to 269 million metric 
tons. Of course, total emissions matter most with regard to climate 
change, but the progress toward lower emissions, relative to near-
constant levels of energy consumption and significant economic growth, 
is noteworthy.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Nevertheless, a much greater reduction in CO2 
emissions is necessary to address the significant risks of climate 
change. Meaningful policy interventions are required to achieve 
additional large-scale carbon emission reductions. Such progress must 
be achieved globally, but a lack of binding commitments from all 
nations does not preclude the U.S. from adopting sensible, market-based 
policies domestically.

    President Biden recently announced an emissions reduction target of 
50 percent of 2005 economy-wide greenhouse gas pollution levels by 2030 
(White House, 2021). This is a significant goal, as the Energy 
Department's current baseline forecast for energy-related 
CO2 emissions in 2030 changes little from current levels 
(EIA, 2021). Even less ambitious reductions will require significant 
changes in the carbon intensity of the energy consumed and the quantity 
of energy consumed in the United States.

    For perspective, in 2019, energy-related CO2 emissions 
accounted for 78 percent of total U.S. greenhouse gas emissions (EPA, 
2021). Figure 2 reports CO2 emissions from the energy sector 
since 2005 and shows that total emissions have declined 14.5 percent 
from 2005 through 2019. Figure 2 also presents the baseline forecast 
from the Department of Energy's Annual Economic Outlook along with the 
level equivalent to a 50 percent reduction in energy-related 
CO2 emissions relative to 2005.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


              the case for targeted energy tax policy
    Policy interventions to encourage market-based reductions in carbon 
emissions are justified by the lack of price signals associated with 
the societal cost of these emissions. Private transactions between 
buyers and sellers of carbon-intensive products fail to incorporate the 
negative externalities associated with emissions of CO2 into 
the atmosphere. Instead, the cost of CO2 emissions is borne 
by society as a whole, including both current and future generations.

    This negative externality is becoming increasingly obvious. Beyond 
the increase in sea level, extreme weather (intensity and frequency), 
and environmental damage, the consequences of climate change can be 
measured in economic terms. Recent research published by the 
Congressional Budget Office (CBO, 2020) estimates that, absent 
meaningful intervention, climate change will cause output in the United 
States to be 1 percent lower in 2050 and in every year after. As I 
recently noted, policymakers need to understand that the cost of 
inaction on climate change is nowhere close to zero (Brill, 2021).

    Tax policies can correct for the negative externality by putting an 
explicit price on CO2 emissions, providing a tax subsidy 
that encourages energy conservation and renewable or low-carbon forms 
of energy, or a combination of both strategies. Tax subsidies can 
reduce the after-tax cost of an investment in a source of renewable 
energy (an investment tax credit) or can be designed to increase the 
price received for the sale of clean energy (a production tax credit). 
Moreover, tax subsidies can serve to bolster nascent technologies 
seeking to achieve production cost efficiencies through scale. For 
example, there have been extremely valuable and important technological 
advances in wind and solar energy. The average prices of solar and wind 
energy have tumbled over the last decade, and markets have responded 
with significant increases in demand for these renewable forms of 
energy. Tax credits further lower the cost of these technologies and 
positively contribute to their adoption (Mai, 2016). However, there are 
downsides to energy tax subsidies that should be noted.
                   drawbacks of energy tax subsidies

    The tax code includes a wide array of tax incentives to encourage 
clean energy, energy efficiency, or energy conservation. Broadly 
speaking, these policies can be grouped in the following categories:

        Production tax credits for renewable energy.
        Production credits for alternative fuels.
        Investment tax credits for renewable production capacity.
        Tax credits for energy-related residential property 
investments such as renewable energy generation and energy-efficient 
upgrades.
        Alternative fuel vehicles and refueling properties.
        Other provisions, including accelerated depreciation for 
certain energy-related properties and pollution control facilities; tax 
credit bonds for renewable energy; an energy research tax credit; and a 
carbon sequestration tax credit.

    Table 1 provides a summary of these provisions that are considered 
tax expenditures by the Joint Committee on Taxation (JCT, 2020).

   Table 1. Clean Energy Related Federal PTax Expenditures by Category
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Production tax credits for renewable energy
------------------------------------------------------------------------
    Credits for electricity production from renewable resources (sec.
     45)
        - Wind
        - Geothermal
        - Qualified hydropower
        - Small irrigation power
        - Municipal solid waste
        - Open-loop biomass
------------------------------------------------------------------------
    Credit for electricity production from closed-loop biomass
     facilities (sec. 45(d)(2))
------------------------------------------------------------------------
Production tax credits for alternative fuels
------------------------------------------------------------------------
    Credit for second-generation biofuel production (sec. 40(a)(4))
    Credit for biodiesel and renewable diesel fuel (sec. 40A)
    Credit for producing fuels from a nonconventional source (sec. 45K)
------------------------------------------------------------------------
Investment tax credits for renewable production capacity
------------------------------------------------------------------------
    Energy credit (sec. 48)
        - Solar
        - Geothermal Fuel Cells
        - Microturbines
        - Combined heat and power
        - Small wind
        - Geothermal heat pump systems
------------------------------------------------------------------------
Tax credits for energy-related residential property investments
------------------------------------------------------------------------
    Credit for nonbusiness energy property (sec. 25C)
    Residential energy-efficient property credit (sec. 25D)
    Credit for construction of energy-efficient new homes (sec. 45L)
    Credit for investment in advanced energy property (sec. 48C)
------------------------------------------------------------------------
Alternative fuel vehicles and refueling properties
------------------------------------------------------------------------
    Credit for plug-in electric vehicles (sec. 30)
    Credit for fuel cell vehicles (alternative motor vehicle credit)
     (sec. 30B)
    Credit for alternative fuel vehicle refueling property (sec. 30C)
    Credit for electric motorcycles (sec. 30D)
------------------------------------------------------------------------
Other clean energy-related tax provisions
------------------------------------------------------------------------
    Credit for carbon dioxide sequestration (sec. 45Q)
    Credit for holders of clean renewable energy bonds (sec. 54)
    Credit for holders of qualified energy conservation bonds (sec. 54A)
    Exclusion of energy conservation subsidies provided by public
     utilities (sec. 136)
    Exclusion of interest on State and local government qualified
     private activity bonds for energy production facilities (sec. 141)
    Exclusion of interest on State and local qualified private activity
     bonds for green buildings and sustainable design projects (sec.
     142(a)(14))
    Energy efficient commercial buildings deduction (sec. 179D)
------------------------------------------------------------------------
Source: Joint Committee on Taxation JCX-23-20, November 5, 2020.


    From a budget perspective, many of the existing tax policies are 
small, sometimes because their value is limited (for example, a 10-
percent credit not to exceed $500 per taxpayer for residential window 
upgrades) and sometimes because the utilization of the policy is low 
(for example, a cellulosic biofuel producer credit). However, the 
aggregate cost of tax subsidies for clean energy is significant. Based 
on estimates provided by the Joint Committee on Taxation, the tax 
expenditures for clean or renewable energy or energy efficiency 
policies will exceed $60 billion during the period 2020-2024 (see Table 
2). The largest renewable energy tax provisions are the Energy 
Investment Tax Credit, and the Energy Production Tax Credit. The five-
year tax expenditure for these two provisions is $52.5 billion.


 Table 2. Clean Energy Related Tax Expenditures: 2020-2024 (Billions of
                                Dollars)
------------------------------------------------------------------------
       Tax Expenditure Category           2020      2021      2020-2024
------------------------------------------------------------------------
Renewables                                $13.2     $12.6         $56.1
------------------------------------------------------------------------
Efficiency                                 $0.7      $0.5          $1.4
------------------------------------------------------------------------
Alternative Tech. Vehicles                 $0.7      $0.6          $3.0
------------------------------------------------------------------------
Total                                     $14.6     $13.7         $60.5
------------------------------------------------------------------------
Source: Data from the Joint Committee on Taxation JCX-23-20, November 5,
  2020.


    The realized cost of these subsidies to the Federal budget could 
grow exponentially if the clean and renewable energy target that 
President Biden has proposed is achieved. This dramatic decline in 
greenhouse gas emissions--a 50-percent reduction relative to 2005 
emissions by 2030--would require a dramatic increase in the utilization 
of renewable energy and electric vehicles, as well as increases in 
energy conservation. The cost of tax subsidies for these activities 
will grow as their adoption grows.

    In addition to the significant cost and the large number of tax 
subsidies, there are other limitations to the subsidy approach. The 
Treasury Department's Inspector General for Tax Administration has 
identified administrative problems with residential energy tax credits 
(sec. 25C and sec 25D) involving both improper claims of the credit and 
incorrect denials (TIGTA, 2011 and 2015). More generally, subsidizing 
energy production will lower the price of electricity and thereby lead 
to an overall increase in demand, which is counterproductive to the 
goal of energy conservation.

    It is difficult (if not impossible) for a subsidy agenda to be 
technology-neutral. Metcalf (2009) illustrates how the hybrid vehicle 
tax credit offers a subsidy that varies from $0 to more than $11 per 
gallon of avoided gasoline consumption based on typical usage 
assumptions and depending on the vehicle purchased. JCT (2016) 
illustrates the complexity in determining the amount of energy saved 
from the credit. Metcalf (2009) demonstrates that the production tax 
credit for wind and geothermal, if measured in terms of subsidy amount 
per ton of CO2 avoided, varies significantly due to the fact 
that geothermal energy likely displaces coal (high in CO2 
per BTU) and wind likely displaces natural gas (lower in CO2 
per BTU). While the production tax credit, determined based on the 
quantity of electricity generation, is the same for both wind and 
geothermal, the subsidy value in terms of CO2 is unequal.

    Finally, many provisions are temporary, which causes uncertainty 
for taxpayers. For example, in 2020, 15 tax provisions were set to 
expire. All but two were renewed, and only one was made permanent (see 
Table 3). This year and in 2022, another 16 energy-related provisions 
are set to expire (JCT, 2021).


Table 3. Energy-Related Tax Provisions Previously Set to Expire December
                                31, 2020
------------------------------------------------------------------------
                   Tax Provision                        Extended Until
------------------------------------------------------------------------
Credit for section 25C Nonbusiness Energy Property           12/31/2021
 (sec. 25C(g))
------------------------------------------------------------------------
Alternative Motor Fuel Vehicle Credit for Qualified          12/31/2021
 Vehicles (sec. 30B(k)(1))
------------------------------------------------------------------------
Credit for Alternative Fuel Vehicle Refueling                12/31/2021
 Property (sec. 30C(g))
------------------------------------------------------------------------
Credit for Two-Wheeled Plug-In Electric Vehicles               1/1/2022
 (sec. 30D(g)(3)(E)(ii))
------------------------------------------------------------------------
Second Generation Biofuel Producer Credit (sec.                1/1/2022
 40(b)(6)(J))
------------------------------------------------------------------------
Energy Production Tax Credit (sec. 45)                         1/1/2022
------------------------------------------------------------------------
Credit for Production of Indian Coal (sec.                   12/31/2021
 45(e)(10)(A))
------------------------------------------------------------------------
Credit for Construction of Energy-Efficient New              12/31/2021
 Homes (sec. 45L(g))
------------------------------------------------------------------------
Special Dep. Allowance for Second Gen. Biofuel                  Expired
 Plant Property (sec. 168(I))
------------------------------------------------------------------------
Energy-Efficient Commercial Building Deduction           Made Permanent
 (sec. 179(D))
------------------------------------------------------------------------
Special Rule to Implement Electric Transmission                 Expired
 Restructuring (sec. 451(k))
------------------------------------------------------------------------
Black Lung Disability Trust Fund: Increase in                12/31/2021
 Amount of Excise Tax on Coal (sec. 4121(e)(2))
------------------------------------------------------------------------
Oil Spill Liability Trust Fund Financing Rate (sec.          12/31/2025
 4611(f)(2))
------------------------------------------------------------------------
Excise Tax Credits and Outlay Payments for                   12/31/2021
 Alternative Fuel (sec. 6426(d)(5), sec.
 6426(e)(6)(C))
------------------------------------------------------------------------
Excise Tax Credits for Alternative Fuel Mixtures             12/31/2021
 (sec. 6426(e)(3))
------------------------------------------------------------------------


    As the Joint Committee on Taxation (JCT, 2016) noted in a report 
prepared for this committee:

        While the government can in theory establish an efficient set 
        of subsidies for the activities it chooses to subsidize, in 
        practice it cannot administratively identify and set up 
        programs to subsidize every conceivable energy-saving practice. 
        Additionally, it is not possible to identify meritorious 
        technologies not yet invented. The government must continue to 
        expand the class of credit-eligible activities if it wishes to 
        minimize the economic distortions that come from favoring 
        certain technologies through tax subsidies over other 
        technologies that prove equally capable of achieving reductions 
        in fossil fuel consumption. Furthermore, the investment in 
        research to develop such new technologies might be constrained 
        by the existence of tax subsidies for current technologies. 
        Investors in such research run the political risk that their 
        newly discovered technologies will not be granted any tax 
        subsidies and may find it difficult to compete with existing 
        subsidized technologies.
  the recent reform proposal introduced by the senate finance chairman
    Chairman Wyden and other lawmakers recently introduced legislation, 
the Clean Energy for America Act, that would consolidate tax incentives 
for renewable energy, transportation, and energy conservation. One 
admirable intent of this legislation is to establish a more technology-
neutral clean energy tax policy. However, as noted above, a fixed rate 
production tax credit may appear neutral but have disparate impacts on 
carbon mitigation.

    Moreover, the new credits proposed in this legislation phase out 
once sector-
specific CO2 emissions decline 25 percent (relative to 
2021). As a recent report by researchers at the University of Maryland 
outlines, a plausible path toward President Biden's emissions target 
would include a 76-percent reduction in CO2 emissions from 
electricity generation and a 40-percent reduction in emissions from 
transportation. Other sectors are likely less adaptable in the coming 
decade (Hultman et al., 2021). Therefore, the clean electricity and 
clean transportation provisions in the Clean Energy for America Act are 
not designed to provide tax incentives during the full transition 
period proclaimed by the administration. An extension and expansion of 
these provisions to align with the targets proposed by President Biden 
would dramatically expand the cost.
 explicitly pricing carbon is the optimal way to reduce co2 
                               emissions
    While tax subsidies for renewable energy production or investment 
can encourage the deployment of more clean energy, these policies--for 
reasons just discussed--are certain to be suboptimal relative to a 
price on carbon, specifically a carbon tax.

    Economists have long agreed that a carbon tax is an efficient and 
effective way to reduce carbon emissions. Prominent economists on the 
left and right--including Ben Bernanke, Alan Greenspan, Martin 
Feldstein, Greg Mankiw, and Glenn Hubbard, as well as Janet Yellen, 
Austan Goolsbee, Jason Furman, Laura Tyson, and Larry Summers--have 
urged the United States to adopt a carbon tax. These views are not new. 
A Wall Street Journal article in 2007 found that a majority of 
economists surveyed believed that a ``tax on fossil fuels would be the 
most economically sound way to encourage alternatives'' (Izzo, 2007). 
One carbon tax proposal has earned endorsement from four former Federal 
Reserve Board chairmen, 28 Nobel Laureates in economics, and 15 former 
chairs of the White House Council of Economic Advisers.

    More recently, the business community has strongly endorsed putting 
a price on carbon. For example, in September 2020, the Business 
Roundtable advocated for a carbon tax, and in January of this year, the 
Chamber of Commerce's position paper on climate change signaled its 
openness to a carbon tax. The American Petroleum Institute and top 
companies in the oil industry have also expressed support.

    A carbon tax is technology-neutral and encourages shifts away from 
carbon-
intensive sources of energy while encouraging energy efficiency and 
conservation, and research and development in new technologies. Many of 
the advantages and design considerations of a carbon tax are considered 
in Brill (2017).

    By imposing a larger burden on coal than on natural gas, a carbon 
tax would support the transition toward greater natural gas utilization 
in the United States and would accelerate the retirement of coal 
plants. Extending and accelerating this trend will further the 
reduction in CO2 emissions in the United States. In 
addition, by imposing a larger burden on natural gas than on renewable 
energy, a carbon tax would encourage additional investment and 
deployment of energy sources such as wind and solar.

    Unlike tax subsidies targeted toward the production of new 
renewable energy, a carbon tax has the potential to impact energy 
demand generally, thereby further reducing CO2 emissions 
over time. A carbon tax would increase the rate of return on energy-
efficient upgrades; encourage the utilization of more fuel- efficient 
vehicles; reduce miles traveled; and drive many small and modest 
adjustments in choices made by consumers, manufacturers, and others on 
their energy consumption. While the price elasticity for electricity 
demand is small in the short run, recent evidence suggests that it is 
quite high in the long run (Burke and Abayasekara, 2018). The 
significance of this result is that a durable carbon tax has the 
potential to significantly reduce energy demand in the period after 
2030, a contrast to policies targeting wind and solar energy deployment 
within the current decade.

    A carbon tax would, depending on the rate set, raise significant 
amounts of new Federal tax revenues. While tax increases may not be a 
desirable outcome to conservatives committed to limited government, a 
carbon tax should be recognized as an opportunity to reduce other more 
distortionary taxes, or as a substitute to alternative taxes that are 
more economically damaging. For example, a carbon tax is certainly 
superior to an increase in the corporate tax rate.

    A $15/ton carbon tax that increases 6 percent annually would raise 
a similar amount of revenue as President Biden's proposal to raise the 
corporate tax rate to 28 percent. A $35/ton carbon tax could raise as 
much as President Biden's entire business tax agenda.

    President Biden's proposed corporate rate hike would put the United 
States first among all OECD nations with respect to the average 
combined State and Federal corporate tax rate (Bunn et al., 2021). It 
would also raise the cost of capital for corporations and increase the 
tax distortion between debt and equity financing (Pomerleau, 2020). A 
carbon tax would have none of these negative consequences but would 
have positive effects on carbon emissions, energy conservation, and the 
transition to a clean energy economy. York (2021) estimates the 
economic advantage of a $25/ton carbon tax versus a 28 percent 
corporate tax rate.
                               conclusion
    The tax code is a well-suited instrument for policy-makers pursuing 
market-based strategies to shift energy consumption in the United 
States toward clean and renewable fuels. This objective is laudable 
given the costs and risks associated with climate change. In theory, 
renewable energy consumption can be encouraged with either a tax on 
carbon or a tax subsidy on items or activities that are alternatives to 
fossil fuels. To date, the United States has pursued the latter 
approach and enacted dozens of targeted tax credits and other tax 
subsidies intended to favor particular types of renewable energy and 
specific energy conservation investments.

    However, as a practical matter, a carbon tax proves far superior. 
Subsidies are difficult to construct in an efficient, technology-
neutral manner when the objective is to displace CO2 
emissions from existing energy forms. Subsidies can be fraught with 
complexity, and the temporary nature of most clean energy tax 
provisions creates costly uncertainty. In contrast, a carbon tax offers 
a broad, efficient, and 
technology-neutral approach to encouraging wider adoption of existing 
clean energy sources. It also incentivizes research into new 
technologies and encourages consumers of energy, whether they be 
households or businesses, to adopt energy-
efficient choices. Finally, a carbon tax is a far superior policy when 
compared to President Biden's business tax agenda, which includes 
increasing the corporate tax, increasing the tax on foreign income, and 
establishing a new alternative minimum tax on certain large businesses.

References

Brill, Alex. 2017. Carbon Tax Policy: A Conservative Dialogue on Pro-
            Growth Opportunities.

Brill, Alex. 2021. ``There Are Costs for Climate Change Whether Leaders 
            Take Action or Not.'' The Hill. https://thehill.com/
            opinion/energy-environment/544507-there-are-costs-for-
            climate-change-whether-we-take-action-or-not.

Bunn, Daniel, et al. 2021. ``President Biden's Infrastructure Plan 
            Raises Taxes on U.S. Production.'' https://
            taxfoundation.org/biden-infrastructure-american-jobs-plan/.

Burke, Paul J., Ashani Abayasekara. 2018. ``The Price Elasticity of 
            Electricity Demand in the United States: A Three-
            Dimensional Analysis.'' The Energy Journal 39 (2): 123-146. 
            https://www.iaee.org/energyjournal/article/3055.

Congressional Budget Office (CBO). 2020. ``CBO's Projection of the 
            Effect of Climate Change on U.S. Economic Output: Working 
            Paper 2020-06.'' https://www.cbo.gov/publication/56505.

Energy Information Administration (EIA). 2021. ``Annual Energy Outlook 
            2021.'' https://www.eia.gov/outlooks/aeo/pdf/
            AEO_Narrative_2021.pdf.

Environmental Protection Agency (EPA). 2021. ``Inventory of U.S. 
            Greenhouse Gas Emissions and Sinks Fast Facts.'' https://
            www.epa.gov/sites/production/files/2021-04/documents/
            fastfacts-1990-2019.pdf.pdf.

Hultman, Nathan, et al. 2021. ``Charting an Ambitious U.S. NDC of 51% 
            Reductions by 2030.'' Center for Global Sustainability 
            Working Paper. https://cgs.umd.edu/sites/default/files/
            2021-03/Working%20Paper_ChartNDC_Feb
            2021.pdf.

Izzo, Phil. 2007. ``Is It Time for a New Tax on Energy?'' The Wall 
            Street Journal, https://www.wsj.com/articles/
            SB117086898234001121.

Joint Committee on Taxation (JCT). 2016. ``Present Law and Analysis of 
            Energy-Related Tax Expenditures.'' https://www.jct.gov/
            publications/2016/jcx-46-16/.

Joint Committee on Taxation (JCT). 2020. ``Estimates of Federal Tax 
            Expenditures for Fiscal Years 2020- 2024.'' https://
            www.jct.gov/publications/2020/jcx-23-20/.

Joint Committee on Taxation (JCT). 2021. ``List of Expiring Federal Tax 
            Provisions 2021-2029.'' https://www.jct.gov/publications/
            2021/jcx-1-21/.

Mai, Trieu, et al. 2016. ``Impacts of Federal Tax Credit Extensions on 
            Renewable Deployment and Power Sector Emissions.'' National 
            Renewable Energy Laboratory. https://www.nrel.gov/docs/
            fy16osti/65571.pdf.

Metcalf, Gilbert E., 2009. ``Tax Policies for Low-Carbon 
            Technologies,'' National Tax Journal, National Tax 
            Association, vol. 62(3), pages 519-33, September.

Pomerleau, Kyle. 2020. ``The Tax Burden on Business Investment Under 
            Joe Biden's Tax Proposals.'' https://www.aei.org/wp-
            content/uploads/2020/09/The-tax-burden-on-business-
            investment-under-Joe-Bidens-tax-proposals.pdf.

Treasury Inspector General for Tax Administration, Processes Were Not 
            Established to Verify Eligibility for Residential Energy 
            Credits, Reference Number: 2011-41-038, April 19, 2011, 
            http://www.treasury.gov/tigta/auditreports/2011reports/
            201141038fr.pdf.

Treasury Inspector General for Tax Administration, Results of the 2015 
            Filing Season, August 31, 2015, https://www.treasury.gov/
            tigta/auditreports/2015
            reports/201540080fr.pdf.

White House. 2021. ``Fact Sheet: President Biden Sets 2030 Greenhouse 
            Gas Pollution Reduction Target Aimed at Creating Good-
            Paying Union Jobs and Securing U.S. Leadership on Clean 
            Energy Technologies.'' https://www.whitehouse.
            gov/briefing-room/statements-releases/2021/04/22/fact-
            sheet-president-biden-sets-2030-greenhouse-gas-pollution-
            reduction-target-aimed-at-creating-good-paying-union-jobs-
            and-securing-u-s-leadership-on-clean-energy-technologies/.

York, Erica. 2019. ``Comparing the Trade-offs of Carbon Taxes and 
            Corporate Income Taxes.'' https://taxfoundation.org/biden-
            carbon-tax-corporate-tax-tradeoffs/.

                                 ______
                                 
            Questions Submitted for the Record to Alex Brill
                 Question Submitted by Hon. Rob Portman
    Question. Concerns have been raised regarding the tax equity 
markets and increased calls for a direct pay option for renewable 
energy credits. Some proposals have been introduced that would provide 
a direct pay option in lieu of tax credits.

    More than a decade ago, in 2009, Congress created such a program, 
called the section 1603 program. The creation of this temporary, $26-
billion section 1603 grant program was part of the American Recovery 
and Reinvestment Act in 2009 and motivated by difficult economic 
conditions and the perceived lack of tax-equity in supporting renewable 
energy projects. The program allowed the Treasury Department to provide 
grants for investments in certain energy production properties in lieu 
of renewable energy tax credits.

    However, the U.S. Treasury Inspector General for Tax Administration 
(TIGTA) outlined serious issues of program integrity, such as companies 
double dipping to receive both the grant and tax credit. As we continue 
to engage in these conversations to further define the role of the tax 
code in helping our country reduce its carbon footprint, program 
integrity must remain a top priority for us.

    Do you think the vulnerabilities such a grant program may have for 
fraud, waste, and abuse limit the effectiveness of its benefits? Do 
program integrity problems, as was demonstrated in the section 1603 
program, have unintended consequences on the development of the broader 
industry?

    Answer. Senator Portman, you are correct that the section 1603 
grant program had significant faults. The December 2013 TIGTA report 
indicates that the majority of taxpayers who had received section 1603 
grants and been inspected by the IRS had compliance issues, including 
the ``double-dipping'' concern you raised.

    As a matter of sound tax policy, any provision intended to promote 
renewable energy should pursue that goal in as neutral and cost-
effective a fashion as possible. Poor administration of a program that 
allows taxpayers to claim both the grant (for which they are eligible) 
and the tax credit (for which they are ineligible if they claim the 
grant) is costly, wasteful, and concerning.

    Programs such as section 1603 should be able to be operated and 
administered by the IRS as intended. However, it is also the case that 
the availability of targeted tax credits and grant programs will lure 
some firms to engage in improper tax activity.

    The alternative policy strategy that I proposed in my testimony--
that is, a carbon tax--does not carry the risk of ``double-dipping'' 
like section 1603 and other tax credits might. Moreover, a carbon tax 
would be cost-effective and technology-neutral.

                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
    Question. I wanted to follow up on our discussion from the hearing 
related to the dangers of relying on China for our renewable energy 
supply chain needs. China has consistently been responsible for unfair 
trade practices like state subsidization, forced data transfer, and IP 
theft. And, as we've most recently seen, a supply chain that is 
completely reliant on Chinese manufacturing is most at risk during 
adverse events, like this global pandemic.

    Should the Federal Government examine the effects on increasing our 
dependency on China before launching a sweeping policy to further 
incentivize the use of renewable energy sources?

    Answer. China is indeed a major supplier of inputs to renewable 
energy production. In addition to the concerns you have raised, I am 
also concerned about the evidence of the use of forced labor in the 
production of solar panel inputs. The U.S. Government should continue 
to examine these issues closely and address concerns with China as they 
arise. Recent actions by the Commerce Department against Hoshine 
Silicon Industry Company and others, for example, are positive steps. 
The targeted banning of imports of polysilicon from Xinjiang will be 
effective in ensuring that renewable energy incentives do not accrue to 
Hoshine and other firms that use forced labor. In my view, broader 
policy action to address the risks of climate change and promote 
renewable energy production in the United States can and should be 
pursued in parallel with efforts to combat unfair or immoral trade 
practices.

    Question. As this committee considers various strategies to support 
energy production--specifically renewable energy production--we should 
diligently keep in mind the number of jobs tied to various energy 
sectors. Energy use in my home State of Indiana is similar to how the 
entire country looks--in Indiana, as of 2019, coal fueled almost 60 
percent of our electricity net generation. Renewable sources for 
electricity in Indiana like wind power accounted for 6 percent, and 
solar power accounted for less than 1 percent. Nationally, renewable 
energy sources account for 17 percent of electricity.

    How do we ensure that jobs tied to energy sectors that are not in 
the ``renewable'' category are not abruptly terminated?

    With millions of Americans relying on diversified energy sources 
for their employment, how can disruptions be minimized?

    Answer. The consequences of a transition from fossil fuel to 
renewable energy will, like any technological advance, result in some 
labor market disruptions. For example, the number of workers in coal 
mining has declined by roughly 50 percent in the last decade to 
approximately 42,000. While these jobs are a very small share of total 
U.S. employment, they are still critical for the workers, their 
families, and their communities. In all likelihood, the trend in 
downward employment in this sector will continue as productivity rises 
and demand falls. While jobs in these industries are unlikely to shift 
``abruptly'' as a result of either technological advances or efforts to 
support renewable energy production, policy-makers may want to consider 
strategies to facilitate more effective job retraining opportunities 
for any displaced workers.

                                 ______
                                 
                Prepared Statement of Hon. Mike Crapo, 
                       a U.S. Senator From Idaho
    The tax code plays an important role in the economy and jobs in the 
energy sector. Energy incentives have the potential to grow our economy 
and create jobs, if executed properly. A number of energy-related 
policy areas have the potential for bipartisan agreement.

    While there are not a lot of specifics on President Biden's energy 
tax credits in the American Jobs Plan, he is clearly proposing to 
increase the corporate and international tax rate and penalize the oil 
and natural gas industry though the tax code. We must understand the 
impact of this proposal on the 10.9 million American jobs in the oil 
and natural gas industries that pay on average seven times the Federal 
minimum wage.

    I look forward to hearing from our witnesses their policy expertise 
and their understanding of how President Biden's proposals will either 
grow or shrink good-
paying American energy jobs. Prior to the pandemic, the United States 
was experiencing one of the strongest economies in decades.

    With the Tax Cuts and Jobs Act in place, and an agenda focused on 
smart regulation, we saw progress for all Americans, including record-
low unemployment rates for African Americans, Hispanics, and others; 
50-year lows in overall unemployment; robust wage gains skewed toward 
lower-wage earners; record-high household incomes; and record-low 
poverty. Considering offsetting the cost of energy provisions with a 
corporate tax rate increase or increasing international taxes, 
especially during a pandemic, is counterproductive and a non-starter on 
my side of the aisle.

    It will be increasingly challenging to return to an economy as 
robust as we saw before the pandemic with the endless streams of tax 
hikes and actions by the administration, such as revoking the permit 
for the Keystone XL Pipeline. The Biden administration's revocation of 
the presidential permit for the Keystone XL Pipeline was shortsighted 
and eliminated over 1,000 jobs, the majority of which were unionized.

    I am willing to work on constructive proposals to modernize and 
innovate our nation's energy production, while not adversely affecting 
millions of good-paying American jobs and the existing energy sources 
necessary for a comprehensive, affordable, and reliable domestic energy 
network. We should discuss ways to improve, and potentially expand, 
incentives to increase domestic energy production and manufacturing. 
However, it is important that we also consider the effectiveness of 
existing incentives.

    Congress should not be picking winners and losers every year when 
temporary credits expire. We must assess whether these credits continue 
to be necessary or whether they have served their intended purpose of 
incentivizing growth and investment. Yet we continue extending credits 
of technologies that have achieved a significant market presence in the 
U.S., an inefficient use of taxpayer dollars. While I support Congress 
taking a neutral approach to energy tax credits, we must consider 
whether some of these technologies continue to require assistance and 
ensure we are designing the tax code to be fair and effective.

    Our tax code should incentivize technology-wide clean energy 
innovation, helping to bring breakthrough power generation to 
deployment until it can compete independently in the market. My 
technology-inclusive bipartisan energy tax proposal--the Energy Sector 
Innovation Credit, or ESIC--would accomplish this by working with 
experts at the Department of Energy, national labs, and other 
stakeholders to target tax credits for innovative clean-energy 
technologies.

    In addition, ESIC would implement a credit phase-down system based 
on market penetration, systematically reducing credits as technologies 
increase their market share, instead of allowing Congress to pick 
winners and losers. I thank Senator Whitehouse for leading this 
proposal with me in the Senate.

    Mr. Chairman, I look forward to working collaboratively with you 
through the committee process to strengthen U.S. energy competitiveness 
by rapidly scaling and diversifying innovative clean energy 
technologies.

                                 ______
                                 
        Prepared Statement of Maria M. Pope, President and CEO, 
                       Portland General Electric
    Chairman Wyden, Ranking Member Crapo, and members of the committee, 
my name is Maria Pope, and I am the president and CEO of Portland 
General Electric. I am honored to testify before you today on the 
critical issues of climate change, jobs and effective clean energy tax 
policy. Thank you for taking up this very important issue. Climate 
change is having very real global impacts and greenhouse gas emissions 
must be dramatically reduced on an economy-wide basis. It will take all 
of us working together to make a difference. National attention and an 
all-hands-on-deck approach is needed without further delay.

    Portland General Electric is a fully integrated electric utility 
based in Portland, OR. We serve roughly half of all Oregonians and 
three quarters of the State's industrial and commercial activity. We 
share our customers' and our communities' vision for a clean, reliable, 
affordable energy future. We have ambitious climate goals to reduce 
greenhouse gas emissions associated with the power we serve customers 
by at least 80 percent by 2030, compared with 2010 levels. We also have 
an aspirational goal of zero greenhouse gas emissions associated with 
the power we serve to customers by 2040. Advancements in policy, 
regulation, and technology are needed to meet these emission reduction 
goals, while maintaining reliable service at a reasonable cost to 
customers.

    PGE is not alone in our emissions reduction work. Many of our peer 
utilities across the country have set similarly ambitious targets. The 
Edison Electric Institute's members, representing the Nation's 
investor-owned utilities, are collectively on a path to reduce their 
greenhouse gas emissions at least 80 percent by 2050, compared with 
2005 levels. Many companies are pledging even faster, more aggressive 
timelines. As of year-end 2019, the U.S. power sector had reduced its 
CO2 emissions by 33 percent below 2005 levels.

    According to the Intergovernmental Panel on Climate Change, we have 
a decade to make significant progress to curb greenhouse gas emissions. 
To achieve that progress across the energy sector on the timeline 
climate science requires, deployment of clean energy resources by 
utilities and others in the energy industry must be accelerated. 
Utilities, or any sector of our economy, cannot achieve these ambitious 
emissions reductions alone. Addressing the climate crisis requires 
substantial capital investments and Federal policies that serve 
everyone equitably--maximizing both benefits to customers and the 
deployment of a wide variety of clean energy resources.

    It is also imperative that Federal policy does not pick winners and 
losers regarding technologies or which entities can deploy the new 
resources that will be needed. It's clear that the Nation needs all 
parties, especially those responsible for delivering reliable power, to 
be able to develop and deploy new resources. The right 
technology-neutral incentives will accelerate the clean energy 
transition and activate all players to make significant investments. 
This committee has the authority to provide those well-designed 
incentives via the tax code. To move forward with speed requires new 
thinking, which is exactly what we see in the Clean Energy for America 
Act.

    Chairman Wyden, I want to thank you and your team for this newly 
introduced and thoughtfully crafted bill. This legislation provides tax 
incentives in a manner that addresses many of these issues I just 
identified. Notably, your bill will help incentivize utilities and 
independent developers alike to transform how electricity is generated 
and used. It is designed to ensure success as it doesn't pick winners 
and losers--in terms of technology or business model--and is flexible 
in that it covers emerging technologies as long as they have zero or 
net negative carbon emissions. This bill reflects the findings from a 
recent analysis by the Rhodium Group which concluded that this kind of 
long-term technology-neutral approach enables all parties to 
participate in the path to a clean energy future, creating an 
opportunity for an all hands on deck approach to drive down electricity 
sector greenhouse gas emissions.

    Portland General Electric enthusiastically supports this bill, and 
we urge its enactment. The Clean Energy for America Act recognizes that 
utilities play a critical role in meeting ambitious greenhouse gas 
reduction and clean energy targets and, at the same time, need support 
to deploy new clean electricity resources and technology supportive of 
the transportation sector's transformation. The bill paves the way for 
us to boost investments--more quickly and equitably--to meet our shared 
goals of reducing emissions and addressing climate change.

    We especially appreciate the optionality between production and 
investment tax credits, while also allowing utilities to opt-out of 
Internal Revenue Service normalization requirements for the new storage 
credit. These provisions ensure that the full benefits of these tax 
incentives are passed through to customers and that regulated utilities 
will not be disadvantaged--leveling the playing field to accelerate 
deployment and ensure affordability for all customers. Keeping energy 
affordable helps build and maintain the broadest support for this 
critical transition.

    Along with affordability, preserving reliability is essential. 
Dispatchable clean resources will play an important role. So will a 
smarter grid that can harness electricity from wind, solar and other 
resources when they are available and store that energy for when it's 
needed. Chairman Wyden's bill provides tax incentives for stand-alone 
energy storage facilities and new clean resources that provide 
important capacity, leading to improvements in reliability.

    The bill also provides the option to elect direct payment of these 
credits. The option enables broader use and lowers costs, creating 
savings which can be directly passed on to customers. For example, 
direct pay can financially insulate the development of these projects 
during challenging economic conditions such as the financial crisis in 
2008 or the pandemic that we are currently experiencing. It also 
mitigates the need for complex tax equity transactions, where credits 
are heavily discounted by large commercial and investment banks or 
other parties. Instead, with this option, the benefits of the tax 
credits can more fully flow through to utility customers and lower the 
cost of the clean energy transformation.

    The Clean Energy for America Act requires that eligible facilities 
must be built by workers who are paid prevailing wages. PGE values our 
partnership with labor, including the IBEW, and we support this 
requirement. We are pleased that the BlueGreen Alliance is here today 
to discuss their perspective.

    Today, the transportation sector is the largest source of 
greenhouse gas emissions. The bill's clean transportation credits 
enable transformative change, encouraging the purchase of a range of 
electric vehicles and investment in critically important charging 
infrastructure. These credits will help us meet our commitment to 
electrify our own fleet and will also enable our customers to make the 
transition to electric vehicles, important steps if our state is to 
meet its decarbonization goals. PGE appreciates and values the 
inclusion of Chairman Carper's charging infrastructure proposal for 
robust charging credits that will boost installation and provide access 
across the Nation.

    I would like to express again my appreciation for Chairman Wyden's 
thoughtful legislation. As we continue our transition to clean energy 
resources, what we need from Congress are the tax incentives contained 
the Clean Energy for America Act, as well as Federal funding for the 
research, development and deployment of new technologies that will help 
us deliver dispatchable clean energy resources. These Federal 
investments will enable utilities to reach deep reductions in 
greenhouse gas emissions.

    As Congress begins discussion on an infrastructure package, there 
is an opportunity to include provisions to help modernize the electric 
grid and transition the Nation to the clean infrastructure of tomorrow. 
This includes legislation such as Chairman Wyden's Clean Energy for 
America Act. We are also aware that Ranking Member Crapo has developed 
his own tax legislation. We look forward to working with Ranking Member 
Crapo, his staff, and the committee as these proposals move forward in 
the months ahead.

    Chairman Wyden, Ranking Member Crapo, committee members, thank you 
for your time and the opportunity to share our perspective on these 
important matters.

                                 ______
                                 
          Questions Submitted for the Record to Maria M. Pope
           Questions Submitted by Hon. Catherine Cortez Masto
    Question. One of the key provisions of the Clean Energy for America 
Act of 2021 is its flexibility for new zero-emission facilities to 
utilize either a production tax credit or an investment tax credit--
based on the needs of each facility. Can you discuss the importance of 
having this flexibility in clean energy legislation?

    Answer. Flexibility for new zero-emission facilities to utilize 
either a production tax credit or an investment tax credit is critical 
to accelerate decarbonization of the power sector and mitigate cost 
impacts on utility customers. The scale of this effort requires the 
active engagement of all parties to build out needed clean energy 
resources. The option to choose the PTC, which is not subject to IRS 
tax normalization rules, creates a level playing field when utilities 
seek new clean energy facilities. Without this optionality, or the 
ability to opt out, regulated utilities must normalize the tax benefit 
over the life of these resources and are therefore at a competitive 
disadvantage during the bidding process. A level playing field between 
unregulated developers and regulated utilities will ensure robust 
competitive procurement processes that result in customers getting the 
best prices for these new clean resources. It is important to note that 
for State-regulated utilities like Portland General Electric, the full 
value of Federal tax credits and other incentives are passed directly 
back to customers in the form of rate credits or rate decreases.

    Question. In line with Chairman Wyden's tech-neutral legislation 
which outlined a stand-alone investment tax credit for transmission, 
and in order to direct public dollars to the appropriate projects, we 
must ensure that any project meets sufficient capacity. Do you think 
that the incentive needs to be focused on building large-scale, 
interregional, difficult to build transmission lines, not subsidize 
lines within already existing utility territories?

    Answer. Limiting the credit to exclude certain transmission lines 
that are needed to integrate and deliver clean energy will make it more 
difficult to achieve the administration's decarbonization goals. It 
also would be difficult to exclude lines in existing utility territory. 
Utility territory covers much of the map of the U.S. and transmission 
within a utility's territory is not necessarily owned, built, or 
controlled by that utility.

    There have been efforts to try to quantify the need for new 
transmission, with a number of studies finding that a significant 
expansion of transmission will be needed to support the clean energy 
transition and get renewable resources from where they are located to 
where the customer need is. For example, one study from the National 
Academy of Sciences, Engineering and Medicine (Carbon-Neutral Pathways 
for the United States) found that a 2.5-fold increase over 2020 
transmission levels would increase the share of wind and solar to 60 
percent of total generation. If we wish to support this needed 
expansion of transmission, it will be important to provide broad-based 
incentives and assistance, as there is no one single answer that will 
address every challenge associated with transmission.

    New transmission lines are difficult to site, permit, and build, 
and they do not necessarily need to be interregional to be vital to our 
decarbonization efforts. Even projects that proponents had hoped would 
be less complicated, for example by proposing to use existing rights of 
way to connect clean energy to load centers, have run into challenges 
with lengthy permitting and siting processes, with significant cost 
outlays.

    Chairman Wyden's proposed tax credit for transmission strikes the 
right balance and addresses the need for transmission by applying the 
credit to transmission 275 kV and above, which would encompass an 
estimated 22 projects across the country currently in some stage of 
development, including the Greenlink West and Greenlink North projects 
in Nevada. These high-capacity, regionally significant transmission 
lines will interconnect large amounts of new generation and the 
electricity will travel long distances to serve load or will be 
transmitted between energy markets. This will provide diversity among 
renewable resources, increasing resilience and integrating wind, solar, 
and other needed generation to decarbonize the generation resource mix.

                                 ______
                                 
   Prepared Statement of Kevin Sunday, Director, Government Affairs, 
             Pennsylvania Chamber of Business and Industry
                     executive summary of testimony
    The Pennsylvania Chamber encourages lawmakers on both sides of the 
aisle to come together to produce durable, bipartisan policy that 
applies the lessons from Pennsylvania's successful leveraging of our 
historic leadership positions in energy and industry through 
competitive markets to produce electricity, natural gas and a host of 
goods and commodities in an increasingly affordable and sustainable 
manner, to Federal policy that positions America for continued 
leadership in an increasingly competitive and dynamic global 
marketplace.

    Among all States, Pennsylvania ranks second in total energy 
production, second in natural gas production, second in installed 
nuclear capacity, third in coal production, third in electricity 
production and eighth in manufacturing output. Pennsylvania is also the 
largest net exporter of electricity of any State and is the largest 
producer on the 13-State PJM grid, where prices are at generational 
lows and GHG emissions have fallen 34 percent across the region since 
2005.

    Pennsylvania's energy assets have contributed to significant 
nationwide decreases in commodity costs for gas and electricity and in 
emissions of NAAQS and greenhouse gasses. Our State has helped position 
the United States as a leader in sustainable economic growth, as our 
Nation has outpaced other developed countries in keeping energy prices 
low while growing the economy and reducing emissions.

    The private sector is deploying a number of innovative technology 
and energy solutions to support traditional and emerging industries in 
a sustainable manner.

    Federal tax and regulatory reform led to substantial wage growth 
across all occupations and job creation in Pennsylvania; however, the 
pandemic has wiped out a decade's worth of job growth. All sectors of 
Pennsylvania's economy fared worse than national averages in terms of 
lost jobs in 2020. Congress must not burden our State with 
uncompetitive, anti-growth tax and regulatory policy.

    Federal infrastructure and air quality permitting must be reformed 
to position our country for continued leadership. Federal policy should 
also reward stewardship and build upon existing public and private 
commitments and leverage the human capital and technology base of 
traditional industries. Regardless of the future energy mix, our 
Nation's economy will require a strong, competitive domestic industrial 
base to provide critical minerals, timber, aggregates, concrete, steel 
and cement.

    A strong economy and continued improvements in quality of life 
depend upon ongoing increases in labor productivity in every region of 
the country. At present, the only rural communities that are matching 
urban and metropolitan regions in terms of wage and productivity growth 
are those communities with natural resource development. Given the high 
wage premiums for workers in the power generation, oil and gas, and 
manufacturing industries, Federal policy must support the continued 
operation and expansion of critical energy and manufacturing industries 
in these non-metro areas.

    Good morning, Senator Wyden, Senator Crapo, and honorable members 
of the Senate Finance Committee, it is an honor and a privilege to 
appear before you this morning to discuss Federal energy and 
environmental policy. It is our sincere hope that lawmakers on both 
sides of the aisle come together to produce durable, bipartisan policy 
that applies the lessons from Pennsylvania's successful leveraging of 
our historic leadership positions in energy and industry to produce 
electricity, natural gas and a host of goods and commodities in an 
increasingly affordable and sustainable manner, to Federal policy that 
positions America for continued leadership in an increasingly 
competitive and dynamic global marketplace. The private sector is 
continuing to innovate and lead on technology solutions to energy 
challenges, and it is imperative that Federal policy produce a reformed 
permitting and regulatory process that allows innovation to flourish 
through a predictable and timely decision-making process. In contrast, 
policy that brackets energy resources into either mandates or bans, or 
that simply encourages the closure of domestic facilities and the 
offshoring of their output to locales with less stringent environmental 
requirements, will not produce a sustainable economy.

    Pennsylvania is the second-largest energy producing State, the 
second-leading State in natural gas production, the third-largest coal 
producing State, and the third-largest electricity producer.\1\ Our 
State is also the largest net exporter of electricity in the country 
and is the largest electricity producer on the 13-State PJM grid that 
provides power to 65 million Americans, thanks to our competitive, 
diverse fleet of power generation resources, including the second-
largest amount of nuclear power of any State in the country. 
Pennsylvania is also eighth in total manufacturing output, with 
leadership positions in food manufacturing, refined products, 
pharmaceuticals, steel, cement, aggregates and pulp and paper.
---------------------------------------------------------------------------
    \1\ Pennsylvania State Energy Profiles, U.S. Energy Information 
Administration, https://www.eia.gov/beta/states/states/PA/rankings.

    All of our members are committed to the stewardship of our State 
and Nation's land, air, and water, and we seek to provide a thoughtful 
and balanced approach on ways we can continue to reduce our 
environmental impacts and grow the economy. As policy-makers at the 
Federal level take a long-term vision towards energy policy, it is 
imperative that the goals be established thoughtfully after careful 
consideration of their ability to be executed in an efficient and 
effective manner. As energy crises in multiple States have shown, 
failure to adequately consider the magnitude of downside risks by 
getting assumptions wrong can produce real-world suffering and impose 
---------------------------------------------------------------------------
enormous costs on businesses and consumers.

   competitive markets and private-sector leadership have delivered 
significant environmental and economic progress in pennsylvania and the 
                             united states
    Among all States, Pennsylvania is the biggest net exporter of 
electricity in terms of megawatt hours, according to a recent analysis 
by the U.S. Energy Information Administration (EIA).\2\ Based on an 
analysis of EIA data, Pennsylvania exported 36 percent of total 
megawatt hours in 2019. Pennsylvania is also the largest power producer 
in the 13-State PJM grid, the largest grid in the country and one that 
delivers power to the homes, schools, and workplaces of more than 65 
million Americans. The competitive markets managed by PJM have resulted 
in significant reductions in NAAQS criteria and greenhouse gas 
emissions from the power generation sector. Since 2005, carbon dioxide 
emission fell across PJM by 34 percent in large part due to competition 
among generation and improvements in technology.\3\ Remarkably, 
Pennsylvania has remained in a leadership position with respect to 
power generation and net exports even with a substantial decrease in 
both tons of emissions and emissions intensity among the portfolio. 
According to a profile of the State's generation and transmission 
assets compiled by PJM,\4\ Pennsylvania's average CO2 
intensity declined from approximately 1,150 lbs/MWh in 2005 to 
approximately 765 lbs/MWh in 2019 (a reduction of 33 percent), and 
SO2 intensity declined from 10 lbs/MWh in 2005 to less than 
1 lb/MWh in 2019 (a reduction of more than 90 percent). Since 2005, 
only one other State has reduced its energy-related CO2 
emissions more in terms of absolute tons.\5\ Additional reductions from 
our State's power generation sector are expected to continue, with PJM 
reporting more than 11,000 MW of natural gas and solar in the State's 
capacity queue. Across the 13-State grid, significant amounts of wind 
(6,240 MW), solar (25,759 MW), storage (3,920 MW) and new natural gas 
(24,990 MW) capacity are also in the queue.
---------------------------------------------------------------------------
    \2\ Today in Energy, December 7, 2020. U.S. EIA, https://
www.eia.gov/todayinenergy/detail.php?id=46156.
    \3\ Emissions Continue to Drop Throughout PJM Footprint. PJM 
Interconnection, March 4, 2020, https://insidelines.pjm.com/emissions-
continue-to-drop-throughout-pjm-footprint/.
    \4\ 2019 Pennsylvania State Infrastructure Report. PJM 
Interconnection, July 2020, https://www.pjm.com/-/media/library/
reports-notices/state-specific-reports/2019/2019-pennsylvania-state-
infrastructure-report.ashx?la=en.
    \5\ State Energy-Related CO2 Emissions by Year, Adjusted 
(1990-2018). U.S. Energy Information Administration, March 2, 2021, 
https://www.eia.gov/environment/emissions/state/.

    These significant declines in air emissions have also been paired 
with decreases in the commodity costs within PJM's energy markets. 
During the first 9 months of 2020, prices in the energy markets were 
the lowest in the 21-year history of the RTO's organized markets. 
Energy markets provide approximately two-thirds of the weight of 
wholesale power prices in PJM. Wholesale prices across PJM for 2019 
were the lowest in 15 years, according to the Independent Market 
Monitor's recent annual report.\6\
---------------------------------------------------------------------------
    \6\ 2019 State of the Market Report for PJM. Independent Market 
Monitor, March 2020, https://www.monitoringanalytics.com/reports/
PJM_State_of_the_Market/2019.shtml.

    With respect to natural gas costs, residential consumers in 
Pennsylvania have seen utility bills, inclusive of commodity costs and 
distribution charges, fall by as much as 56 percent, with annual 
savings ranging between $321 and $1,643 depending on the utility. With 
respect to commercial and industrial customers, total bills have fallen 
at minimum by 28 percent and as much as 56 percent, depending on the 
utility. These cost reductions have resulted in significant 
improvements in one of the highest cost pressures for these types of 
facilities, and by extension their competitiveness.\7\
---------------------------------------------------------------------------
    \7\ Rate Comparison Reports for 2008 and 2020, Pennsylvania Public 
Utility Commission, https://www.puc.pa.gov/filing- resources/reports/
rate-comparison-reports/.

    With specific regards to the commodity cost components of gas 
utility bills, utilities' purchased gas costs are between 67 percent 
and 83 percent lower compared to 2008 levels. These costs are passed 
directly to consumers with no mark-up by the utility. Absent 
infrastructure buildout and the onset of production from the Marcellus 
shale that has occurred since 2008, the average household would be 
paying between $1,368 and $2,467 more annually on commodity charges. 
Commercial customers would be paying between $3,800 and $6,855 more per 
year, and large commercial and industrial customers would be paying 
between $68,400 and $123,390 more.\8\ In a hypothetical alternative 
timeline in which natural gas production from the Marcellus shale never 
occurred and these higher costs held constant over the last 12 years, 
natural gas utility customers across all ratepayer classes would have 
paid tens of billions of dollars more in higher costs in Pennsylvania 
alone.
---------------------------------------------------------------------------
    \8\ Purchased Gas Costs, Pennsylvania Public Utility Commission, 
https://www.puc.pa.gov/NaturalGas/pdf/PGC.pdf.

    Reductions in air emissions have not been limited to the power 
generation sector. Overall, Pennsylvania's industrial sources have 
achieved significant declines in emissions of federally regulated 
pollutants over the past several decades. According to data available 
on PA DEP and U.S. EPA's websites, these reductions include decline in 
annual emissions of NOx on the order of 65 percent, 
SO2 by 90 percent, CO by 69 percent, VOCs by 36 percent and 
PM 10 by 37 percent. Further, these reductions are yielding a 
demonstrable improvement in air quality. Every monitoring point in the 
State is measuring attainment for the 2008 ozone standards of 75 ppb, 
and in just 1 year the number of monitoring points measuring non-
attainment for the 2015 ozone standard of 70 ppb fell from eight to 
just four. The State is also measuring attainment at all points for 
both the annual and 24-hour standards from PM 2.5, and the Allegheny 
County Health Department announced in February that for the first time 
in decades its monitors were measuring healthy levels of air quality 
---------------------------------------------------------------------------
for all criteria pollutants.

    Pennsylvania's contributions to growing the economy while reducing 
energy prices and emissions have positioned the United States for 
leadership in sustainable growth. As EPA's Acting Assistant 
Administrator Joseph Goffman noted in a recent memo to regional 
offices, ``ongoing changes in electricity generation mean that the 
emission reduction goals that the [Obama administration's Clean Power 
Plan] for 2030 have already been achieved.''\9\ From 2005 to 2019, 
according to an analysis of World Bank, EIA and International Energy 
Agency data,\10\ the United States' economy grew by 64 percent, to 
roughly $21.4 trillion in GDP, while reducing carbon dioxide emissions 
by 16 percent. Over the same period, Europe's economy grew at half the 
same pace (31 percent) yet lagged the United States on emissions 
reductions on an absolute basis--a reduction of 742 mmt for Europe 
compared to a reduction of 936 mmt for the United States, or a delta of 
210 million metric tons of CO2. More broadly, over the same 
15-year period, OECD countries as a whole reduced on net carbon dioxide 
emissions by 1,524 mmt--of which the United States can proudly lay 
claim to having been responsible for more than 60 percent of those 
reductions. Policy-makers must not lose sight of the fact that while 
these reductions were taking place in the developed world, as the 
economies of India and China grew, so did their greenhouse gas 
emissions. India's CO2 emissions grew by more than 1,200 
mmt, or a 115-percent increase, nearly single-handedly dwarfing 
reductions in OECD countries. China's emissions grew by 4,400 mmt, or 
an 81-percent increase--nearly three times the total reductions of OECD 
countries. Further, as this international comparison in emissions 
demonstrates, the offshoring of domestic manufacturing as a result of 
uncompetitive tax, labor, and regulatory policy will result in 
operations in countries that have much higher emissions intensities.
---------------------------------------------------------------------------
    \9\ Memorandum to EPA Regional Administrators: Status of Affordable 
Clean Energy Rule and Clean Power Plan. United States Environmental 
Protection Agency Office of Air and Radiation, February 12, 2021.
    \10\ World Bank Open Data, March 9, 2021, https://
data.worldbank.org/; International Energy Statistics, U.S. EIA, https:/
/www.eia.gov/international/data/world; CO2 Emissions from 
Fuel Combustion, International Energy Agency, http://wds.iea.org/wds/
pdf/Worldco2_
Documentation.pdf.

    As the United States develops new technology solutions in both 
fossil and zero-carbon resources, it is imperative trade and energy 
policy support the continued export of these solutions to developing 
countries. In the near term, this must include liquefied natural gas 
(LNG), which is currently being shipped to India and East Asia. In 
addition to providing a reliable, low-carbon resource for countries 
abroad while supporting domestic exploration and pipeline activity, LNG 
also provides, for the importing country, greater geopolitical 
optionality and a reduced reliance on energy developed in countries 
---------------------------------------------------------------------------
whose regimes favor neither democracy nor sustainable development.

    IEA electricity and natural gas commodity pricing data also hint at 
why economic growth in the EU has trailed the United States. Industrial 
users in the United States pay much less for electricity than any 
European country--in some cases, less than half. Residential 
electricity prices in the United States are also the fourth-
lowest among all developed nations. The United States is also second 
among all developed nations in terms of lowest natural gas commodity 
costs for industry and third for residential users. Leveraging these 
low costs with pro-growth tax and regulatory policy will position 
Pennsylvania and the United States for further global leadership in 
economic growth and emissions reductions, but policy-makers must not 
sacrifice these economic advantages on costly mandates or unwieldy 
regulatory mechanisms that raise costs and offshore economic activity. 
In sum, higher energy prices due to taxes, regulatory requirements or a 
lack of infrastructure do not result in better environmental outcomes, 
but they do result in worse economic performance.
congress should not enact punitive federal tax and energy policy, given 
   the pandemic erased substantial economic gains achieved in years 
                           leading up to 2020
    Various recent analyses noted the significant benefits that accrued 
to the Nation, its economy and its workforce in the years following the 
passage of the Tax Cuts and Jobs Act. Research published in late 2019 
from the St. Louis Federal Reserve concluded that ``the evidence 
suggests that both innovation and [venture capital] investment 
increased significantly after the Tax Cuts and Jobs Act. The level of 
innovation and VC investment in 2018 and the first half of 2019 should 
support increased growth rates in the next years.''\11\ Last month, the 
Joint Committee on Taxation reported to this committee that in the year 
immediately following enactment of TJCA, business investment and 
employment rose in the United States.\12\ Finally, tax reform moved the 
United States from having the highest corporate rate among all OECD 
nations to a more competitive position. As the U.S. Chamber noted in 
its recent statement to this committee, ``. . . on the Tax Foundation's 
International Tax Competitiveness Index (ITCI), the United States ranks 
21st out of 36 countries on overall competitiveness, a jump from the 
28th ranking prior to tax reform, and 19th on corporate taxes, up from 
35th before tax reform.''\13\
---------------------------------------------------------------------------
    \11\ Tax Cuts, Venture Capital, and Long-Term Growth. Juan M. 
Sanchez, Federal Reserve Bank of St. Louis Economic Research, August 8, 
2019, https://research.stlouisfed.org/publications/economic-synopses/
2019/08/30/tax-cuts-venture-capital-and-long-term-growth.
    \12\ U.S. International Tax Policy: Overview and Analysis. Joint 
Committee on Taxation, March 19, 2021, https://www.jct.gov/
publications/2021/jcx-16-21/.
    \13\ U.S. Chamber of Commerce letter to Senators Wyden and Crapo, 
regarding March 25, 2021 hearing, April 6, 2021.

    Pennsylvania benefitted significantly from the passage of this act 
as well. Using 2016 as a baseline, economic conditions in Pennsylvania 
significantly improved through 2020, in part due Federal tax and 
regulatory reform. As noted throughout various media reports, companies 
in Pennsylvania and across the country raised wages, increased hiring, 
and boosted benefits in the wake of the act's passage. Across all 
occupations, Pennsylvania added more than 238,000 jobs between 2016 and 
2020. Based on the most recently available State and Federal labor and 
employment data,\14\ median wages across all occupations in 
Pennsylvania increased by $6,410 in the 4-year period, or roughly 13.5 
percent. Notably, workers in the 25th percentile saw the biggest gains 
in average annual income (+16.84 percent) versus workers at the median 
(+13.8 percent) or at the 75th percentile (+13.76 percent). The table 
below notes income gains among several broad categories of occupations 
in Pennsylvania. We also highlight the significant wage growth since 
2016 in growing Pennsylvania sectors: chemicals manufacturing and 
natural gas power plant operations.
---------------------------------------------------------------------------
    \14\ State Occupational Employment and Wage Estimates--
Pennsylvania, 2020 and 2016. U.S. Bureau of Labor Statistics, May 2020, 
https://www.bls.gov/oes/current/oes_pa.htm


------------------------------------------------------------------------
                                              Net increase
                  Median wage,  Median wage,   in average     % chance
   Occupation         2016          2020       wages since   since 2016
                                                  2016
------------------------------------------------------------------------
All occupations       $47,540       $53,950        $6,410       +13.48%
------------------------------------------------------------------------
Business              $72,010       $78,750        $6,740        +9.36%
 financial
------------------------------------------------------------------------
Community social      $42,840       $48,360        $5,520       +12.89%
 service
------------------------------------------------------------------------
Education             $55,760       $63,690        $7,930       +14.22%
------------------------------------------------------------------------
Health care           $74,590       $80,640        $6,050        +8.11%
------------------------------------------------------------------------
Food service          $22,530       $26,130        $3,600       +15.98%
------------------------------------------------------------------------
Personal care         $25,190       $30,030        $4,840       +19.21%
------------------------------------------------------------------------
Construction          $49,610       $55,570        $5,960       +12.01%
 trades and
 extraction
------------------------------------------------------------------------
Maintenance and       $45,620       $52,270        $6,650       +14.58%
 repair workers
------------------------------------------------------------------------
Manufacturing         $38,130       $42,010        $3,880       +10.18%
 workers
------------------------------------------------------------------------
Chemical plant        $54,130       $72,480       $18,350       +33.90%
 operators
------------------------------------------------------------------------
Gas plant             $58,730       $70,440       $11,710       +19.94%
 operators
------------------------------------------------------------------------


    However, our State's economy suffered greatly during the pandemic 
and in just 1 year lost major ground in terms of Pennsylvanians 
employed. Comparing February 2021 to February 2020, Pennsylvania lost 
nearly 436,000 jobs, the seventh-highest job loss figure of all States. 
To put it another way, in just 1 year, the pandemic (and the impacts of 
mitigation response measures and individual behavior) cost Pennsylvania 
nearly twice as many jobs as were created over 4 years, and the total 
number of Pennsylvanians employed in the State today is smaller than it 
was 10 years ago, despite a larger population.\15\ Over the past year, 
Pennsylvania has outpaced national averages in job losses in all 
sectors, with outsized losses in mining and logging, manufacturing, and 
leisure and hospitality. While State and Federal pandemic recovery 
efforts are helping these industries recover, Federal policymakers must 
not enact tax, trade and regulatory policy that will further damage 
already ailing sectors. As we note throughout this testimony, 
Pennsylvania is a leader in the vital energy, manufacturing and service 
industries that produce the goods necessary to sustain a modern 
economy.
---------------------------------------------------------------------------
    \15\ Pennsylvania Local Area Unemployed Statistics. U.S. Bureau of 
Economic Analysis, April 14, 2021, https://data.bls.gov/timeseries/
LASST420000000000006?amp%253bdata_tool=XG
table&output_view=data&include_graphs=true.


----------------------------------------------------------------------------------------------------------------
                                              Net                                 Net
                   February    February     change,    % change,   February     change,    % change,   % change,
                     2016        2020      2016 vs.    2016 vs.      2021      2020 vs.    2020 vs.    2020 vs.
                                             2020        2020                    2021      2021, PA    2021, USA
----------------------------------------------------------------------------------------------------------------
Total Nonfarm      5,855.10       6,093         238       4.06%    5,656.70     -435.90      -7.15%      -6.21%
 Jobs
----------------------------------------------------------------------------------------------------------------
Goods Producing       826.8       861.5          35       4.20%         812      -49.50      -5.75%      -4.59%
 Industries
----------------------------------------------------------------------------------------------------------------
    Mining and         29.6        26.1          -4     -11.82%        21.4       -4.70     -18.01%     -14.64%
     Logging
----------------------------------------------------------------------------------------------------------------
    Construction      229.6       264.6          35      15.24%         253      -11.60      -4.38%      -4.03%
----------------------------------------------------------------------------------------------------------------
    Manufacturin      567.6       570.8           3       0.56%       537.6      -33.20      -5.82%      -4.38%
     g
----------------------------------------------------------------------------------------------------------------
Service            5,028.30       5,231         203       4.03%    4,844.70     -386.30      -7.38%      -6.56%
 Providing
 Industries
----------------------------------------------------------------------------------------------------------------
    Trade,         1,125.90    1,129.40           4       0.31%      1101.7      -27.70      -2.45%      -2.86%
     Transportat
     ion and
     Utilities
----------------------------------------------------------------------------------------------------------------
    Information        85.8        89.2           3       3.96%          81       -8.20      -9.19%      -8.51%
----------------------------------------------------------------------------------------------------------------
    Financial         318.5       333.4          15       4.68%       323.6       -9.80      -2.94%      -1.18%
     Activities
----------------------------------------------------------------------------------------------------------------
    Professional      780.9       812.8          32       4.09%       770.3      -42.50      -5.23%      -3.59%
     and
     Business
     Services
----------------------------------------------------------------------------------------------------------------
    Education      1,192.60      1308.6         116       9.73%       1,233      -75.60      -5.78%      -5.28%
     and Health
     Services
----------------------------------------------------------------------------------------------------------------
    Leisure and       558.6       584.2          26       4.58%       439.2     -145.00     -24.82%      -20.4%
     Hospitality
----------------------------------------------------------------------------------------------------------------
    Other             259.8       264.3           5       1.73%       228.2      -36.10     -13.66%      -7.41%
     Services
----------------------------------------------------------------------------------------------------------------
    Government        706.2       709.2           3       0.42%       667.2      -42.00      -5.92%      -6.08%
----------------------------------------------------------------------------------------------------------------


    Significant Federal intervention into the private sector through 
energy and environmental policy may result in economic damage to local 
communities, many of them in rural America. The energy and 
manufacturing base in many such communities create high labor 
productivity and well-paying jobs for workers. While from a national 
perspective, workers in metropolitan areas on average are more highly 
paid and productive than in rural areas, as researchers at the 
Brookings Institution have noted, the most productive industries 
outside cities are those involving natural resources. To quote their 
analysis, ``many small metro economies are highly productive as well, 
especially those that specialize in oil, gas and mining.''\16\ As noted 
throughout this testimony, the United States will continue to need a 
strong domestic manufacturing, mining, energy production, and 
infrastructure base to continue to grow its economy and meet 
environmental goals. Regulatory policy that results in the loss of 
these industries will not produce a sustainable economy and will only 
further exacerbate the challenges already facing rural communities. 
Many of the provisions envisioned in the American Jobs Act and Clean 
Energy for America Act are sweeping in their scope and may have 
significant unintended consequences; as such we strongly encourage 
deliberation and economic evaluation of these proposals, given the 
potential for economic harm to much of our State's energy economy. A 
recent jobs and wage report from the National Association of Energy 
Officials notes that while energy workers earn on average 34 percent 
more than the media worker, the lowest paid energy jobs are those in 
solar, wind and energy efficiency.\17\ Conversely, workers in natural 
gas earn 59 percent above median wages and 42 percent above average for 
power generation workers. Within Pennsylvania, oil, petroleum and 
natural gas provide the most employment of all energy resources, 
according to the report.
---------------------------------------------------------------------------
    \16\ Understanding US productivity trends from the bottom-up. 
Joseph Parilla and Mark Muro, Brookings Institution, March 2017, 
https://www.brookings.edu/research/understanding-us-productivity-
trends-from-the-bottom-up/#cancel.
    \17\ Wages, Benefits and Change: A Supplemental Report to the 
Annual U.S. Energy and Employment Report. NASEO and Energy Futures 
Initiatives, 2020, https://www.usenergyjobs.
org/.
---------------------------------------------------------------------------
 sweeping changes to federal tax and regulatory policy would threaten 
  long-term investment, given challenging dynamics at the state level
    While much detail remains to be filled in regarding how the Biden 
administration would pay for proposed infrastructure investments and 
other social programs under the American Jobs Act, our members remained 
concerned with discussions around proposals to raise the corporate tax 
rate. As noted by the U.S. Chamber in its statement for the record to 
this committee dated April 6, 2021, the 2017 Tax Cuts and Jobs Act 
resulted in significant improvements in the United States' 
competitiveness among OECD nations. Raising the Federal corporate rate 
to 28 percent while leaving in place provisions of TCJA that broadened 
the tax base would result in the United States being in an even worse 
competitive situation than prior to 2017. Additionally, as the U.S. 
Chamber's statement notes, various reports, including those compiled by 
the Joint Economic Committee, have estimated labor bears a significant 
burden of the corporate income tax--``70 percent or higher [being] the 
most likely outcome'' according to one of the analyses.\18\ As the Tax 
Foundation has noted, just a 1-percentage-point increase in the Federal 
corporate rate would reduce long-run GDP by $56 billion, with 
commensurate losses in average wages and employed Americans. An 
increase to 25 percent would reduce GDP by $220 billion and cost more 
than 175,000 jobs.\19\
---------------------------------------------------------------------------
    \18\ Labor Bears Much of the Cost of the Corporate Tax. Tax 
Foundation, October 24, 2017, https://taxfoundation.org/labor-bears-
corporate-tax/.
    \19\ Proposed Corporate Rate Hike Would Damage Economic Output. 
August 23, 2018, https://taxfoundation.org/proposed- corporate-rate-
hike-damage-economic-output/.

    The National Association of Manufacturers also released an analysis 
of the detrimental consequences to our economy should Congress raise 
taxes on business and repeal key provisions of the TCJA.\20\ These 
consequences include a significant decline in total employment--nearly 
1 million jobs by 2023--as well as a reduction in annual employment of 
600,000 jobs per year and a reduction in national GDP of $117 billion 
over the next 2 years.
---------------------------------------------------------------------------
    \20\ Study: Tax Increases Cause Major Job Losses, Harm U.S. 
Economy. National Association of Manufacturers, April 2021, https://
www.nam.org/wp-content/uploads/2021/04/TaxStudy
OnePager.pdf.

    Should Congress raise the Federal corporate tax rate, 
Pennsylvania's economy would be disadvantaged worse than most States, 
given our State corporate net income tax rate is 9.99 percent, the 
second-highest flat rate among all States. In addition, Pennsylvania is 
one of only a handful of States that limits the ability of companies to 
carry forward net operating losses. Significant increases in corporate 
rates at the Federal level, on top of Pennsylvania's middling status 
for competitiveness and attractiveness for new and expanded investment, 
would further disadvantage our State's economy and, by extension, its 
vital industries that, as noted in this testimony, have helped this 
---------------------------------------------------------------------------
Nation grow its economy and reduce its emissions.

    Further, to impose sweeping tax and regulatory changes just a 
handful of years after the largest change to the Federal tax code in a 
generation threatens to set up a dynamic which will ultimately harm the 
long-term attractiveness of investment in Pennsylvania and the United 
States--which is rapid swings of the pendulum of policy. Such a dynamic 
would make long-term planning and investment extremely challenging.

    In addition, key industries in energy and manufacturing in 
Pennsylvania face an inordinate number of challenges at the State and 
regional level. These include: persistent calls by some policy-makers 
and stakeholders for a punitive severance tax on natural gas 
development (in addition to the already challenging business tax 
structure at the State level and the State's unique impact fee that is 
assessed on every unconventional gas well), neighboring States 
attempting to obstruct the construction of federally approved 
infrastructure or taking other regulatory actions to raise costs on our 
State's manufacturing, energy, and infrastructure facilities, continual 
litigation over local land use and State and Federal permitting 
approvals for new and expanded infrastructure and operations, and a 
generally challenging regulatory environment for air and water permits.

    To reiterate, our State's energy economy, including continually 
increasing output from the Marcellus shale and other natural gas plays, 
has helped position the United States in a leadership position with 
respect to emissions reductions and economic growth. Among independent, 
non-integrated oil and gas drillers, an outsized portion of capital 
expenditures are related to intangible drilling costs--in some cases 
upward of 80 percent--which is expected given their predominant 
business is extracting hydrocarbons. Changes to Federal tax policy that 
discourage continued investment into the exploration and production of 
oil and gas would not only harm our State's economy, they would have 
the effect of restricting supply of vital commodities but not the 
demand for them--with the result being higher energy costs paid by 
consumers and businesses. As the International Energy Agency's most 
recent World Energy Outlook notes, the world and the United States 
still need to invest $390 billion per year into oil and gas development 
after 2030 to meet energy demand.

    The U.S. Department of Labor announced recently that the Consumer 
Price Index increased month over month by a level unseen in a decade, 
in large part due to higher gasoline and natural gas prices.\21\ Tax or 
regulatory policy that discourages new production or the construction 
or operation of associated infrastructure will only further cause 
further upward pressure on prices, given expected demand.
---------------------------------------------------------------------------
    \21\ Consumer Price Index--March 2021. U.S. Department of Labor 
Bureau of Labor Statistics, April 13, 2021, https://www.bls.gov/
news.release/pdf/cpi.pdf.

    Further, the State is in the midst of a debate regarding whether 
Governor Wolf can and should have Pennsylvania join the Regional 
Greenhouse Gas Initiative, a cap-and-trade program for power 
generators. The Pennsylvania Chamber has, while noting the merits of 
market-based approaches to reduce emissions and the challenges that 
climate change presents, repeatedly raised concerns over the potential 
costs of doing so. Meeting energy and environmental challenges will 
require continued innovation, and innovation is much more likely to 
come through market-based systems that send investment signals, rather 
than command-and-control regulatory structures that mandate the use of 
certain energy resources and that ban (in practice or in the plain 
definition of the term) other resources. To this end, we have advocated 
that should Pennsylvania join RGGI, it must be a workable program that 
encourages the continued development of combined heat and power 
projects at manufacturers and that does not sacrifice, through leakage 
(the displacement of generation to non-RGGI States within PJM) 
Pennsylvania's role as a net energy exporter and largest generating 
State in PJM. Beyond RGGI, the Republican State legislature and 
Democratic governor's administration continue to engage on long-term 
energy policy conversations related to climate change, net metering, 
tax policy, regulatory reform, electric vehicles and land use policy. 
Any durable energy policy established through legislation under the 
current political dynamics in Pennsylvania will be the product of 
bipartisan compromise and collaboration; we remain greatly concerned 
that Federal energy and infrastructure policy established solely 
through executive action or partisan reconciliation will erode the 
value of such a give and take at the State level and eclipse the policy 
---------------------------------------------------------------------------
choices our State has made.

    To cite one example, the State legislature is contemplating policy 
to address deployment of electric vehicle charging stations in a manner 
that is equitable with respect to the various ratepayer classes--
residential, commercial and industrial--and that respects that many 
counties are rural and whose populations lack interest in purchasing an 
electric vehicle. The legislature, the Governor, and various 
stakeholders, including the Pennsylvania Chamber, are also in dialogue 
regarding sustainable transportation funding given the increased use of 
more efficient and alternative fuel vehicles. Federal policy that 
mandates deployment of electric vehicles is, in our view, extremely 
unlikely to respect these dynamics and any compromise policy outcome 
reached by stakeholders at the State level.
 federal infrastructure decision-making must be streamlined to support 
               domestic manufacturing and energy security

    As Federal lawmakers debate a long-term vision for energy and 
environmental progress, administration officials and Congress must not 
lose sight of the many challenges currently facing our existing 
industries. Addressing these issues through bipartisan reforms can 
unlock further investment and continue to position the United States 
for long-term growth. Among these include streamlining the permitting 
process for infrastructure, providing for a more common-sense and 
flexible air quality permitting regime, and rewarding stewardship in 
key industrial sectors.

    First, while Pennsylvania has abundant supplies of energy and 
exports roughly one-third of its electricity and three-quarters of its 
natural gas, nearby States are facing self-imposed energy crises due to 
short-sighted political decisions on infrastructure. As a few examples 
of the real-world impacts of these States attempting to impose 
unilateral vetoes on federally approved infrastructure projects, 
utilities in New Jersey have warned State regulators that there may be 
inadequate supplies of natural gas during the winter season.\22\ 
Electricity market regulators in New England continue to grapple with 
fuel security and natural gas supply issues, with ISO-NE noting 
``inadequate infrastructure to transport natural gas has at times 
affected the ability of natural gas-fired power plants to get the fuel 
they need to perform. This energy-security risk has become a pressing 
concern for New England, considering the major role natural gas-fired 
generation plays in keeping the lights on and setting prices for 
wholesale electricity.''\23\ Infamously, several winters ago a ship 
carrying LNG from Russia delivered its cargo to a Boston port despite 
the city being just a short drive away from some of the most prolific 
producing shale gas wells in the world in northeastern Pennsylvania. 
Our Federal infrastructure permitting regime was not designed with the 
intention of allowing single States to unilaterally veto federally 
approved interstate projects--a position the Biden administration 
endorses in its recent Supreme Court filing in PennEast Pipeline v. New 
Jersey.\24\
---------------------------------------------------------------------------
    \22\ New Jersey utilities warn of gas shortages, argue for new 
pipelines. Politico Pro New Jersey, October 25, 2019, https://
subscriber.politicopro.com/states/new-jersey/story/2019/10/25/new-
jersey-utilities-warn-of-gas-shortages-argue-for-new-pipelines-1225986.
    See also comments of New Jersey Natural Gas, Levitan and 
Associates, and PSEG Services Corporation in New Jersey Board of Public 
Utilities Docket GO19070846.
    \23\ Natural Gas Infrastructure Constraints. ISO-NE, https://
www.iso-ne.com/about/what-we-do/in-depth/natural-gas-infrastructure-
constraints.
    \24\ See Brief of the United States as Amicus Curiae Supporting 
Petitioner, filed March 8, 2021, https://www.supremecourt.gov/
DocketPDF/19/19-1039/171249/20210308193306999_19-1039
tsacUnitedStates.pdf.

    Oil pipelines and associated infrastructure are also being impacted 
or threatened by Federal and State regulatory actions--the result of 
which would eliminate jobs and jeopardize economic vitality. To our 
north, our allies in Canada are crying foul over the Federal 
Government's revocation of the Keystone XL pipeline's cross-border 
permit. To our west, the State government in Michigan is attempting to 
obstruct the international, interstate Line 5 project--which supplies 
crude oil and natural gas liquids to domestic refiners in Michigan, 
Ohio, and Pennsylvania as well as Ontario and Quebec. Crude shipped on 
Line 5 makes its way to northwest Pennsylvania to be refined and sold 
at retail outlets in the Great Lakes region. Growing our economy, 
ensuring reliable energy and meeting environmental goals will require a 
durable Federal permitting approach that considers State interests in 
interstate permitting but does not allow them to obstruct the 
---------------------------------------------------------------------------
construction of vital and necessary projects.

    Siting and permitting reforms for interstate infrastructure, 
broadly speaking, would also be a boon to investment into electric 
transmission projects specifically in a way that additional 
socialization of costs for these projects through investment tax 
credits would not. Given the return on equity rates approved by State 
and Federal commissions as well as the identified need to increase 
supply and reduce congestion in certain regions of the country, the 
barriers to construction of interstate projects have not been from a 
lack of financing but from a dysfunctional permitting process, 
obstruction by States and litigation by disaffected NGO's. Further, 
socialization of costs through Federal investment tax credits for 
electric infrastructure may only exacerbate the on-going controversy 
regarding equitable cost allocation of certain transmission project 
costs between and among States and their ratepayer classes.

    Second, and relatedly, the decision-making process for 
infrastructure permitting in this country needs streamlining. Whether 
the project in question is a port expansion, a new highway, or an 
energy project, the National Environmental Policy Act (NEPA), while 
well-intentioned, has resulted in years of delay to the point where it 
can take longer to approve a project than to build it. These 
unreasonable delays are not only costly, but deprive the public and our 
economy of the benefits that modern infrastructure can deliver. Keeping 
our transportation, logistics, manufacturing, aviation and energy 
industries competitive in an intensely dynamic global marketplace will 
require a more transparent, fair, and nimble approval process, and as 
Congress and the Biden administration turn the page to an 
infrastructure package, it is vital these projects be built quickly and 
efficiently. The PA Chamber is a proud member, alongside leaders from 
the building trades, agriculture, construction, transportation, 
manufacturers, and trade associations as part of the Unlock American 
Investment coalition that supports reforms to NEPA.

    Finally, given the significant energy security, economic 
opportunity, and environmental benefits such a storage hub would 
represent, we strongly encourage the Biden administration and lawmakers 
to continue to support an ethane storage hub in Appalachia. Continued 
investment into the operation and expansion of domestic petrochemical 
and plastics manufacturing capacity is necessary, given that recent 
supply chain disruptions, leading to a shortage of semiconductor chips 
and plastics components, have caused automakers to halt production in 
several States. An 
energy-focused economic development strategy for Pennsylvania, as 
outlined in an economy analysis dubbed Forge the Future, has the 
potential to bring an additional $60 billion in State GDP and more than 
100,000 jobs to our State. The Appalachian region, including 
Pennsylvania, Ohio, West Virginia and Kentucky, could become a 
petrochemicals and plastic manufacturing hub--according to the American 
Chemistry Council, more than $28 billion in economic expansion and more 
than 100,000 jobs could be created should the region capitalize on an 
ethane storage project and secure the construction and operation of 
several petrochemical plants.
    pennsylvania's energy and manufacturing sectors continue to lead
    Pennsylvania is a leading State in terms of food manufacturing, 
refined products, pharmaceuticals, steel, concrete, cement, aggregates, 
and pulp and paper, as well as industries that helped us weather and 
overcome the pandemic: health care, telecommunications and logistics. 
Every one of these industries are working to innovate and make use of 
domestic energy resources to improve resiliency and sustainability. A 
few examples include:

        A major metropolitan airport working with leaders in natural 
gas and renewables to develop a microgrid using natural gas developed 
on site.
        Innovative deployment of nuclear power to provide reliable, 
baseload, zero-carbon power to a data center warehouse.
        A former underground mine now houses a secure, world-class 
data center and documents storage facility.
        Fertilizer and ammonia manufacturers producing vital products 
for the agriculture sector through the use of domestic natural gas 
liquids and carbon capture and sequestration technology.
        Use of natural gas helps a leading pharmaceutical company's 
manufacturing facility reduce.emissions and costs to remain competitive
        A cement manufacturer switching to natural gas to reduce costs 
and emissions.
        A leading pulp and paper manufacturer turning to natural gas 
for on-site heat and power to reduce cost and emissions.
        A global integrated oil and gas company selecting southwestern 
Pennsylvania to site a multi-billion-dollar petrochemical facility, 
with its produced products boosting domestic medical, automotive, and 
food manufacturing industries.
        A leading consumer products company harnesses local gas 
reserves to provide all of its heating and power needs while sending 
excess power back out to the grid.
        Waste management, logistics and utility companies are 
partnering to capture biogas for use as a clean fuel for heavy 
trucking.

    These success stories demonstrate just a fraction of the renewal of 
opportunity that can be achieved in part through policy that allows all 
segments of the energy value chain to flourish. These segments include 
the development of our natural resources, power generation from a 
diverse portfolio of fuel sources, expanded oil, gas, and electric 
infrastructure, and the use of those commodities in manufacturing and 
industry. The American economy stands to benefit tremendously as energy 
is developed and moved through infrastructure for final use in homes 
and businesses; we can also continue to secure additional improvements 
in air and water quality as we develop this value chain.
federal energy and environmental policy must also encourage investments 
  into efficiency improvements, domestic output, and long-term energy 
                                security
    We must, however, not lose sight of the fact that if the goal of 
Federal energy and infrastructure policy is to encourage and 
accommodate the rapid and efficient buildout of new and expanded energy 
and manufacturing facilities and related infrastructure, financing is 
only one aspect of the process. Permitting reform must come hand in 
hand with any Federal policy, and end-users in industrial and 
manufacturing sectors must be able to operate in a regulatory 
environment that encourages the adoption of cleaner burning fuels and 
allows such facilities' to continue and expand domestic operations. The 
PA Chamber also urges adequate funding and resources be provided to 
States commensurate with any Federal partnership in funding key 
infrastructure projects. The regulatory schema established by EPA and 
USDOT, among other Federal agencies, are in large part passed down to 
State and local resource agencies for implementation. This may come in 
the form of State environmental agencies incorporating Federal air or 
water permitting requirements into State approvals of projects. Broadly 
speaking, in many years the practical extent of EPA's involvement in 
the permit review process is to hand down substantial regulatory 
obligations to the States without commensurate funding and then delay 
projects approvals by second-guessing the State regulators' work.

    As noted previously in testimony before other congressional 
committees, economic growth and environmental progress depend upon a 
well-functioning and rational regulatory system; the Federal air 
quality permitting regime shows signs of being neither and must be 
modernized.\25\ Pennsylvania Chamber members have reported that the 
current process is an impediment to investing in the efficiency of 
their operations and improving their ability to compete abroad. Because 
of the costs associated with triggering New Source Review (NSR) 
thresholds, companies have canceled projects that would have reduced 
emissions, lowered operating costs and provided an overall benefit to 
public health and the environment. Disputes between State and Federal 
regulators over interpretation and application of regulatory criteria 
result in sizeable legal and engineering costs and leave projects in 
limbo for months, or years. Lenders will not provide financing until 
the resolution of litigation from third-party groups over the 
perpetually changing universe of Best Achievable Control Technology 
(BACT) and Lowest Achievable Emissions Rate (LAER) controls.
---------------------------------------------------------------------------
    \25\ Hearing on the CLEAN Future Act: Industrial Climate Policies 
to Create Jobs and Support Working Communities, March 18, 2021, https:/
/energycommerce.house.gov/committee-activity/hearings/hearing-on-the-
clean-future-act-industrial-climate-policies-to-create.
    New Source Review Permitting Challenges for Manufacturing and 
Infrastructure, February 14, 2018, https://www.pachamber.org/advocacy/
legislative_agenda/communications/PA_
Chamber_House_EC_Sub_Enviro_NSR_Testimony_021418.pdf.
    Modernizing Environmental Laws: Challenges and Opportunities for 
Expanding Infrastructure and Promoting Development and Manufacturing, 
February 16, 2017, https://www.pa
chamber.org/advocacy/legislative_agenda/communications/
House_EC_Sub_Enviro_Modernizing
_Environmental_Laws.pdf.

    Our members have supported reforms to these programs, including 
greater consideration for the net emissions benefit when a facility is 
going through the NSR or PSD process for a facility modification. We 
have also applauded the Trump administration's end of the longstanding 
``once in, always in'' rule for major sources of hazardous air 
pollutants, the repeal of which encouraged sustainability by no longer 
requiring facilities who reduce annual emissions below major source 
thresholds to continue to be permitted and operate as major sources. We 
also encourage contemplation of two reforms regarding the use of offset 
credits--one, given the focus of the Clean Air Act on interstate 
impacts, being expanding the geography of where a credit may be secured 
beyond the purchasing facility's region or county, and two, given the 
shortage of some types of credits and regulators' penchant for 
justifying new rules on the co-benefits of emissions not being directly 
regulated, being more accommodating to securing and retiring emission 
reduction credits (ERCs) of one pollutant (for example, nitrogen oxide) 
---------------------------------------------------------------------------
to offset emissions of another (for example, particulate matter).

    Given the challenges presented by NSR and other air and permitting 
programs, and the fact that there is no scenario in which the United 
States achieves substantial decarbonization without widespread 
deployment of carbon capture and underground storage technology (CCUS), 
policy-makers should enact reforms such that the permitting obligations 
do not discourage a power plant, manufacturing or industrial facility 
looking to retrofit CCUS technology into the facility's operations. A 
company proposing to install CCUS technology at an existing facility 
will have to undergo applicability determinations with State and 
Federal regulators to determine if the project is significant enough to 
constitute a ``major modification'' and thus subject to NSR 
requirements. NSR may also be triggered if the installation of carbon 
capture technology results in a significant change in the process 
design of the plant, even if the overall emissions profile of the 
facility does not change. In a hypothetical future carbon-constrained 
policy environment, NSR may also be triggered by power plants or 
industrial facilities seeking to install and operate carbon capture 
technology that will allow the facilities to run more frequently but 
with less emissions intensity. Depending on the structure of State air 
quality requirements (i.e., if the State outright adopts by reference 
Federal NSR requirements) and the judgment of EPA's regional air 
offices, applicability determination process may include notice and 
comment and public hearings. Should the project be located in an area 
that is in attainment with NAAQS, the project may be required to 
conduct air modeling, which can take a year. As noted in this 
testimony, there is also risk of litigation from third-party NGO's over 
what is the relevant technology under LAER or BACT. We project that, 
absent litigation and with a commitment from air quality regulators on 
timely permitting, it will take upwards of 2 years to permit a CCUS 
project in a best-case scenario. Within PJM, the installation of the 
technology may require the power plant to go idle for a period of time 
and lose out on energy and capacity market revenues, which again speaks 
to the need for a timely, fair and predictable process. Finally, there 
may be additional delays in constructing and operating infrastructure 
associated with a CCUS project, due to permitting requirements as they 
relate to endangered species, pipeline siting, underground injection 
and NEPA. These challenges were discussed in a recent report from DOE's 
Lawrence Liverpool National Laboratory,\26\ which examined challenges 
associated with constructing CCUS projects in California--an analysis 
that is especially salient given that much of the CLEAN Future Act 
appears to borrow, in both intent and design, from environmental policy 
established by California State regulators.
---------------------------------------------------------------------------
    \26\ Permitting Carbon Capture and Storage Projects in California. 
George Peridas, Lawrence Liverpool National Laboratory, February 2021, 
https://www-gs.llnl.gov/content/assets/docs/energy/
CA_CCS_PermittingReport.pdf.

    Further, as Dr. Brian Anderson, director of the Department of 
Energy's National Energy Technology Laboratory (NETL), situated in 
southwestern Pennsylvania, recently testified to the Pennsylvania State 
Senate,\27\ given the carbon-emitting resources' significant share of 
domestic energy resources and the intermittent nature of renewable 
resources such as wind and solar, carbon capture and underground 
storage ``will continue to be necessary to grid-scale energy storage 
for grid reliability during this energy transition.'' In other words, 
should Congress establish a goal of net-zero emissions for the United 
States by mid-century, it will be absolutely necessary to continue to 
invest in fossil fuel exploration and associated transmission 
infrastructure--so that both the fuels themselves and the greenhouse 
gasses produced during combustion can be moved through a robust and 
safe network of pipelines. Several leading energy companies are working 
with DOE NETL on innovative research and demonstration projects 
involving carbon capture, including applications in power generation 
and consumer products. Pennsylvania Chamber members are also working 
with innovative leaders in the ammonia and fertilizer industries to 
pair carbon capture technology with locally produced natural gas to 
produce vital products for the agriculture sector. Companies working in 
the concrete and cement industries are also switching to natural gas in 
the near term to power their industrial processes and examining ways 
to, in the long term, develop their products with carbon capture.
---------------------------------------------------------------------------
    \27\ Written Comments of Dr. Brian Anderson, Director of the 
National Energy Technology Laboratory, U.S. Department of Energy, 
Informational Briefing to the Pennsylvania Senate Environmental 
Resources and Energy Committee, March 10, 2021, https://environmental.
pasenategop.com/wp-content/uploads/sites/34/2021/03/2021-03.10.2021-
Anderson-Written-Comments_PA-Senate-ERE-Committee-8MAR2021.pdf.

    As these efforts show, traditional energy resources can be paired 
in innovative ways with new technology to create new markets and 
support vital existing industries. Continued investment into both 
electric and gas infrastructure is necessary to meeting energy and 
climate goals. As researchers as Columbia University recently noted in 
an analysis, ``while it may seem counterintuitive, investing more in 
the domestic natural gas pipeline network could help the US reach net-
zero emission goals more quickly and cheaply. Fortifying and upgrading 
the system could prepare the existing infrastructure to transport zero-
carbon fuels as they become available and, in the meantime, reduce 
harmful methane leaks from natural gas.''\28\
---------------------------------------------------------------------------
    \28\ Investing in the US Natural Gas Pipeline System to Support 
Net-Zero Targets. Blanton, Lott and Smith, Columbia University, April 
22, 2021, https://www.energypolicy.columbia.edu/research/report/
investing-us-natural-gas-pipeline-system-support-net-zero-targets.

    Pennsylvania also continues to be a leader with respect to nuclear 
power, having the second-most installed nuclear capacity of any State. 
These facilities represent nearly 80 percent of the State's zero-carbon 
generation and are supported by a strong base of vendors and human 
capital in the State, augmented by nuclear engineering graduates 
produced by leading universities such as Penn State and Carnegie 
Mellon. An economic report sponsored by our organization, the 
Pennsylvania Building and Construction Trades Council, the Allegheny 
Conference on Community Development and the Greater Philadelphia 
Chamber of Commerce found that the nuclear industry contributes 
approximately $2 billion to State GDP and supports nearly 16,000 
jobs.\29\ Nuclear jobs are also the highest-paying of all energy jobs, 
according to a recent report--105 percent more than the average median 
wage.\30\ Our State was host to the Nation's first commercial nuclear 
facility and we have a resource and knowledge base to support continued 
innovation and operation of these facilities, and it remains imperative 
that Federal policy recognize emissions reduction goals will not be met 
without continued contributions from the nuclear energy industry.
---------------------------------------------------------------------------
    \29\ Pennsylvania Nuclear Power Plants' Contribution to the State 
Economy. Brattle Group, December 2016, https://www.pachamber.org/
assets/pdf/pa_nuclear_report.pdf.
    \30\ Wages, Benefits and Change: A Supplemental Report to the 
Annual US Energy and Employment Report. NASEO and Energy Futures 
Initiatives, 2020, https://www.usenergyjobs.
org/.

    As domestic and international demand for renewable resources 
expands, it is also imperative the United States establishes policy 
that encourages the domestic mining of critical minerals, which are 
used not just in solar panels but a variety of applications in 
telecommunications, computer chips and other hardware. Pennsylvania's 
mining, steel, and timber industries, as well as that of other States, 
must not be regulated out of existence. Regardless of the composition 
of our energy mix, our economy will still need timber, aggregates, 
concrete, steel and cement to build infrastructure, and the human 
capital and equipment stock used by these industries today can be put 
to use for critical minerals mining and low- carbon manufacturing and 
infrastructure buildout tomorrow. Federal policy must also continue to 
support development of strong domestic energy and manufacturing bases, 
which includes trade policy that does not result in higher costs for 
vital supply chain components. At the same time, policy should also 
continue to encourage research and development, including advances in 
modular nuclear technology, hydrogen and other emerging energy 
---------------------------------------------------------------------------
resources.

    In closing, Pennsylvania's success in energy production and leading 
in a variety of industrial and manufacturing segments while reducing 
emissions demonstrates how competitive markets, private sector 
innovation and stable policy can reap enormous dividends for our 
environment and our economy. Our success has helped the United States 
keep costs low, produce massive economic growth, and lead the world in 
reducing greenhouse gas emissions. We stand ready to work with leaders 
in Washington to continue those trends. I reiterate our encouragement 
that the Biden administration and lawmakers on both sides of the aisle 
come together to produce durable, effective, bipartisan energy and 
environmental policy that keeps the United States in a flagship 
position in an increasingly challenging and dynamic global marketplace. 
Thank you for the opportunity to appear before you today.

                                 ______
                                 
           Questions Submitted for the Record to Kevin Sunday
                Questions Submitted by Hon. Rob Portman
    Question. Concerns have been raised regarding the tax equity 
markets and increased calls for a direct pay option for renewable 
energy credits. Some proposals have been introduced that would provide 
a direct pay option in lieu of tax credits.

    More than a decade ago, in 2009, Congress created such a program, 
called the section 1603 program. The creation of this temporary, $26 
billion section 1603 grant program was part of the American Recovery 
and Reinvestment Act in 2009 and motivated by difficult economic 
conditions and the perceived lack of tax equity in supporting renewable 
energy projects. The program allowed the Treasury Department to provide 
grants for investments in certain energy production properties in lieu 
of renewable energy tax credits.

    However, the U.S. Treasury Inspector General for Tax Administration 
(TIGTA) outlined serious issues of program integrity, such as companies 
double dipping to receive both the grant and tax credit. As we continue 
to engage in these conversations to further define the role of the tax 
code in helping our country reduce its carbon footprint, program 
integrity must remain a top priority for us.

    Do you think the vulnerabilities such a grant program may have for 
fraud, waste, and abuse limit the effectiveness of its benefits? Do 
program integrity problems, as was demonstrated in the section 1603 
program, have unintended consequences on the development of the broader 
industry?

    Answer. As our testimony noted, Pennsylvania's embrace of 
competitive markets has secured significant economic and environmental 
benefits for the State, region, and country. We therefore are concerned 
over the potential for distortive effects into the energy marketplace 
through subsidies and mandates, which too often have the effect of not 
producing innovation in the private sector but competition in the 
lobbying space to preserve favorable financial and regulatory treatment 
granted by Congress and regulators. As the Independent Market Monitor 
for the 13-State PJM grid (which manages the competitive electricity 
markets in states including Pennsylvania and Ohio) has noted on several 
occasions, ``subsidies are contagious.'' With this in mind, we must 
raise serious concerns over direct pay provisions, which as outlined in 
your question for the record would function as direct financing by the 
government to preferred energy resources in a manner that may not be 
transparent or equitable. With respect to entities without tax 
liabilities either due to the financial circumstances of a tax 
reporting period or due to their status as a non-profit, tax credits 
can still be monetized through sales between private parties. Such 
practice is common today among many recipients of tax credit programs 
and as such speaks against the need for direct pay.

    Finally, as it remains a live policy question at FERC as to how 
regional transmission organizations, who oversee electricity markets, 
must account for State and Federal subsidies in market offerings as 
established in approved tariffs such as the Minimum Offer Price Rule, 
we also encourage the committee to engage with PJM, FERC, and 
stakeholders as to how these tax credits would be incorporated into 
competitive electricity market structures in a just and reasonable 
manner.

    Please consider our organization a resource for further discussion 
on this or any other policy matter. Thank you for the opportunity to 
provide our perspective on these important matters, and for your 
leadership in promoting pro-growth tax and energy policy for our 
region.

                                 ______
                                 
        Prepared Statement of Jason Walsh, Executive Director, 
                           BlueGreen Alliance
    Thank you, Chairman Wyden, Ranking Member Crapo, and distinguished 
members of the committee. My name is Jason Walsh. I am the executive 
director of BlueGreen Alliance, a national partnership of labor unions 
and environmental organizations. On behalf of my organization, our 
partners, and the millions of members and supporters they represent, I 
want to thank you for convening this important hearing to discuss the 
role of the Federal tax code in transitioning to a clean energy economy 
and ensuring the creation of quality, family-sustaining jobs across the 
economy.

    The BlueGreen Alliance unites America's largest and most 
influential labor unions and environmental organizations to solve 
today's environmental challenges in ways that create and maintain 
quality jobs and build a stronger, fairer economy. Our partnership is 
firm in its belief that Americans don't have to choose between a good 
job and a clean environment--we can and must have both. I believe we 
are in a unique moment to address the climate crisis, create good jobs, 
and inject equity into our society as we work to rebuild our economy 
and recover from the COVID-19 pandemic.

    This committee and the U.S. tax code can play a critical role in 
achieving these goals. Federal tax policies can be enacted to ensure we 
are deploying the technology needed to meet our climate goals, while 
ensuring jobs created in the clean energy sector are high-quality union 
jobs and that investments made drive growth in U.S. manufacturing. We 
can also work to ensure equity in the transition to a clean economy by 
maximizing the benefits of job growth in the clean energy sector for 
low-income workers and workers of color, as well as for communities 
disproportionately impacted by pollution, deindustrialization, and 
energy transition.
                     good jobs in the clean economy
    We are in the midst of a massive energy transition. The world's 
leading scientific organizations have been unambiguous that climate 
change is a dire and urgent threat and that the longer we delay, the 
stronger the action required. Over the last decade, we have witnessed 
the worsening impacts climate change is having on our communities. To 
avoid the catastrophic consequences of climate change, we must ensure 
rapid greenhouse gas emissions reductions--based on the latest science 
and in line with our fair share--to put America on a pathway of 
reducing its emissions to net-zero emissions by 2050, and to ensure we 
are solidly on that path by 2030.

    As the Nation works to drive down emissions to address the climate 
crisis and fights to stay competitive in the global race to develop the 
clean technology of the future, we can see examples of how clean energy 
investments can spur economic recovery, the growth of a clean economy, 
and high-quality job creation across the country. For example, a 
heavily unionized crew of trades people built the Block Island offshore 
wind project off the coast of Rhode Island, union auto workers on 
factory floors across the country are building cleaner cars and trucks, 
and workers in St. Louis and Los Angeles are gaining access to high-
skilled jobs in energy efficiency retrofitting, pipefitting, and 
transit manufacturing. These are good, union jobs building and 
maintaining a clean energy and climate-resilient economy, today.

    At the same time, not enough of the new jobs that have been created 
or promised in the clean energy economy are high-quality, family-
sustaining jobs. Before the COVID-19 pandemic, more than 3.3 million 
Americans were working in the clean energy economy.\1\ On average, 
clean energy workers make more than the typical worker in America. A 
recent report found that clean energy jobs--defined by that report as 
jobs in renewable energy, energy efficiency, grid modernization and 
storage, clean fuels, and clean vehicles--pay 25 percent more than the 
national median wage \2\ at an average of $23.89 an hour for clean 
energy jobs compared with the 2019 national median of $19.24.
---------------------------------------------------------------------------
    \1\ BW Research Partnership, Clean Jobs, Better Jobs; An 
Examination of Clean Energy Job Wages and Benefits, 2020. Available 
online: https://e2.org/wp-content/uploads/2020/10/Clean-Jobs-Better-
Jobs.-October-2020.-E2-ACORE-CELI.pdf.
    \2\ BW Research Partnership, Clean Jobs, Better Jobs; An 
Examination of Clean Energy Job Wages and Benefits, 2020. Available 
online: https://e2.org/wp-content/uploads/2020/10/Clean-Jobs-Better-
Jobs.-October-2020.-E2-ACORE-CELI.pdf.

    However, it is also the case that workers in clean energy sectors 
earn less on average than workers in fossil fuel energy sectors. The 
primary reason for this wage gap is the gap in union density between 
renewable energy jobs and jobs in the traditional energy sector. For 
example, jobs in wind and solar industries average 4 percent to 6 
percent union density, compared to 10 percent to 12 percent union 
density in natural gas, nuclear, and coal power plants. Likewise, we 
see that clean energy-specific occupations are in general lower paid 
than traditional energy-specific occupations. While highly unionized 
fossil fuel utilities workers earn over $82,000 a year, solar PV 
installers with a 4-percent unionization rate make a median annual wage 
of less than $45,000, though that wage does increase slightly if those 
---------------------------------------------------------------------------
workers have an electrician's license.

    Wind and solar generation currently employ significantly more 
workers than most traditional energy generation sectors. Solar energy, 
which is the energy sub-sector with the lowest union density, employs 
345,393 workers. By comparison, the nuclear generation sector employs 
60,916 workers and has a much higher union density at 12 percent. 
Likewise, the wind generation sector employs 114,774 workers with union 
density of just 6 percent, while coal generation employs 79,711 with a 
unionization rate of 10 percent. The two lowest paying occupations in 
the clean energy sector--solar PV installers and wind turbine 
technicians--are also the two with the highest projected growth, 
meaning that the sectors within the energy industry that are expected 
to grow the fastest are not currently producing good-paying jobs 
relative to other jobs in the energy sector.

    Unionization is a key pathway to quality jobs and family sustaining 
wages. Union jobs on the whole pay better, have better benefits, and 
are safer than non-union jobs.\3\ Workers who are members of, or are 
represented by a union, earn significantly more than those who are not 
across all relevant industries and occupations, with especially 
pronounced benefits for lower-paid workers. For example, on average, 
union members earn a premium of 15 percent higher wages than non-union 
workers in the utilities sector, and 45 percent higher wages in the 
construction sector.
---------------------------------------------------------------------------
    \3\ AFL-CIO, Building Power for Working People, 2021. Available 
online: https://aflcio.org/what-unions-do/empower-
workers#::text=Union%20Jobs%20Help%20Achieve%20Work%2DLife
%20Balance&text=There%27s%20more%20to%20life%20than,schedules%20and%20no
%20manda
tory%20overtime.

    As we work to meet our climate goals, we need to make a massive 
investment in energy efficiency and the deployment of clean and 
renewable technology nationwide, including low- and no-carbon 
electricity production; carbon capture, removal, storage, and 
utilization; natural ecosystem restoration; and zero carbon 
transportation options. At the same time, we must ensure that these 
investments translate into good jobs and that in doing so we eliminate 
the disparities between job quality of renewable and traditional energy 
---------------------------------------------------------------------------
sectors.

    While we're working to grow clean energy jobs in this country, we 
must ensure that we are not only ensuring those are good jobs, but 
accessible jobs. This includes supporting and growing pathways into 
good union jobs in these and other sectors for workers of color and 
other segments of the population historically left out of these jobs.

    Historically--and persistently--black Americans fare worse in the 
economy, having lower wages, less savings to fall back on, and 
significantly higher poverty rates as systemic racism has stacked the 
deck against people of color. Regardless of education level, black 
workers are far more likely to be unemployed than white workers. 
Historically, unemployment rates are twice as high for black workers. 
That disparity carries into the workplace as well, with black workers 
paid on average 73 cents to the dollar compared to white workers.\4\ 
The wage gap persists regardless of education, and even with advanced 
degrees black workers make far less than white workers at the same 
level. The poverty rate for white Americans sits at about 8.1 percent. 
For black households, it is 20.7 percent.\5\
---------------------------------------------------------------------------
    \4\ Economic Policy Institute, Black workers face two of the most 
lethal preexisting conditions for coronavirus--racism and economic 
inequality, 2020. Available online: https://www.epi.org/publication/
black-workers-covid/.
    \5\ Economic Policy Institute, Black workers face two of the most 
lethal preexisting conditions for coronavirus--racism and economic 
inequality, 2020. Available online: https://www.epi.org/publication/
black-workers-covid/.

    One of the tools at our disposal in the fight for equity is 
unionization. Research has shown that through the collective bargaining 
power of unions,\6\ workers are able to get more and better benefits 
such as health insurance and pensions, and are able to fight for more 
enforcement of the labor protections they have a right to under the 
law, like enforcement of safety and health regulations, and overtime. 
And research has shown that across the board, union members earn higher 
wages than non-union workers,\7\ and the difference is most pronounced 
for workers of color and women. White union members earn on average 17 
percent more than their non-union counterparts. Female union members 
earn 28 percent more, black union members earn 28 percent more, and 
Latino union members earn 40 percent more in wages than non-union 
Latino workers.
---------------------------------------------------------------------------
    \6\ Economic Policy Institute, Black workers face two of the most 
lethal preexisting conditions for coronavirus--racism and economic 
inequality, 2020. Available online: https://www.epi.org/publication/
black-workers-covid/.
    \7\ Bureau of Labor Statistics, New Release, January 22, 2021. 
Available online: https://www.bls.gov/news.release/pdf/union2.pdf.

    Increasing union density in the clean energy sector is therefore a 
key way to address the inequity inherent in our economy. Another key 
mechanism for building career pathways and increasing access is through 
registered apprenticeship, pre-
apprenticeship, and other union-affiliated training programs. Community 
Workforce Agreements (CWAs) and Community Benefit Agreements (CBAs) are 
another key opportunity. Similar to a project labor agreement, these 
are collective bargaining agreements that are negotiated with both 
union and community partners. These types of agreements often include 
local hire provisions, targeted hire of low-income or disadvantaged 
workers, and the creation of pre-apprenticeship pathways for careers on 
the project. Beyond the obvious benefits to workers of these higher 
wage, benefit, and career path opportunities, it's also relevant to 
this committee the fiscal benefits of decreased reliance on Federal 
programs such as Medicaid, EITC, SNAP, and the like, that come with a 
well-paying union job with strong, stable benefits.
                       manufacturing supply chain
    Although the environmental benefits to Americans of a wind or solar 
farm or a car lot full of electric vehicles (EVs) may be obvious, to 
truly bring home the benefits of the clean energy transition, policy-
makers must make sure that the manufacturing facilities producing these 
products, as well as the machines that make the parts and materials 
that go into them, are also here at home. Manufacturing has a long 
history of supplying good-paying jobs to workers across this country 
and has been the backbone of the American middle class. Manufacturing 
currently employs about one in 11 American workers, in addition to 
contributing $2 trillion a year \8\ to the gross domestic product 
(GDP). However, the Nation has lost nearly 5 million manufacturing jobs 
since 1997.\9\ If the Nation fails to make the investments needed and 
put in place smart policies, American manufacturing will continue to 
weaken. Countries around the world are rushing to capture the 
manufacturing and jobs benefits of the global shift to clean energy and 
the United States could lead the pack with the right policies in place.
---------------------------------------------------------------------------
    \8\ Economic Policy Institute, The Manufacturing Footprint and the 
Importance of U.S. Manufacturing Jobs. Available online: https://
www.epi.org/publication/the-manufacturing-footprint-and-the-importance-
of-u-s-manufacturing-jobs/.
    \9\ Economic Policy Institute, We can reshore manufacturing jobs, 
but Trump hasn't done it, 2020. Available online: https://www.epi.org/
publication/reshoring-manufacturing-jobs/#::text=
Overall%2C%20the%20U.S.%20has%20suffered,Census%20Bureau%202020a%2C%2020
20b.

    Unfortunately, decades of bad policy, offshoring, and outsourcing 
have weakened supply chains and lost jobs, and the United States has 
not been taking full advantage of the opportunity to support and 
strengthen domestic manufacturing along that supply chain. Today, far 
too many of the solar panels,\10\ solar components, EV components,\11\ 
and parts and materials for wind turbines \12\ that build the clean 
economy are manufactured overseas and shipped to the United States. 
Steps should be taken now to rebuild those vital supply chains and grow 
jobs here in the United States.
---------------------------------------------------------------------------
    \10\ U.S. Energy Information Administration, U.S. shipments of 
solar photovoltaic modules increase as prices continue to fall, 2020. 
Available online: https://www.eia.gov/today
inenergy/
detail.php?id=44816#::text=Effective%20February%207%2C%202018%2C%20the,
sub
sequent%20year%20for%20four%20years.&text=In%202019%2C%20imports%20accou
nted%20for
,of% 20total%20solar%20PV%20shipments.
    \11\ United States Trade Commission, Journal of International 
Commerce and Economics, The supply chain for electric vehicle 
batteries, 2018. Available online: https://www.usitc.gov/publications/
332/journals/the_supply_chain_for_electric_vehicle_batteries.pdf.
    \12\ IBIS World, Wind Turbine Manufacturing Industry in the U.S., 
2021. Available online: https://www.ibisworld.com/united-states/market-
research-reports/wind-turbine-manufacturing-industry/.
---------------------------------------------------------------------------
Solar
    The story of the U.S. solar industry is illustrative of the 
consequences of the failure to act proactively in the early days of a 
budding industry and the need for a comprehensive, coordinated 
industrial policy that marries strong trade and manufacturing rules.

    In the early days of solar energy, the U.S. was the leader of solar 
energy research, development, and manufacturing. However, due to 
China's aggressive moves though trade policy, subsidy, and massive 
domestic investment in PV manufacturing around 2008-2013, U.S. 
manufacturing of solar components was largely pushed to the sidelines. 
Because of inconsistent international trade policy and incoherent 
Federal clean technology manufacturing strategy, the Nation has 
struggled to build a competitive solar manufacturing industry. The few 
solar manufacturers we have left rely on international supply chains.

    For example, for American polysilicon manufacturers, this means 
they are entirely captive to Chinese wafer manufacture, which dominates 
the global market, as their only customers. When China strategically 
decided to shut down the use of non-Chinese polysilicon in their wafer 
manufacturing, the U.S. suppliers were essentially frozen out of the 
supply chain. And it's no better at the other end of the supply chain, 
where U.S. module manufacturers have no control over the materials 
sourcing, labor, or environmental practices behind the key components 
in their modules, because they have no choice but to source them from 
China. Recent reporting on the substantially lower environmental, human 
rights, and labor standards, in China, show how ultimately 
unsustainable this arrangement is, for example, in the ongoing 
accusations of forced labor.\13\
---------------------------------------------------------------------------
    \13\ Council on Foreign Relations, China's Repression of Uyghurs in 
Xinjiang, 2021. Available online: https://www.cfr.org/backgrounder/
chinas-repression-uyghurs-xinjiang.

    Over the years to come, with the dramatic fall in prices for solar 
and continuing improvements in the manufacture of solar components, the 
United States has an opportunity to expand PV manufacturing capacity in 
a way that provides quality, high-road jobs. With strong deployment 
measures, crafted hand in hand with deliberate manufacturing policies--
including manufacturing investment, measures to fill critical supply 
chain gaps, and a fairer trade policy--the United States can create 
high-quality jobs and improve our economic security at the same time. 
Our policies must also support high labor and environmental standards 
throughout the clean energy supply chain.
Wind
    Primarily due to the extraordinary size of the components and the 
attendant logistical issues of international shipping, the story is 
brighter when looking at the onshore wind industry, though there is 
still room for improvement. There are currently more than 500 U.S. 
manufacturing facilities specializing in wind components.\14\ Currently 
more than 90 percent of nacelles \15\--the housing for the generator, 
gearbox, and other mechanics--for U.S. onshore wind turbines are 
assembled in the United States, along with 40 percent-70 percent of 
blades and hubs and 65 percent-85 percent of wind towers.\16\ However, 
the materials that can readily be shipped, such as internal nacelle 
components, like electronics, have very little domestic content. And 
very few of these facilities are union-represented. We must ensure we 
expand our domestic supply chain for wind and increase job quality.
---------------------------------------------------------------------------
    \14\ DOE Office of Energy and Renewable Energy, Wind Manufacturing 
and Supply Chain, 2021. Available online: https://www.energy.gov/eere/
wind/wind-manufacturing-and-supply-
chain#::text=There%20are%20more%20than%20500,to%20multi%2Dmegawatt%20po
wer%20rat
ings.
    \15\ Lawrence Berkeley National Laboratory, Wind Energy Technology 
Data Update: 2020 Edition, 2020. Available online: https://
escholarship.org/uc/item/9r49w83n.
    \16\ Lawrence Berkeley National Laboratory, Wind Technologies 
Market Report, 2020. Available online: https://emp.lbl.gov/wind-
technologies-market-report.

    The opportunities and risks are even more acute with respect to the 
budding offshore wind industry. The potential for responsible offshore 
wind development in the United States is substantial. According to the 
U.S. Department of Energy, if the Nation utilized even 1 percent of its 
technical potential offshore wind capacity, it could power nearly 6.5 
million homes.\17\ The industry is rapidly expanding both domestically 
and internationally.
---------------------------------------------------------------------------
    \17\ DOE Office of Energy and Renewable Energy, Computing America's 
Offshore Wind Energy Potential, 2016. Available online: https://
www.energy.gov/eere/articles/computing-america-s-offshore-wind-energy-
potential.

    Currently, the United States has just one offshore wind project 
operating--the Block Island Offshore Wind Farm off the coast of Rhode 
Island.\18\ This project was the result of years of collaboration 
between labor unions, environmental organizations, industry, and key 
government officials and entities. The project demonstrates the 
diverse, highly skilled workforce that will be necessary for all future 
offshore projects the United States is now projected to create 18.6 
gigawatts (GW) of clean and cost-effective offshore wind power in seven 
Atlantic States within the next decade.\19\ This has the potential of 
133,000 and 212,000 jobs per year in seven Atlantic States.\20\ The 
Atlantic coast States could create $200 billion in new economic 
opportunities, as well as over 43,000 high-paying, permanent jobs, 
simply by developing 54 GW of their 1,283 GW offshore wind energy 
potential.\21\
---------------------------------------------------------------------------
    \18\ Orsted, Offshore Wind Projects in the U.S., 2020. Available 
online: https://us.orsted.com/wind-projects.
    \19\ Oceana, Offshore Wind Report, 2010. Available online: https://
oceana.org/sites/default/files/reports/Offshore_Wind_Report_-
_Final_1.pdf.
    \20\ National Renewable Energy Laboratory, Offshore Wind Power in 
the United States, 2010. Available online: https://www.nrel.gov/docs/
fy10osti/49229.pdf.
    \21\ National Renewable Energy Laboratory, Offshore Wind Power in 
the United States, 2010. Available online: https://www.nrel.gov/docs/
fy10osti/49229.pdf.

    However, with very little domestic infrastructure to support 
offshore wind, the risk of components coming from overseas along with 
the installation vessels is high. For example, with the exception of 
the foundation, all of the major parts and components of the Block 
Island Wind Farm were manufactured outside of the United States. The 
nacelles for the project came from France, the towers from Spain, and 
the blades from Denmark.\22\ As the industry grows, sourcing components 
domestically represents a significant opportunity to help revitalize 
American manufacturing. SIOW's recent white paper predicts an almost 
$70 billion buildout of U.S. offshore wind supply chain by calculating 
growth in a number of sectors, which include wind turbines and towers; 
turbine and substation foundations; upland, export, and array cables; 
onshore and offshore substations; and marine support, insurance, and 
project management. However, currently there is no domestic supply 
chain for these items, meaning that we risk significant portions of the 
investment to build offshore wind projects flowing out of the economy 
to purchase technology manufactured abroad, rather than supporting the 
growth of manufacturing and jobs domestically.
---------------------------------------------------------------------------
    \22\ General Electric, My Turbine Lies Over the Ocean: It Takes 
Herculean Labor to Build America's First Offshore Wind Farm.

    Strong, long-term policy that drives rapid and responsible 
deployment and provides investment certainty in offshore wind is 
necessary, coupled with policies to ensure utilization of domestically 
manufactured materials, invest directly in U.S. manufacturing 
facilities, and in related infrastructure like transmission.
Electric Vehicles
    Happening alongside the Nation's transition to cleaner, cheaper 
forms of energy is an ongoing shift to cleaner vehicles, including EVs. 
The auto sector is at the heart of U.S. manufacturing, and ensuring the 
United States leads in EV deployment and manufacturing will be critical 
to sustaining good jobs in auto and auto components manufacturing. The 
global transition to EVs is already underway, with our competitors 
moving quickly to capture the manufacturing and jobs gains in this 
transition. Today China holds 70 percent share of global EV battery 
production capacity, with U.S. and Europe lagging with 16 percent and 
10 percent respectively. Looking out 10 years, current business-as-
usual market projection puts the U.S. even further behind--now lagging 
Europe with only 12 percent of global battery capacity. The security of 
American jobs in an EV-dominated automotive market depends on swift 
policy action to leverage our world class manufacturing base and enable 
it to move rapidly to build electric vehicles, cells, batteries, and 
electric drivetrain components, at scale, in the U.S. In short, the 
United States is at a crossroads with EV development. Either we enact 
policy that secures and potentially grows manufacturing jobs or we step 
away from technological leadership and cede the next generation of 
manufacturing jobs to our competitors.

    As is true across the clean energy sector, the quality of EV jobs 
varies a great deal throughout the industry.\23\ Looking across the 
supply chain, some manufacturers in the auto sector offer wages just 
over minimum wage with no benefits and hazardous working conditions. 
Others pay workers in the $20-$30 per hour range with full benefits and 
rigorous safety processes and oversight. Jobs in the automotive sector 
can either provide a ladder of training and rewarding career paths or 
they can be temporary and dead-end jobs.
---------------------------------------------------------------------------
    \23\ BlueGreen Alliance, Electric Vehicles at a Crossroads: 
Challenges and Opportunities for the Future of U.S. Manufacturing and 
Jobs. Available online: https://www.bluegreenalliance.org/wp-content/
uploads/2018/09/Electric-Vehicles-At-a-Crossroads-Report-vFINAL.pdf.

    As we make investments to grow deployment of energy efficiency and 
clean and renewable energy, we must ensure that those investments 
simultaneously spur growth of domestic supply chains and American 
---------------------------------------------------------------------------
manufacturing.

    And we must also ensure that throughout the manufacturing sector 
steps are taken to require or incentivize high road labor standards and 
responsible labor practices, and to strengthen workers' rights by 
protecting the right of workers to unionize, fighting back against 
offshoring and outsourcing with strong domestic procurement and trade 
policies, and discouraging worker misclassification, which allows 
employers to deny benefits to workers by claiming they are temporary or 
part-time employees while they are working full time.
                            recommendations
    I believe we can update and improve our tax policy to reshape our 
clean energy economy and ensure that family sustaining jobs come with 
it. We can also enhance tax credits to strengthen American 
manufacturing and domestic supply chains.

    In particular, I urge this committee to:

      1.  Extend and Strengthen Clean Energy Tax Credits: Key clean 
energy tax credits should be extended and strengthened, including those 
for onshore and offshore wind, solar, clean transportation, EV charging 
infrastructure, grid modernization, and energy efficiency. Congress 
should also make these tax credits temporarily refundable--many of the 
newer companies in this space don't have taxable income to fully take 
advantage of these credits and lower income consumers may be unable to 
gain the benefits of these credits if they aren't refundable. Congress 
should couple these tax credits with labor standards and procurement 
policies that ensure the use of domestic, clean, and safe materials 
made by law-abiding corporations throughout the supply chain and 
support employers that adopt high road labor practices, including 
organizing neutrality, prevailing wages, registered apprenticeship, 
protection against worker misclassification, excessive use of temporary 
labor, safety and health protections, project labor agreements, 
community benefit agreements, local hire, and other provisions and 
practices that prioritize improving training, working conditions, and 
project benefits. As I mentioned earlier, not only are these important 
worker protections, but they substantially lower costs to the Federal 
Government of enforcement actions as well as lessening the expenditures 
from low-income support programs, such as EITC, Medicaid, and SNAP.

         We are eager to engage with this committee and congressional 
offices around consideration of a technology-neutral approach to future 
energy tax credits, such as the approach outlined in Chairman Wyden's 
Clean Energy for America Act. We appreciate that this approach rewards 
carbon abatement, spurring deployment and innovation of low- and no-
carbon technologies and rewarding existing zero-emission generation. 
Nuclear power is the single largest source of zero-emission electricity 
in the United States. A recent report by the Union of Concerned 
Scientists found that nearly 35 percent of the country's nuclear power 
plants, representing 22 percent of U.S. nuclear capacity, are at risk 
of early closure or slated to retire and that retiring plants early 
could result in a cumulative 4- to 6-percent increase in U.S. power 
sector carbon emissions by 2035. The study also found that to avoid the 
worst consequences of climate change we need carbon-reduction policies 
that better reflect the value of zero-emission electricity, coupled 
with policies to ensure safety and waste remediation.

         We are also encouraged to see inclusion in this bill of 
prevailing wage and registered apprenticeship language to better ensure 
that clean energy construction jobs are safe and family-sustaining and 
provide competitive benefits. We look forward to working with Chairman 
Wyden and this committee to expand on these provisions, including 
addressing domestic content.

      2.  Support Manufacturing and Clean Energy Supply Chains: 
Policies that increase the demand for clean technology must go hand in 
hand with incentives to support and grow American manufacturing and 
domestic supply chains. Already, as the Nation increases deployment of 
clean technology, our ability to manufacture those products and the 
parts and materials that go into them is falling further behind as 
demand increases.\24\ That is why targeted investments and smart 
policies are needed to ensure that the Nation is able to capture the 
benefits of the clean energy economy.
---------------------------------------------------------------------------
    \24\ E&E News, Biden's ``Buy America'' plan may hit a solar wall, 
2021. Available online: https://www.eenews.net/stories/1063726219.

         In 2020, the BlueGreen Alliance released a comprehensive 
manufacturing agenda \25\ proposing a set of national actions to 
achieve global leadership across clean technology manufacturing; cut 
emissions from the production of essential materials; upgrade and 
modernize the entirety of the U.S. industrial base; and undertake a new 
generation of industrial development that rebuilds good American jobs 
and is clean, safe, and fair for workers and communities alike.
---------------------------------------------------------------------------
    \25\ BlueGreen Alliance, Manufacturing Agenda: A National Blueprint 
for Clean Technology Manufacturing Leadership and Industrial 
Transformation, 2020. Available online: https://
www.bluegreenalliance.org/resources/manufacturing-agenda-a-national-
blueprint-for-clean-technology-manufacturing-leadership-and-industrial-
transformation/.

         There are two key policies this committee should consider. 
First, it should renew and robustly fund the Advanced Energy Projects 
Credit (48C): The Advanced Energy Projects Credit is a 30-percent 
investment tax credit created to reequip, expand, or establish domestic 
clean energy, transportation, and grid technology manufacturing 
facilities. The program should be funded at at least $10 billion, or 
made permanent and, given the current economic climate, the program 
should be made refundable. The scope of the program should be expanded 
to capture the manufacture of key energy and carbon reducing 
technologies, such as battery cells. Furthermore, both the manufacture 
of and deployment of industrial emissions reduction technologies and 
processes should be eligible for support under this or other existing 
---------------------------------------------------------------------------
relevant tax credits.

         We also recommend the committee improve the 48C tax credit 
along the lines of the American Jobs in Energy Manufacturing Act, 
sponsored by Senators Stabenow and Manchin, which would ensure projects 
pay prevailing wage and would be targeted in a way to support clean 
technology manufacturing in communities that have lost jobs in 
manufacturing, mining, or power generation and other disadvantaged and 
impacted communities and should prioritize those firms hiring displaced 
workers. Legislation like this can help jumpstart our economic 
recovery, ensure we are building America's energy future here at home, 
reduce industrial emissions, and deliver good union jobs for workers 
and the communities that need it the most, including those impacted by 
changes in our Nation's energy systems.

         Second, it should create an incentive, similar to the 45M 
technology production tax credit (PTC) to create a durable incentive 
for domestic production of strategic clean energy and vehicle component 
technologies. In addition to the up-front investment incentive of 48C, 
this structure would give an incentive to expand operations to a 
globally competitive scale quickly and substantially. For example, to 
help fill gaps in the solar supply chain, such a manufacturing PTC 
could provide a per-unit or per-watt credit for domestically produced 
modules, photovoltaic cells, photovoltaic wafers, and solar grade 
polysilicon. Coupling a PTC with other manufacturing and deployment 
incentives could help reverse decades of disinvestment, offshoring, and 
inconsistent manufacturing policy that has weakened our once 
competitive edge. Importantly, such an incentive would reward large 
scale and efficiency, exactly what we need to compete in these rapidly 
expanding global industries and help ensure our manufacturing remains 
strong and resilient against future subsidies and potential dumping by 
our competitors. We need a coordinated approach, including measures 
such as an adapted 45M technology production tax credit as proposed 
here, to incentivize strategic technology manufacturing here, harness 
American ingenuity, and drive down deployment costs while adding 
family-sustaining jobs across the country.

      3.  Support a job-sustaining transition to clean vehicles: 
Consumer incentives stand to play a significant role in shaping the 
shift to electric vehicles and the manufacturing, jobs, and community 
impacts of that transition. The existing 30D consumer tax credit should 
be updated to support domestic assembly, domestic content, and high-
road labor standards. The structure of the credit must help retain and 
grow the next generation of high-skill, high-wage, family-supporting 
jobs in the United States and support the growth of high-volume, high-
quality domestic electric vehicle production and supply chains 
necessary to remain competitive in this space over the long term. To 
address equity issues with the existing credit, the credit should be 
converted to a refundable credit or ideally refunded at the point of 
sale, and the incentive should be targeted towards more moderate income 
and working-class households. Additionally, we believe that Congress 
should establish a tax credit to incentivize the purchase of used EVs, 
which could improve access to EVs for low- and moderate-income 
consumers, and Congress should ensure that such a credit is similarly 
refundable and targeted. Additionally, similar criteria for domestic 
manufacturing, labor standards, and addressing equity should be applied 
to the 30B credit for other advanced technology vehicles.

         We also support the ongoing work to expand the 30C tax credit 
for charging infrastructure, as the robust proliferation of easily 
accessible charging will be essential to the success of EV adoption. 
Incentives for charging infrastructure should ensure availability for 
all communities, with a priority on filling gaps in low-income, rural, 
and deindustrialized communities and communities of color, and 
availability for residents of multi-family housing, and be refundable. 
These incentives should also require certified training of electric 
vehicle supply equipment (such as the Electric Vehicle Infrastructure 
Training Program, or EVITP) and the domestic manufacture of charging 
stations.
   potential impact of good jobs and domestic manufacturing in clean 
                                 energy
    This committee is gathered today to discuss the tax code's role in 
creating American jobs, achieving energy independence, and providing 
consumers with affordable, clean energy. I'm here to argue that we can 
achieve all of these policy goals while also ensuring that workers are 
paid fair wages, that we support and grow our domestic manufacturing 
supply chains, and that communities that have traditionally been left 
behind in our economy experience the gains in clean air, clean water, 
and middle-class-enabling jobs. This is a classic example of the 
BlueGreen Alliance's mission: we don't have to choose between achieving 
our climate goals by deploying clean, affordable energy and creating 
quality, family-sustaining jobs across our economy. We can have both at 
the same time.

    Researchers from Princeton University \26\ in a recent working 
paper found increasing wages for workers in the clean energy sector by 
20 percent would only increase the capital costs of solar and wind 
projects by 2-4 percent and operations and maintenance costs by 
approximately 3-6 percent across technologies, assuming current 
domestic content shares. Those small technology cost increases may very 
well be offset by an increase in labor productivity--an increase, by 
the way, that often comes from better training and the stability that 
comes from higher wages. For example, a 20-percent labor cost premium 
can be offset by an increase in domestic labor productivity of 20 
percent. The research also found the impact of increased domestic 
manufacturing for clean energy to be similarly minimal, with a 10-
percent increase in domestic sourcing associated with only a 1-percent 
increase in project costs for solar PV projects.
---------------------------------------------------------------------------
    \26\ Princeton University, Influence of high road labor policies 
and practices on renewable energy costs, decarbonization pathways and 
labor outcomes, 2021. Available online: https://www.dropbox.com/sh/
ad9pzifo9w1a49u/AAC2milGD44MlwXo1Sk7EAgsa?dl=0.

    When looking at the larger picture of the impact that increasing 
the wages of clean technology workers and domestic content utilization 
would have on the total cost of transitioning to a clean energy system, 
again, the Princeton researchers found that the impact was very 
minimal, determining that there is only a 3-percent difference in 
supply-side investment cost over the entire transition period from 2020 
to 2050, and that these costs would have no recognizable impact on 
---------------------------------------------------------------------------
deployment of clean energy.

    While increasing wages and the amount of domestic content in the 
solar and wind energy industries will have a very minimal impact on 
project costs, workers in those industries would see significant 
benefits, including billions in higher wages and hundreds of thousands 
of new jobs in the 2020s. The researchers found paying workers 20 
percent more and increasing the use of domestic content would generate 
an additional $5 billion in annual wages in the 2020s, which equates to 
increasing each worker's average annual wages by over $12,000-$13,000. 
And by producing more of these components here in the United States, we 
can support an additional 45,000 jobs in the 2020s. Importantly, this 
committee has before it a set of policies that it can undertake to 
ensure that even these small potential increases are ``lost in the 
noise'' of robust incentives to re-shore and expand domestic 
deployment. The smart incentives we're talking about today can not only 
increase the standard of living of millions of Americans, but can 
increase their quality of life, all while continuing to drive down the 
costs of the clean energy technologies we need to deploy to secure our 
children's future--a win-win-win opportunity that is nearly 
unprecedented in our history.
                               conclusion
    As the United States ramps up efforts to grow the clean economy, we 
must invest in a range of clean energy sources, energy efficiency, and 
electric vehicles. At the same time, moving forward without putting the 
right policies in place to lift up the quality of the jobs created and 
ensure workers and communities see the benefits of these investments 
would put the burdens of economic transition on workers.

    Through Federal tax policy, we can make strategic investments in 
clean energy projects in ways that ensure the jobs created are good 
jobs and that the investments deliver gains for American manufacturing, 
for workers, and for communities, particularly disadvantaged 
communities and workers. I urge this committee to advance policies to 
support clean energy development together with high-road labor 
standards and policies to reinvigorate our domestic supply chains and 
American manufacturing, and to prioritize these investments in places 
hit by energy transition and deindustrialization.

    Thank you for the opportunity to speak in front of the committee.

                                 ______
                                 
           Questions Submitted for the Record to Jason Walsh
           Question Submitted by Hon. Catherine Cortez Masto
    Question. In line with Chairman Wyden's tech-neutral legislation 
which outlined a stand-alone investment tax credit for transmission, 
and in order to direct public dollars to the appropriate projects, we 
must ensure that any project meets sufficient capacity. Do you think 
that the incentive needs to be focused on building large-scale, 
interregional, difficult-to-build transmission lines, not subsidize 
lines within already existing utility territories?

    Answer. Thank you for the question. In my testimony, I spoke about 
how we should create policy that supports the deployment of clean 
energy and related infrastructure including expanding our transmission 
capacity and grid security.

    To accommodate for the increased demand for renewable energy, we 
need to build out our transmission lines by two or three times our 
grid's current capacity. I believe we should incentivize new 
transmission capacity for where it is necessary, which will 
predominantly be new lines, connecting existing or future projects. The 
Federal Government should increase availability for Federal loan 
guarantees and grants for high-voltage transmission lines. DOE should 
develop a national transmission plan and address gaps in the grid to 
avoid shortages and ensure consistent supply. We should also increase 
funding for energy storage and grid resiliency RD&D. We can do this 
through revitalizing the Smart Grid Investment Grant Program, and 
increasing funding for the Energy Storage program. That said, ensuring 
existing lines within utility territories have the capacity to 
transport the energy necessary should also be a competitive factor when 
awarding Federal funds. Further, lines built with Federal dollars 
should also have high-road labor standards, such as prevailing wage and 
apprenticeship utilization. We were pleased to see these standards 
included in the chairman's Clean Energy for America Act, which has an 
investment tax credit for transmission. Additionally, high-voltage 
lines should utilize domestically sourced materials and supply chains 
when possible.

                                 ______
                                 
                 Question Submitted by Hon. Todd Young
    Question. Thank you for your comments during the hearing related to 
Federal investment in hydrogen. Beyond the promising energy uses, you 
had mentioned some other unique opportunities for hydrogen utilization.

    Can you please expand further on the economic opportunities that 
hydrogen energy provides given its broad potential in the electricity 
sector--in addition to transportation, energy storage, and many other 
uses?

    Answer. Thank you for this question. As I mentioned in the hearing, 
hydrogen has enormous potential as an energy carrier.

    We are particularly interested in the role zero-carbon hydrogen can 
play in reducing emissions from hard-to-abate sectors, like heavy 
industry. Manufacturing is critical for the health of our economy, and 
the industrial sector is a key source of good jobs for American 
workers. At the same time, the sector represents a large and growing 
share of U.S. greenhouse gas emissions. To meet our climate goals, we 
need to reduce these emissions while ensuring we do not drive jobs and 
emissions overseas.

    Using zero-carbon hydrogen as a fuel or feedstock for industrial 
processes is a promising pathway to reduce industrial emissions. As one 
example, primary steel can be produced through direct reduction of iron 
ore with renewables-based hydrogen as a fuel and feedstock instead of 
coal. These kinds of projects are already underway. In Hamburg, 
Germany, ArcelorMittal launched a project aimed at the first industrial 
scale production and use of Direct Reduced Iron (DRI) made with 100 
percent hydrogen as the reductant. And in a trial at its Hofors mill, 
the Swedish steel maker Ovako found that using hydrogen instead of 
natural gas as a source of high-temperature heat is not only possible 
to power commercial steel production but also had no effect on the 
quality of steel.

    Hydrogen is also showing promise as a fuel source for aviation, 
marine shipping, and long-haul trucking--sectors where electrification 
is more challenging.

    What is more, hydrogen allows us to decarbonize sectors while using 
some of our existing infrastructure and workforce. And workers, 
especially those already trained in the utility sector and in 
pipefitting, already have many of the skills necessary to operate a 
hydrogen economy.

    As I mentioned in the hearing as well, while hydrogen is promising, 
we need to work out concerns over safety and co-pollutants.

                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon
    The Finance Committee meets this morning for its first hearing on 
the climate crisis since 2009. It comes right on the heels of President 
Biden's announcement of an ambitious new climate goal: cutting 
emissions at least in half by the end of the decade compared to 2005 
levels. That target comes with a lot of big challenges, starting with 
energy-related emissions, as well as transportation.

    The reality is, a debate on energy and transportation is largely a 
debate on tax policy. That puts this committee in the driver's seat 
when it comes to job-creating legislation that addresses head-on the 
existential challenge of the climate crisis.

    The energy tax code in America is a cluttered, old heap of more 
than 40 different tax breaks for a variety of energy sources and 
technologies, including clean energy and transportation. Most of those 
incentives are temporary. That keeps clean energy businesses and 
workers living in an uncertain state of limbo. On the other hand, at 
the base of this system are century-old, permanent tax breaks for oil 
and gas companies. There's no uncertainty for them; they get guaranteed 
benefits funded by American taxpayers every year.

    At a time when people in Oregon and around the country are 
routinely clobbered by the disastrous effects of the climate emergency, 
it's important to be clear about what this broken, old energy tax 
system means in practice. Under the laws on the books, taxpayers are 
subsidizing the climate crisis. That's what it means when fossil fuel 
interests get special, permanent breaks above and beyond what's 
available to everybody else.

    There's a taxpayer subsidy for megastorms and terrible floods along 
our coastlines and waterways. There's a taxpayer subsidy for massive 
wildfires bigger and hotter than any the west experienced decades ago. 
There's a taxpayer subsidy for wintertime bouts of extreme cold that 
send the privileged fleeing to tropical resorts while their neighbors 
freeze to death in their homes. What's worse, taxpayers are also on the 
hook for much of the cleanup when disasters strike.

    Last week I introduced the Clean Energy for America Act that would 
throw the old set of more than 40 tax breaks in the dustbin. The bill, 
which has more than two dozen cosponsors, would replace that old 
hodgepodge with a new set of three incentives: one for clean energy, 
one for clean transportation, and one for energy efficiency.

    Experts tell us that getting the policy right in those areas is the 
whole ballgame. This emissions-based approach also works hand in glove 
with the smart, fresh ideas that several other members will bring 
forward today.

    In terms of tax certainty and predictability, it would level the 
playing field for everybody. It would be a job-creating, free market 
competition to get to net-zero carbon emissions. Clean energy producers 
and businesses that focus on cutting-edge transportation would no 
longer have to worry about their tax incentives disappearing because 
Congress is deadlocked yet again. The bill would help to supercharge 
innovation in clean transportation and energy storage.

    That's a big reason why there's a new coalition lining up behind 
this proposal. The Environmental Defense Fund, the Sierra Club, the 
Natural Resources Defense Council, the building trades and the Edison 
Electric Institute, among others, have all announced support for this 
bill. It's a new coalition for a new day.

    There's a big opportunity in the months ahead to pass this 
legislation along with investments in communities that powered the 
United States over the last century. It's essential to make sure that 
nobody is left behind in the process of tackling these challenges and 
moving to clean energy.

    This is the right approach for high-wage, high-skill jobs. This is 
the right approach for addressing the existential threat of the climate 
emergency. This is the right approach for promoting innovation and 
competing with companies in China and around the world. If the Congress 
doesn't work hard to create these jobs in America, other countries are 
going to grow at our expense.

    I'm looking forward to discussing the Clean Energy for America Act 
today. And I want to thank our excellent witness panel for joining the 
committee.

                                 ______
                                 
                             Rhodium Group

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                        U.S. Energy and Climate

                             April 20, 2021

Pathways to Build Back Better: Jobs From Investing in Clean Electricity

One of the primary goals of President Biden's American Jobs Plan is to 
create millions of new jobs through new federal investments in clean 
infrastructure. This note focuses on the electric power sector and 
assesses job creation and retention potential associated with a 
substantial clean energy investment package. We find that investments 
in decarbonizing electricity on net can create more than 600,000 jobs a 
year on average over the timeframe of 2022-2031. We find that the jobs 
created or retained in clean generation far outweigh jobs lost at 
fossil fuel-fired power plants and upstream fuel supply.

Investing in a clean future

President Biden's American Jobs Plan (AJP) includes a series of new 
programs and extensions of tax credits to drive investment in new clean 
electricity infrastructure. The core of the plan is a Clean Electric 
Standard (CES) coupled with a long-term extension of renewable tax 
incentives and new tax credits for storage and transmission. Meanwhile, 
members of Congress are considering their options for clean electricity 
investment policies and procedural pathways for passing legislation. We 
previously assessed the impact of an investment package consisting 
solely of tax credits and incentives to expand new clean generation, 
retain existing clean capacity and accelerate coal retirements. That 
research found that the federal spending package on its own could get 
electric power sector emissions on a straight-line path to zero in 
2035, at least through 2025. In 2031, the package drives emissions down 
to 66-74% below 2005 levels depending on the costs of clean energy 
technologies (Figure 1). EPA regulations on CO2 and 
conventional pollutants deliver further gains.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


In this note, we take the next step and quantify the employment 
impact of our investment scenario. With 9 million Americans still out 
of work 14 months into the COVID-19 pandemic, understanding if and how 
new clean energy investments can get people back to work is critical. 
While our investment scenario is not identical to the clean electricity 
provisions in the AJP, it is directionally consistent. Our investment 
scenario also reflects recent legislative proposals, including the 
Clean Energy for America Act and the American Nuclear Infrastructure 
Act. While it's too early to know the contents of a congressional clean 
electricity infrastructure package, we think that the investment 
scenario is a decent proxy for what potentially is yet to come. It is 
also a good foundation for assessing the job impacts of clean 
electricity investment overall.

A clean infrastructure investment transition

As we discussed in our previous note, federal investment can drive new 
clean capacity additions onto the grid at an annual average rate up to 
twice as fast as last year's record. Investment also retains existing 
clean generators such as nuclear plants that would otherwise retire due 
to competition with cheap natural gas. The net impact is a surge of 
zero-emitting generation onto the grid over the next decade at the 
expense of coal and natural gas. In our analysis, on an annual average 
basis over the 2022-2031 budget window, every 3 megawatt-hours (MWh) of 
additional clean generation from investment displaces roughly 2 MWh of 
natural gas combined cycle (NGCC) generation and 1 MWh of coal. This 
leads to 307-328 MWh of additional nuclear generation and 204-318 MWH 
of wind and solar compared to current policy (Figure 2). The range 
reflects mid and low technology costs. Meanwhile, coal declines by 182-
198 MWh, and NGCCs ramp down by 330-420 MWh on an annual average basis.

Reductions in fossil generation directly impact jobs both at the power 
plants generating electricity and at the coal mines and gas fields 
where the power plant fuel comes from, and in the transportation of 
those fuels to generation sites. The main driver of jobs associated 
with clean energy is the number of gigawatts (GW) of retained and new 
capacity built in response to federal investment. Think workers running 
nuclear plants and crews building record amounts of wind, solar, and 
storage over the next decade across the US. On a cumulative capacity 
basis, retained and new clean capacity dwarf the decline of fossil 
capacity (Figure 3). Under mid tech costs, clean capacity additions and 
retentions are 6.5X greater than fossil subtractions. This grows to 
nearly 9X when we consider low tech costs.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


All of the new clean capacity additions and clean capacity 
retention reflect private investment into US clean energy 
infrastructure leveraged by federal spending. We estimate that federal 
spending catalyzes $332-$399 billion in net new investment in the bulk 
power system from 2022 through 2031. The investments consist of $244-
$361 billion for new and retained capacity, plus another $26-$59 
billion in transmission and $62-$79 in net new spending on operation 
and maintenance of generators (Figure 4). Meanwhile, switching the grid 
from fossil to clean results in $104-$119 billion in savings from 
avoided fuel costs. While this represents savings for consumers, it 
also reflects fewer work opportunities for coal miners, gas drillers, 
and fossil power plant operators.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

The employment implications of federal electricity investment

To assess what new federally driven spending on electricity 
infrastructure and clean energy deployment means for jobs, we developed 
an employment projection model calibrated to the Energy Futures 
Initiative and NASEO's annual US Energy and Employment Report. This 
survey identifies total annual employment in both electricity 
generation and fuel supply, broken down by technology and sector. We 
identify employment intensity trends in all generation technologies 
over the past five years (including solar, wind, geothermal, nuclear, 
coal, natural gas, oil, geothermal, hydro, and biomass), as well as all 
fuel supply and transportation categories and transmission investment 
by comparing historical employment survey data from the US Energy and 
Employment Report with historical energy data from the Energy 
Information Administration (EIA). We then apply these historical 
relationships to projected changes in electricity capacity additions, 
retirements, transmission buildout, and fuel supply from RHG-NEMS, a 
detailed energy system model used to produce the generation, capacity, 
and investment results described above.

We find that in our investment scenario, net national employment in 
power generation, upstream fuel supply, and downstream transmission is 
290,000 jobs higher on average between 2022-2031 in our mid technology 
cost case and 606,000 jobs higher in our low technology cost case than 
under current policy over the same period (Figure 5). That's 2.9 and 
6.1 million job-years respectively. In our mid technology cost case, 
coal mining and transportation jobs are 14,000 and coal generation jobs 
are 11,000 lower in the investment scenario than in the current policy 
counterfactual. Natural gas production and transportation jobs are 
31,000 lower and generation jobs are 3,600 lower (oil-related jobs are 
relatively unchanged due to the small amount of oil used for power 
generation in the U.S.) These losses in fossil fuel employment are 
dwarfed by gains in nuclear and renewable generation, battery storage 
and transmission. 26,000 jobs are saved at currently operating nuclear 
plants and 278,000 jobs are gained through the manufacture, 
installation and operation of new wind, solar, geothermal and other 
renewable energy sources. Jobs associated with building and operating 
transmission lines and battery storage are 33,000 and 11,000 higher 
respectively on average between 2022 and 2031 in our investment 
scenario than under current policy.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

In our low technology cost case, coal employment (mining, 
transportation and power generation) is 27,000 jobs lower and natural 
gas employment (production, transportation and power generation) is 
46,000 jobs lower on average between 2022 and 2031 as a result of 
federal clean electricity investment than under current policy. But the 
job gains in clean generation, storage and transmission are more than 
8x larger than those lost in fossil generation and upstream fuel 
supply. Renewable electricity-related jobs are 548,000 higher on 
average between 2022 and 2031. Transmission jobs are 75,000 higher and 
battery storage jobs are 28,000 higher. All told, we project 1.7 
million Americans on average would be working in the manufacture, 
installation and production of clean electricity between 2022 and 2031 
(Figure 6). That's nearly 1 million more than work in these fields 
today, and 679,0000 more than would be employed under current policy 
over that same time period. In our investment scenario, clean 
electricity would employs as many people between 2022 and 2031 in the 
US as all fossil fuel production, transportation, distribution and 
generation combined.

A core promise of the AJP is not just creating jobs but creating 
``good-paying union jobs.'' How do the clean electricity jobs a federal 
investment package would create fare on this metric? A new US Energy 
and Employment Report provides national survey data on current average 
wages across all occupations associated with different energy sources 
(Table 1). Unfortunately, there is not the same kind of comprehensive 
survey data on unionization rates. The US Energy and Employment Report 
recommends the federal government start collecting and publishing these 
data going forward.

Across all energy types, median hourly wages are considerably higher 
than the national median wage. Workers in nuclear power and electricity 
transmission and distribution earn the most--105% and 66% more than the 
national median, respectively. In our investment scenario there are 
49,000 more jobs on average in these areas combined between 2022 and 
2031 in our mid technology cost case, and 103,000 more in our low 
technology cost case. Coal and natural gas jobs, both of which decline 
in our investment scenario relative to a current policy counterfactual 
pay 50% and 59% more than the national median respectively. Median 
wages for wind, solar and storage jobs, all of which grow considerably 
in our analysis, are 36%, 28%, and 27% higher than the national median.


        Table 1. Average Wages by Energy Type Across Occupations
                         Thousand full-time jobs
------------------------------------------------------------------------
                                                   Premium Compared to
  Industry Crosscut      Median Hourly Wage          National Median
------------------------------------------------------------------------
Coal                                   $28.69                     49.9%
 
Natural Gas                            $30.33                     58.5%
 
Oil                                    $26.59                     38.9%
 
Nuclear                                $39.19                    104.8%
 
Wind                                   $25.95                     35.6%
 
Solar                                  $24.48                     27.9%
 
Electricity                            $31.80                     66.1%
 Transmission and
 Distribution
 
Electicity Storage                     $24.36                     27.3%
------------------------------------------------------------------------
Source: U.S. Energy Employment Report.


It's worth noting that while the majority of current solar jobs are 
associated with rooftop solar and other distributed applications, the 
majority of additional solar capacity built in our investment scenario 
is utility-scale solar serving the bulk power system. Utility-scale 
solar is less labor intensive than distributed solar, so this feature 
of our modeling significantly reduces projected job gains compared to a 
future where the current split between utility-scale and distributed 
solar remained constant. But utility-scale solar-related jobs also tend 
to pay more and are more likely to be unionized, so we would expect the 
median wage associated with the renewable energy jobs created as a 
result of the plan to be higher than Table 1 suggests. The inclusion of 
prevailing wage, project labor agreement (PLA) or other job quality 
requirements in a federal infrastructure package, as some in Congress 
are considering, would further increase future wages in renewable 
energy-related professions.

While the increase in clean generation jobs we project in our analysis 
far outweighs declines in fossil generation jobs and associated fuel 
supply, Congress can take additional steps to mitigate the impact of 
those job declines--particularly for coal communities. In our 
investment scenario, total natural gas-related employment still grows 
relative to 2019 levels, just less than it would under current policy. 
Oil-
related employment stays relatively flat. Coal-related employment, 
which has been declining for decades, continues to fall sharply under 
current policy due to already announced and projected coal power plant 
retirements. Average annual employment between 2022 and 2031 is 42% 
lower than 2019 levels in our low technology cost case. In our 
investment scenario this grows to 56%. There will be some opportunities 
for coal mine, transport and power plant workers to find employment in 
renewable energy, nuclear, transmission, storage, or in carbon capture 
and sequestration (which is not the focus of this analysis but a likely 
additional area of infrastructure investment with substantial economic 
and employment benefits). But investments as part of a federal 
infrastructure package can also help diversify the economic and 
employment base of coal communities beyond energy and create new 
pathways to economic growth and prosperity.

Conclusion

It's still unclear whether a clean energy infrastructure investment 
package will make it through Congress, and if it does, what it will 
include. What is clear from our analysis is that an ambitious effort to 
invest in decarbonizing the electric system will, on net, create and 
retain far more jobs in clean generation than will be lost in fossil 
fuel generation and associated fuel supply. These can be well-paid, 
high-quality jobs, particularly if an infrastructure investment package 
includes labor standards and support for coal communities. If one of 
the goals of an infrastructure package is to get Americans back to work 
after a pandemic-induced recession, robust investment in the electric 
power sector is a solid place to start.

Disclosure Appendix

This nonpartisan, independent research was conducted with support from 
Bloomberg Philanthropies, ClimateWorks Foundation, the Heising-Simons 
Foundation, and the William and Flora Hewlett Foundation. The results 
presented in this report reflect the views of the authors and not 
necessarily those of supporting organizations.

This material was produced by Rhodium Group LLC for use by the 
recipient only. No part of the content may be copied, photocopied or 
duplicated in any form by any means or redistributed without the prior 
written consent of Rhodium Group.

Rhodium Group is a specialized research firm that analyzes disruptive 
global trends. Our publications are intended to provide clients with 
general background research on important global developments and a 
framework for making informed decisions. Our research is based on 
current public information that we consider reliable, but we do not 
represent it as accurate or complete. The information in this 
publication is not intended as investment advice and it should not be 
relied on as such.

                                 ______
                                 

                             Communications

                              ----------                              


                       American Chemistry Council

                         700 Second Street, NE

                          Washington DC 20002

May 10, 2021

The Honorable Chairman Wyden
The Honorable Ranking Member Crapo
U.S. Senate
Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

Re: Senate Committee on Finance Hearing on ``Climate Challenges: The 
Tax Code's Role in Creating American Jobs, Achieving Energy 
Independence, and Providing Consumers with Affordable, Clean Energy'' 
Hearing April 27, 2021--10 a.m.

Dear Chairman Wyden and Ranking Member Crapo:

The American Chemistry Council (ACC) represents the leading companies 
engaged in the business of chemistry. ACC member companies apply the 
science of chemistry to create and manufacture innovative products that 
make people's lives better, healthier, and safer. The business of 
chemistry is a $565 billion enterprise and a key element of the 
nation's economy. Over 25% of U.S. GDP is generated from industries 
that rely on chemistry, ranging from agriculture and automotive to 
semiconductors and electronics, textiles, pharmaceuticals, and building 
and construction. Materials and technologies from our industry are used 
to create solutions that enhance sustainability, including electric and 
fuel-efficient vehicles, wind turbines, solar panels, advanced 
batteries, and energy-efficient building materials.

To fight climate change, we call upon Congress to enact legislation 
that will:

      Increase government investment and scientific resources to 
develop and deploy low emissions technologies in the manufacturing 
sector;

      Adopt transparent, predictable, technology- and revenue-neutral, 
market-based, economy-wide carbon price signals; and

      Encourage adoption of emissions-avoiding solutions and 
technologies throughout the economy to achieve significant emissions 
savings.

More specifically, ACC appreciates the opportunity to submit comments 
in response to the Committee's hearing in late April concerning use of 
the tax code to combat climate change. We approve of all approaches 
that support U.S. competitiveness and recognize contributions from the 
products of chemistry to avoid greenhouse gas emissions--including use 
of the tax code.

To that end, ACC has several suggested proposed changes to the tax 
code. These include:

      Temporarily extend and expand the Section 48C clean energy 
manufacturing tax credit and ensure it includes a broad range of 
technologies, including those that are nascent.

      Increase the value of the Section 45Q tax credit for Carbon 
Capture Utilization and Storage, extend the start of construction date 
to 2031, and lower the volume threshold.

      Establish a technology-neutral incentive for production of low-
carbon hydrogen.

      Temporarily extend and expand the Section 25C and Section 45L 
tax credits to promote energy efficient construction and home energy 
efficiency retrofits in a technology-neutral manner.

      Simplify the cost recovery for energy-efficient building 
improvements, for example, by enacting the E-QUIP Act and/or enhancing 
the Section 179D tax deduction.

We are encouraged that many of our suggestions were the topic of the 
hearing in late April. We look forward to continuing our engagement 
regarding such changes.

Sincerely,

Robert B. Flagg
Senior Director, Federal Affairs

                                 ______
                                 
                  American Petroleum Institute et al.

                200 Massachusetts Avenue, NW, Suite 1100

                       Washington, DC 20001-5571

    Our organizations represent all the diverse segments of the natural 
gas, oil, and fuels industry--ranging from fully integrated oil and 
natural gas companies to independent companies. Together, our industry 
employs almost 11 million people. Our members are producers, refiners, 
suppliers, retailers, pipeline operators and marine transporters, as 
well as service and supply companies providing much of our nation's 
energy.

    As the Senate Finance Committee considers changes to the domestic 
and international components of the United States' Internal Revenue 
Code, our organizations wish to submit this statement for the record to 
ensure all due consideration is given to 1) the contributions made by 
the oil and natural gas industry in combating global climate change; 2) 
the unique aspects of the industry necessitating specific taxation 
rules; and 3) the impact our industry has on the many communities 
across the country.

    The oil and natural gas industry will also continue to play an 
essential role in the ongoing economic recovery and expansion related 
to the global COVID-19 pandemic. Our organizations support policies 
that will continue to facilitate the development of affordable, 
reliable, and sustainable energy and look forward to working with the 
Senate Finance Committee to achieve these objectives.
 Achieving and Maintaining American Energy Independence and Emissions 
        Reduction
    The last decade of American energy production has moved the U.S. 
into the enviable position of being the world's energy leader. The days 
of the U.S. being dependent on energy sources from our global 
competitors and unfriendly regimes is no longer a reality thanks to the 
American energy renaissance. Prior to the COVID-19 pandemic, the U.S. 
was a net exporter of energy in 2020.\1\ This occurred simultaneously 
\2\ with the U.S. becoming the leader in global carbon dioxide 
reductions since 2000.\3\ A vast majority of these reductions were due 
to innovations implemented by the oil and natural gas industry. 
Ensuring the U.S. tax code adequately recognizes the unique aspects of 
the industry-which has made the American energy renaissance and carbon 
emissions reductions possible-is essential if further emissions 
reductions are to be achieved.

    \1\ EIA, ``U.S. total energy exports exceed imports in 2019 for the 
first time in 67 years,'' https://www.eia.gov/todayinenergy/
detail.php?id=43395.
    \2\ U.S. Energy Information Administration, ``U.S. Energy Facts 
Explained,'' https://www.eia.gov/energyexplained/us-energy-facts/.
    \3\ UN Climate Change ``GHG data from UNFCC'' (CO2 Total 
w/o LULUCF 2000-2018), https://unfccc.int/process-and-meetings/
transparency-and-reporting/greenhouse-gas-data/ghg-data-unfccc/ghg-
data-from-unfccc.

    It is of critical importance these innovations be paired with a tax 
code that recognizes the differences between oil and natural gas 
production and other industries. Preserving intangible drilling costs 
(IDCs) achieves this goal and puts the oil and natural gas sector on a 
level playing field with other industries who get to immediately 
expense their expenditures. IDCs also take into account the unique 
aspects of the industry that distinguish it from others. By definition, 
the oil and natural gas reserve is a depleting resource. When a 
productive well is found, it immediately contains less resources. To 
continue providing domestically sourced and cost-efficient energy, new 
wells must be continually drilled. By comparison, other industries can 
use the same robot, structure, or piece of equipment for many years 
---------------------------------------------------------------------------
before having to replace it.

    Drilling is also still an inexact science. Although the odds of 
drilling a ``dry hole'' are far lower than in the past, nonproductive, 
or dry, holes still occur. When constructing a piece of tangible 
equipment, provided that the plans are followed, a usable piece of 
equipment will be placed in service. There is no such guarantee with 
oil and natural gas production. Allowing the oil and natural gas sector 
to recover its costs in the year of spend is crucial to ensuring that 
enough capital is available to drill the next well and produce the oil 
and natural gas that has been crucial to the U.S. becoming a leader 
energy production. Industry-specific provisions exist in the Internal 
Revenue Code not because they are tax giveaways, but because they are 
provisions that recognize the unique aspects of the industry.

    The same characteristics apply to percentage depletion, a tax 
provision that is almost 100 years old and is used by only to the 
smallest producers-often family-owned businesses. Percentage depletion 
was created by Congress to compensate extractive industries, like oil 
and natural gas, for the declining value of extractive resources. In 
the intervening years, Congress has restricted the provision to only 
the smallest oil and gas producers. It is currently limited to the 
first 1,000 barrels of oil (or equivalent) per day and is limited to 
60% of the taxpayer's net income. Percentage depletion primarily helps 
these small businesses operate, retire, and reclaim end of life wells. 
The elimination of percentage depletion would likely force many of 
these small businesses to lay-off employees or shutter their businesses 
altogether. It may also increase the number of orphan wells by 
significantly reducing the capital needed to cap and reclaim 
unprofitable wells.

    The oil and natural gas industry has also become a leader in 
finding synergies between the extraction of natural resources and the 
sequestration of emissions related to global warming. In particular, 
the deployment of carbon capture, utilization and storage (CCUS), 
hydrogen and other low and zero-emission technologies hold great 
promise for reducing emissions while meeting the world's growing energy 
demand.

    The U.S. is the world leader in the deployment of CCUS technology. 
The U.S. has 12 commercial-scale carbon capture facilities in 
operation, with the capacity to capture on the order of 25 million 
metric tons (MMT) of CO2 annually.\4\ An additional 22 
carbon capture facilities are in various stages of development in the 
U.S., including those already under construction.\5\ CCUS may not be an 
oil and gas specific technology, but it offers a way of meeting energy 
demand while also offering the potential to lower the carbon profile of 
oil and natural gas production through CO2-enhanced oil 
recovery (EOR) with permanent geologic storage. Finding ways to 
encourage both CCUS, and related EOR projects, will be essential in 
combating carbon dioxide emissions.
---------------------------------------------------------------------------
    \4\ Global CCS Institute. ``Facilities Database'' 2020.
    \5\ Id.

    According to the IEA Sustainable Development Scenario for the World 
Energy Outlook 2020, CCUS accounts for nearly 15% of the cumulative 
reduction in emissions compared with the Stated Policies Scenario.\6\ 
Similarly, according to the United Nations Intergovernmental Panel on 
Climate Change (IPCC), the costs of achieving atmospheric 
CO2 levels consistent with the Paris Agreement would be more 
than double without CCUS.\7\ The oil and natural gas sector is an 
essential partner in the global fight against climate change. Having a 
tax code which reflects this reality will better position the U.S. to 
lead in both energy production and global emission reductions.
---------------------------------------------------------------------------
    \6\ International Energy Administration, ``Energy Technology 
Perspectives 2020,'' https://www.iea.org/reports/energy-technology-
perspectives-2020. September 2020.
    \7\ Intergovernmental Panel on Climate Change, Climate Change 2014: 
Synthesis Report. Contribution of Working Groups I, II and Ill to the 
Fifth Assessment Report of the Intergovernmental Panel on Climate 
Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, 
Geneva, Switzerland, 151 pp. 2014.
---------------------------------------------------------------------------
 Jobs, Lower Energy Costs, and Other Economic Impacts of the Oil and 
        Gas Industry
    The oil and natural gas sector operates worldwide and provides jobs 
that pay well above the U.S. average. Our organizations urge the Senate 
Finance Committee to consider the impact of proposals relating to the 
oil and natural gas sector from the standpoint of economic impact to 
the American worker. For example, proposals exist to increase the rate 
of taxation on income earned abroad even if it is in the form of 
extractive income for which there is zero risk of profit shifting given 
that oil and gas reserves cannot be physically moved to low or no tax 
jurisdictions. However, some wish to increase the rate of taxation of 
this type of income, with some even seeking to end the practice of 
foreign extraction. Policymakers should recall that a 10% reduction in 
foreign investment could reduce our ability to invest domestically by 
2.6%, and that for every 100 jobs lost abroad, an additional 127 jobs 
are lost domestically.\8\ Although the physical extraction of resources 
may occur overseas, the support necessary for these operations comes 
from domestic workers in the form of geologists, planners, accountants, 
attorneys, and so on.
---------------------------------------------------------------------------
    \8\ PwC, ``Impacts of the Natural Gas, Oil and Petrochemical 
Industry on the U.S. Economy in 2018,'' May 2020.

    It is also important to note that many foreign countries impose 
separate taxes on oil and gas operations since they are immobile and 
cannot move to a country with lower taxes. For example, on top of a 
corporate income tax, Norway imposes an additional tax on oil and gas 
extractive income. Recognizing this, the U.S. tax code provides foreign 
tax credits (FTCs) to U.S. companies to prevent the double taxation of 
that income earned abroad. For countries with separate income taxes on 
extractive income, dual capacity taxpayer rules and a decades long 
history of legal precedent have created a process for U.S. corporations 
to demonstrate that those separate taxes on oil and gas operations are 
in facts and circumstances income taxes. If they are determined to be 
income taxes, they qualify for FTCs, which ensure that these U.S. 
---------------------------------------------------------------------------
corporations are not double taxed.

    Any proposal to eliminate this process and these dual capacity 
rules will subject U.S. companies to double taxation. It will make U.S. 
corporations less competitive and cede U.S. jobs to foreign 
competitors, which will result in less investment and fewer jobs here 
in the U.S.

    The oil and natural gas industry is also a major contributor to job 
creation and investment in our communities. More than ten million jobs 
in the U.S. are associated with the sector, with direct industry jobs 
paying nearly double the national private sector average. Furthermore, 
for every oil and natural gas industry job, an additional 2.7 jobs are 
also supported.\9\ These jobs are found in the restaurant, hotel and 
hospitality, and transportation sectors. All of these economic sectors 
have been severely impacted by the ongoing COVID-19 pandemic. 
Legislation intended to punish the oil and natural gas sector will also 
inevitably punish these workers, none of whom ought to be unnecessarily 
subjected to additional pain during this ongoing crisis.
---------------------------------------------------------------------------
    \9\ Id.

    Moreover, the oil and natural gas industry generates billions in 
revenue for the federal and state governments in rent, royalties, and 
corporate and income tax payments. In 2019 alone, the industry 
generated over $14 billion for state treasuries through severance 
taxes. Now more than ever, our communities rely on those payments to 
---------------------------------------------------------------------------
fund schools, infrastructure, and other critical social services.

    The natural gas, oil, and fuels industries' investment in this 
country have also led to a 15% decrease in household energy costs over 
the last decade-while the costs for food, education, and healthcare 
have skyrocketed. Those cheaper energy costs are crucial to working 
families in every single community across the country.

    Additionally, there are an estimated 12.5 million private owners of 
oil and natural gas mineral rights. These royalty owners receive 
regular payments from companies which develop these mineral resources. 
Many are retirees who rely on a predictable stream of payments and the 
associated depletion allowance for retirement security. These royalty 
owners, residing in all fifty states, also benefit from the percentage 
depletion allowance. These royalty owners are not producers or 
operators, rather they are private landowners from all walks of life 
who operate in partnership with oil and natural gas producers to ensure 
fair access and fair return for the minerals produced on their land.
No Discrimination Against Economic Sectors
    The Internal Revenue Code is most effective when general 
provisions, rather than industry-specific, are made available to all 
economic sectors. This creates a level playing field on which all 
sectors can compete equally. The application of this philosophy can be 
found in several proposals currently sitting with the Senate Finance 
Committee. Our organizations are resolutely opposed to the elimination 
of generally available business provisions, solely applicable to the 
oil and natural gas sector, such as the availability of emergency 
economic relief under the CARES Act. These discriminatory proposals to 
limit generally available business provisions are based on animus 
towards individual companies and not accounting, taxation, financial, 
or prudent energy policy. This lack of consideration for effective 
energy policy is further demonstrated by proposals to terminate the 
CCUS credit, which has and can further support substantial amounts of 
sequestered carbon emissions. Our organizations believe that generally 
available business provisions should be made available for all.

    Thank you for the opportunity to provide feedback on the ongoing 
efforts of the Senate Finance Committee to address changes to the 
United States tax code.

    Sincerely,

American Exploration and Production Council
American Fuel and Petrochemical Manufacturers
American Petroleum Institute
Energy Workforce and Technology Council
Independent Petroleum Association of America
U.S. Oil and Gas Association

                                 ______
                                 
                    American Public Gas Association

                201 Massachusetts Avenue, NE, Suite C-4

                          Washington, DC 20002

May 10, 2021

The Honorable Ron Wyden
Chairman
U.S. Senate
Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510

The Honorable Mike Crapo
Ranking Member
U.S. Senate
Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510

Re: April 27, 2021 Hearing on ``Climate Challenges: The Tax Code's Role 
in Creating American Jobs, Achieving Energy Independence, and Providing 
Consumers with Affordable, Clean Energy''

Dear Chairman Wyden and Ranking Member Crapo,

APGA is the trade association for approximately 1,000 communities 
across the U.S. that own and operate their retail natural gas 
distribution entities. They include municipal gas distribution systems, 
public utility districts, county districts, and other public agencies, 
all locally accountable to the citizens they serve. Public gas systems 
focus on providing safe, reliable, and affordable energy to their 
customers and support their communities by delivering fuel to be used 
for cooking, clothes drying, and space and water heating, as well as 
for various commercial and industrial applications. In addition to the 
residential and industrial uses most are familiar with, natural gas is 
also used for transportation. Our members supply gas to natural gas 
vehicle (NGV) fueling stations, and many also maintain and manage 
fueling stations or operations of their own.

APGA appreciates the opportunity to contribute to the Committee's 
discussion regarding how to ensure the tax code incentivizes investment 
in and development of the technology needed for a clean energy future. 
Public natural gas utilities continue to play a role in reducing 
greenhouse gas (GHG) emissions in all sectors. Our members are good 
stewards of the environment and take seriously their role in providing 
clean, affordable, and reliable energy. Tax code changes that allow for 
effective and efficient use of all energy, including natural gas, 
should be a part of the conversation as the Committee develops 
legislation.

APGA would like to use this opportunity to highlight the importance of 
tax code provisions that support the NGV industry. APGA has been a 
strong supporter of the growth and development of NGVs. This important 
engine technology already provides some of the cleanest vehicles on the 
road with significantly lower GHG emissions than those using gasoline 
or diesel. Despite this, the ongoing conversation regarding 
transportation and climate change centers on electrification. We 
appreciate the opportunity to share more information with the Committee 
about how natural gas and NGVs can play a part in meeting the 
Administration's climate goals.

Many APGA members are heavily invested in natural gas transportation 
fuels, primarily in the form of compressed natural gas (CNG). This fuel 
has proven to be safe, clean, abundant, and affordable, and our members 
are proud to distribute it. As a fuel source, CNG provides unmatched 
reliability. Its delivery is only dependent on the availability of 
natural gas via underground pipelines. Natural gas supply is far less 
likely to be disrupted by severe weather events than gasoline and 
electricity. During the 2017 hurricane season, for example, natural gas 
remained fully functional even while there were widespread power 
outages and major gasoline shortages. Natural gas and the NGVs that run 
on it proved resilient for two reasons. First, the fuel supply could be 
delivered without interruption because natural gas pipelines are mostly 
underground and were protected from debris, wind, and storm surges. 
Further, CNG can be pumped without the use of electricity because NGV 
fueling stations are run on generators that are powered by natural gas.

Natural gas is not only a reliable energy source; it is also 
environmentally friendly. The Committee is right to focus on promoting 
investment in low and no-emission vehicles in America's pursuit of a 
clean energy future. Electric vehicles, however, are not the only 
available technology. The Department of Energy estimates that natural 
gas engines can lower emission levels of GHGs as much as 11 percent 
when compared to traditional gasoline combustion engines.\1\ While NGVs 
are already cleaner and achieve lower GHG emission levels than 
traditional vehicles, they also have the immediate potential to become 
even more environmentally friendly with additional support for the 
development of renewable natural gas (RNG).
---------------------------------------------------------------------------
    \1\ ``Natural Gas Vehicle Emissions,'' Alternative Fuel Data 
Center, U.S. Department of Energy, https://afdc.energy.gov/vehicles/
natural_gas_emissions.html, accessed May 4, 2021.

RNG, which is produced by capturing gas created by various waste 
sources, is chemically identical to fossil natural gas and can be 
blended with fossil natural gas or, in some cases, used exclusively in 
a system.\2\ Blending even small amounts of RNG with fossil natural gas 
can produce significant emissions reductions,\3\ and RNG currently 
accounts for more than 53 percent of all natural gas motor fuel.\4\ 
Because RNG is created by recycling biomethane collected from 
agricultural waste, landfills, and wastewater treatment plants into a 
usable product, it has the potential to yield a carbon-negative 
lifecycle emissions result.\5\ Using the tax code to promote the 
development and use of this fuel will only further advance the already 
existing environmental benefits of NGVs.
---------------------------------------------------------------------------
    \2\ Id.
    \3\ Id.
    \4\ ``Decarbonize Transportation with Renewable Natural Gas,'' 
NGVAmerica, https://static1.squarespace.com/static/
53a09c47e4b050b5ad5bf4f5/t/6079e813a7999069b32ece17/1618
602009958/NGV+RNG+Decarbonize+2020+final.pdf, accessed May 4, 2021.
    \5\ Id.

The environmental benefits of RNG have led to growing interest from the 
transportation sector in increasing its use to lower GHG emissions. The 
United Parcel Service (UPS), for example, is making significant 
investments in RNG and compressed natural gas (CNG) transportation 
initiatives. They recently announced plans to purchase more than 6,000 
natural gas-powered trucks between 2020 and 2022, a commitment 
representing a $450 million investment in the company's alternative 
fuel program to reduce emissions.\6\ Amazon, as part of its commitment 
to become carbon neutral by 2040, also recently signed a five-year 
contract to purchase RNG for its fleet.\7\ The Committee should ensure 
that any changes to the energy tax code continue to encourage such 
investments.
---------------------------------------------------------------------------
    \6\ ``UPS adding 6,000 NGVs,'' Shale Directories, https://
www.shaledirectories.com/blog/ups-adding-6000-ngvs/ accessed May 4, 
2021.
    \7\ ``Amazon Inks RNG Agreement, Considers Possible Stake in Clean 
Energy Fuels,'' Natural Gas Intel, https://www.naturalgasintel.com/
amazon-inks-rng-agreement-considers-possible-stake-in-clean-energy-
fuels/, accessed May 4, 2021.

It is especially noteworthy that, when fueled by RNG, the newest NGVs 
are the only fully commercially available option to achieve ultra-low 
or near-zero emission levels of nitrogen oxides (NOx).\8\ 
They also produce a much lower amount of particulate matter than other 
engines, supporting the Administration's goals of decreasing emissions 
in areas disproportionately impacted by urban air pollution. Cummins 
Westport, for example, already produces natural gas engines that are 
90% cleaner than what the current EPA standard requires.\9\ The 
company's 8.9-liter ISL G NZ engine is certified to meet the California 
Air Resource Board (CARB) standard--the most rigorous emission standard 
for NOx.
---------------------------------------------------------------------------
    \8\ NGVAmerica, supra note 4.
    \9\ ``Next Generation Heavy-Duty Natural Gas Engines Fueled by 
Renewable Natural Gas,'' NGV America, https://cdn.ngvgamechanger.com/
pdfs/game-changer-graphic-onesheet.pdf, accessed May 4, 2021.

This already-existing natural gas engine technology can fill an 
important gap by providing an opportunity to reduce emissions in 
difficult to electrify applications like long-haul and regional 
trucking, transit buses, refuse trucks, and high horsepower off-road 
equipment. Heavy-duty vehicles and equipment are major sources of 
emissions, and while reliable electric alternatives are not yet 
available, natural gas options are. Replacing one diesel-burning, 
heavy-duty truck with a new ultra low-NOx, natural gas 
heavy-duty truck has the same emissions reduction impact as removing 
119 traditional combustion engine passenger vehicles from the road.\10\ 
If policymakers are serious about achieving the ambitious emissions 
reduction goals laid out by the Administration, it would be foolish to 
ignore the opportunity to capitalize on existing natural gas technology 
to reduce emissions in these areas, simply because it does not fit with 
the current narrative of electrification as the ``end all be all'' 
climate solution.
---------------------------------------------------------------------------
    \10\ ``Which Road to Take,'' NGV America, https://ngvamerica.org/
wp-content/uploads/2020/10/NGVAmerica-Which-Road-TX-vs-CA-
Investments.pdf, accessed May 4, 2021.

Finally, APGA would like to urge the Committee to consider the full 
lifecycle of vehicles and their energy source when choosing the path 
forward. While we acknowledge that battery powered electric vehicles 
(BEVs) have the advantage of zero tailpipe emissions, producing 
lithium-ion batteries is an energy intensive process. In fact, 
manufacturing an electric vehicle can produce anywhere from 15 to 68 
percent more GHG emissions than a conventional vehicle, depending on 
the size and range.\11\ This should be accounted for when evaluating 
the environmental benefits of BEVs versus other alternatives, like 
NGVs. It is also important to note that battery disposal is another 
looming environmental issue associated with BEVs. The current lack of 
available recycling methods when electric vehicle batteries reach the 
end of their useful life is an additional environmental cost that 
should be factored into the Committee's consideration of how to move 
towards a cleaner transportation future.
---------------------------------------------------------------------------
    \11\ Cleaner Cars from Cradle to Grave, Union of Concerned 
Scientists, https://www.
ucsusa.org/resources/cleaner-cars-cradle-grave, accessed May 4, 2021.

APGA supports the Committee's work to reduce emissions and move towards 
a cleaner energy future, and we are grateful for the opportunity to 
contribute to the conversation on this important topic. However, the 
Committee should use the tax code to promote a level playing field for 
all energy sources in the pursuit of lower GHG emissions. The pursuit 
of electrification as the sole solution ignores the contributions 
natural gas has already made to lowering emissions and abandons its 
potential in achieving environmental goals. When it comes to clean 
vehicle fuels, if policymakers provide support for the adoption of NGV 
technology and the increased use of RNG, public natural gas utilities 
will continue to deliver emissions reductions and environmental 
benefits well into the future. For these reasons, APGA hopes the 
Committee will pursue tax incentives that encourage an ``all of the 
above'' approach to reducing emissions. Thank you again for the 
opportunity to submit this input. APGA stands ready to work together in 
---------------------------------------------------------------------------
this effort.

Dave Schryver
President and CEO
[email protected]

                                 ______
                                 
                  Associated Builders and Contractors

                    440 First Street, NW, Suite 200

                          Washington, DC 20001

                              202-595-1505

                              www.abc.org

May 4, 2021

The Honorable Ron Wyden
U.S. Senate
Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Wyden:

On behalf of Associated Builders and Contractors, a national trade 
association with 69 chapters representing more than 21,000 member 
companies in the construction industry, I submit the following letter 
expressing concerns with changes proposed to a number of clean energy 
program tax credits in the Clean Energy for America Act as a statement 
for the record for the April 27, 2021, full Senate Finance Committee 
hearing titled, ``Climate Challenges: The Tax Code's Role in Creating 
American Jobs, Achieving Energy Independence, and Providing Consumers 
With Affordable, Clean Energy.''\1\
---------------------------------------------------------------------------
    \1\ https://www.finance.senate.gov/hearings/climate-challenges-the-
tax-codes-role-in-creating-american-jobs-achieving-energy-independence-
and-providing-consumers-with-affordable-clean-energy.

As builders of America's clean energy projects and infrastructure, ABC 
members appreciate your leadership in support of a sustainable and 
resilient clean energy ecosystem to fuel America's economic comeback 
from the COVID-19 pandemic and maintain its global competitiveness in 
the 21st century. However, ABC is troubled by provisions in the 
legislation that will needlessly increase construction costs and reduce 
competition from qualified companies and their skilled employees who 
---------------------------------------------------------------------------
participate in the construction of the clean energy marketplace.

The increased costs resulting from the legislation's proposed 
government-registered apprenticeship program requirements and 
prevailing wage regulations for the construction of projects receiving 
clean energy tax incentives may make program tax credits unusable--
depending on the type of clean energy construction project and 
geographic market--and hinder the ability of clean energy producers to 
be competitive against fossil fuel producers, which ultimately 
undermines critical policies addressing climate change.

As currently drafted, this legislation will create a shortage of 
skilled labor and contractors able to deliver a rapid, market-driven 
and cost-effective transition away from fossil fuel energy to clean 
energy. In addition, these changes will create added costs that will be 
passed on to ratepayers, manufacturers and consumers, and decrease 
America's energy cost advantage attractive to manufacturers and 
businesses in a global marketplace.

Concerns With Government-Registered Apprenticeship Requirements

Section 601 in Title VI of the Clean Energy for America Act requires 
all contractors and subcontractors building projects receiving 
applicable tax credits with four or more construction workers on a 
jobsite to ``ensure that not less than 15% of the total labor hours of 
such work'' is to be performed by participants in government-
registered apprenticeship programs.\2\
---------------------------------------------------------------------------
    \2\ Title VI offers some exceptions to this requirement if 
contractors can demonstrate ``a lack of availability of qualified 
apprentices in the geographic area,'' and a ``good faith effort,'' 
although it is unclear how and who makes exception determinations and 
if it will impact competition during the bidding process for the 
construction of a clean energy project.

In practice, this will increase costs and have a chilling impact on the 
ability of contractors--especially local, small, veteran-, disabled-, 
women- and minority-owned contractors and workers already performing 
specialty work in the clean energy economy--to continue to compete to 
build the clean energy ecosystem, and it will artificially limit the 
---------------------------------------------------------------------------
pool of scarce labor needed to build out the clean energy marketplace.

To be clear, ABC and its 69 chapters support government-registered 
apprenticeship programs--offering more than 300 U.S. Department of 
Labor and state government-registered apprenticeship programs in 20 
different construction occupations across America--as part of its all-
of-the-above workforce development strategy \3\ to tackle the 
industry's skilled workforce shortage--estimated at 430,000 workers in 
2021 alone.\4\
---------------------------------------------------------------------------
    \3\ According to the results of Associated Builders and 
Contractors' 2020 Workforce Development Survey, ABC contractor members 
invested $1.5 billion on workforce development initiatives in 2019, 
providing craft, leadership and safety education to 1.1 million course 
attendees to advance their careers in commercial and industrial 
construction. Safety education accounted for nearly half of the total 
workforce investment, averaging $1,147 per employee annually. ABC's 
investment in an all-of-the-above approach to workforce development has 
produced a network of ABC chapters and affiliates in hundreds of 
locations across the country that offer more than 800 apprenticeship, 
craft, safety and management education programs--including more than 
300 U.S. Department of Labor and state equivalent government-registered 
apprenticeship programs across 20 different occupations--to build the 
people who build America. Available at: https://www.abc.org/News-Media/
News-Releases/entryid/17581/abc-members-provided-education-for-1-1-
million-course-attendees-in-2019-new-survey-finds.
    \4\ ABC: The Construction Industry Needs to Hire an Additional 
430,000 Craft Professionals in 2021, March 23, 2021, https://abc.org/
News-Media/News-Releases/entryid/18636/abc-the-construction-industry-
needs-to-hire-an-additional-430-000-craft-professionals-in-2021.

In addition, individual ABC member contractors, other construction 
industry trade associations and community and educational workforce 
development partners also provide federal and state government-
---------------------------------------------------------------------------
registered apprenticeship programs.

However, as further explained below, participants and graduates of 
federal and state registered apprenticeship programs in the 
construction industry constitute only a small fraction of the 
industry's workforce. In fact, some segments of the industry have 
almost no government-registered apprenticeship programs. For example, 
the residential construction sector has few government-registered 
apprenticeship programs, and this marketplace would be especially 
harmed by new regulations tied to the 45L New Energy Efficient Home 
Credit in Title III of this bill.

Other segments of the construction industry have greater concentrations 
of government-registered apprenticeship programs and contractor 
participation, but the majority of these contractors do not participate 
in government-registered apprenticeship programs for a variety of 
compelling reasons. The majority of industry contractors provide 
workforce development for employees through vocational and technical 
schools, community workforce development program partnerships, 
industry-
recognized programs and specialty training designed by employers that 
are not federal or state government-registered apprenticeship programs.

Data demonstrates the government-registered apprenticeship system is 
not meeting the industry's demand for skilled labor. According to data 
from the U.S. DOL,\5\ in FY 2020, the construction industry's federal 
government-registered apprenticeship system produced less than 20,749 
completers of its 4- to 5-year apprenticeship programs. In addition, 
construction industry apprenticeship programs registered with state 
governments produced an estimated 15,000 to 20,000 completers in FY 
2020.\6\ At current rates of completion, it would take more than 10 
years for all government-registered construction industry 
apprenticeship program completers to fill the estimated 430,000 vacant 
construction jobs needed just in 2021.
---------------------------------------------------------------------------
    \5\ According to the U.S. DOL Office of Apprenticeship, in FY 2020 
the construction industry's 4,793 federal government-registered 
apprenticeship programs had 188,452 active apprentices and produced 
just 20,749 completers, https://www.dol.gov/agencies/eta/
apprenticeship/about/statistics/2020.
    \6\ Unfortunately, there is no centralized reporting of government 
data for all State Apprenticeship Agency government-registered 
apprenticeship programs, as discussed by the Workforce Data Quality 
Campaign's Registered Apprenticeship Data FAQs, available at https://
thetruthaboutplas.com/wp-content/uploads/2019/04/
Apprentice_FAQ_2pg_web-RAPIDS-020219.pdf.

Almost all unionized contractors, which are concentrated in the 
nonresidential construction markets, participate in government-
registered apprenticeship programs as a condition of collective 
bargaining with unions. According to Bureau of Labor Statistics data, 
unionized contractors employ less than 13% of the U.S. construction 
workforce, while 87% of the U.S. construction workforce freely chooses 
to work for contractors not affiliated with unions.\7\
---------------------------------------------------------------------------
    \7\ U.S. Bureau of Labor Statistics, Union Members Summary, January 
22, 2021, https://www.bls.gov/news.release/union2.nr0.htm.

It is undeniable that this legislation's government-registered 
apprenticeship requirement will steer work to unionized contractors and 
create clean energy jobs for unionized labor, while needlessly 
eliminating contracting opportunities and killing jobs for nonunion 
---------------------------------------------------------------------------
businesses and workers already building the clean energy ecosystem.

Needlessly excluding all contractors who do not participate in 
government-registered apprenticeship programs from building clean 
energy projects subject to clean energy tax incentives is problematic. 
It will create a shortage of contractors and skilled labor to complete 
these projects, undermine established and preferred industry workforce 
development pipelines not affiliated with government-registered 
apprenticeship programs, displace contracts and jobs for businesses and 
workers already building the clean energy economy, give an unfair 
competitive advantage to unionized contractors and labor, increase 
clean energy construction costs and ultimately threaten America's rapid 
and cost-effective transition to clean energy.

Concerns With Davis-Bacon Prevailing Wage Requirements

The Clean Energy for America Act expands Davis-Bacon prevailing wage 
requirements to eight clean energy tax credit programs, which will 
reduce competition from contractors already building the clean energy 
economy, increase construction costs and render some of these tax 
credit programs unusable.

ABC has long maintained that the Davis-Bacon Act and related 
regulations are outdated, needlessly raise construction project costs 
for hardworking taxpayers, stifle contractor productivity and 
discourage competition while disproportionately affecting small 
businesses interested in pursuing federal and federally assisted 
construction projects.

Flaws in the Prevailing Wage Determination System

The 90-year-old Davis-Bacon Act requires the U.S. DOL's Wage and Hour 
Division to determine and set hourly prevailing wages and benefits 
contractors must pay to construction workers on federal and certain 
federally assisted construction projects exceeding $2,000. The DOL WHD 
determines wage and benefits rates for four different types of 
construction (Building, Heavy, Highway and Residential), for more than 
20 different types of construction trade occupations (i.e., 
electricians, carpenters, laborers etc.) in more than 3,000 counties 
across America. Instead of using statistically modern and accurate BLS 
survey methodology and data, the WHD surveys contractors in various 
markets on a rolling basis through a convoluted and inefficient 
process.\8\ In short, once survey response data is collected, if a 
single rate is paid to a majority of the employees in a given 
classification and locality, it is adopted as prevailing. If no single 
rate is paid to a majority, then the weighted average of all rates paid 
is adopted as prevailing wage.
---------------------------------------------------------------------------
    \8\ U.S. DOL Wage and Hour Division, Construction Surveys Status By 
State, https://www.dol.gov/agencies/whd/government-contracts/
construction/surveys/status.

For more than three decades, Congress and government oversight agencies 
have decried the timeliness and accuracy of the prevailing wage rates 
determined by the U.S. DOL. In particular, the DOL's survey process 
leading to the determination of prevailing wages has long been 
recognized to be arbitrary and unworkable, leading to inflated, 
outdated and inaccurate prevailing wage determinations and other errors 
on many projects. Numerous reports from the U.S. Government 
Accountability Office, DOL's Office of Inspector General and 
congressional hearings \9\ have highlighted the DOL's failure to 
properly determine prevailing wage rates under the Davis-Bacon Act. 
These reports and hearings have criticized the DOL WHD for: (1) Using 
an unscientific method to estimate Davis-Bacon rates with DOL wage 
surveys that use unrepresentative, self-selected samples;\10\ (2) 
Utilizing unreliably small sample sizes;\11\ (3) Combining data from 
economically unrelated counties;\12\ and (4) Failing to update wage 
rates in a timely manner.\13\
---------------------------------------------------------------------------
    \9\ Congressional hearing, Promoting the Accuracy and 
Accountability of the Davis Bacon Act, June 18, 2013, https://
www.gpo.gov/fdsys/pkg/CHRG-113hhrg81435/html/CHRG-113hhrg81
435.htm.
    \10\ U.S. Government Accountability Office, Davis-Bacon Act: 
Methodological Changes Needed to Improve Wage Survey, GAO-11-152, March 
2011, http://www.gao.gov/new.items/d11152.pdf; U.S. Department of 
Labor, Office of Inspector General, Concerns Persist with the Integrity 
of Davis-Bacon Act Prevailing Wage Determinations, Audit Report No. 04-
04-003-04-420, March 30, 2004, pp. 12-13, http://www.oig.dol.gov/
public/reports/oa/2004/04-04-003-04-420.pdf; U.S. Department of Labor, 
Office of Inspector General, Inaccurate Data Were Frequently Used in 
Wage Determinations Made Under the Davis-Bacon Act, Audit Report No. 
04-97-013-04-420, March 10, 1997, http://www.oig.dol.gov/public/
reports/oa/pre_1998/04-97-013-04-420s.htm; and U.S. General Accounting 
Office, Davis-Bacon Act: Labor Now Verifies Wage Data, but Verification 
Process Needs Improvement, HEHS-99-21, January 1999, http://
www.gao.gov/archive/1999/he99021.pdf.
    \11\ U.S. Government Accountability Office, Davis-Bacon Act: 
Methodological Changes Needed to Improve Wage Survey, p. 23.
    \12\ U.S. Government Accountability Office, Davis-Bacon Act: 
Methodological Changes Needed to Improve Wage Survey, Figure 5.
    \13\ U.S. Government Accountability Office, Davis-Bacon Act: 
Methodological Changes Needed to Improve Wage Survey, p. 18.

As a result of a flawed, unscientific wage calculation methodology, the 
DOL's published determinations of federal ``prevailing'' wages in 
construction no longer reflect actual local wages in many geographic 
markets and types of construction. In fact, despite years of low union 
density, hovering around 13% of the U.S. construction industry 
workforce,\14\ the DOL's wage survey process somehow adopts union wage 
rates more than 48% of the time, according to the DOL OIG.\15\ Union 
wage rates are estimated to be mandated in the nonresidential 
construction categories (Building, Heavy and Highway) of Davis-Bacon 
wage determinations more than 80% of the time, a statistical 
improbability given that 87% of the U.S. construction workforce does 
not belong to a union.\16\
---------------------------------------------------------------------------
    \14\ Ibid. BLS Union Members Summary.
    \15\ U.S. Department of Labor, Office of Inspector General, Better 
Strategies are Needed to Improve the Timelines and Accuracy of Davis-
Bacon Act Prevailing Wage Rates, Audit Report No. 04-19-001-15-001, 
March 29, 2019, at https://www.oig.dol.gov/public/reports/oa/viewpdf.
php?r=04-19-001-15-001&y=2019.
    \16\ https://www.bls.gov/news.release/union2.nr0.htm.
---------------------------------------------------------------------------

Prevailing Wage's Regulatory Burden on Small and Large Contractors

In a 2021 survey of ABC member companies, roughly 88% of participants 
stated they do not support prevailing wage laws and the Davis-Bacon Act 
in its current form, with more than 82% supporting reforms to and/or 
full repeal of prevailing wage laws.\17\
---------------------------------------------------------------------------
    \17\ ABC Newsline, Survey Says: ABC Members Strongly Support Repeal 
or Reforms to Costly Davis-Bacon Act and Prevailing Wage Laws, March 3, 
2021, https://abc.org/News-Media/Newsline/entryid/18540/survey-says-
abc-members-strongly-support-repeal-or-reforms-to-costly-davis-bacon-
act-and-prevailing-wage-laws.

The construction industry has one of the highest concentrations of 
small business participation, at more than 82%.\18\ In fact, of the 
745,207 construction industry establishments employing more than 7 
million workers, 81.47% (607,161 establishments) have fewer than 10 
employees and 98.77% (736,068 establishments) have less than 100 
employees.\19\
---------------------------------------------------------------------------
    \18\ U.S. Small Business Administration, Office of Advocacy, 2019 
Small Business Profile, Table 1: U.S. Employment by Industry, 2016, 
https://cdn.advocacy.sba.gov/wp-content/uploads/2019/04/23142719/2019-
Small-Business-Profiles-US.pdf
    \19\ U.S. Census Bureau, All Sectors: County Business Patterns by 
Legal Form of Organization and Employment Size Class for the U.S., 
States, and Selected Geographies: 2019, https://data.census.gov/cedsci/
table?d=ANN%20Business%20Patterns%20County%20Business%20Pat
terns&tid=CBP2019.CB1900CBP&hidePreview=true.

The amount of time that contractors must spend educating their payroll 
administrators, human resource personnel, project estimators, 
operations managers and foreman in the arcane and arbitrary regulations 
governing the regulatory framework and current enforcement of Davis-
Bacon prevailing wage rules can be overwhelming to small and even large 
---------------------------------------------------------------------------
businesses.

DOL wage determinations force contractors performing work on Davis-
Bacon covered projects to use outdated and inefficient union job 
classifications that ignore the productive and safe work practices and 
efficient labor utilization strategies successfully used in the merit 
shop construction industry. Further, the DOL has failed to give 
contractors notice of many of its letter rulings and, with rare 
exceptions, has not posted such rulings on its website. ABC supports 
regulatory language requiring the DOL to publish any union work 
assignment rules that contractors are expected to abide by and 
prohibiting the DOL from penalizing contractors for misclassifications 
based on unpublished work rules.

The effort required to determine proper classification of employees in 
the absence of published information on unwritten union work assignment 
practices is in itself a significant burden, and each of the issues 
referenced above leads to compliance dilemmas and additional burdens 
for many contractors, particularly small businesses in the construction 
industry.

As a result, many contractors capable of successfully performing 
prevailing wage work choose not to pursue it. Because of these 
increased administrative costs and other burdens, 67.6% of ABC member 
survey respondents said prevailing wage laws result in less competition 
from subcontractors, and 75% said it would make contractors less likely 
to bid on public works projects in their own communities, paid for by 
their own tax dollars.\20\
---------------------------------------------------------------------------
    \20\ Ibid, ABC survey of membership, 2021.

The DOL's failure to provide detailed information about job duties that 
correspond to each wage rate makes it difficult to determine the 
appropriate wage rate for many construction-related tasks in new 
technologies. In addition, the DOL's lack of wage determinations in new 
job classifications and programs covered by Davis-Bacon has a history 
of delaying the distribution of federal assistance, slowing the 
construction and growth of new technologies and undermining public 
---------------------------------------------------------------------------
policy goals.

For example. the American Recovery and Reinvestment Act of 2009 
expanded federal Davis-Bacon requirements to 40 additional federal 
programs.\21\ Several agencies reported that new Davis-Bacon 
regulations had a negative impact on ARRA-related program 
administration and goals that resulted in needless delays, increased 
costs and complaints from stakeholders impacted by the policy 
change.\22\ Federal agencies maintained that Davis-Bacon regulations 
directly delayed their ability to spend funds, in part because the DOL 
was required to determine prevailing wages for home weatherization work 
in every county in the United States before work could be 
performed.\23\ A related 2010 U.S. Department of Energy Office of 
Inspector General report cited Davis-Bacon regulations as the prime 
factor holding up the launch of its Weatherization Assistance Program, 
which did not begin work until October 2009, eight months after 
President Obama signed ARRA into law.\24\ A March 4, 2010, GAO report 
determined that ``as of December 31, 2009, 30,252 homes had been 
weatherized with Recovery Act funds, or about 5 percent of the 
approximately 593,000 total homes that DOE originally planned to 
weatherize using Recovery Act funds.''\25\ This bureaucratic boondoggle 
helped shape the narrative that ARRA failed at creating and funding 
shovel-ready jobs.\26\
---------------------------------------------------------------------------
    \21\ U.S. Government Accountability Office, Recovery Act: 
Officials' Views Vary on Impacts of Davis-Bacon Act Prevailing Wage 
Provision, GAO-10-421, Published February 24, 2010, released March 24, 
2010, https://www.gao.gov/products/gao-10-421.
    \22\ U.S. Government Accountability Office, Recovery Act: Progress 
and Challenges in Spending Weatherization Funds, GAO-12-195, December 
2011, https://www.gao.gov/assets/gao-12-195.pdf.
    \23\ U.S. Government Accountability Office, Recovery Act: Project 
Selection and Starts Are Influenced by Certain Federal Requirements and 
Other Factors, GAO-10-383, Published Feb. 10, 2010, Publicly Released 
February 18, 2010, https://www.gao.gov/products/gao-10-383.
    \24\ U.S. Department of Energy Office of Inspector General Office 
of Audit Services, Special Report: Progress in Implementing the 
Department of Energy's Weatherization Assistance Program Under the 
American Recovery and Reinvestment Act, OAS--RA-10-04, February 2010, 
https://www.energy.gov/sites/prod/files/igprod/documents/OAS-RA-10-
04.pdf.
    \25\ U.S. Government Accountability Office, Recovery Act: Factors 
Affecting the Department of Energy's Program Implementation, GAO-10-
497T, Published March 4, 2010, https://www.gao.gov/products/gao-10-
497t.
    \26\ Jonthan Karl, ABC News, Report: Stimulus Weatherization 
Program Bogged Down by Red Tape; February 8, 2010, https://
abcnews.go.com/WN/Politics/stimulus-weatherization-jobs-president-
obama-congress-recovery-act/story?id=9780935.

Applying new prevailing wage regulations to the construction of clean 
energy projects with job classifications that lack DOL-determined rates 
has the potential to delay projects, increase costs and undermine the 
market's ability to deliver critical projects to achieve climate goals 
faster.

Prevailing Wage Regulations Will Increase Costs

It is difficult to determine the exact cost expanding prevailing wage 
regulations would have on the clean energy marketplace. Doing so would 
require further complex study for each type of clean energy 
construction project receiving tax credits and replicating that 
research in various geographic markets across the country. However, 
broader research \27\ and industry feedback suggests prevailing wage 
regulations will increase costs.
---------------------------------------------------------------------------
    \27\ Additional studies on the impact of the federal Davis-Bacon 
Act and state and local prevailing wage laws on construction costs 
available at www.abc.org/Davis-Bacon.

As a result of the government mandating non-market-wage determinations 
and increased administrative costs and other burdens described above, 
94% of ABC member survey respondents believe that government prevailing 
wage laws make projects more expensive.\28\
---------------------------------------------------------------------------
    \28\ ABC Newsline, Survey Says: ABC Members Strongly Support Repeal 
or Reforms to Costly Davis-Bacon Act and Prevailing Wage Laws, March 3, 
2021, https://abc.org/News-Media/Newsline/entryid/18540/survey-says-
abc-members-strongly-support-repeal-or-reforms-to-costly-davis-bacon-
act-and-prevailing-wage-laws.

The Congressional Budget Office estimates that repealing the Davis-
Bacon Act would save the federal government $17.1 billion between 2021 
and 2030.\29\ However, additional research that found Davis-Bacon 
requirements add 9.9% to construction costs and inflate labor costs by 
an average of 22% above market rates,\30\ further suggests repealing 
the act would actually save taxpayers more than $11.56 billion a year.
---------------------------------------------------------------------------
    \29\ Congressional Budget Office, Repeal the Davis-Bacon Act, 
December 9, 2020, https://www.cbo.gov/budget-options/56809.
    \30\ Glassman, Head, Tuerck and Bachman, The Beacon Hill Institute, 
The Federal Davis-Bacon Act: The Prevailing Mismeasure of Wages, 
February 2008, https://www.beaconhill.org/BHIStudies/PrevWage08/
DavisBaconPrevWage080207Final.pdf.

Other research indicates the increased costs of expanding prevailing 
wage requirements onto clean energy projects receiving tax credits 
would be especially acute in the single-family and multifamily 
---------------------------------------------------------------------------
residential construction markets.

For example, a 2017 study by Blue Sky Consulting Group, Impacts of a 
Prevailing Wage Requirement on Market Rate Housing in California,\31\ 
found that prevailing wage requirements on privately financed 
residential construction would, ``lead to a reduction in the number of 
new market rate houses built, fewer affordable housing units, and a 
decrease in the number of construction jobs in the state. . . .'' The 
report concludes, ``Overall, our analysis shows that expanding 
prevailing wage requirements to include privately financed housing 
construction in California would also increase the costs of building 
new homes. Requiring prevailing wage rates for residential construction 
would increase hourly labor costs by 89% on average, with some parts of 
the state experiencing increases of more than 125%. We estimate that 
this increase could translate to a 37% increase in construction costs, 
or about $84,000 for a typical new home.''
---------------------------------------------------------------------------
    \31\ https://www.mendocinocounty.org/home/
showpublisheddocument?id=23824.

A 2016 report by the New York City Independent Budget Office on the 
impact of New York state prevailing wage requirements on affordable 
housing projects built with the 421a property tax break estimated it 
would cost the city an additional $4.2 billion, increasing affordable 
housing construction costs by 23%, or $80,000 per unit.\32\
---------------------------------------------------------------------------
    \32\  New York City Independent Budget Office, Correction to Our 
January 2016 Report on Prevailing Wages, February 2017, https://a860-
gpp.nyc.gov/downloads/k0698779f?locale=en.

According to a March 2020 study by the Terner Center for Housing 
Innovation at the University of California, Berkley, prevailing wage 
requirements cost an average of $30 more per square foot.\33\ An 83 
square foot project--smaller than most kitchens--would consume the 
entire value of the 45L tax credit. An average new home of 2,300 square 
feet would see increased construction costs of nearly $70,000.
---------------------------------------------------------------------------
    \33\ https://ternercenter.berkeley.edu/wp-content/uploads/pdfs/
Hard_Construction_Costs_
March_2020.pdf (see page 14).

Until the Davis-Bacon Act can be modernized and regulators address the 
red tape burdens and increased costs resulting from this anti-
competitive and costly regulatory scheme, it would be wise to keep 
prevailing wage regulations in their current form off of clean energy 
tax credits projects. Doing so would create the conditions for all 
qualified contractors and their skilled workforce to compete to build 
the clean energy economy and give taxpayers additional value for 
investments in clean energy and public works projects as Congress works 
to enact critical clean energy infrastructure modernization and America 
faces a $2.6 trillion infrastructure gap by 2029.\34\
---------------------------------------------------------------------------
    \34\ American Society for Civil Engineers, 2021 Report Card for 
America's Infrastructure, Investment Gap 2020-2029, https://
infrastructurereportcard.org/resources/investment-gap-2020-2029/.
---------------------------------------------------------------------------

The Free Market Should Determine Wages

ABC supports robust wages and benefits for construction workers 
pursuing their career dreams in the construction industry while 
building the clean energy economy. In contrast to government wage 
mandates disconnected from a true prevailing wage, compensation is best 
set by the free market that can reward a worker's experience, training, 
commitment to safety and overall work ethic.

Research suggests that clean energy jobs, in general, are good jobs and 
provide a median hourly wage that is 25% higher than the national 
median wage. In addition, according to an October 2020 report by BW 
research, ``Clean energy job salaries are also comparable--in some 
cases better--than fossil fuel job salaries. Jobs in coal, natural gas 
and petroleum fuels pay about $24.37 an hour, for instance, while jobs 
in solar and wind pay about $24.85 an hour. Similarly, jobs in energy 
efficiency--the biggest part of America's energy sector--come with 
median salaries of about $24.44. Clean energy occupations also had 
higher rates of health care coverage, and virtually all enjoyed 
comparable or better retirement benefits than the national 
average.''\35\
---------------------------------------------------------------------------
    \35\ BW Research Partnership, Clean Jobs, Better Jobs; An 
Examination of Clean Energy Job Wages and Benefits, October 2020, 
https://e2.org/wp-content/uploads/2020/10/Clean-Jobs-Better-Jobs.-
October-2020.-E2-ACORE-CELI.pdf.

Additional research on construction worker wages and benefits for jobs 
specific to various sectors of the clean energy ecosystem and in 
individual geographic labor markets is needed before sweeping 
government-determined prevailing wage requirements and their 
accompanying red tape and inefficiencies are implemented on clean 
energy projects receiving federal tax incentives.

Conclusion

Thank you for considering ABC's serious concerns regarding new 
government-
registered apprenticeship requirements and Davis-Bacon prevailing wage 
regulations on the construction of clean energy projects receiving tax 
credits. We hope that you will continue to work with the clean energy 
marketplace's construction stakeholders and producers to assess the 
real economic impact of these proposed changes so the credits are 
usable, create jobs for all Americans and qualified companies in the 
construction industry and support America's transition to the clean 
energy economy.

If you or your staff have questions or require any additional 
information, please do not hesitate to contact me.

Respectfully submitted,

Ben Brubeck
Vice President of Regulatory, Labor and State Affairs

                                 ______
                                 
                        Carbon Capture Coalition

                      2801 21st Ave. S, Suite 220

                         Minneapolis, MN 55407

The Carbon Capture Coalition appreciates the opportunity to submit this 
statement for the record for the Senate Finance Committee's hearing 
entitled ``Climate Challenges: The Tax Code's Role in Creating American 
Jobs, Achieving Energy Independence, and Providing Consumers with 
Affordable, Clean Energy.'' The Coalition thanks the Committee for its 
efforts to date to respond to the COVID-19 pandemic. As our nation 
begins to look beyond the crisis, we have a responsibility to rebuild 
and retool our nation's domestic energy, industrial and manufacturing 
sectors in ways that put our economy on a path to net-zero emissions by 
midcentury. Carbon capture must be central to the effort to achieve 
net-zero emissions reduction goals, while preserving and creating 
middle-class jobs that pay family-sustaining wages, providing 
environmental and other benefits to communities, and supporting 
regional economies across our country.

The Carbon Capture Coalition is a nonpartisan collaboration of more 
than 80 businesses and organizations dedicated to building federal 
policy support to enable 
economy-wide commercial scale deployment of the full suite of carbon 
capture technologies, which includes carbon capture, removal, 
transport, utilization, and storage. Widespread adoption of carbon 
capture technologies at industrial facilities, power plants and future 
direct air capture facilities is critical to achieving net-zero 
emissions to meet midcentury climate goals, strengthening and 
decarbonizing domestic energy, industrial production and manufacturing, 
and retaining and expanding a high-wage jobs base. Convened by the 
Great Plains Institute,\1\ Coalition membership includes industry, 
energy, and technology companies; energy and industrial labor unions; 
and conservation, environmental, and clean energy policy organizations.
---------------------------------------------------------------------------
    \1\ https://betterenergy.org/.

This statement outlines comprehensive and robust policy recommendations 
---------------------------------------------------------------------------
to realize economy-wide deployment of carbon capture, including:

      Providing a direct pay option for the federal 45Q tax credit;
      Extending an additional ten years the commence construction 
window for the 45Q credit;
      Enhancing 45Q credit values for industrial and power plant 
carbon capture and direct air capture;
      Making carbon capture and direct air capture projects eligible 
for tax-exempt private activity bonds;
      Expanding eligibility of master limited partnerships to include 
carbon capture projects; and
      Implementing technical fixes and direct pay for the Section 48A 
tax credit to enable carbon capture retrofits of existing power plants.

 Providing a direct pay option and additional ten-year extension for 
                    the federal Section 45Q tax credit

The 45Q tax credit is the cornerstone federal policy for enabling 
economy-wide deployment of carbon management technologies, and a direct 
pay option and 10-year extension for 45Q represent the Coalition's top 
legislative priorities. Implementing direct pay for 45Q is the most 
important step Congress can take to leverage greater private investment 
in carbon capture, direct air capture and carbon utilization projects 
and to realize the full emissions reduction and job creation benefits 
of the tax credit. Direct pay would eliminate the significant tax 
credit value currently being lost to burdensome, costly and inefficient 
tax equity transactions, creating an urgently needed alternative for 
most project developers, who otherwise lack sufficient taxable income 
to fully utilize the credits, or who are exempt from federal tax 
liability altogether. The full value of federally funded tax credits 
should go directly to investments in technology innovation, emissions 
reductions and job creation, not to financial and legal third parties.

Extending the commence construction window to qualify for 45Q an 
additional ten years, to the end of 2035, would establish a critically 
needed investment horizon to give carbon management projects the time 
required to scale up between now and midcentury. While federal tax 
credits were first established for wind and solar energy in 1992 and 
2005, respectively, the current 45Q tax credit has only been in place 
since 2018. Carbon capture technologies deserve a comparable timeframe 
to benefit from the availability of this crucial federal 45Q incentive.

To that end, the Coalition urges the Committee to pass the Carbon 
Capture, Utilization, and Storage (CCUS) Tax Credit Amendments Act of 
2021 (S. 986) introduced by Senators Tina Smith (D-MN) and Shelley 
Moore Capito (R-WV) earlier this year. This broadly supported 
bipartisan bill includes direct pay for 45Q and a 5-year extension of 
the tax credit, with the aim of helping carbon capture achieve its full 
potential for emissions reduction, job creation and domestic energy and 
industrial production.

 Enhancing 45Q credit values for industrial and power plant carbon 
                    capture and direct air capture

Analyses by the Intergovernmental Panel on Climate Change and the 
International Energy Agency make clear that economywide deployment of 
carbon capture and direct air capture is vital to meeting midcentury 
climate goals. However, carbon-
intensive and hard-to-abate industrial sectors, including steel, 
cement, chemicals and refining; electric power generation; and direct 
air capture all feature higher costs of capture and greater commercial 
risk for early deployment. In fact, cement production, natural gas and 
biomass power generation, and direct air capture do not yet have large-
scale commercial projects placed in service anywhere in the world, 
making it critically important to provide higher 45Q tax credit values 
to accelerate and expand early carbon capture and direct air capture 
deployment.

Given the urgency of the climate crisis, the need to safeguard domestic 
production and jobs as key energy, industrial and manufacturing sectors 
decarbonize, and the opportunity to maintain U.S. technology leadership 
in this arena, Congress should increase current 45Q credit values for 
industrial and power generation projects to $85 per metric ton for 
CO2 captured and stored in saline geologic formations and 
$60 per ton for captured CO2 stored in oil and gas fields or 
used to produce low and zero-carbon fuels, chemicals, building 
materials and other products. For direct air capture projects, credit 
values should rise to $180 and $130 per ton, respectively.

The above-referenced bipartisan CCUS Tax Credit Amendments Act (S. 986) 
includes enhanced 45Q credit values for direct air capture projects. 
However, further bipartisan legislation is needed to augment the value 
of 45Q for carbon capture and utilization projects in industry and 
electric power generation, as proposed by the administration.

 Make carbon capture and direct air capture projects eligible for tax-
                    exempt private activity bonds

Federal financial incentives beyond the 45Q tax credit often either 
exclude carbon capture projects or require technical modifications to 
allow projects to qualify. Expanding the suite of financing mechanisms 
available to carbon capture, direct air capture and carbon utilization 
projects will make additional private capital available on more 
favorable terms, thus increasing future deployment and emissions 
reduction potential.

Carbon capture and direct air capture projects are currently ineligible 
for tax-
exempt private activity bonds (PABs), a common, well-accepted mechanism 
for financing large-scale private infrastructure projects that have 
public benefits, including large-scale air pollution control 
investments in the 1970s and 1980s at privately owned power plants. 
Compared to conventional bank financing, tax-exempt PABs reduce annual 
debt payments, both by lowering interest rates and extending the 
repayment period. The Coalition urges Congress to make carbon capture 
and direct air capture eligible for PABs, which would, in turn, reduce 
financing costs and encourage the development of more projects.

 Expanding eligibility of master limited partnerships to include carbon 
                    capture projects

Carbon capture projects, along with other low- and zero-carbon energy 
projects, are also currently ineligible for master limited partnerships 
(MLPs), a business structure that allows for raising equity on public 
markets, while providing the tax benefits of a partnership.

The Coalition urges the Committee to pass the Financing our Energy 
Future Act (S. 1034) introduced by Senators Chris Coons (D-DE) and 
Jerry Moran (R-KS) in March 2021. This bill would ensure the 
availability of tax-advantaged MLPs as a tool for financing carbon 
capture projects, reducing the cost of equity and providing project 
developers with access to capital on more favorable terms.

 Implementing technical fixes to the Section 48A tax credit to enable 
                    carbon capture retrofits of existing power plants

Design flaws in the current 48A investment tax credit program have made 
it impossible for companies to access existing incentives to retrofit 
currently operating coal-fired power plants with carbon capture 
technology. Enacting proposed reforms to 48A to modify plant heat rate 
requirements for compatibility with operating carbon capture equipment 
and providing for direct pay would unlock approximately $2 billion in 
currently available funding for retrofits.

The bipartisan CCUS Tax Credit Amendments Act of 2021 (S. 986), as 
mentioned above, would implement these needed technical changes, while 
also making a direct pay option available for the 48A credit, in 
addition to the 45Q tax credit. Again, the Coalition urges the 
Committee to pass this pivotal bill, which enjoys bipartisan support 
from across the political spectrum in the Senate.

Conclusion

The groundbreaking provisions for deployment of carbon capture, direct 
air capture, carbon utilization and associated CO2 transport 
and storage infrastructure in these bipartisan bills before Congress 
will help put America's energy, industrial and manufacturing sectors on 
track to reach net-zero emissions by 2050. Analyses by the Rhodium 
Group also reveal the potential for creating tens of thousands and 
hundreds of thousands of jobs and for hundreds of billions in 
investment from carbon capture \2\ and direct air capture \3\ 
deployment, respectively, if these technologies are deployed at levels 
needed to meet net-zero targets. At the same time, Congress will be 
ensuring the long-term viability of vital industries that provide 
millions of existing high-wage jobs, which represent the lifeblood of 
American workers, their families and communities, and regional 
economies.
---------------------------------------------------------------------------
    \2\ https://rhg.com/research/state-ccs/.
    \3\ https://rhg.com/research/capturing-new-jobs-and-new-business/.

The Carbon Capture Coalition appreciates the support of the Committee 
in advancing legislation to enable greater deployment of carbon 
management technologies to meet net-zero emissions reduction goals by 
midcentury. We look forward to working with the Committee on a 
bipartisan basis to advance the policy priorities outlined in this 
statement. Should you have any questions about the legislation or 
recommendations noted in this statement, please contact Madelyn 
Morrison, External Affairs Manager, Carbon Capture Coalition at 
mmorrison@carboncapture
---------------------------------------------------------------------------
coalition.org.

                                 ______
                                 
                        Center for Fiscal Equity

                      14448 Parkvale Road, Suite 6

                          Rockville, MD 20853

                      [email protected]

                    Statement of Michael G. Bindner

Chairman Wyden and Ranking Member Crapo, thank you for the opportunity 
to submit these comments for the record to the Committee on this topic.

On warming in general, there is no doubt that it is man-made. While 
there was a warm period around the first millennium, we came to it 
gradually. Industrialization may have ended what is called the Little 
Ice Age, but that warming is sudden and has dire consequences. We do 
not know that it will stop the way it did in the Middle Ages; indeed, 
it is not likely to, which makes these hearings vital.

Starting with the coasts, there will be sea level rise. Indeed, the 
flooding shown in Vice President Gore's latest film shows how bad it is 
getting. The wealthy don't seem to care, because they have flood 
insurance.

The most basic step to at least get wealthier taxpayers on board 
(including the upper-middle class) is to cap flood insurance benefits 
to a level where beach houses properties can no longer be insured. Even 
that small step could never be enacted. Too many donors have beach 
houses.

Our economic system is the problem. Until we move to something more 
cooperative, the well-off will turn their economic power into political 
power.

Without a technical solution, (like fusion, which Koch et al. are slow 
rolling) all the incentives in the world will not stop plutocrats from 
scuttling every attempt at regulating emissions. Historically, unless 
people start dying from the air, as they are in China and did in 
Pennsylvania from the smog, nothing gets done. The river had to be 
actually burning in Cleveland before anything was done. Expect no less, 
which is why the hurricanes are coming in handy now.

Polluters will only accept carbon taxes as an alternative to direct 
regulation. If we dropped fuel efficiency standards and imposed carbon 
taxes instead, I suspect that car makers and the energy industry would 
jump on board. Some level of regulation, like some level of social 
welfare, helps save business owners from themselves. One need only 
remember the smog that blanketed Beijing during their Olympics to see 
what happens from minimal regulation. China is now going all in on 
renewable energy. Will we learn the same lesson?

We have the capacity to do both. Regulations need to be ramped up AND 
Carbon Value-Added Taxes need to be enacted to fund infrastructure and 
research into technical solutions like Helium-3 fusion and electric 
cars which receive computer control and power from a covered roof 
deck--preferably one topped with grass.

I use the term carbon value-added tax (C-VAT) because energy prices are 
tax-
inelastic. When energy is needed, it is purchased, especially for 
transportation. Unless gasoline taxes approach $4 per gallon, people 
simply fill up their SUV's and cope with the price changes. There is 
plenty of space to increase gas taxes before consumers change their 
behavior.

Because energy usage is inelastic, carbon usage must be included on 
receipts or invoices. It is the only way to assure consumers have the 
information to purchase responsibly.

The Fair Tax, the Green New Deal, Carbon Taxes, and Goods and Services 
(Credit Invoice) Taxes all assume some sort of subsidy to hold poor 
families harmless--some kind of rebate or prebate. Many even believe 
that levying such taxes could be a good way to increase household 
income to for poorer families, which would also produce economic 
growth. I agree that subsidizing families will increase growth, however 
I submit that the best way to do so is through either existing 
subsidies or wages.

Increasing the Child Tax Credit, making it permanently refundable and 
establishing a carbon VAT should all be elements of comprehensive tax 
reform. The first attachment offers the latest update to the Center for 
Fiscal Equity's proposal. Reform should be bipartisan so that it has 
staying power. One possible point of compromise is to end the 
requirement for all but the wealthiest to file income tax.

The nation has already taken steps on the journey to reform in passing 
the American Rescue Plan Act.

The ARPA has its pluses and its minuses. On the minus side, families 
who had adequate income during the pandemic now have money to blow. 
Instead of spending it they are using it to speculate. Masses of people 
are about to enter the bottom half of EFT and Crypto markets, which 
will allow the top tiers of the scheme (whose seed money was provided 
by the Ryan-Brady-Trump tax cuts) to get out.

On the plus side, the increased child tax credit and its new 
refundability will provide long-term economic security to families. The 
second essential step is to increase the minimum wage so that no one 
has to work for free or have a decreased standard of living without 
working by living solely on the CTC.

The minimum wage should be immediately increased to match the 
Republican offer of $10 per hour. To return wages to 1965 levels, which 
rewarded productivity gains, the wage should be increased over time to 
between $11 and $13 an hour, which is a nice range to compromise,

We should also make a commitment to also decrease what constitutes a 
full-time work week. 32 hours, with four 8 hour days or five 6.5 hour 
days would put more people to work at higher wages. Increased minimum 
wages are important given increases to the Child Tax Credit so that no 
one will attempt to simply live on what is paid to their children.

The current challenge in implementing a higher CTC is how to get the 
money to families immediately. Doing so through direct IRS payments 
cannot be a long-term solution.

There are two avenues to distribute money to families. The first is to 
add CTC benefits to unemployment, retirement, educational (TANF and 
college) and disability benefits. The CTC should be high enough to 
replace survivor's benefits for children.

The second is to distribute them with pay through employers. This can 
be done with long-term tax reform, but in the interim can be 
accomplished by having employers start increasing wages immediately to 
distribute the credit to workers and their families, allowing them to 
subtract these payments from their quarterly corporate or income tax 
bills.

Over the long haul, tax reform is necessary to cement these gains. Our 
tax reform plan is designed to provide adequate income and services to 
families (both with increased minimum wages and child tax credits) 
through employer-paid taxes, funding government services through a 
goods and services tax, separating out taxation of capital gains and 
income from income to an asset value-added tax and higher tier 
subtraction VAT collections on wage income up to the $330,000 level and 
above, with additional personal income taxation for incomes over 
$425,000.

The top rates for higher tier subtraction VAT, personal income taxes 
and asset VAT would all be set to the same rate, say 26%, so that forms 
of income are not manipulated to avoid taxation. It would also 
effectively raise taxes on salaried income to 52%, with capital incomes 
reinvested or investments funded by salary income adding an additional 
26% of taxation. Spending money will also trigger taxation.

Adding the effect of lower tier subtraction VAT collection to taxation 
on business owners and the top marginal rate approaches 90%. Such taxes 
are meant to prevent payment of extreme salaries rather than maximizing 
revenue. This provides more wages to the rest of the population, 
especially to those who are not adequately compensated at lower income 
levels.

Reform allows a rebalancing of fiscal responsibilities. The federal 
child tax credit we propose, plus increases in the minimum wage to at 
least $12/hour may provide enough family income in most states. Other 
states would add additional support through a state subtraction VAT. 
Comprehensive reform will truly end welfare as we know it by giving 
families what they need for a decent living.

Please see a second attachment for an updated treatment of energy taxes 
as a whole, which was first submitted in 2012. Energy taxes can take 
three forms: infrastructure development, environmental sin taxes and 
subsidies to industry (and how to avoid them).

Thank you for this opportunity to share these ideas with the committee. 
As always, we are available to meet with members and staff or to 
provide direct testimony on any topic you wish.

Please be so kind as to distribute these comments to members and staff 
in both houses, with the invitation to acknowledge and discuss today's 
submission.

 Attachment--Tax Reform, Center for Fiscal Equity, March 5, 2021

Individual payroll taxes. These are optional taxes for Old-Age and 
Survivors Insurance after age 60 for widows or 62 for retirees. We say 
optional because the collection of these taxes occurs if an income 
sensitive retirement income is deemed necessary for program acceptance. 
Higher incomes for most seniors would result if an employer 
contribution funded by the Subtraction VAT described below were 
credited on an equal dollar basis to all workers. If employee taxes are 
retained, the ceiling should be lowered to $85,000 to reduce benefits 
paid to wealthier individuals and a $16,000 floor should be established 
so that Earned Income Tax Credits are no longer needed. Subsidies for 
single workers should be abandoned in favor of radically higher minimum 
wages.

Wage Surtaxes. Individual income taxes on salaries, which exclude 
business taxes, above an individual standard deduction of $85,000 per 
year, will range from 6.5% to 26%. This tax will fund net interest on 
the debt (which will no longer be rolled over into new borrowing), 
redemption of the Social Security Trust Fund, strategic, sea and non-
continental U.S. military deployments, veterans' health benefits as the 
result of battlefield injuries, including mental health and addiction 
and eventual debt reduction. Transferring OASDI employer funding from 
existing payroll taxes would increase the rate but would allow it to 
decline over time. So would peace.

Asset Value-Added Tax (A-VAT). A replacement for capital gains taxes, 
dividend taxes, and the estate tax. It will apply to asset sales, 
dividend distributions, exercised options, rental income, inherited and 
gifted assets and the profits from short sales. Tax payments for option 
exercises and inherited assets will be reset, with prior tax payments 
for that asset eliminated so that the seller gets no benefit from them. 
In this perspective, it is the owner's increase in value that is taxed.

As with any sale of liquid or real assets, sales to a qualified broad-
based Employee Stock Ownership Plan will be tax free. These taxes will 
fund the same spending items as income or S-VAT surtaxes. This tax will 
end Tax Gap issues owed by high income individuals. A 26% rate is 
between the GOP 24% rate (including ACA-SM and Pease surtaxes) and the 
Democratic 28% rate. It's time to quit playing football with tax rates 
to attract side bets.

Subtraction Value-Added Tax (S-VAT). These are employer paid Net 
Business Receipts Taxes. S-VAT is a vehicle for tax benefits, including

      Health insurance or direct care, including veterans' health care 
for non-
battlefield injuries and long-term care.

      Employer-paid educational costs in lieu of taxes are provided as 
either 
employee-directed contributions to the public or private unionized 
school of their choice or direct tuition payments for employee children 
or for workers (including ESL and remedial skills). Wages will be paid 
to students to meet opportunity costs.

      Most importantly, a refundable child tax credit at median income 
levels (with inflation adjustments) distributed with pay.

Subsistence level benefits force the poor into servile labor. Wages and 
benefits must be high enough to provide justice and human dignity. This 
allows the ending of state administered subsidy programs and 
discourages abortions, and as such enactment must be scored as a must 
pass in voting rankings by pro-life organizations (and feminist 
organizations as well). To assure child subsidies are distributed, S-
VAT will not be border adjustable.

The S-VAT is also used for personal accounts in Social Security, 
provided that these accounts are insured through an insurance fund for 
all such accounts, that accounts go toward employee-ownership rather 
than for a subsidy for the investment industry. Both employers and 
employees must consent to a shift to these accounts, which will occur 
if corporate democracy in existing ESOPs is given a thorough test. So 
far it has not. S-VAT funded retirement accounts will be equal-dollar 
credited for every worker. They also have the advantage of drawing on 
both payroll and profit, making it less regressive.

A multi-tier S-VAT could replace income surtaxes in the same range. 
Some will use corporations to avoid these taxes, but that corporation 
would then pay all invoice and subtraction VAT payments (which would 
distribute tax benefits). Distributions from such corporations will be 
considered salary, not dividends.

Invoice Value-Added Tax (I-VAT). Border adjustable taxes will appear on 
purchase invoices. The rate varies according to what is being financed. 
If Medicare for All does not contain offsets for employers who fund 
their own medical personnel or for personal retirement accounts, both 
of which would otherwise be funded by an S-VAT, then they would be 
funded by the I-VAT to take advantage of border adjustability. I-VAT 
also forces everyone, from the working poor to the beneficiaries of 
inherited wealth, to pay taxes and share in the cost of government. 
Enactment of both the A-VAT and I-VAT ends the need for capital gains 
and inheritance taxes (apart from any initial payout). This tax would 
take care of the low-income Tax Gap.

I-VAT will fund domestic discretionary spending, equal dollar employer 
OASI contributions, and non-nuclear, non-deployed military spending, 
possibly on a regional basis. Regional I-VAT would both require a 
constitutional amendment to change the requirement that all excises be 
national and to discourage unnecessary spending, especially when 
allocated for electoral reasons rather than program needs. The latter 
could also be funded by the asset VAT (decreasing the rate by from 
19.5% to 13%).

As part of enactment, gross wages will be reduced to take into account 
the shift to S-VAT and I-VAT, however net income will be increased by 
the same percentage as the I-VAT. Adoption of S-VAT and I-VAT will 
replace pass-through and proprietary business and corporate income 
taxes.

Carbon Value-Added Tax (C-VAT). A Carbon tax with receipt visibility, 
which allows comparison shopping based on carbon content, even if it 
means a more expensive item with lower carbon is purchased. C-VAT would 
also replace fuel taxes. It will fund transportation costs, including 
mass transit, and research into alternative fuels (including fusion). 
This tax would not be border adjustable.

Summary

This plan can be summarized as a list of specific actions:

1.  Increase the standard deduction to workers making salaried income 
of $425,001 and over, shifting business filing to a separate tax on 
employers and eliminating all credits and deductions--starting at 6.5%, 
going up to 26%, in $85,000 brackets.

2.  Shift special rate taxes on capital income and gains from the 
income tax to an asset VAT. Expand the exclusion for sales to an ESOP 
to cooperatives and include sales of common and preferred stock. Mark 
option exercise and the first sale after inheritance, gift or donation 
to market.

3.  End personal filing for incomes under $425,000.

4.  Employers distribute the child tax credit with wages as an offset 
to their quarterly tax filing (ending annual filings).

5.  Employers collect and pay lower tier income taxes, starting at 
$85,000 at 6.5%, with an increase to 13% for all salary payments over 
$170,000 going up 6.5% for every $85,000--up to $340,000.

6.  Shift payment of HI, DI, SM (ACA) payroll taxes employee taxes to 
employers, remove caps on employer payroll taxes and credit them to 
workers on an equal dollar basis.

7.  Employer paid taxes could as easily be called a subtraction VAT, 
abolishing corporate income taxes. These should not be zero rated at 
the border.

8.  Expand current state/federal intergovernmental subtraction VAT to a 
full GST with limited exclusions (food would be taxed) and add a 
federal portion, which would also be collected by the states. Make 
these taxes zero rated at the border. Rate should be 19.5% and replace 
employer OASI contributions. Credit workers on an equal dollar basis.

9. Change employee OASI of 6.5% from $18,000 to $85,000 income.

Attachment--Energy Taxes

There are three aspects to consider regarding whether energy policy 
should be conducted through the tax code: energy taxes as 
transportation user fees; energy taxes as environmental sin taxes and 
energy tax policies as a subsidy for business. How to design provisions 
for a sustainable energy policy and tax reform will be discussed for 
each of these areas and we will address certain oversight questions on 
whether current tax provisions have been implemented efficiently and 
effectively.

Energy Taxes as Transportation User Fees

The most familiar energy tax is the excise tax on gasoline. It 
essentially functions as an automatic toll, but without the requirement 
for toll booths. As such, it has the advantage of charging greater 
tolls on less fuel efficient cars and lower tolls on more efficient 
cars, all without requiring purchase of a EZ Pass or counting axles.

It is a highly efficient tax in this regard, although its effectiveness 
is limited because it has not kept pace with inflation. This could be 
corrected by shifting it from a uniform excise to a uniform percentage 
tax--however because the price of fuel varies by location, there may be 
constitutional problems with doing so. The only other option to 
increase this tax in order to overcome the nation's infrastructure 
deficit--which is appropriately funded with this tax--is to have the 
courage to increase it.

In times of high unemployment, such an increase would be a balm to 
economic growth, as it would put people back to work. Given the 
competitive nature of gas prices, there is some question as to whether 
such an increase would produce a penny for penny increase in gasoline 
prices. If the tax elasticity is more inelastic than elastic, the tax 
will be absorbed in the purchase price and be a levy on producers. If 
it is more elastic, it will be a levy on users and will impact 
congestion (and thus decrease air pollution and overall conservation).

For many citizens, either prospect is a win-win, given concerns over 
both climate change and energy industry profits. The only real question 
is one of the political courage to do what is necessary for American 
jobs and infrastructure--and that seems to be a very open question.

Energy taxes are currently levied through the private sector, rather 
than through toll booth employees, which from the taxpayer point of 
view is a savings as it externalizes the pension and benefit 
requirements associated with hiring such workers.

In the event that gasoline cars were replaced with electric cars, given 
either improvements in battery charging technology or in providing 
continuous supply through overhead wires, much in the same way that 
electric trains and buses receive power, any excise per kilowatt for 
the maintenance of roads could be collected in the same way--or the 
road system could be made part of a consortium with energy providers, 
car makers and road construction and maintenance contractors--
effectively taking the government out of the loop except when eminent 
domain issues arise (assuming you believe such a tool should be used 
for private development, we at the Center believe that it should not 
be).

The electric option provides an alternative means to using natural gas, 
besides creating a gas fueling infrastructure, with natural gas power 
plants providing a more efficient conduit than millions of internal 
combustion engines. The electric option allows for the quick 
implementation of more futuristic fuels, like hydrogen, wind and even 
Helium3 fusion. Indeed, if private road companies become dominant under 
such a model, a very real demand for accelerated fusion research could 
arise, bypassing the current dependence on governmental funding.

Energy Taxes as Environmental Sin Taxes

Carbon Taxes, Cap and Trade and even the Gasoline Excise are 
effectively taxes on pollution or perceived pollution and as such, 
carry the flavor of sin taxes. As such, they put the government in the 
position of discouraging vice while at the same time trying to benefit 
from it. Our comments above as to whether the tax elasticity of the 
gasoline excise has an impact on congestion and pollution is applicable 
to this issue, although tax inelasticity will mute the effect of 
discouraging ``sinful'' behavior and instead force producers to 
internalize what would otherwise be considered externalities--provided 
of course that the proceeds from these taxes are used to ameliorate 
problems of both pollution (chest congestion) by paying for health care 
and traffic congestion in building more roads and making more public 
transit available--while funding energy research to ease the carbon 
footprint of modern civilization.

Oddly enough, this approach was once considered the conservative 
alternative to other more intrusive measures proposed by liberals, like 
imposing pollution controls on cars and factories or simply closing 
down source polluters. When those options are taken off the table, 
however, or are considered impractical, then the concept of 
environmental sin taxes becomes liberal and no action at all becomes 
the conservative position.

These use of environmental sin taxes is by nature much more efficient 
economically than pollution controls and probably also more efficient 
than allowing producers and consumers to benefit from externalities 
like pollution, congestion and asthma. As with transportation funding, 
such taxes are only effective if they actually provide adequate funding 
for amelioration or otherwise change consumer behavior. If the politics 
of the day prevent taxes from actually accomplishing these objectives, 
then their effectiveness is diminished.

The short term political win of keeping taxes too low can only work for 
so long. Reality has a way of intruding, either because infrastructure 
crumbles, congestion becomes too high, children become ill with asthma 
(for full disclosure purposes, I suffered from this after moving down-
wind as a child from an Ohio Edison coal plant) and sea levels rise--
destroying vacation homes and the homes of those who support them--and 
if Edgar Cayce is to be believed--the states that are the heart of the 
Republican base.

The role of energy taxes as sin taxes are preserved in comprehensive 
tax reform only if they are preserved in addition to value added and 
net business receipts taxes. If there is no separate tax or higher rate 
for these activities, there is no sin tax effect and the ``sin'' is 
effectively forgiven with any amelioration programs funded by the whole 
of society rather than energy users.

Energy Tax Policies as a Subsidy for Business

There are quite a few ways in which energy tax policy subsidizes 
business. The most basic way is the assessment of adequate energy 
taxes, or taxes generally, to pay for government procurement of 
infrastructure and research. If tax reform does not include adequate 
revenue, the businesses which fulfill these contracts will be forced to 
either reduce staff or go out of business. Government spending 
stimulates the economy when more money is spent because taxes are 
raised and dedicated (or even earmarked) for these uses. Eliminating 
specific energy taxes in tax reform forces this work into competition 
with other government needs.

Let me be clear that the Center does not propose such a move. Our 
approach actually favors more, not less, identification of revenues 
with expenditures, reducing their fungibility, with the expectation 
that taxes increase when needs are greater and decrease when they are 
met, either through building in advance of need or finding an 
alternative private means of providing government services.

The more relevant case to the Committee's question is the existence of 
research and exploration subsidies as they exist inside of more general 
levies, such as the Corporate Income Tax. To the extent to which tax 
reform eliminates this tax and replaces it with reforms such as the 
Subtraction Value-Added Tax (which taxes both labor and profit), such 
subsidies are problematic, but not impossible to preserve.

This is one of the virtues of a separate S-VAT, rather than replacing 
the Corporate Income Tax with a VAT or a Fair Tax--which by their 
nature have no offsetting tax expenditures. The challenge arises, 
however, when the existence of such subsidies carry with them the 
impression that less well connected industries must pay higher taxes in 
order to preserve these tax subsidies. Worse is the perception, which 
would arise with their use in an SVAT, that such subsidies effectively 
result in lower wages across the economy. Such a perception, which has 
some basis in reality, would be certain death for any subsidy.

One must look deeper into the nature of these activities to determine 
whether a subsidy is justified, or even possible. If subsidized 
activities are purchased from another firm, the nature of credit 
invoice value-added taxes, carbon (receipt visible) value-added taxes 
and employer-paid subtraction value-added taxes alleviate the need for 
any subsidy at all, because the VAT paid implicit in the fees for 
research and exploration would simply be passed through to the next 
level on the supply chain and would be considered outside expenditures 
for SVAT calculation and therefore not taxable. If research and 
exploration is conducted in house, then the labor component of these 
activities would be taxed under both the IVAT and the SVAT, as they are 
currently taxed under personal income and payroll taxes now.

The only real issue is whether the profits or losses from these 
activities receive special tax treatment. Because profit and loss are 
not separately calculated under such taxes, which are essentially 
consumption taxes, the answer must be no. The ability to socialize 
losses and privatize profits through the SVAT would cease to exist with 
the tax it is replacing.

If society continues to value such subsidies, they would have to come 
as an offset to a carbon tax or cap and trade regime, if at all, as the 
excise tax for energy is essentially a retail sales tax and the 
industrial model under which the energy industry operates insulates the 
gasoline excise from the application of any research and exploration 
credits. If the energy companies were to change their model to end 
independent sales and distribution networks and treat all such 
franchisees as employees (with the attendant risk of unionization), 
then the subject subsidies could be preserved--provided that the 
related energy tax is increased so that the subsidy could actually 
operate--favoring those who participate in research and development and 
penalizing those who do not.

In other words, if big oil wants to keep this subsidy when there are no 
corporate income tax, it must buy up all its franchisees and allow the 
government to double the gasoline tax with a deduction at payment for 
research and exploration.

Without taxes, there can be no subsidy.

                                 ______
                                 
                        Citizens' Climate Lobby

                       1750 K St., NW, Suite 1100

                          Washington, DC 20006

Citizens' Climate Lobby (CCL) appreciates the opportunity to submit 
written testimony to the Senate Finance Committee for the April 27, 
2021 hearing on ``Climate Challenges: The Tax Code's Role in Creating 
American Jobs, Achieving Energy Independence, and Providing Consumers 
with Affordable, Clean Energy.''

Citizens' Climate Lobby is a grassroots organization that trains and 
supports volunteers to build relationships with their elected 
representatives in order to influence climate policy. CCL's key purpose 
is to create political will for climate solutions while empowering 
individuals to exercise their personal and political power. CCL has 
over 180,000 supporters nationwide from every state and congressional 
district.

Summary

Citizens' Climate Lobby encourages Congress to put a price on 
greenhouse gas emissions as an effective and evidence-based approach to 
mitigating climate change. Congress has already developed impressive 
carbon pricing legislation that can quickly reduce greenhouse gas 
emissions and protect low income Americans including America's Clean 
Future Fund of 2021 (S. 685),\1\ The American Opportunity Carbon Fee 
Act of 2019,\2\ The Climate Action Rebate Act of 2019,\3\ and The 
Energy Innovation and Carbon Dividend Act.\4\ This last policy is a 
carbon fee and dividend approach supported by scientists, economists, 
and thousands of businesses, prominent individuals, faith groups, and 
local governments from both sides of the political aisle.\5\
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    \1\ https://www.congress.gov/bill/117th-congress/senate-bill/685.
    \2\ https://www.congress.gov/bill/116th-congress/senate-bill/1128.
    \3\ https://www.congress.gov/bill/116th-congress/senate-bill/2284.
    \4\ https://energyinnovationact.org/.
    \5\ https://energyinnovationact.org/supporters-overview/.

We support this policy and encourage Congress to pass it because it 
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would

      Create millions of jobs in a clean energy economy.
      Act quickly and efficiently to reduce emissions.
      Add higher quality jobs in the energy sector.
      Increase GDP on a net basis.
      Move the U.S. toward energy independence.
      Make clean, affordable energy available to Americans.
      Protect U.S. businesses in the transition to clean energy.
      Encourage global action on emissions reductions.
      Dramatically improve our health and save lives.
      Achieve emissions reductions without adding to the federal 
deficit.
Creating Quality American Jobs
Creating Jobs

A carbon price will create more U.S. jobs in the clean energy sector as 
we transition to a clean energy economy. To provide a few examples, 
relative to coal, generating energy from wind creates 1.5 times more 
jobs, from solar thermal creates 2 times more jobs, from photovoltaic 
solar creates 8 times more jobs, and energy efficiency efforts create 
3.5 times more jobs per unit of energy.\6\ Similarly, investing in 
clean energy generates approximately 3.2 times more U.S. jobs than 
equivalent spending would generate in fossil fuels.\7\
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    \6\ Wei, Max, et al. ``Putting Renewables and Energy Efficiency to 
Work: How Many Jobs Can the Clean Energy Industry Generate in the 
U.S.?'' Energy Policy, vol. 38, no. 2, 2010, pp. 919-931.
    \7\ Pollin, Robert, et al. Department of Economics and Political 
Economy Research Institute (PERI), June 2009, The Economic Benefits of 
Investing in Clean Energy.

A carbon price that returns revenue to citizens will bring job growth 
in other sectors beyond clean energy as well. British Columbia 
implemented a carbon price that returned revenues to citizens and 
demonstrated that over a 6 year period, job gains in labor-intensive 
sectors like health care outweighed job losses in energy intensive 
sectors like air travel.\8\ A study of a carbon fee and dividend 
similar to the Energy Innovation and Carbon Dividend Act showed that 
the policy would create 2.8 million jobs above baseline over 20 years 
between clean energy jobs and local jobs in sectors such as healthcare 
and entertainment.\9\ The clean energy economy provides more job 
opportunities in both the energy sector and the broader economy.
---------------------------------------------------------------------------
    \8\ Yamazaki, Akio. ``Jobs and Climate Policy: Evidence from 
British Columbia's Revenue-
Neutral Carbon Tax.'' Journal of Environmental Economics and 
Management, vol. 83, 25 April 2017, pp. 197-216.
    \9\ Nystrom, Scott, and Patrick Luckow. Regional Economic Models, 
Inc. (REMI) and Synapse Energy Economics, Inc. (Synapse), 2014, The 
Economic, Climate, Fiscal, Power, and Demographic Impact of a National 
Fee-and-Dividend Carbon Tax.

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Quality Jobs

Transitioning to clean energy will not only create more jobs, but will 
create more quality jobs with higher wages and better benefits. On 
average in 2018 fossil fuel jobs earned $25/hr, wind and solar jobs 
earned $24/hr, nuclear jobs earned $46/hr, and jobs that applied to all 
forms of energy earned $28/hr.\10\ The median hourly wages for clean 
energy jobs are 25% higher than the national median wage for all jobs. 
Further, clean energy jobs are more likely to come with health and 
retirement benefits than the rest of the private sector. And generally, 
unionization rates for clean energy jobs are slightly higher than the 
rest of the private sector.\11\
---------------------------------------------------------------------------
    \10\ ``Occupational Employment Statistics.'' U.S. Bureau of Labor 
Statistics (May 2018).
    \11\ E2, ACORE, and CELI, October 2020, Clean Jobs, Better Jobs: An 
Examination of Clean Energy Job Wages and Benefits.

Energy jobs are naturally transitioning to clean energy jobs as clean 
energy employment (+6%) grew more than twice the national average 
(+2.7%) between 2017 and 2019 while employment in natural gas and coal 
have fallen -5.3% and 7.1% respectively.\12\ A carbon price would 
accelerate this trend of job creation in a sector that has higher than 
average wages and higher unionization rates. Many current energy 
occupations will also continue to thrive in a low-carbon energy 
environment. These would include installation and maintenance of 
expanded power grid infrastructure, pipeline installation and 
maintenance for CO2 and/or hydrogen pipelines, refinery and 
process plant construction and operation in biorefineries, and the 
nuclear power utility workforce.
---------------------------------------------------------------------------
    \12\ E2, ACORE, and CELI, October 2020, Clean Jobs, Better Jobs: An 
Examination of Clean Energy Job Wages and Benefits.
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Achieving Energy Independence
Well designed climate policy can help the U.S. increase energy 
independence on its path to net-zero emissions. A study of the carbon 
fee and dividend approach using the Energy Innovation and Carbon 
Dividend Act of 2019 found that the policy would have virtually no 
effect on U.S. oil production and relatively small impact on U.S. 
natural gas production by 2030 while effectively reducing 
emissions.\13\ This is possible because as U.S. fuel demand decreases 
as a result of the carbon price, the U.S. sources higher percentages of 
fuel locally and decreases imports.
---------------------------------------------------------------------------
    \13\ Kaufman, Dr. Noah, et al. Columbia Center on Global Energy 
Policy, 2019, An Assessment of the Energy Innovation and Carbon 
Dividend Act.
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Providing Consumers With Affordable, Clean Energy
Moving to Clean Energy

Carbon pricing is an effective way to move our economy toward clean 
energy sources. Modest carbon prices, as low as $7/ton by 2020, $22/ton 
by 2025, and $36/ton by 2030 can meet the same greenhouse gas emissions 
reductions that would be achieved by the regulatory approaches of the 
Clean Power Plan, Corporate Average Fuel Economy (CAFE) Standards, and 
Renewable Fuel Standards combined.\14\ Reasonable carbon prices can put 
the U.S. clearly on the path to net-zero by 2050. A carbon price of 
about $34 to $64/ton by 2025 and $77 to $124/ton in 2030 will put us on 
the path to net-zero by 2050.\15\ The carbon price targets set in the 
Energy Innovation and Carbon Dividend Act hit the center of these 
estimates.
---------------------------------------------------------------------------
    \14\ Knittel, Christopher R. MIT Center for Energy and 
Environmental Policy Research, 2019, Knittel, Christopher R., Diary of 
a Wimpy Carbon Tax: Carbon Taxes as Federal Climate Policy.
    \15\ Kaufman, Noah, et al. ``A Near-Term to Net Zero Alternative to 
the Social Cost of Carbon for Setting Carbon Prices.'' Nature Climate 
Change, vol. 10, no. 11, 2020, pp. 1010-1014, doi:10.1038/s41558-020-
0880-3.

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Maintaining Affordable Energy

As the U.S. transitions to a healthier and more sustainable clean 
energy economy, there will be temporary increases in energy prices for 
consumers. It is critical to protect low income communities from 
increasing energy prices as we make this necessary transition. A carbon 
fee and dividend like the Energy Innovation and Carbon Dividend Act can 
effectively move the U.S. toward net-zero energy while protecting 
consumers by returning 100% of the revenue equally to American 
residents. Under this plan, 61% of households and 68% of individuals in 
the U.S. end up receiving more than enough in monthly carbon dividends 
to offset their increased costs. These benefits highly correlate with 
low income Americans with 97% of the lowest two economic quintiles 
benefiting or breaking even on increased energy costs.\16\
---------------------------------------------------------------------------
    \16\ Ummel, Kevin. 2020, Household Impact Study II (HIS2) The 
Impact of a Carbon Fee and Dividend Policy on the Finances of U.S. 
Households.
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Preferred by Businesses

Carbon pricing is the preferred climate policy of many businesses. This 
approach lays out a predictable price for businesses to plan for. A 
carbon price does not set restrictions on specific businesses or select 
winners but applies the same incentive to innovate and reduce emissions 
evenly. See the following notable statements of support for carbon 
pricing:

      U.S. Chamber of Commerce: ``The Chamber supports a market-based 
approach to accelerate GHG [greenhouse gas] emissions reductions across 
the U.S. economy. We believe that durable climate policy must be made 
by Congress, and that it should encourage innovation and investment to 
ensure significant emissions reductions, while avoiding economic harm 
for businesses, consumers and disadvantaged communities. This policy 
should include well designed market mechanisms that are transparent and 
not distorted by overlapping regulations. U.S. climate policy should 
recognize the urgent need for action, while maintaining the national 
and international competitiveness of U.S. industry and ensuring 
consistency with free enterprise and free trade principles.``
      Business Roundtable:\17\ ``Business Roundtable believes 
corporations should lead by example, support sound public policies and 
drive the innovation needed to address climate change. To this end, the 
United States should adopt a more comprehensive, coordinated and 
market-based approach to reduce emissions. This approach must be 
pursued in a manner that ensures environmental effectiveness while 
fostering innovation, maintaining U.S. competitiveness, maximizing 
compliance flexibility and minimizing costs to business and society. 
International cooperation and diplomacy backed by a broadly supported 
U.S. policy will be the key to achieving the collective global action 
required to meet the scope of the challenge and position the U.S. 
economy for long-term success.''
---------------------------------------------------------------------------
    \17\ https://www.businessroundtable.org/climate.
---------------------------------------------------------------------------
      American Petroleum Institute (API):\18\ ``API endorses an 
economy wide price on carbon, the most impactful policy for emissions 
reductions, but recognizes the prevalence of ongoing discussions 
regarding sector-specific policies, including a Clean Energy Standard 
(CES) focused on the electricity sector. API supports fuel- and 
technology-neutral approaches to addressing emissions in the 
electricity sector and believes that any CES under consideration should 
include natural gas and recognize and value the many benefits natural 
gas provides to an increasingly lower-carbon electricity grid.''
---------------------------------------------------------------------------
    \18\ https://www.api.org/climate.
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Carbon Border Fee Adjustment

Protecting U.S. Businesses

Carbon prices paired with a carbon border fee adjustment will not 
disadvantage U.S. business in the world market. A carbon border fee 
adjustment may be imposed on covered fuels and ``emissions-intensive 
trade-exposed'' (EITE) goods \19\ that cross our border in either 
direction; imported EITE goods from a country without an equivalent 
carbon price to the U.S. will pay a fee to make up the difference and 
American-made EITE products exported to such a country will receive a 
rebate for the carbon fee. These goods include products like steel, 
aluminum, cement, glass, certain chemicals, and some agricultural 
products.\20\
---------------------------------------------------------------------------
    \19\ ``Legislation: Energy-Intensive, Trade-Exposed Industries.'' 
American Council for an Energy-Efficient Economy (accessed 21 May 
2020).
    \20\ Mares, J.W. and B.P. Flannery. ``WTO-Compatible Methodologies 
to Determine Export Rebates and Import Charges for Products of Energy-
Intensive, Trade-Exposed Industries, If There Is an Upstream Tax on 
Greenhouse Gases.'' Working Paper 18-19. Resources for the Future (Oct 
2018).

Carbon border fee adjustments prevent the carbon fee from putting 
American businesses at a competitive disadvantage in global markets. It 
will also remove the incentive for businesses to relocate overseas to 
---------------------------------------------------------------------------
avoid the carbon fee.

Threats and Opportunities on International Coordination

The United States is currently falling behind as the only developed 
nation without a national carbon price.\21\, \22\ China, 
another influential economy, has launched an emissions trading scheme 
that lays the groundwork for phasing out carbon emissions.\23\ Both the 
European Union (EU) and Canada--countries that account for a third of 
our international trade \24\--have enacted carbon prices and are 
discussing border carbon adjustments of their own.\25\, \26\
---------------------------------------------------------------------------
    \21\ ``Carbon Pricing Dashboard: Up-to-Date Overview of Carbon 
Pricing Initiatives.'' Carbon Pricing Dashboard | Up-to-Date Overview 
of Carbon Pricing Initiatives, World Bank.
    \22\ World Economic Situation and Prospects, United Nations, 2021, 
p. 125.
    \23\ Carpenter, Scott. ``Toothless Initially, China's New Carbon 
Market Could Be Fearsome.'' Forbes, 2 March 2021.
    \24\ ``U.S. International Trade Data.'' Foreign Trade, U.S. Census 
Bureau.
    \25\ Aylor, B., et al. ``How an EU Carbon Border Tax Could Jolt 
World Trade.'' Boston Consulting Group (30 June 2020).
    \26\ ``A Healthy Environment and a Healthy Economy.'' Government of 
Canada (11 December 2020).

The EU's recent announcement that they will enforce a carbon border 
adjustment mechanism in 2023 has already inspired meaningful action in 
other countries. Russia, reportedly worried about what an EU border 
carbon adjustment would mean for their trade relationship, announced a 
plan to monitor polluters by 2022 to serve as the basis of an emissions 
trading system.\27\ The EU's announcement also inspired China to 
accelerate the deployment of their carbon market \28\ because of their 
significant trade relationship. This is a convincing proof point that 
carbon border adjustments will play an important role in influencing 
global action on climate change.
---------------------------------------------------------------------------
    \27\ Khrennikova, Dina. ``Russian Lawmakers Back The Nation's First 
Ever Climate Law.'' Bloomberg.com, Bloomberg, 20 April 2021.
    \28\ Rathi, Akshat. ``Carbon Restrictions Can Bend the Emissions 
Curve: Green Insight.'' Bloomberg Law, 27 April 2021.

The U.S. has the opportunity to enact a carbon price to not only avoid 
paying our trading partners border carbon adjustment fees, but to enact 
a carbon border fee adjustment that will leverage our trade 
relationships to encourage other countries to meet the ambition of our 
carbon price. Goods made in the U.S. are already 80% more carbon-
efficient than the world average \29\ meaning the U.S. holds a 
competitive advantage in a global market with an ambitious carbon 
price.
---------------------------------------------------------------------------
    \29\ Rorke, Catrina, and Greg Bertelsen. Climate Leadership 
Council, September 2020, America's Carbon Advantage.
---------------------------------------------------------------------------

Quickly and Efficiently Reduce Emissions

Carbon pricing will quickly reduce emissions to put the U.S. on a path 
to net-zero emissions by 2050. Studies of the Energy Innovation and 
Carbon Dividend Act show that it would reduce U.S. emissions 50% 
relative to 2005 by 2030 \30\ and put us on a path to attain net-zero 
emissions by 2050.\31\ Furthermore, carbon prices are less likely to be 
held up by judicial hurdles. Carbon fees are firmly grounded in 
Congress's constitutional ``power to lay and collect taxes,''\32\ 
making it resistant to court challenges similar to those that held up 
the Clean Power Plan.
---------------------------------------------------------------------------
    \30\ Hafstead, Marc. ``Carbon Pricing Calculator.'' Carbon Pricing 
Calculator, Resources for the Future, 10 August 2020, www.rff.org/
publications/data-tools/carbon-pricing-calculator/.
    \31\ Kaufman, Noah, et al. ``A Near-Term to Net Zero Alternative to 
the Social Cost of Carbon for Setting Carbon Prices.'' Nature Climate 
Change, vol. 10, no. 11, 2020, pp. 1010-1014, doi:10.1038/s41558-020-
0880-3.
    \32\ Article I. Legal Information Institute (accessed 28 November 
2020).

Carbon pricing is an economically efficient way to reduce greenhouse 
gas emissions. In a comparison between regulations or a $42/ton carbon 
tax to achieve the same emissions reductions, using the carbon tax 
approach will best protect U.S. GDP. If a carbon tax is applied, by 
2036 the annual GDP will be $420 billion higher ($100 per month per 
U.S. household) than if the same emissions reductions were achieved by 
regulations.\33\
---------------------------------------------------------------------------
    \33\ Analysis Insights for Policymakers ed., vol. 1, NERA Economics 
Consulting, December 2020., Economic Impacts of the Climate Leadership 
Council's Carbon Dividends Plan Compared to Regulations Achieving 
Equivalent Emissions Reductions.
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Increase GDP on a Net Basis

Continuing on our current climate change trajectory will have a 
negative impact on the U.S. GDP from changes including worsening 
agricultural productivity, mortality, crime, energy use, storm 
activity, and coastal inundation.\34\ Reducing greenhouse gas emissions 
consistent with the Paris target of ``well below 2+C'' instead of 
continuing business-as-usual will result in the U.S. GDP being an 
estimated 2-4% higher in 2050.\35\ A carbon fee and dividend policy 
would also maintain a higher U.S. GDP relative to a business-as-usual 
scenario through mid century and develop a far stronger GDP by 
2100.\36\
---------------------------------------------------------------------------
    \34\ Nunn, Ryan, et al. Brookings, 2019, Ten Facts about the 
Economics of Climate Change and Climate Policy.
    \35\ Swiss Re Institute, April 2021, The Economics of Climate 
Change: No Action Not an Option.
    \36\ International Monetary Fund, Oct 2020, World Economic Outlook: 
A Long and Difficult Ascent.
---------------------------------------------------------------------------

Dramatically Improve Our Health and Save Lives

The impacts of climate change have been acknowledged as the major 
public health challenge of the century.\37\ Burning fossil fuels harms 
our health directly by generating pollutants, and indirectly through 
release of greenhouse gases. Both the direct and indirect costs are 
often paid for by taxpayers. A policy consistent with 2+C would save an 
average of 90,000 U.S. lives a year over 50 years creating a health co-
benefit value of $700 billion per year.\38\
---------------------------------------------------------------------------
    \37\ Watts, N., et al. ``The Lancet Countdown on health and climate 
change: from 25 years of inaction to a global transformation for public 
health.'' The Lancet 391 10120, 581-630 (10 February 2018).
    \38\ Shindell, Drew, ``Health and Economic Benefits of a 2+C 
Climate Policy.'' 2020.
---------------------------------------------------------------------------

 Achieve Emissions Reductions without Adding to the Federal Deficit

Carbon pricing can not only quickly and efficiently reduce America's 
greenhouse gas emissions, but can do so without adding to the federal 
deficit. Assessing a fee on pollution generates revenue that can be 
used to aid the transition to a low carbon economy. The following 
recent bills demonstrate effective carbon prices and uses of revenue 
that protect vulnerable populations:

      The Energy Innovation and Carbon Dividend Act \39\ is a revenue 
neutral carbon price that distributes all of the net proceeds equally 
back to citizens in carbon dividend payments. This legislation would 
reduce America's carbon pollution by 50% by 2030 and ensure that more 
than 60% of Americans, especially low income Americans, have their 
increased carbon costs offset.\40\
---------------------------------------------------------------------------
    \39\ https://energyinnovationact.org/.
    \40\ Kevin, Ummel. vol. 2, Greenspace Analytics, 2020, Household 
Impact Study: The Impact of a Carbon Fee and Dividend Policy on the 
Finances of U.S. Households.
---------------------------------------------------------------------------
      America's Clean Future Fund of 2021 (S. 685) \41\ allocates the 
majority of revenues to be used as rebates to American households to 
manage increased carbon costs. 25% of the funds are saved to be 
allocated between transition assistance programs for fossil fuel 
employees and the Climate Change Finance Corporation (C2FC), a federal 
agency the bill would establish to support clean energy research and 
development.
---------------------------------------------------------------------------
    \41\ https://www.congress.gov/bill/117th-congress/senate-bill/685.
---------------------------------------------------------------------------
      The American Opportunity Carbon Fee Act of 2019 \42\ provides a 
tax credit to individuals to compensate for increased carbon cost. This 
bill targets assistance by providing Social Security and veterans' 
program beneficiaries and other retired and disabled Americans with an 
inflation-adjusted annual benefit and by delivering grants to states to 
support transition assistance.
---------------------------------------------------------------------------
    \42\ https://www.congress.gov/bill/117th-congress/senate-bill/685.
---------------------------------------------------------------------------
      The Climate Action Rebate Act of 2019 \42\ distributes the 
majority of revenue back to American households in carbon dividend 
payments. 20% of revenues are reserved to fund infrastructure projects, 
5% to research and development, and 5% to transition assistance.
---------------------------------------------------------------------------
    \42\ https://www.congress.gov/bill/117th-congress/senate-bill/685.

                                 ______
                                 
                   Fermata LLC (d/b/a Fermata Energy)

                            1705 Lambs Road

                       Charlottesville, VA 22901

Chairman Wyden, Ranking Member Crapo, and Members of the Committee, my 
name is David Slutzky, and I am the Founder and CEO of Fermata LLC (d/
b/a Fermata Energy). Fermata Energy designs, supplies, and operates 
technology that integrates electric vehicles with buildings and the 
electricity grid, turning electric vehicles into valuable storage 
assets that combat climate change, increase energy resilience, and 
reduce energy costs.

Today most electric vehicles have ``one-way'' charging. Their batteries 
can be charged with electricity from the grid or other power sources, 
but they cannot discharge that electricity back into homes, businesses 
or the grid. Electric vehicles that can send electricity back into 
homes, businesses and the electric grid help cut energy costs, improve 
energy resilience and fight climate change. However most electric 
vehicles and electric vehicle chargers are not equipped to do that 
today.

By helping to jumpstart the market for ``bidirectional'' electric 
vehicle charging (sometimes referred to as ``vehicle-to-x,'' ``V2X'' or 
``V2G''), the federal government could build an American industry with 
good jobs and other enormous benefits for families and businesses. This 
technology can help protect against electric outages like what happened 
earlier this year in Texas. Bidirectional charging will speed 
deployment of solar and wind power by unlocking a vast new source of 
energy storage: the batteries already in electric vehicles. And it 
accelerates the deployment of electric vehicles by providing owners 
with a way to earn money with their parked cars and gives them a source 
of backup power.

As a V2X industry leader, we hope that our testimony will bring 
attention to the bidirectional charging and V2X services industry 
emerging in the United States. In addition to Fermata, companies such 
as Nuvve, Coritech, Rhombus, and Amply are pioneering bidirectional 
charging and V2X services technology in California, Colorado, and 
Delaware. At the same time, a growing number of U.S. automotive 
manufacturers, such as Ford, Rivian, Lucid, Blue Bird Corporation, 
Proterra, and Thomas Built are also incorporating bidirectional 
technology in their vehicles, creating jobs in Illinois, Michigan, 
Ohio, North Carolina, and Georgia. We believe that it's only a matter 
of time before bidirectional charging is the standard for electric 
vehicles.

Momentum for bidirectional charging is building. Many utilities are 
taking interest in V2X, launching pilots, research studies, programs, 
and industry partnerships to explore the potential of this technology. 
A U.S. bidirectional charging industry is starting to emerge, with more 
vehicle manufacturers offering models enabled for bidirectional power 
flows, UL-certified bidirectional chargers being manufactured and 
installed, and a growing number of projects demonstrating the 
technology's benefits.

Federal leadership could be transformational for bidirectional charging 
in the U.S., helping position the U.S. as a leader in this industry of 
the future. At present the federal solar and storage tax credit 
actually acts as a barrier to bidirectional EV charging, since it 
applies to stationary energy storage assets only. This creates an 
uneven playing field for the vast energy storage potential within 
electric vehicles. Widespread adoption of bidirectional charging will 
involve a number of market participants, including utilities, auto 
manufacturers, vehicles owners and building owners. Federal support 
would send a strong signal about the opportunities and public benefits 
of bidirectional charging, helping jumpstart the market.

PROPOSAL

We propose strengthening the electric vehicle charger tax credit to 
support bidirectional EV charging infrastructure.

      The IRS Section 30C alternative refueling property tax credit 
currently covers 30% of eligible costs (capital and installation) for 
electric vehicle charging equipment, up to a maximum of $1,000 for 
individuals and $30,000 for businesses. The credit expires December 31, 
2021.

      IRS Section 30C should be amended to: 1) add ``bidirectional 
electric vehicle charging equipment'' to the list of alternative 
refueling property eligible for 30C tax credits, 2) increase the 
current tax credit ceilings for both individuals and businesses (as 
proposed in S.975) and 3) increase the tax credit percentage for 
bidirectional charging equipment from 30%, by an additional 20%, to 
allow for the increased cost of the equipment. The total credit would 
be up to a maximum of $3,333 for individuals and $200,000 for 
businesses, with an expiration date of December 31, 2028. 
``Bidirectional electric vehicle charging equipment'' would be defined 
as ``equipment that allows an electric vehicle to charge and discharge 
electricity."

      To create thousands of new clean energy jobs and support U.S. 
manufacturing: Expand the Section 48C Qualifying Advanced Energy 
Project credit to include bidirectional electric vehicle charging 
equipment (in Section 48C(c)(1)(A)(i)(II)) and increase the overall 
credits available by $3B each year for the next five years.

BENEFITS

Bidirectional charging of electric vehicles will bring enormous 
benefits on a range of issues.

Job creation: The steps proposed here would create thousands of U.S. 
jobs and position the United States as the leader in a growing global 
industry. This includes jobs manufacturing bidirectional electric 
vehicle chargers and components as well as installing those chargers. 
U.S.-based manufacturing of bidirectional electric vehicle chargers and 
components is already underway, with facilities ready to expand 
quickly. Installation and maintenance of bidirectional electric vehicle 
chargers are jobs that can never be outsourced. Furthermore, by 
speeding adoption of solar and wind power with widespread, cost-
effective energy storage, these steps would also contribute to job 
creation in the renewable energy industry. Expanding this tax credit 
would create American engineering, manufacturing, supply chain, and 
sales jobs in a nascent American industry and an emerging technology 
industry that is poised for rapid growth.

Lower Costs for Families and Businesses. Bidirectional charging turns 
electric vehicles into revenue-generating assets. With bidirectional 
charging, families and businesses can reduce--or in some cases, 
completely offset--the cost of owning of a vehicle. Parked vehicles 
could deliver real value for their owners for the first time. Families 
struggling to pay the bills and businesses looking to cut costs would 
both benefit. The benefits for disadvantaged communities would be 
especially strong, providing affordable mobility with clean vehicles 
that produce no air pollutants. Most EVs remain parked most of the day 
as an underutilized, untapped energy storage resource. Bidirectional 
charging technology harnesses this resource to lower the cost of EV 
ownership, leading to faster, more equitable EV adoption for low-income 
communities at risk of being ``left behind.''

The savings potential of bidirectional charging technology is enormous. 
In a recent case study by E Source--a leading research and advisory 
firm--a Fermata bidirectional charger paired with a Nissan LEAF in 
Virginia generated revenue sufficient to pay for more than 95% of the 
lease cost of a Nissan LEAF. In some parts of the United States 
(including California, Colorado, Indiana, Michigan and the Northeast), 
revenues from bidirectional charging could equal or exceed annual 
vehicle costs. It is important to recognize how impactful V2X can be to 
the total cost of ownership of an EV, making these vehicles more cost 
effective than internal combustion vehicles.

Affordable, Clean Transportation for Low-Income Communities:

Low-income communities benefit most from this technology:

      Many disadvantaged cannot afford personal transportation, let 
alone EVs. COVID-19 budget impacts to public transportation compound 
this problem enormously.

      Low-income options for cars are often limited to old vehicles, 
which while being less expensive to purchase, are not dependable and 
often end up costing more to service and repair than drivers can 
afford.

      Bidirectional EVs are the solution because they provide the 
lowest cost form of effective personal transportation.

Decarbonization of the Electric Grid and Vehicle Fleet: Bidirectional 
electric vehicles could provide a massive, decentralized source of 
energy storage, allowing utilities to integrate solar and wind power 
into electric grids far more rapidly and cheaply. With bidirectional 
chargers, for example, electric vehicles can charge when there is 
overgeneration of renewables (such as in the middle of a sunny day) and 
then supply stored energy back into the grid when renewable generation 
is low. Bidirectional charging also provides owners of electric 
vehicles with a new revenue source, helping cut the costs of electric 
vehicle ownership and speeding deployment of electric vehicles. 
Bidirectional charging thus simultaneously promotes the transition to 
both a clean electric grid and clean vehicle fleet.

Energy Resilience and Grid Stability: Bidirectional electric vehicle 
charging can help families and businesses during electric outages, 
unlocking the potential of their electric vehicles to serve as backup 
generators. The technology also reduces the need for costly utility 
infrastructure upgrades by providing peak shaving, renewable energy 
optimization and ancillary services for grid operators and utilities. 
Bidirectional charging has the potential to generate significant value 
and cost-savings for utilities and grid operators by optimizing smart 
charging services and unlocking V2X value streams at the wholesale and 
retail level. By enabling electric vehicles to provide backup power to 
buildings and the grid, this next-generation of charging infrastructure 
will help families during electric outages, enhance grid resilience and 
protect the grid against disruptions such as from natural disasters.

Direct Benefits to the Federal Government: As the nation's largest 
vehicle owner, the federal government would benefit enormously from 
bidirectional charging. With bidirectional electric vehicles, the 
federal government could sell electricity from its vast fleet back to 
electric grids, earning revenue and cutting costs for taxpayers.

BIDIRECTIONAL CHARGING IS A TRIPLE WIN

      It protects families and businesses against electric outages 
like happened in Texas.
      It speeds deployment of solar and wind power, by unlocking a 
vast new source of energy storage.
      It speeds deployment of electric vehicles to all Americans, by 
providing owners with a way to earn money with their parked cars and 
source of backup power. (Bidirectional charging is an especially big 
win for low- and middle-income drivers, democratizing EV adoption by 
lowering costs.)

FERMATA ENERGY

Fermata Energy is one of a few American companies pioneering technology 
in the space of bidirectional or V2X charging. We are an inspiring 
story of American entrepreneurship and innovation. Founded in 2011, 
Fermata Energy is a vertically integrated company focused on V2X 
technology that includes all aspects needed for V2X operations: 
hardware development of chargers, network aggregation and operational 
software, and business operations for commercial interactions and 
monetization of V2X activities for customers.

Fermata is headquartered in Charlottesville, VA and has a hardware team 
based in Blacksburg, Virginia and a software team based in Raleigh, 
North Carolina. Other Fermata employees are based in New York, 
California, Maryland, and Texas. Fermata's existing V2G charger, the 
FE-15, is the first charger UL has certified in North America to the 
UL9741 bidirectional charger requirements. Fermata's existing units are 
manufactured by Fermata's contract manufacturer, Electronic 
Instrumentations Technology (EIT), in Danville, Virginia.

In addition to developing hardware and software required to perform V2X 
activities, Fermata Energy has spent nearly 10 years studying the value 
streams that V2X can unlock from an EV, which of these value streams 
are commercially viable today without regulatory intervention, and how 
to best monetize these value streams. Fermata has extensive experience 
with analyzing use cases, monetization mechanisms, and business models 
to maximize the benefits of V2X technologies. Fermata Energy's V2X 
solutions integrate not only proprietary hardware and software, but 
also a network of strategic partnerships. In 2018, Nissan North America 
announced that they chose Fermata Energy for a major V2G pilot project 
at their North American Headquarters.

Fermata already has several active V2X sites with utility partners and 
fleet customers across the U.S.. We currently have seven publicly 
announced projects across the U.S., and many more deployments with 
utility and fleet partners planned for 2021. Most notably, we have 
active commercial V2X deployments with the City of Boulder, Colorado; 
Green Mountain Power (an electric utility in Vermont); Roanoke Electric 
Cooperative (a rural electric cooperative in North Carolina); and 
Bigelow Tea Company. These sites are performing commercial V2B and V2G 
activities with EVs right now, earning thousands of dollars a year for 
our customers with just a few initial applications. At our utility 
sites, Fermata's systems are successfully performing demand response 
and Fermata plans to expand this technology to the utilities' customer 
base this year as well. In 2021, Fermata also plans to pilot other 
revenue-generating V2X applications with our next deployment partners.

As an industry leader, we are committed to our founding vision: 
accelerating the adoption of electric vehicles and accelerating the 
transition to a clean energy economy. We are a mission-driven 
organization, and we understand that the importance and potential of 
the bidirectional charging industry far outweighs any one organization 
or company. Educating consumers, utilities, industry, and policymakers 
about bidirectional charging is central to our mission.

CONCLUSION

We are at a critical tipping point as a nation, and globally, in our 
response to climate change. Natural disasters that threaten the 
reliability of the electric power grid and American lives are on the 
rise. The impacts of climate change are also intensifying. Rolling 
blackouts and brownouts in California and the Pacific Northwest, as 
well as the recent grid failure in Texas, are stark examples of this 
growing risk.

Now, more than ever, we must support and incentivize domestic 
technologies that can stem the tide of climate change and its adverse 
impacts. Bidirectional charging has proven potential to cut energy 
costs, improve energy resilience, and fight climate change. This new 
but growing segment of the electric vehicle charging industry provides 
cost effective solutions to rolling blackouts, peak reduction, and the 
transition to renewable energy. The electric grid and consumers need 
energy storage to meet evolving energy needs and to harden the grid 
against natural disasters. At the same time, EVs must be affordable to 
enable an equitable transition to a clean energy economy. Bidirectional 
charging sits at the intersection of these two major societal 
challenges, and offers a powerful solution to both.

This technology and growing American industry can provide major 
benefits to consumers, utilities, and the electric grid, all while 
delivering cost-savings and pollution mitigation to low-income 
communities that have often been underserved by the cleantech and 
renewable energy sector. The green energy space has seen tremendous 
growth over the past few decades; dozens of new, innovative, and 
disruptive technologies have flourished with the support of public 
investment. The bidirectional charging industry is similarly poised to 
provide tremendous benefits to American consumers, the energy industry, 
and the economy at large. With a jumpstart from a small change to the 
tax code, this emerging American technology and industry can deliver on 
its full promise.

Thank you for your time and consideration,

David Slutzky
CEO, Founder Fermata LLC

                                 ______
                                 
              Independent Petroleum Association of America

                    1201 15th Street, NW, Suite 300

                          Washington, DC 20005

                              202-857-4722

                            Fax 202-857-4799

                         https://www.ipaa.org/

IPAA represents thousands of America's independent oil and natural gas 
producers. Our members are the primary producers of the nation's oil 
and natural gas and account for 83 percent of America's oil production 
and 90 percent of its natural gas output. These independent producers 
are a driving force in our economy and support roughly 4.5 million jobs 
in the United States. IPAA member companies are innovative leaders and 
broke the code to usher in the shale oil and natural gas revolution in 
the United States.

As the United States and the world struggle to rebound from the 
economic hardship caused by the COVID-19 pandemic, it is essential for 
America to continue to be a leader in energy development. All forms of 
energy will be needed in the coming years and natural gas and oil 
produced in the United States will be a key component of that energy 
mix. Oil and natural gas will not be the only energy source for the 
United States, but they will be essential to the American economy for 
years to come.

The choices the nation makes regarding its energy mix will have a huge 
impact on its economy and its international position. If America does 
not pursue a thoughtful energy policy, the nation will suffer 
economically. Unless demand for fossil energy changes dramatically, 
efforts to suppress U.S. oil and natural gas production will be 
counterproductive to the goals of addressing greenhouse gas emissions, 
increasing job growth and expanding America's impact around the globe. 
Energy is a geopolitical issue. For the last half-century, American 
foreign policy has been predicated on the nation's vulnerability to oil 
and natural gas supply disruptions. The shale revolution turned the 
United States into an energy superpower, has enhanced American national 
security and created significant geopolitical advantages for this 
nation around the globe.

Additionally, natural gas production and use has created the cleanest 
air quality the nation has seen in two decades. The United States has 
become the envy of nations for its dedication to reliable, affordable, 
responsible energy production.

Independent producers recognize the need to manage their emissions, 
including methane emissions. Over the past several years, as methane 
regulations have been developed, IPAA has been active in trying to 
assure that the regulations are designed appropriately for the diverse 
elements of the industry, including the small business operations that 
dominate ownership of low producing wells.

However, a troubling undercurrent of effort to suppress American oil 
and natural gas production appears directed at numerous factors that 
affect production. Among these is a false claim of ``tax subsidies'' 
for oil and natural gas production that are, in fact, normal business 
deductions.

The Role of American Oil and Natural Gas

Despite the hyperbole of new energy sources displacing oil and natural 
gas, in reality, oil and natural gas supplied about 70 percent of 
America's energy in 2020 and is projected to supply about 70 percent in 
2050. Internationally, oil and natural gas are about 50 percent of 
total energy consumption. These realities cannot be ignored and wished 
away. Oil and natural gas are a key component of the American economy--
an economy that must grow for a strong nation to continue.

      They provide the fuels for the vast majority of the 275 million 
vehicles registered in the United States--vehicles that will be on the 
road for decades to come. Included among these are the millions of 
trucks that transported and delivered the key commodities that kept 
America functioning for the past year of the COVID pandemic.

      They provide fuel for the trains and the airplanes that are 
essential for interstate and international commerce.

      They fuel the vessels that transport America's exports and 
imports.

      Altogether, oil and natural gas provide 93 percent of 
transportation energy.

      They heat and cool America's homes and businesses, providing 95 
percent of the energy needed.

      They generate American electricity; natural gas generates 40 
percent of American electrical power.

      They produce the synthetic fibers, pharmaceuticals, medical 
supplies, computer and cell phone components, agricultural fertilizers 
and chemicals that are essential for a modern country.

      The provide revenues to state governments and the federal 
government to fund important programs ranging from education to land 
and water conservation.

While oil and natural gas greenhouse gas emissions must be managed, 
their use provides key environmental benefits. America's success in 
reducing its greenhouse gas emissions comes from its expanded use of 
natural gas. Internationally, expanded use of natural gas promises to 
help the world improve its greenhouse gas emissions. Meanwhile, cleaner 
American oil products like low sulfur diesel fuel provides lower income 
countries the opportunity to reduce their reliance on dirty fuels in 
their homes and huts that place severe risks on their health and to 
limit the devastation of their forests. The environment and public 
health challenges across the world are large and complex and failure to 
address fundamental health challenges limits nations' ability to 
address their greenhouse gas emissions.

Unfortunately, rather than recognize the key roles oil and natural gas 
play in the American economy, anti-oil and natural gas interests 
concoct elaborate fiction that American oil and natural gas companies 
somehow duped the American public into using its products. 
Realistically, demand for these products has driven the advanced 
economies of the world. Following World War II, Americans began the 
long sought recovery from the Great Depression. Their demand for 
vehicles, electricity, emerging new products and homes resulted in 
increasing the need for more and more oil and natural gas and their 
products. In fact, American demand exceeded the capacity of American 
oil and natural gas production. America had to import more and more oil 
and eventually turned to importing natural gas.

American oil dependency after 1970 led to fifty years of international 
security issues where America's foreign policy choices depended on its 
effect on oil supply. Two clear crises were oil embargoes in 1973 and 
1979. By 2007, the United States was importing 65 percent of its oil 
supply. While much of it came from Canada and Mexico, significant 
amounts came from the Middle East where relationships were tenuous or 
hostile. The shale oil revolution changed international energy security 
dynamics significantly, positioning the United States more securely.

However, new efforts to suppress American oil and natural gas supply 
could reverse these important policy shifts. Demand drives the need for 
oil and natural gas supply. Crushing American supply will not reverse 
American demand. Instead, America will need to meet its energy demand 
by returning to imports. Global greenhouse gas emissions will not be 
reduced but American energy security will be threatened again like the 
fifty years following 1970.

Tax Issues

One path to reducing American oil and natural gas production involves 
restricting its capital investment. Because all oil and natural gas 
production declines--or depletes--over time, new production must 
replace the lost production. New wells must be drilled. Existing wells 
must be maintained even as their production diminishes. For independent 
producers, most of its capital comes through the well head. That is, 
the revenue it receives from selling its production becomes the capital 
it needs to drill and maintain wells. Clearly, tax policy then plays a 
significant role. Taxes remove capital.

Oil and natural gas tax policies will continue to draw attacks from 
those anti-oil and natural gas factions that want to cripple American 
production. Much of the rhetoric surrounding these attacks will hide 
behind the red herring of ``tax subsidies for Big Oil'' when the 
reality is that the tax provisions are not ``subsidies'' but normal 
business deductions. The impact of changing the provisions will fall on 
independent oil and natural gas producers, substantially on small 
businesses, and on royalty owners such as retirees, ranchers and 
farmers who own oil and natural gas mineral resources underlying their 
properties.

Two of the most targeted tax provisions are the treatment of intangible 
drilling and development costs (IDC) and percentage depletion.

Intangible Drilling Costs

Since 1913, a drilling and development costs deduction has been allowed 
as an ordinary and necessary business expense for those costs where 
there is no remaining equipment to value (salvage value) when an oil or 
natural gas well is completed. Because there is nothing tangible to 
value, these costs are generally called ``intangible drilling costs'' 
or IDCs. For the past 35 years, American tax policy has shortened the 
depreciation period for equipment to allow capital to be recovered and 
reinvested in new American projects. Like other rapid depreciation 
schedules in the tax code, the drilling cost deduction allows for 
investment capital to be immediately recovered and encourages its 
reinvestment. This is the same concept adopted as Bonus Depreciation in 
the 2017 Tax Reform Act. It is neither a ``tax subsidy'' nor a 
``loophole.'' For American independent producers expensing has resulted 
in facilitating reinvestment in new American projects at rates up to 
150 percent of American cash flow.

Within the past 15 years the combination of advanced horizontal 
drilling techniques and sophisticated hydraulic fracturing opened the 
development of both shale gas and shale oil formations. Clearly, while 
America has been producing these resources for 150 years, today's 
production will reflect a vastly different onshore industry than in the 
past. Similarly, the industry will continue to advance its technology 
in the offshore where the challenges of deeper formations and deeper 
water depths have driven significant changes in the past twenty years. 
What is common to developing all of these resources is the need for 
capital. In 2017, independent producer capital expenditures were 
approximately $110 million.

Independent producers have a history of investing in America. Prior to 
the economic challenges the industry has faced in the past several 
years, assessments have concluded independents reinvesting up to 150 
percent of their American cash flow back into new American projects. 
And, independents drill 91 percent of wells in the United States. The 
faster that producers recover the capital invested in projects, the 
faster it can be reinvested. For independent producers since 1913--at 
the inception of the tax code--drilling costs for the elements that are 
not a part of the final operating well could be deducted in the year 
they are incurred (expensed). These costs can be 60 to 90 percent of 
the development costs of a well--with shale wells on the high end. 
Clearly, putting this capital back into new production means more jobs, 
more production and more federal and state taxes.

For example, independent producers influenced almost $1.2 trillion of 
sales activity in the United States during 2018. This, in turn, 
contributed about $573 billion or 2.8% of U.S. GDP and supported 4.5 
million jobs (3.0% of non-agricultural employment). IHS Market 
estimates the independents initiated economic activity that generated 
over $101 billion in federal state and local taxes in 2018.

Percentage Depletion

Depletion, like depreciation, allows for the recovery of capital 
investment over time. Percentage depletion is used for most mineral 
resources including oil and natural gas. It is a tax deduction 
calculated by applying the allowable percentage to the gross income 
from a property. For oil and natural gas the allowable percentage is 15 
percent.\1\
---------------------------------------------------------------------------
    \1\ For marginal wells the allowable percentage is increased (from 
the general rate of 15 percent) by one percent for each whole dollar 
that the average price of crude oil for the immediately preceding 
calendar year is less than $20 per barrel. In no event may the rate of 
percentage depletion under this provision exceed 25 percent for any 
taxable year. The term ``marginal production'' for this purpose is 
domestic crude oil or domestic natural gas which is produced during any 
taxable year from a property which (1) is a stripper well property for 
the calendar year in which the taxable year begins, or (2) is a 
property substantially all of the production from which during such 
calendar year is heavy oil (i.e., oil that has a weighted average 
gravity of 20 degrees API or less corrected to 60 degrees Fahrenheit). 
A stripper well property is any oil or gas property which produces a 
daily average of 15 or less equivalent barrels of oil and gas per 
producing oil or gas well on such property in the calendar year during 
which the taxpayer's taxable year begins.

Depletion has been a part of the tax code since its inception. 
Initially, the only form of depletion was cost depletion; however, it 
limits depletion to the capital cost of a project. After World War I, 
Congress recognized that too many natural resources were being 
abandoned because of cost depletion limiting the economic viability of 
projects. Consequently, it began to allow forms of value depletion to 
---------------------------------------------------------------------------
be used as well. In 1926, it settled on percentage depletion.

Percentage depletion has changed over time. Current tax law limits the 
use of percentage depletion of oil and natural gas in several ways. 
First, the percentage depletion allowance may only be taken by 
independent producers and royalty owners and not by integrated oil 
companies. Second, depletion may only be claimed up to specific daily 
American production levels of 1,000 barrels of oil or 6,000 mcf of 
natural gas. Third, the net income limitation requires percentage 
depletion to be calculated on a property-by-property basis. It 
prohibits percentage depletion to the extent it exceeds the net income 
from a particular property. Fourth, the deduction is limited to 65% of 
net taxable income. Percentage depletion in excess of the 65 percent 
limit may be carried over to future years until it is fully utilized.

Despite these limitations, percentage depletion remains an important 
factor in the economics of American oil and natural gas production. 
Most independent producers do not exceed the 1000 barrel per day 
limitation. Yet, these producers are a significant component of 
America's oil and natural gas production. For example, they are the 
predominant operators of America's marginal wells. Over 85 percent of 
America's oil wells are marginal wells--producing less than 15 barrels 
per day, averaging about 2.5 barrels per day. Yet, these wells produce 
about 10 percent of American oil production. About 75 percent of 
American natural gas wells are marginal wells (averaging about 22 
mcfd), producing approximately 10 percent of American natural gas. 
Marginal wells are unique to the United States; other countries shut 
down these small operations. Once shut down, they will never be opened 
again--it is too costly. Even keeping them operating is expensive--they 
must be periodically reworked, their produced water (around 9 of every 
10 barrels produced) must be disposed properly, the electricity costs 
to run their pumps must be paid. The revenues retained by percentage 
depletion are essential to meet these costs. For larger wells, 
percentage depletion provides more revenues to be used to find new oil 
and natural gas in the United States.

In addition to independent producers, royalty owners can take 
percentage depletion on wells producing their mineral assets. Royalty 
owners can take percentage depletion on wells regardless of whether the 
producer is an independent or integrated company. One reason that 
percentage depletion draws attention is the revenue estimate associated 
with it; however, the revenue estimate never separates its evaluation 
between producers and royalty owners.

Conclusion

Oil and natural gas will remain a key component of energy supply in the 
world for the foreseeable future. Their emissions will need to be 
managed, but no modern economy will function without them. This is 
clearly true in the United States where oil and natural gas contributes 
approximately 70 of the energy consumed in the country now and in 2050. 
Growth in other energy sectors will occur but more energy will be 
needed to maintain a robust American economy.

If new policies reduce American demand for oil and natural gas, 
production and imports will diminish. However, artificial politic 
efforts to suppress American supply will not reduce demand; it will 
only lead to a return to an import dependent energy structure with 
attendant energy security risks.

False attacks on ``tax subsidies'' targeting American oil and natural 
gas producers and royalty owners will reduce supply while hurting 
independent producers, particularly small businesses, and royalty 
owners. They will not reduce greenhouse gas emissions. The ultimate 
beneficiaries of these actions would be foreign national oil companies 
producing with less emissions management than those in the United 
States. Congress should oppose these adverse policies.
                 Industrial Energy Consumers of America

                      1776 K Street, NW, Suite 720

                          Washington, DC 20006

                        Telephone (202) 223-1420

                            www.ieca-us.org

The Honorable Ron Wyden
Chairman
U.S. Senate
Committee on Finance
221 Dirksen Senate Office Building
Washington, DC 20510

Re: The ``Clean Energy for America Act.'' Investment Tax Credit (ITC) 
for Electric Transmission Infrastructure

Dear Chairman Wyden:

Thank you for the introduction of the ``Clean Energy for America Act.'' 
As some of the largest industrial electricity consumers in the U.S., we 
are concerned about Section 102, the Clean Electricity Investment 
Credit and the 30 percent Investment Tax Credit (ITC) for electric 
transmission facilities. The ITC is not needed and unless consumer 
safeguards are added, consumers will likely pay for hundreds of 
billions of dollars for electric transmission projects that are not 
needed or are overpriced, which substantially increases electric costs 
for all consumers. Manufacturing competitiveness and jobs will be 
impacted.

Electric transmission costs are manufacturing's highest increasing 
energy-related cost. As an example, in the last decade, PJM's 
transmission costs increased from $4.22 to $10.39 per megawatthour 
(Mwh), which is an increase of 145 percent. In the last 5 years, the 
costs increased from $7.69 to $10.39 per Mwh or 35 percent. Other RTOs 
and ISOs have similar cost increases.

The assumption that a financial incentive is necessary for companies to 
invest in electric transmission is not correct. Companies have easy 
access to low-cost capital for transmission projects. The major barrier 
to building-out the grid is the failure to implement planning and 
permitting processes. This is a matter that the Federal Energy 
Regulatory Commission (FERC) needs to address.

Electric transmission projects receive generous guarantee high return 
on equity (ROE) on capital for the life of the asset. State and federal 
wholesale electric market regulations award generous ROEs that range 
from 10 to 15 percent. These high ROEs are sufficient incentive to 
attract capital without an ITC. Most manufacturing business ROEs are in 
the single digits.

To meet national climate GHG emissions reduction goals, hundreds of 
billions of dollars of transmission projects would be needed. President 
Biden's ``American Jobs Plan'' calls for the buildout of at least 20 
gigawatts of high-voltage capacity power lines. Princeton University's 
December 2020 study ``Net Zero America'' states that high-voltage 
transmission capacity will need to be expanded by roughly 60 percent at 
an estimated cost of $350 billion. We urge you to be prudent to protect 
consumers.

If you do proceed with the ITC, we would urge you to insert a provision 
which requires that all electric transmission projects that receive the 
ITC be competitively bid. The FERC can verify that when transmission 
projects are competitively bid, it reduces costs to consumers. To this 
point, several state utilities have used their influence over state 
policymakers to put in place Right of First Refusal (ROFRs) provisions 
that block competitive bidding of transmission projects, over the 
objections of consumers. Importantly, ROFRs exist in states with large 
wind and solar resources.

We encourage you to hold a hearing on this matter. Given the magnitude 
of the transmission spending that will be needed to achieve U.S. 
climate goals, unless this matter is handled correctly, consumers will 
be saddled with high electric prices for decades to come and 
manufacturing competitiveness will be impacted. We look forward to 
working with you on this matter.

Sincerely,

Paul N. Cicio
President and CEO
                                 ______
                                 
The Industrial Energy Consumers of America is a nonpartisan association 
of leading manufacturing companies with $1.1 trillion in annual sales, 
over 4,200 facilities nationwide, and with more than 1.8 million 
employees. It is an organization created to promote the interests of 
manufacturing companies through advocacy and collaboration for which 
the availability, use and cost of energy, power or feedstock play a 
significant role in their ability to compete in domestic and world 
markets. IECA membership represents a diverse set of industries 
including: chemicals, plastics, steel, iron ore, aluminum, paper, food 
processing, fertilizer, insulation, glass, industrial gases, 
pharmaceutical, building products, automotive, independent oil 
refining, and cement.

                                 ______
                                 
          National Association of Royalty Owners, Inc. (NARO)

                      7030 S. Yale Ave., Suite 404

                            Tulsa, OK 74136

Jack Fleet
Executive Director
[email protected]

My name is Jack Fleet, executive director of NARO. I appreciate the 
opportunity to provide testimony to the committee on this important 
topic.

This testimony is being provided to present NARO's concerns about 
legislation which has been proposed in Congress and would remove 
Percentage Depletion Allowance for oil and gas production. This action 
will be harmful to millions of middle-income American royalty owners 
and result in the loss of royalty payments, many of whom are retirees 
living on fixed incomes.

NARO shares concerns of the domestic energy community, in particular 
oil and natural gas, in the treatment of US government policy regarding 
stimulation of domestic energy production. To that end, my testimony is 
focused on the significant negative impact to royalty owners through 
the modification of removing Percentage Depletion Allowance from our 
Federal Tax Code. Percentage Depletion Allowance is the only tax 
deduction that many royalty owner takes on their royalty income.
Who is NARO?
The National Association of Royalty Owners is a volunteer led, member 
based, 501(c)6 and represents the concerns of an estimated 12.6 million 
royalty owners. Our mission is to support, advocate and educate for the 
empowerment of mineral and royalty owners. We were founded by Jim 
Stafford in 1980 to address the concern of Windfall Profit Tax on 
royalty owners. We have members in all 50 states.

The average NARO member is over 60 years old, widowed and receives less 
than $500 a month in royalties, which supplements their social security 
income.

Owners of producing mineral interest (royalty owners) are entitled to 
their proportionate share of production paid by royalty revenue. NARO 
holds to the claim the royalty owner's right of equity and fair play in 
accordance with lease contracts and law. To that end, royalty owners 
have the right to be heard in matters regarding oil and gas energy 
policy, proposed legislation or regulatory issues that would positively 
or adversely affect their interest.

NARO represents many royalty owners who do not have the wealth, time or 
resources of larger oil and gas or mineral companies and as a result, 
have a limited ability to make an impact and inform legislators of 
their concerns.
How many royalty owners are there?
Royalty owners come from all walks of life: ranchers, farmers, barbers, 
teachers, pharmacist, homemakers, factory workers, carpenters, 
retirees, widowers and just about every trade or profession in the 
United States. Our members are your constituents, they are diversified 
politically and belong to all political parties. Many of them, no 
doubt, voted for members of this committee and depend on you to 
represent them.

In 2013, NARO gave testimony to the United States House of 
Representatives Committee on Ways and Means and estimated nationally 
there were 8,440,755 royalty owners. Today, that number has grown to an 
estimated 12,600,000. The number of royalty owners is increasing due to 
fractionalization of mineral estates from generation to generation. 
Additionally, there is an increase in citizens buy minerals and 
royalties for the first time.

Today, we estimate the number of royalty owners in each state to be:


------------------------------------------------------------------------
 
------------------------------------------------------------------------
AK  20,400     AL  49,725     AR  382,500    AZ  216,750    CA  765,000
------------------------------------------------------------------------
CO  981,750    CT  25,500     DC  25,500     DE  3,825      FL  242,250
------------------------------------------------------------------------
GA  127,500    HI  12,495     IA  49,725     ID  53,550     IL  114,750
------------------------------------------------------------------------
IN  40,800     KS  221,850    KY  16,575     LA  188,700    MA  45,900
------------------------------------------------------------------------
MD  53,500     ME  8,288      MI  66,300     MN  71,400     MO  165,750
------------------------------------------------------------------------
MS  58,650     MT  71,400     NC  100,725    ND  36,975     NE  29,325
------------------------------------------------------------------------
NH  20,400     NJ  71,400     NM  242,250    NV  66,300     NY  191,250
------------------------------------------------------------------------
OH  45,900     OK  2,537,250  OR  76,500     PA  18,500     RI  8,288
------------------------------------------------------------------------
SC  33,150     SD  8,288      TN  89,250     TX  4,462,500  UT  58,650
------------------------------------------------------------------------
WY  45,900
------------------------------------------------------------------------


These estimates are only those that are currently receiving royalties 
on producing mineral estates. However, there are many more mineral 
owners in all states that are not receiving royalties.
Percentage Depletion Allowance:
This tax allowance is not specific to the oil and natural gas Industry. 
In fact, many natural resource industries are allowed to take depletion 
allowance, such as Sulphur, Uranium, other rare earth minerals, ores, 
industrial grade crystals, gold, silver, copper, timber and coal to 
name a few. It should also be noted that small oil and gas operations 
that take advantage of percentage depletion allowance are capped at 15 
barrels of oil per day per well. Many of these small operators produce 
1-5 barrels of oil a day and have 11 employees on average.
Percentage Depletion is Not Cost Depletion:
Depletion represents the decreasing values of a limited reservoir of a 
non-renewable resource. Just as an assets value depreciates over time 
and thus the tax liability on that value changes accordingly. The non-
renewable resource is diminished over time and the value of that 
resource depreciates.

Most large companies use cost depletion to calculate the cost/expense 
involved in extracting or mining of the natural resource and the 
reserve that remains after the extraction. The alternative to this 
complicated method is Percentage Depletion Allowance, which is much 
simpler to apply, especially for the average royalty owner.

The Percentage Depletion Allowance for oil and natural gas is 15%. The 
flat percentage makes calculating this allowance easy and has limits to 
benefit the middle-income American royalty owner and has nothing to do 
with large companies. While Cost Depletion is very costly, complicated 
and, in most cases, impossible for the small royalty owner to 
determine. Contracts between the mineral or royalty owner and the 
operator do not provide for the details necessary for Cost Depletion to 
be determined.

The proposal to eliminate Percentage Depletion Allowance would not 
eliminate a ``subsidy'' to ``Big Oil'' but would hurt the small royalty 
owner, most assuredly constituents of the members of this committee. 
Subsidy is defined as a direct cash payment by the government to a 
person or business. While leaving Cost Depletion which the large oil 
and natural gas companies use untouched. Further, people that buy 
minerals, such as one family member who buys out another family 
member's interest, likely relied on the continued existence of 
percentage depletion in agreeing on the price.

Removing Percentage Depletion Allowance would also result in a tax 
increase for many royalty owners who make less than $400,000 per year. 
As mentioned earlier, the average NARO member's royalty income is $500 
per month and supplements their social security and retirement income. 
Removing their Percentage Depletion Allowance would raise their annual 
taxable income and increase their tax burden, counter to President 
Biden's commitment to protect incomes of those below $400,000 a year.
Conclusion:
NARO stands strongly behind keeping Percentage Depletion Allowance and 
opposes efforts to eliminate it. Removing this allowance will put an 
added financial burden on the citizens that own these natural resources 
and hurt those that use their royalty income to supplement their social 
security and retirement. All of this, just as the economy and our 
citizens are starting to recover from the COVID pandemic.

I would like to conclude with an example of the impact royalty income 
means to a NARO member, Ms. Mosley of North Carolina with mineral and 
royalty interest in West Virginia.

``The royalty money supplements my small social security allowing me 
freedom from fear of poverty. And it allows me to donate to charities, 
including in the county where my minerals are (different from my 
residence). My cataract surgery with special replacement lenses was 
possible with the royalty money. President Biden has said that he will 
not raise taxes on incomes under $400,000. Well, mine is quite a lot 
less than that, and removal of the depletion deduction would certainly 
raise my taxes!''

    Source: ``The Need for Percentage Depletion Allowance for Mineral/
Royalty Owners: How Tax Policy Can Simultaneously Affect the Equitable 
Treatment of Royalty Owner, and National Security'' by NARO 2013.

                                 ______
                                 
                  National Energy and Fuels Institute

                           1629 K Street, NW

                          Washington, DC 20006

                             (202) 508-3645

                              www.nefi.com

                              @nefiaction

                              May 11, 2021

The Hon. Ron Wyden                  The Hon. Mike Crapo
Chair                               Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
Washington, DC 20510                Washington, DC 20510

Dear Chairman Wyden and Ranking Member Crapo:

We write in response to the hearing titled ``Climate Challenges: The 
Tax Code's Role in Creating American Jobs, Achieving Energy 
Independence, and Providing Consumers with Affordable, Clean Energy,'' 
held on Thursday, April 27, 2021. The National Energy and Fuels 
Institute (NEFI) appreciates the opportunity to submit comments on 
behalf of America's liquid heating fuels industry.

NEFI has been a voice for small Main Street energy distributors and 
HVAC providers since 1942. Most are multi-generational family 
businesses that deliver a safe, reliable, and efficient fuel for space 
and water heating applications. This fuel is commonly referred to as 
home heating oil, a catch-all term that includes various grades of fuel 
oil and kerosene. Our industry serves approximately 6.5 million homes 
and businesses nationwide.\1\ This includes over five million homes and 
businesses throughout the Northeast and Mid-Atlantic regions, or 90% of 
the entire U.S. heating oil market.\2\
---------------------------------------------------------------------------
    \1\ U.S. Census Bureau, American Community Survey (ACS), Fuel Oil 
Use by Occupied Housing Units, Five-Year Avg. (2013-2017). Percent (%) 
of homes is calculated as a percentage of total state occupied housing 
units.
    \2\ For this purpose, NEFI defines the ``broader Northeast and Mid-
Atlantic regions'' to include New England, Delaware, Maryland, New 
Jersey, New York, North Carolina, Pennsylvania, West Virginia, 
Virginia, and the District of Columbia.

As the Chairman noted in his opening statement, the purpose of the 
hearing was to discuss the Clean Energy for America Act (CEAA), 
introduced on Wednesday, April 21, 2021. The CEAA eliminates around 40 
temporary tax incentives and, according to the Chairman, ``replac[es] 
them with emissions-based, technology-neutral credits to turbocharge 
investment in clean electricity, clean transportation and energy 
conservation.''\3\ Our comments focus on the CEAA and its potential 
effects on NEFI members and their consumers.
---------------------------------------------------------------------------
    \3\ U.S. Senate Committee on Finance, Wyden, Colleagues Introduce 
Legislation to Overhaul Energy Tax Code, Create Jobs, Combat Climate 
Crisis, April 21, 2021 [press release].
---------------------------------------------------------------------------

I. Renewable Fuel Incentives

The liquid heating fuels industry is committed to reducing greenhouse 
gas emissions (GHGs). At a 2019 summit organized by NEFI in Providence, 
Rhode Island, over 300 industry stakeholders approved a resolution that 
promises to deliver a net-zero-carbon liquid heating fuel to consumers 
by 2050. This commitment, known as the Providence Resolution, includes 
interim goals of a 15-percent reduction in GHGs by 2023 and at least a 
40-percent reduction by 2030. These goals are largely consistent with 
President Biden's emission reduction targets and U.S. commitments under 
the Paris Climate Agreement.

Recent studies by IHS Markit and Kearney find the Providence 
Resolution's goals can be achieved through utilization of renewable 
fuels including biomass-based diesel and cellulosic fuels designed 
exclusively for thermal energy applications.\4\ A 15-percent reduction 
in carbon emissions can be achieved with a 20-percent (or B20) blend of 
biodiesel and ultra-low sulfur heating fuel; and a 40-percent reduction 
can be achieved with a 50-percent (or B50) blend of the same.\5\ Based 
on average annual consumption, around 2.5 billion gallons of biodiesel 
will be required annually to achieve a B50 blend industrywide. 
Additional volumes of biodiesel and other advanced biofuels, including 
those produced from cellulosic feedstocks, will enable delivery of a 
``net-zero'' liquid heating fuel by 2050.
---------------------------------------------------------------------------
    \4\ See HIS Markit, Heating Oil: Transitioning to Bioblends 2023-
2050 (report prepared for the National Oilheat Research Alliance), 
August 13, 2020; and Kearney, Roadmap to Success: Achieving a Net-Zero 
Carbon Future by 2050, October 2020.
    \5\ Based on average biodiesel emissions data provided by the 
National Biodiesel Board (NBB).

Blends of biodiesel derived from either soybean oil or recycled 
vegetable oils are in widespread use throughout the industry and have 
been embraced by consumers. Many retailers are now delivering biodiesel 
and heating oil blends of 20% (B20).\6\ These fuels utilize existing 
storage and distribution infrastructure and, in most cases, can be used 
seamlessly in existing oil-fired appliances to deliver immediate GHG 
reductions at little to no additional cost to the end-user.\7\ At the 
direction of Congress, the National Oilheat Research Alliance (NORA) is 
developing pathways to even higher biodiesel blends and high-
performance cellulosic fuels designed exclusively for residential and 
commercial heating appliances.\8\
---------------------------------------------------------------------------
    \6\ National Oilheat Research Alliance, Survey on Mechanical Issues 
Related to Biodiesel Blending, March 2017, p. 2.
    \7\ National Oilheat Research Alliance, Developing a Renewable 
Biofuel Option for the Home Heating Oil Sector: A Report to Congress, 
State Governments and the Administrator of the Environmental Protection 
Agency,'' May 2015, p. 18.
    \8\ Congress revised the NORA statute in the 2014 Farm Bill to 
focus on the research and development of advanced biofuels. See Pub. L. 
113-79, Section 12405(a). Cellulosic fuels being developed for thermal 
heating applications includes Ethyl Levulinate (EL), a high-performance 
renewable fuel derived from woody biomass, municipal solid waste, and 
other sustainable feedstocks. A study by Biofine Developments Northeast 
Inc. and EarthShift Labs shows EL to reduces emissions by over 100-
percent when compared to conventional petroleum-based home heating oil.

The successful adoption and widespread acceptance of renewable liquid 
heating fuels across our industry is due in large part to the biodiesel 
and renewable diesel blenders' tax credit (BTC). We commend Congress 
for reinstating the tax credit through December 31, 2022, thereby 
providing producers, marketers, and consumers alike with greater 
certainty and market stability. The BTC incentivizes fuel suppliers in 
the Northeast to invest in blending, storage, and delivery 
infrastructure to help meet growing demand for advanced biofuels in the 
---------------------------------------------------------------------------
residential and commercial energy sector.

Section 201 of the CEAA replaces the BTC and other renewable fuel 
incentives with a single ``technology-neutral'' incentive based on a 
fuel's lifecycle carbon emissions. Alternative fuels produced in the 
United States may receive a tax credit if their lifecycle emissions are 
reduced by at least 25%. Zero and net-negative emission fuels qualify 
for a maximum tax credit of $1.00 per gallon. Between now and 2030, 
renewable fuels must become increasingly cleaner to qualify for the 
credit. Further, the CEAA phases-out the incentive over five years once 
the U.S. Environmental Protection Agency and Department of Energy 
certify that the transportation sector emits 75% less carbon than 2021 
levels.

NEFI is evaluating the specifics of Section 201 and its potential 
impact on continued growth of renewable liquid heating fuels, 
particularly in the Northeast. While we do not currently have a 
position on this proposal, we look forward to discussing the merits of 
performance-based policies based on life cycle emissions. An accurate 
measuring of carbon intensity must be established and applied 
universally for such policies to be successful.

II. Residential Energy Efficiency Incentives

In addition to reducing GHGs through cleaner drop-in fuels, significant 
gains can be made through increased building efficiency. Our industry 
has been a leader in this regard. Through more efficient appliances and 
cleaner burning fuels, the heating oil industry has reduced per home 
fuel consumption by more than 50% over 40 years.\9\ Over the last ten 
years, our industry has embraced ultra-low sulfur (ULS) heating fuels, 
which are now in widespread use and have been mandated by state and 
local governments throughout the Northeast and Mid-Atlantic regions. 
ULS heating fuels burn as cleanly as natural gas, increase system 
efficiencies, reduce maintenance costs, and save consumers 
money.\10\, \11\
---------------------------------------------------------------------------
    \9\ Source: www.oilheatamerica.com.
    \10\ Batey, John E., et al., Ultra Low Sulfur Home Heating Oil 
Demonstration Project: Summary Report, Energy Research Center, Inc and 
Brookhaven National Laboratory and prepared for the New York State 
Energy Research and Development Authority (NYSERDA), September 2015.
    \11\ The National Oilheat Research Alliance estimates heating plant 
service cost savings for a typical homeowner for ULS fuel is around $50 
per year and fuel efficiency improves about 2 percent.

Combining renewable liquid heating fuels with modern, efficient home 
heating appliances is the quickest and most cost-effective path to 
reducing residential GHG emissions and consumer energy bills. It also 
provides homeowners an affordable alternative to costly and inefficient 
heat pumps. A residential heat pump conversion is typically 3 to 6 
times the cost of a high efficiency biofuel-compatible heating system, 
with conversions ranging up to $35,000 or more. Recent studies conclude 
that electric heat pumps and ``cure-all'' electrification policies 
unnecessarily burden lower-income households and vulnerable communities 
and perpetuate environmental and economic inequalities.\12\ 
Alternatively, renewable fuels provide Americans on a fixed income with 
a ``plug and play'' solution to lower energy costs and an opportunity 
to make meaningful contributions in the battle against climate change.
---------------------------------------------------------------------------
    \12\ Acosta, Joel, Study: Electrification is a Misguided Approach 
to Tackle Climate Change, Energy In Depth, July 9, 2020, 
www.energyindepth.org/study-electrification-is-a-misguided-approach-to-
tackle-climate-change (accessed May 11, 2021).

Notably, heat pumps could quite literally leave consumers ``out in the 
cold.'' They are known to perform very poorly in the field compared to 
their nameplate efficiency rating. This efficiency continuously 
degrades as temperatures drop below 40 degrees to the point of the 
equivalent of electric resistance heat.\13\, \14\ The 
increased load results in super-peaking situations that increase GHG 
emissions because many generators rely on fossil fuels to meet surging 
electricity demand. These peaking events strain the electric grid and 
can result in catastrophic power outages, as evidenced by the recent 
Texas power crisis.
---------------------------------------------------------------------------
    \13\ Winkler, Jon, Ph.D., Laboratory Test Report for Fujitsu 12RLS 
and Mitsubishi FE12NA Mini-Split Heat Pumps, U.S. Department of Energy, 
September 2011.
    \14\ RDH Building Sciences, Inc., BC Cold Climate Heat Pump Field 
Study (Project 21090.00), November 9, 2020.

A total of 61% of all occupied housing units in the state rely on 
electric heat to stay warm each winter, according to the U.S. Census 
Bureau.\15\ In response to record cold temperatures and snowfall this 
February, millions of Texans cranked up their electric heating systems, 
which proved more than the state's electric grid could handle.\16\ 
While not the lone cause of the crisis, dependence on electric heat 
contributed to blackouts that resulted in $195 billion in economic 
damages and up to 200 deaths statewide, making it one of the costliest 
disasters in the Lone Star State's history.\17\, \18\
---------------------------------------------------------------------------
    \15\ U.S. Census Bureau, American Community Survey, 2019, primary 
heat source by occupied housing unit.
    \16\ Traywick, Catherine, et al., The Two Hours that Nearly 
Destroyed Texas' Electric Grid, Bloomberg Green, February 20, 2021, 
www.bloomberg.com/news/features/2021-02-20/texas-blackout-how-the-
electrical-grid-failed (accessed May 11, 2021).
    \17\ Ivanova, Irina, Texas winter storm costs could top $200 
billion--more than hurricanes Harvey and Ike, CBS News, February 25, 
2021, www.cbsnews.com/news/texas-winter-storm-uri-costs (accessed May 
11, 2021).
    \18\ Despart, Zach, Analysis reveals nearly 200 died in Texas cold 
storm and blackouts, almost double the official count, April 1, 2021, 
https://www.houstonchronicle.com/news/houston-texas/
houston/article/texas-cold-storm-200-died-analysis-winter-freeze-
16070470.php (accessed May 11, 2021).

Consider as well that refrigerants used in heat pump installations have 
a high global warming potential (GWP). R-410A, the most common 
refrigerant used in heat pumps, has a GWP that is 2,088 times that of 
carbon dioxide.\19\ Heat pump refrigerant often leaks, resulting in 
reduced efficiency and poor performance. Leaks are so common that 
recharging refrigerant is necessary over the life of the heat pump. 
Further, next generation modern fluorinated refrigerants are now 
recommended for evaluation and phase-out by the European Commission due 
to even greater GWP than R-410A, as they degrade into the same 
substance that they were supposed to replace.\20\
---------------------------------------------------------------------------
    \19\ Global Warming Potential (100 year), IPCC 4th Assessment 
Report, 2007.
    \20\ Garry, Michael, EC Urged to Look at ``Lifecycle GWP'' of 
Alternatives to HFCs, R744: CO2 Cooling Marketplace, May 7, 2021, 
www.r744.com/ec-urged-to-look-at-lifecycle-gwp-of-hfc-alternatives 
(accessed May 11, 2021).

We commend the committee for seeking an approach that allows Americans 
to choose heating fuels and technologies they deem safest for their 
families and the environment. Section 302 of the CEAA replaces the 
existing and relatively lackluster home energy efficiency tax credits 
with a more robust incentive. It provides a credit of 30% of the cost 
of a home efficiency improvement up to $500, with an overall annual 
limit of $1,500 for all home improvements. This is three times the 
---------------------------------------------------------------------------
benefit under existing law.

Homeowners may choose whether to upgrade an existing heating system, 
water heater, or air conditioner, or make improvements to envelope 
efficiency. This is not unlike the existing tax credit under Section 
25C of the Internal Revenue Code. However, the existing tax credit 
needlessly restricts some of the most efficient renewable liquid 
heating fuel appliances from eligibility. This could result in a 
consumer switching to a fuel with a higher global warming potential 
just to be eligible for a tax credit.

The CEAA discussion draft defers from the existing tax credit in that 
it allows heating appliances to qualify if they meet or exceed 
requirements of the highest efficiency tier (not including any advanced 
tier) established by the Consortium for Energy Efficiency (CEE).\21\ 
Unfortunately, the CEE does not address efficiencies for biofuel-
compatible space and water heating systems.\22\ We strongly recommend 
the CEAA include qualifying language for these systems to allow our 
consumers to improve the efficiency of their homes, reduce their energy 
costs, and help in the fight against climate change.
---------------------------------------------------------------------------
    \21\ Section 320(c)(1)(A) of the CEAA discussion draft.
    \22\ Note that biofuel-compatible heating system or appliance is 
synonymous with liquid fuel-fired or oil-fired.

Specifically, we recommend qualifying criteria include ENERGY STAR 
certified biofuel-compatible furnaces and heat and hot water boilers. 
Prescriptive measures can be taken to help ensure energy savings are 
much greater than identified by AFUE alone for heat and hot water 
boilers. First, boilers having two-inch or greater insulation on water 
jacketed surfaces, identifies a better performing class of heating 
equipment.\23\ Second, ``tankless coil'' boilers that have an internal 
heat exchanger to produce domestic hot water without a tank are 
inefficient and should be excluded. The CEAA should also include 
indirect water heaters and storage tanks with two-inch or greater 
insulation that are heated by a biofuel-compatible heat and hot water 
boiler.
---------------------------------------------------------------------------
    \23\ Butcher, Thomas, Performance of Integrated Hydronic Heating 
Systems, Brookhaven National Laboratory prepared for the New York State 
Energy Research and Development Authority (NYSERDA) and the National 
Oilheat Research Alliance, December 2007.
---------------------------------------------------------------------------

III. Conclusion

We understand Congress is in the early stages of advancing clean energy 
tax reform. We applaud the Senate Finance Committee for taking this 
ambitious first step in evaluating how the tax code can be better 
leveraged to reduce GHG emissions, strengthen U.S. energy security, and 
reduce energy costs. NEFI stands ready to work with you to ensure the 
CEAA allows the renewable liquid heating fuels industry and its 
consumers to contribute to these goals and benefit from related tax 
incentives.

Please do not hesitate to reach out by phone (202) 508-3645 or by e-
mail at sean.
[email protected].

Thank you again.

Sincerely,

Sean O. Cota
President and CEO

                                 ______
                                 
                    Natural Gas Vehicles for America

                400 North Capitol Street, NW, Suite 450

                          Washington, DC 20001

                             ngvamerica.org

Hon. Ron Wyden                      Hon. Mike Crapo
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                 Committeeon Finance

Dear Chairman Wyden, Ranking Member Crapo, and Members of the 
Committee:

NGVAmerica, on behalf of our member companies, thanks you for your 
April 27 hearing focused on the role of the tax code in creating 
American jobs, enhancing our energy independence, and providing 
affordable clean energy. NGVAmerica and our members believe the tax 
code plays a crucial role in tackling our climate challenge and 
respectfully asks for an extension of key alternative fuel incentives 
in any climate-related tax legislation.

NGVAmerica is the national trade organization dedicated to the 
development of a growing, profitable, and sustainable market for 
vehicles and carriers powered by clean, affordable, and abundant 
geologic and renewable natural gas (RNG). Our roughly 200 member 
companies produce, distribute, and market natural gas and biomethane, 
domestically manufacture and service natural gas vehicles, engines, and 
equipment, and operate fleets powered by clean-burning gaseous fuels 
across North America.

NGVAmerica believes climate change is real, that we need immediate 
investment to clean and decarbonize heavy-duty transportation, and that 
renewable natural gas vehicles are an affordable, scalable, and 
immediate solution. In keeping with these beliefs, we ask that you 
consider the following policy recommendations aimed at cleaning 
emissions from transportation:

Policy Recommendations

      Extend for a minimum of five years the $0.50/gallon Alternative 
Fuels Tax Credit.

      Enact for a minimum of ten years a $1.00/gallon tax credit for 
renewable natural gas in transportation.

      Provide a two-year Federal Excise Tax holiday for clean trucks; 
permanently amend the Federal Excise Tax to provide a level-playing 
field for clean trucks.

      Amend the Waterways Fuel Tax to Remove the Disincentive for 
Liquefied Natural Gas (LNG).

      Level the Playing Field for Natural Gas Vehicles by Enacting a 
Tax Credit for Light, Medium, and Heavy Natural Gas Vehicles.

Background and Policy Justification

We are in the midst of an irreversible climate crisis and need to make 
a drastic impact on emissions in a short period of time. The 
transportation sector emits the largest share of the nation's 
greenhouse gases, and 57% of trucks on road today don't meet EPA's 2010 
emissions standards.\1\ We also have a clean air problem. More than 135 
million people live in counties the American Lung Association awarded 
an ``F'' for either ozone or particle pollution in its 2021 State of 
the Air report.\2\ The number one source of urban emissions is vehicles 
such as short-haul, long-haul, refuse, school and transit buses. These 
high polluting trucks are diesel trucks, but newer technology brings 
affordable, clean options offering a big impact when it comes to clean 
air. In fact, replacing 1 traditional diesel-burning heavy-duty truck 
with 1 new Ultra Low-NOx natural gas heavy-duty truck is the 
emissions equivalent of removing 119 traditional combustion engine cars 
off our roads.\3\
---------------------------------------------------------------------------
    \1\ https://www.dieselforum.org/news/accelerating-turnover-to-new-
technology-diesel-engines-increased-use-of-biobased-diesel-fuels-
ensure-steady-progress-on-carbon-reduction-clean-air-gains.
    \2\ https://www.lung.org/research/sota/air-quality-facts.
    \3\ Source: https://greet.es.anl.gov/afleet_tool.

Deploying cleaner technology, with help from key tax incentives, can 
reduce this significant source of GHGs and tailpipe emissions. The 
newest heavy-duty natural gas trucks are 90% cleaner than the EPA's 
current NOx standard and 90% cleaner than the latest 
available diesel engine.\4\ Fueling with natural gas reduces 
CO2 and greenhouse gas emissions compared to comparable 
diesel. If fueling with LNG, the well-to-wheels GHG emissions reduction 
is 11%; fueling with CNG is a 17 reduction.\5\ However, fueling with 
renewable natural gas (RNG) provides even greater CO2 and 
greenhouse gas emission reductions, anywhere from 40 percent to greater 
than 500 percent on a well-to-wheels basis.\6\ When it comes to carbon 
intensity, the California Air Resources Board's Low Carbon Fuel 
Standards Pathways certified carbon intensity values for RNG (Bio-LNG 
or Bio-CNG) as the lowest Energy Economy Ratio-Adjusted Carbon 
Intensity, as low as -532.74 CI.\7\
---------------------------------------------------------------------------
    \4\ https://www.ngvamerica.org/wp-content/uploads/2018/12/NGV-VW-
HD-Trucks.pdf.
    \5\ Source: NGVAmerica Emissions Whitepaper based on CARB LCFS. 
Numbers compared to diesel emissions (well-to-wheel).
    \6\ https://ww2.arb.ca.gov/resources/documents/lcfs-pathway-
certified-carbon-intensities.
    \7\ https://ww2.arb.ca.gov/resources/documents/lcfs-pathway-
certified-carbon-intensities.

Simply put, heavy-duty vehicles fueled by natural gas give drastic, 
immediate tailpipe emissions reductions in the segment of the 
transportation sector that is dirtiest and hardest to electrify. When 
fueling these clean trucks and buses with renewable natural gas, 
tailpipe emissions reductions are paired with carbon neutral and carbon 
---------------------------------------------------------------------------
negative fuel.

Renewable Natural Gas (RNG), or biomethane (RNG) is produced by 
capturing methane wherever organic materials are present (e.g., 
landfills, dairy farms, wastewater treatment facilities, and animal and 
crop waste systems). The United States has abundant sources of 
renewable natural gas that can be harnessed for RNG production, 
including 66.5 million tons per year of food waste, 17,000 wastewater 
facilities, 8,000 large farms and dairies, as well as 1,750 
landfills.\8\ Renewable natural gas production is steadily increasing 
to meet growing demand throughout the U.S.
---------------------------------------------------------------------------
    \8\ Source: Coalition for Renewable Natural Gas, 2017.

Utilized in heavy-duty NGVs, RNG use as a transportation fuel has 
increased 267% over the past five years, eliminating 3.5 million tons 
of carbon dioxide equivalent (CO2e) in 2020 alone.\9\ In 
2020, 53% of all on-road fuel used in natural gas vehicles was RNG, 
which is over 340 million gasoline gallon equivalents. In 2020, RNG as 
a Transportation Fuel lowered greenhouse gas emissions equivalent to 
removing 8,796,396,117 miles driven by the average passenger car. 
Despite the increased commitment from the NGV industry to reduce our 
carbon footprint and increase use of renewable fuels, the tax code and 
other market forces have made it difficult for additional NGVs to be 
deployed on road.
---------------------------------------------------------------------------
    \9\ https://www.ngvamerica.org/wp-content/uploads/2019/04/RNG-
Driving-Down-Emissions.pdf.

Unfortunately, low diesel prices, the increased expense to fleets for 
investment in cleaner-burning trucks, costs related to infrastructure, 
and inconsistent and retroactive tax incentives for natural gas in 
transportation, the U.S. falls far behind other countries with regard 
to deploying these clean, domestic and renewably fueled vehicles. In 
2020, 1.68% of new heavy freight truck sales were natural gas and just 
---------------------------------------------------------------------------
0.73% of all new truck sales were natural gas.

This means that the transportation sector remains particularly 
dependent on 
petroleum-based diesel fuels, importing about 5 million barrels of 
crude oil a day and exacerbating America's reliance on foreign oil. 
While natural gas currently accounts for 30% of total energy 
consumption, it represents just 0.3% of energy consumed in the 
transportation sector.\10\ Per the Department of Energy, ``Petroleum 
comprised 92% of U.S. transportation energy use in 2018.''\11\
---------------------------------------------------------------------------
    \10\ Energy Information Administration (EIA) Annual Energy Outlook 
2017, Table 2: Energy Consumption by Source and Sector, https://
www.eia.gov/outlooks/aeo/data/browser/#/?id=2-
AEO2017&cases=ref2017&sourcekey=0.
    \11\ https://tedb.ornl.gov/wp-content/uploads/2019/03/
Edition37_Full_Doc.pdf#page=176.

As such, there remains a transformative opportunity to invest in 
switching more American fleets to domestically produced natural gas and 
renewable natural gas. Between unstable or rapidly increasing fuel 
prices, concerns over market manipulation by OPEC, and the role the 
global oil market plays in funding governments whose policies are 
hostile to U.S. interests, there are significant geopolitical reasons 
---------------------------------------------------------------------------
to pursue further energy independence.

While proponents of electric vehicles (EVs) insist that zero tailpipe 
emissions vehicles are the only way to fight on-road emissions, EVs 
have carbon-intensive component parts, are only as clean as the 
electricity that charges them, and Heavy-Duty EVs are unlikely to be 
scalable, affordable, and on road in the next decade. Additionally, 
with regard to vehicle replacement, as it currently stands, it would 
take more than 1 EV to replace an existing diesel vehicle, while 
natural gas offers a 1:1 replacement option.

Battery-electric and hybrid EVs are also particularly resource heavy 
when it comes to rare earth minerals. Batteries for these vehicles 
contain up to thirty pounds of rare earth minerals, and with the 
relatively short lifespan of these batteries, this mineral rich product 
will be manufactured more frequently than other vehicle components. 
This is critically important, as 85% of the world's rare earth minerals 
come from China. Continuing to invest in EVs for transportation would 
be to continue to invest in Chinese global leadership in rare earth 
minerals extraction and exportation. In fact, during 2012-2015, more 
than 70% of rare earth compounds and minerals imported by the U.S. came 
from China. This also leads to the possibility of price swings, as was 
the case in 2011, when the average price of certain rare earth minerals 
increased 750% as a result of China, who controlled 97% of global rare 
earth production, clamped down on trade. As America works to clean our 
transportation sector and maintain energy independence it's crucial to 
bear in mind that increased use of rare earth minerals for EV 
technology shifts export power and American dollars to China.

Fortunately, we have a domestically manufactured technology and 
domestically produced alternative fuel available for on-road heavy-duty 
use today. Natural gas vehicles, engines, component parts, along with 
fueling infrastructure such as compressors, cylinders, and machinery 
are developed and manufactured in the United States. An increase in 
NGV- and RNG-related manufacturing will bring about more American jobs 
and continue to move America toward energy independence. An industry 
study found that for a five-year extension of the Alternative Fuels Tax 
Credit (AFTC), the industry could expect, over the course of ten years, 
to see an additional $9.9 billion in economic growth, creation of 
62,000 new middle-class jobs with an average salary of $52,000/year and 
$5.8 billion in additional private sector investment in infrastructure 
and equipment.

Use of the tax code to further deploy clean, domestically fueled 
vehicles powered by natural gas and RNG is a no-brainer. Credits such 
as the $0.50/gallon Alternative Fuels Tax Credit (AFTC) are needed to 
spur additional deployment of NGVs. Unfortunately, this credit has 
experienced very short-term and, in many instances, retroactive 
extensions and fleets interested in purchasing newer, more expensive 
technologies have not been able to plan for long-term investments or 
make purchase decisions with the ability to account for financial 
benefits from the credit. Another reason natural gas has failed to 
reach market saturation as a transportation fuel is that it has been 
competing on an uneven playing field. Electric vehicle technology and 
petroleum-based fuels have dominated American transportation for 
decades, receiving the lion's share of federal focus tax credits, and 
research and development funding. Biodiesel, for example, has received 
$1.00/gallon while clean fuels such as natural gas and RNG have 
received half that. As such, NGVs have not reached market penetration 
and continue to require support from the tax code in order to offset 
increased incremental cost of newer alternative fuel technologies. 
Providing incentives for natural gas fuel sales will make it more 
economically attractive to a larger percentage businesses and vehicle 
operators. As the natural gas industry grows and larger numbers of 
vehicles are produced, the first-cost or incremental cost of natural 
gas vehicles will come down because of economies of scale and 
competition. That process would be greatly accelerated by extending tax 
incentives and removing tax barriers that currently impede the growth 
of natural gas vehicle use.

When making a purchase decision, fleets consider fixed costs, running 
costs, fuel costs, maintenance costs, and other considerations, 
including their payback period. There remains a significant incremental 
cost on alternative fuel vehicles when compared to standard diesel 
vehicles. In fact, DOE has identified the desire to obtain an ambitious 
price reduction of $40,000 or more in order to spur more deployment, 
for the case of natural gas vehicles. Tax credits help in offsetting 
these costs and making the switch to a cleaner fuel not only more 
attractive, but economically feasible.

Further, a study conducted by the National Renewable Energy Laboratory 
(NREL) concluded: ``As illustrated throughout this report, the economic 
environment for any particular fleet brought about by subsidies and tax 
credits can have a tremendous impact on project profitability, 
especially those projects that involve vehicle and fuel purchasing. 
Significant synergies result when tax credits are used in combination. 
When combined, the tax credits for station cost, vehicle purchase, and 
fuel purchase result in payback periods shorter than 4 years for each 
fleet [considered with VICE 2.0].''\12\
---------------------------------------------------------------------------
    \12\ https://www.nrel.gov/docs/fy15osti/63707.pdf.

As such, we respectfully ask for the following changes to the Tax Code:

 Extend for a Minimum of 5 Years the $0.50/Gallon Alternative Fuels Tax 
                    Credit

The Alternative Fuels Tax Credit (AFTC) is the single most effective 
mechanism for transitioning fleets to clean-burning natural gas. 
Unfortunately, the credit has been extended only for short periods of 
time and is often extended retroactively, with uncertainty negatively 
impacting fleet investment decisions. The credit was put in place as a 
mechanism to get vehicles of all duty weights to transition to 
alternative fuels. This credit performs as intended when given a 
sufficient prospective extension. Since enactment of the credit, we 
have seen increased deployment in alternative fuel vehicle technology, 
improved efficiency and reliability of alternative fuel vehicles, 
advancements in on-board fuel storage, fueling infrastructure 
components, and higher horsepower engines. Technology has matured, is 
reliable, and utilizes American manufacturing. Unfortunately, due to 
the short-term nature of the AFTC, fleets interested in purchasing 
newer, more expensive technology have not been able to plan for long-
term investments or make purchase decisions with the ability to account 
for financial benefits from the credit. As such, NGVs and other 
eligible fuels have not reached market penetration and continue to need 
the credit as a way of offsetting increased incremental cost of newer 
alternative fuel technologies.

 Enact for a Minimum of 10 Years a $1.00/Gallon Tax Credit for RNG in 
                    Transportation

Similar to the AFTC, NGVAmerica proposes creation of an RNG-specific 
transportation fuel credit worth $1.00/gallon. This amount will 
incentivize deployment of clean-burning NGVs and quicken the move to 
decarbonized on road fuels. This credit will also incentivize fleets 
who are already deploying NGVs to move to RNG, further reducing their 
carbon footprint.

Implementing a new RNG fueling credit creates a new economic driver 
unlocking millions of investment dollars in local economies and 
supporting hundreds of thousands of clean energy-sector jobs in 
construction, operations, maintenance, manufacturing, and engineering. 
This credit incentivizes capture of emissions for beneficial use and 
creates additional revenue streams in the agriculture sector, where RNG 
production also encourages carbon-responsible waste handling practices.

According to the World Bank, solid waste is expected to rise by 70% by 
2050 if global status quo is maintained. Stimulating investments in RNG 
incentivizes businesses to capture this waste where it exists. RNG 
production results in increased gas collection at landfills, wastewater 
treatment plants, and agricultural waste streams while simultaneously 
benefiting communities that are disproportionately impacted by air, 
water, and odor pollution. Creation of a new on road credit for RNG 
provides dual environmental benefits, grows our economy, and continues 
expansion of clean energy infrastructure across the country.

 Provide a 2-year Federal Excise Tax Holiday for Clean Trucks; 
                    Permanently Amend the Federal Excise Tax on Trucks 
                    to Provide a Level Playing Field for Trucks Powered 
                    by Natural Gas

The tax code currently imposes a 12% Federal Excise Tax (FET) on the 
sale of heavy-duty trucks, trailers and tractors. This tax is the 
highest federal excise tax on a percentage basis on any product. The 
FET is an onerous tax burden to customers who want to buy new, cleaner, 
and safer, more fuel-efficient trucks, and because it raises the 
capital cost of purchasing trucks, it therefore discourages new 
investment and new sales. The current tax treatment amplifies an 
inequity imposed on alternative fuel (NGV) trucks because these trucks 
include new technology and are sold in limited quantities, and, 
therefore have a much higher ``first cost'' or incremental cost than 
conventional trucks.

The tax acts as a penalty for alternative fuel trucks because the 12% 
rate is assessed on the base cost of the truck and on the incremental 
cost, unnecessarily adding to the already higher cost of these 
vehicles. The higher tax increases prices and extends the required 
payback period for these trucks and makes it harder for businesses to 
choose to purchase a natural gas truck. In order to spur purchases of 
cleaner trucks and further a thriving secondary clean-truck market, 
Congress should provide a two-year FET holiday and permanently resolve 
disparities in the FET for clean heavy-duty trucks. Both of these 
actions will also spur a burgeoning secondary market for clean trucks, 
which is one of the more challenging segments to turn over.

 Amend the Waterways Fuel Tax to Remove the Disincentive for Liquefied 
                    Natural Gas

Liquefied Natural Gas (LNG) used to power marine vessels on the inland 
waterways is a burgeoning market. LNG produces significantly lower 
levels of toxic emissions than diesel fuel, including lower levels of 
carbon dioxide, nitrogen oxide and sulfur dioxide. Using LNG instead of 
diesel fuel also reduces pollution from particulate matter, 
specifically PM2.5, known as exhaust soot. The use of other 
fuels such as heavy fuel oil (HFO) and marine fuel oil (MFO) result in 
particularly high levels of harmful exhaust emissions such as black 
carbon and CO2 which are both major contributors to climate 
change. While CO2, particulate matter, and black carbon are 
the dominant GHG emissions of concern for climate change, the 
combustion of diesel, HFO, and MFO in marine applications also leads to 
high levels of criteria air pollutants such as nitrogen oxide 
(NOX), sulfur oxide (SOX) that compromise human 
and ecosystem health. LNG, on the other hand, virtually eliminates many 
of these air pollutants and GHG emissions and is ready for large-scale 
deployment in all sectors of marine transportation today.

In 2014, a significant increase in the inland waterways tax on fuel 
used in marine transportation was enacted into law. Effective March 31, 
2015, the inland waterways tax increased from 20 cents per gallon to 29 
cents per gallon of diesel, LNG, or any other fuel used in marine 
transportation on the inland waterways. Unfortunately, a user of LNG in 
marine transportation now has to pay 50 cents in tax for the same 
amount of energy contained in a gallon of diesel fuel that is only 
taxed at 29 cents.

According to the Oak Ridge National Laboratory, diesel fuel has an 
energy content of 128,700 Btu per gallon (lower heating value) and LNG 
has an energy content of 74,700 Btu per gallon (lower heating value). 
Therefore, a gallon of LNG produces approximately 58 percent of the 
energy produced by a gallon of diesel fuel. On an energy equivalent 
basis, it takes about 1.7 gallons of LNG to provide the same amount of 
energy as a gallon diesel. This current tax treatment of LNG to power 
vessels on the inland waterways is a disincentive to investment in new 
LNG powered marine vessels and fueling locations. Congress should 
change the Inland Waterways Financing rate on LNG so that the tax is 
imposed on the energy content of a diesel gallon (known as a diesel 
gallon equivalent) rather than strictly on a per gallon basis. LNG has 
huge potential as a cheaper, cleaner, domestic energy source and the 
financing mechanism for the inland waterways system should not be 
putting its use at a disadvantage.

 Level the Playing Field for Natural Gas Vehicles by Enacting a Tax 
                    Credit for Light, Medium, and Heavy Natural Gas 
                    Vehicles

The tax code currently provides a tax credit of up to $7,500 for the 
purchase of an electric vehicle (26 USC 30D). This incentive is 
available on the first 200,000 electric vehicles sold by a manufacturer 
and phases out shortly after this level is achieved. The credit is 
therefore worth in excess of $1.5 billion per manufacturer. The tax 
code does not provide a similar incentive for the purchase of natural 
gas vehicles.

The tax code should be amended to include a comparable credit for 
natural gas vehicles ($7,500 light-duty, $12,000 medium-duty, $25,000 
heavy-duty) in order to encourage manufacturers to produce them and 
accelerate the sale of all classes of natural gas vehicles. This action 
is needed to create a level playing field for natural gas vehicles 
relative to electric vehicles and encourages the deployment of cleaner 
trucks, SUVs, and popular heavy light-duty vehicles not currently 
available electrified, affordably. Providing a tax incentive for the 
purchase of new natural gas vehicles would be an effective tool because 
it directly incentivizes businesses, fleets and individuals to invest 
in new, natural gas vehicles. Such an incentive would directly support 
all aspects of the natural gas vehicle industry value chain, from 
equipment suppliers, to vehicle manufactures, fuel sellers, station 
owners, and component producers.

Conclusion

NGVAmerica and our member companies believe these are a few crucial 
ways the tax code can fight climate change, create jobs, and continue 
our energy independence. Cleaning up the transportation sector as 
quickly as possible will have drastic clean air improvements and reduce 
our carbon footprint. Transitioning our fleet to domestic geologic and 
renewable natural gas ensures that our clean energy transition 
continues to employ American workers, increase American manufacturing, 
and enhance energy independence.

The tax code is key to this transition, and as such, we respectfully 
request that you enact and extend these key tax incentives to provide 
parity, predictability, and an incentive mechanism enabling fleets 
nationwide to make cleaner transportation investments.

For additional information concerning this statement, please contact 
NGVAmerica's Director, Federal Government Relations Allison Cunningham 
at acunning
[email protected] or 202-824-7363.

Thank you for your consideration.

Sincerely,

Daniel J. Gage
President

                                 ______
                                 
               National Stripper Well Association (NSWA)

Who is NSWA?

Founded in 1934, the NSWA is the only national association responsible 
for representing the interests of the nation's smallest, and yet most 
efficient and effective, oil and natural gas wells before Congress and 
the federal agencies. Learn more about NSWA at www.nswa.us.

Our mission is to ensure the critical needs and concerns of producers, 
owners, and operators of marginally-producing oil and gas wells are 
addressed regarding federal legislation and regulation. With members in 
30 states, from California to West Virginia, NSWA is a viable and 
powerful voice for the American stripper well producer.

Our members are the small independent businessmen and women who own 
stripper wells producing 15 barrels of oil (equal to 90 Mcf of natural 
gas) or less per day. No large integrated oil and gas company is a 
member of NSWA.

Our members are the ``family farmers'' of the United States energy 
sector, with our typical member company employing 11 or fewer full-time 
employees.

Why Oil and Gas Matters to the Nation

Today, oil and gas operators are the lifeblood of the American economy.

The industry supplies nearly 70 percent of America's energy needs at a 
low cost for millions of families, as household energy costs have 
decreased 15 percent in the last decade alone. It has given the United 
States enviable energy independence and, as a result, enhanced national 
security.

Production of oil and gas provides much-needed tax revenues for 
federal, state, and local governments to fund education, infrastructure 
projects, and helps to provide salaries for teachers and first 
responders.

Consider that the vast majority of the 275 million vehicles registered 
in the United States--vehicles that will be on the road for decades to 
come--are oil and gas powered. This includes the trucks that 
transported and delivered the key commodities that kept America 
functioning for the past year of the COVID pandemic. They provide fuel 
for the trains and the airplanes that are essential for interstate and 
international commerce. They fuel the vessels that transport America's 
exports and imports.

Yet, consider that less than half the content of a barrel of oil goes 
towards gasoline, as the industry produces critical products used for a 
wide array of everyday products: agricultural fertilizers, 
pharmaceuticals, medical supplies, a host of pivotal technologies, 
production of synthetic fibers in clothes and sportswear, medical 
supplies, computer and cell phone components, and chemicals that are 
essential for a modem country.

The industry also provides lubricants in wind turbines and uses 
hydrocarbon precursors for manufacturing of synthetic blade components 
that go into solar panels that require oil or natural gas.

The Importance of Percentage Depletion and IDC

For the reasons outlined above, continued economic incentives drawn 
from the tax code to allow small operators like our members to keep 
more of their own monies to run their businesses--monies often from the 
owner's pocket, not provide by banks, large corporations, or hedge 
funds--are vital to the economy, just now coming out of the COVID 
crisis. Two of those tax treatments, Percentage Depletion and IDC, are 
vital to NSWA.
IDC
Since 1913, a drilling-and-development-costs deduction has been allowed 
as an ordinary and necessary business expense for those costs where 
there is no remaining equipment to value (salvage value) when an oil or 
natural gas well is completed.

Because there is nothing tangible to value, these costs are generally 
called ``intangible drilling costs'' or IDC. For the past 35 years, 
American tax policy has shortened the depreciation period for equipment 
to allow capital to be recovered and reinvested in new American 
projects. Like other rapid depreciation schedules in the tax code, the 
drilling cost deduction allows for investment capital to be immediately 
recovered and encourages its reinvestment. This is the same concept 
adopted as Bonus Depreciation in the 2017 Tax Reform Act. It is neither 
a ``tax subsidy'' nor a ``loophole.'' For American independent 
producers, expensing has resulted in facilitating reinvestment in new 
American projects at rates up to 150 percent of American cash flow.

The U.S. tax code is designed to levy taxes on net profits, not on 
dollars used for operational costs or capital expenditures. Every 
business since the inception of the tax code has used cost recovery 
provisions like IDC.

The expensing of IDC allows companies to recover costs such as labor, 
site preparation, equipment rentals, and other expenditures for which 
there is no salvage value. It is important to note that 80 percent of 
IDC are associated with labor costs. It is also important to note that 
the independent oil and gas industry, which accounts for 80 percent of 
our nation's oil production and 90 percent of its natural gas 
production, would be hit hardest by the elimination of this provision. 
IDC often represent 60 to 80 percent of total production costs and 
repealing them could result in the loss of over a quarter million jobs 
by 2023.
Percentage Depletion
Depletion, like depreciation, allows for the recovery of capital 
investment over time. Percentage depletion is used for most mineral 
resources, including oil and natural gas. It is a tax deduction 
calculated by applying the allowable percentage to the gross income 
from a property. For oil and natural gas, the allowable percentage is 
15 percent.\1\
---------------------------------------------------------------------------
    \1\ For marginal wells, the allowable percentage is increased (from 
the general rate of 15 percent) by one percent for each whole dollar 
that the average price of crude oil for the immediately preceding 
calendar year is less than $20 per barrel. In no event may the rate of 
percentage depletion under this provision exceed 25 percent for any 
taxable year. The term ``marginal production'' for this purpose is 
domestic crude oil or domestic natural gas which is produced during any 
taxable year from a property which (1) is a stripper well property for 
the calendar year in which the taxable year begins, or (2) is a 
property substantially all of the production from which during such 
calendar year is heavy oil (i.e., oil that has a weighted average 
gravity of 20 degrees API or less corrected to 60 degrees Fahrenheit). 
A stripper well property is any oil or gas property which produces a 
daily average of 15 or less equivalent barrels of oil and gas per 
producing oil or gas well on such property in the calendar year during 
which the taxpayer's taxable year begins.

Depletion has been a part of the tax code since its inception. 
Initially, the only form of depletion was cost depletion; however, it 
limits depletion to the capital cost of a project. After World War I, 
Congress recognized that too many natural resources were being 
abandoned because of cost depletion limiting the economic viability of 
projects. Consequently, it began to allow forms of value depletion to 
---------------------------------------------------------------------------
be used as well. In 1926, it settled on percentage depletion.

Percentage depletion has changed over time. Current tax law limits the 
use of percentage depletion of oil and natural gas in several ways. 
First, the percentage depletion allowance may only be taken by 
independent producers and royalty owners and not by integrated oil 
companies. Second, depletion may only be claimed up to specific daily 
American production levels of 1,000 barrels of oil or 6,000 Mcf of 
natural gas. Third, the net income limitation requires percentage 
depletion to be calculated on a property-by-property basis. It 
prohibits percentage depletion to the extent it exceeds the net income 
from a particular property. Fourth, the deduction is limited to 65% of 
net taxable income. Percentage depletion in excess of the 65 percent 
limit may be carried over to future years until it is fully utilized.

Despite these limitations, percentage depletion remains an important 
factor in the economics of American oil and natural gas production. 
Most independent producers do not exceed the 1,000 barrel per day 
limitation. Yet, these producers are a significant component of 
America's oil and natural gas production. For example, they are the 
predominant operators of America's marginal wells. Over 85 percent of 
America's oil wells are marginal wells--each producing less than 15 
barrels per day, averaging about 2.5 barrels per day. Yet, these wells 
produce about 10 percent of American oil production. About 75 percent 
of American natural gas wells are marginal wells (averaging about 22 
Mcfd), producing approximately 10 percent of American natural gas.

Marginal wells are unique to the United States; other countries shut 
down these small operations. Once shut down, they will never be opened 
again--it is too costly. Even keeping them operating is expensive--they 
must be periodically reworked, their produced water (around 9 of every 
10 barrels produced) must be disposed properly, the electricity costs 
to run their pumps must be paid. Therefore, the revenues retained by 
percentage depletion are essential to meet these costs. For larger 
wells, percentage depletion provides more revenues to be used to find 
new oil and natural gas in the United States.

In addition to independent producers, royalty owners can take 
percentage depletion on wells producing their mineral assets. Royalty 
owners can take percentage depletion on wells regardless of whether the 
producer is an independent or integrated company. One reason that 
percentage depletion draws attention is the revenue estimate associated 
with it; however, the revenue estimate never separates its evaluation 
between producers and royalty owners.

The Economic Impact of Loss of Percentage Depletion

NSWA has commissioned a just-released independent economic study that 
outlines the impacts of eliminating percentage depletion over the next 
15 years, both nationally and across the most directly impacted 18 
states. From the study:

      Eliminating the percentage depletion allowance would have a 
large and increasing impact on the stripper well industry, the oil and 
natural gas sector, as well as the broader economy. The percentage 
depletion elimination case [in this study] assumes that the percentage 
depletion allowance would be eliminated as of 2022.

      The elimination of the percentage depletion allowance is 
projected to have a large and increasing impact on the number of 
producing stripper wells across the 15-year (2021-2035) forecast 
period. On average,\2\ the elimination of percentage depletion is 
projected to lead to an over 14 percent reduction in the number of 
producing stripper wells in the U.S.
---------------------------------------------------------------------------
    \2\ The averages calculated in this report are calculated across 
the full 15-year forecast period which includes one year (2021) where 
no impacts of eliminating percentage depletion are assumed to occur due 
to delays in implementation.

      By the end of the forecast period in 2035, the number of 
producing stripper wells is projected to be over 167 thousand wells 
lower if the percentage depletion allowance was eliminated, with 
producing stripper wells projected at around 489 thousand compared to 
---------------------------------------------------------------------------
656 thousand in the base case (an over 25 percent reduction).

      This study forecasts that in the Base Case--which assumes no 
change in law or policy--combined oil and natural gas production from 
stripper wells will average around 1.98 million barrels of oil 
equivalent a day between 2021-2035, the forecast period. In the 
Percentage Depletion Elimination Case--where legislation is enacted to 
eliminate it, production is projected to fall to an average of 1.68 
million barrels of oil equivalent a day (an over 12 percent reduction). 
The impact of eliminating the percentage depletion allowance is 
projected to grow across the forecast period.

      For example, if percentage depletion was eliminated, by 2035, 
oil and natural gas production from stripper wells is projected to fall 
by over 26 percent, from over l .91 million barrels of oil equivalent a 
day in the Base Case to just over 1.42 million barrels of oil 
equivalent a day in the Percentage Depletion Elimination Case.

      If percentage depletion were eliminated, this study projects 
that over the 2021 to 2035 forecast period, oil and natural gas 
industry spending would be reduced by over $7.1 billion per year on 
average. By the end of the forecast period in 2035, spending is 
projected to be reduced by over $9.1 billion dollars. Over the full 15-
year forecast period from 2021 to 2035, total spending is projected to 
be reduced by over $107 billion.

      Across the forecast period (2021-2035), projected average 
employment reductions are estimated at just under 84 thousand jobs per 
year. By 2035, projected reductions in employment are estimated to be 
just over 105 thousand jobs per year.

      Elimination of the percentage depletion allowance is projected 
to reduce annual contributions to GDP by an average of around $8.7 
billion per year. By the end of the forecast period in 2035, reductions 
in GDP are projected to reach over $11 bill ion per year.

      Over the next 15 years, royalty payments are projected to 
decline by an average of around $640 million per year. By the end of 
2035, royalty payments are projected to decline by over $935 million 
per year. Over the full 15-year period from 2021 to 2035, total royalty 
payments are projected to be reduced by over $8.9 billion.

      This study estimates that eliminating the percentage depletion 
allowance would lead to state government revenue reductions of around 
$200 million per year on average over the 2021 to 2035 forecast period. 
By the end of the forecast period, revenue reductions are projected to 
reach around $315 million annually in 2035.

      Across the 15-year forecast period, additional federal corporate 
taxes paid to the U.S. Treasury, due to the elimination of percentage 
depletion, are projected to average just over $450 million per year.

      Over the forecast period, as production is projected to decline 
due to the elimination of percentage depletion, the positive tax 
benefit of eliminating percentage depletion is projected to decline 
annually starting in 2025 ($560 million per year). By the end of the 
forecast period in 2035, projected additional revenues are expected to 
decline to around $385 million.

Conclusion

Eliminating or reducing the present-law percentage depletion deduction 
and IDC would significantly harm the competitiveness of the American 
economy.

In particular, independently owned stripper well operators--who are 
eligible for the deduction, unlike ``Big Oil'' companies due to the per 
day barrel limitation of oil produced--would be particularly impacted. 
These stripper well operators provide approximately ten percent of U.S. 
oil and gas production, drawn from approximately 80 percent of the 
wells operating in the U.S., across 35 states.

Ending percentage depletion would mean the loss of tens of thousands of 
direct and indirect well paying jobs, especially in rural areas where 
small communities are dependent in ways big and small on operators and 
their employees.

In addition, the federal treasury would lose significant federal income 
tax revenue as well as the loss of state and local taxes and royalty 
revenues.

Also, over 12 million land and lease owners--across all 50 states--
would lose royalty checks, in the event of the loss of percentage 
depletion, resulting in the loss of critical income to countless 
retirees on fixed incomes.

The combined impact of countless lost jobs and individual royalty 
payments at a time of an ongoing pandemic would be an especially cruel 
and callous act by Congress.

However, it's more than jobs. It's about maintaining real energy 
security for future generations.

Lest we forget how far we have come in our nation's drive for energy 
independence, a short history lesson is in order. American oil 
dependency after 1970 led to fifty years of international security 
issues where America's foreign policy choices depended on its effect on 
oil supply. Two clear crises were oil embargoes in 1973 and 1979.

By 2007, the United States was importing 65 percent of its oil supply. 
While much of it came from Canada and Mexico, significant amounts came 
from the Middle East where relationships were tenuous or hostile. The 
shale oil revolution changed international energy security dynamics 
significantly, positioning the United States today much more securely.

However, new efforts to suppress American oil and natural gas supply 
could reverse these important policy shifts. Demand drives the need for 
oil and natural gas supply. Crushing American supply will not reverse 
American demand. Instead, America will need to meet its energy demand 
by returning to imports. Global greenhouse gas emissions will not be 
reduced but American energy security will be threatened again like the 
fifty years following 1970.

So, short-sighted actions to undercut safe and environmentally sound 
oil and gas production through the elimination of tax treatments and 
deductions could easily lead to the rise in oil and gas imports being 
delivered via large tankers from foreign, less environmentally 
conscious, nations because eliminating percentage depletion will not 
curb demand. In addition, increased costs for commodities and higher 
prices for consumers will continue to rise, thereby imposing an 
unnecessary burden on the United States' economy.

In short, we cannot over-emphasize the importance of energy production 
to the people and economy of our nation.

For all these reasons, the percentage depletion deduction and IDC are 
vitally important to U.S. prosperity and must be retained.

                                 ______
                                 
                       Paper Recycling Coalition

                              P.O. Box 275

                           Clifton, VA 20124

                             (202) 347-8000

                https://www.paperrecyclingcoalition.com/

U.S. Senate
Committee on Finance

Dear Chairman Wyden and Ranking Member Crapo:

The Paper Recycling Coalition (PRC) is pleased to submit this statement 
for inclusion in the Committee's hearing record. We look forward to 
serving as a resource to the Committee as it evaluates how the tax code 
can help address climate challenges, including advancing paper 
recycling as a climate solution.

Paper recycling has significant climate benefits, including the 
avoidance of methane emissions from landfills. Moreover, the 
manufacture of 100 percent recycled paperboard and containerboard has a 
net negative emissions profile. Yet federal tax policy incentivizes the 
destruction of the recycled paper sector's raw material: recyclable 
paper. Specifically, section 45(c)(1)(G) of the tax code provides a tax 
credit for electricity produced from municipal solid waste (i.e., 
waste-to-energy production). This policy has negatively impacted the 
paper recycling industry by incentivizing the burning of paper for 
energy recovery.

The PRC's comments submitted herein are in support of eliminating this 
economically destructive and environmentally harmful practice. A simple 
way to address this issue is by adopting the proposed section 45 
modifications included in the ``Protecting America's Paper for 
Recycling Act'' (PAPER Act). The PAPER Act was introduced in both the 
115th and 116th Congresses and is expected to be reintroduced this 
spring by Senators Stabenow, Carper, Boozman, Baldwin, and Cassidy.

About the Paper Recycling Coalition

The PRC's eight member companies represent the interests of the 100 
percent recycled paperboard and containerboard industries. Our members 
operate 500 facilities in 45 states and support over 63,000 well-paid 
jobs with competitive benefits. PRC members manufacture 100 percent 
recycled paper products that are ubiquitous in American commerce, such 
as cereal and pizza boxes, tubes and cores, Amazon cartons, and other 
shipping containers and packaging critical to today's growing 
e-commerce economy.

The paperboard and containerboard manufacturing sectors are among the 
country's greatest economic and environmental success stories. The 
amount of used paper recovered for recycling has nearly doubled since 
1990. In 2019, over 66 percent of all paper used by Americans was 
recovered to be recycled into new products, marking the tenth 
consecutive year with a rate above 60 percent.

As rates of paper recycling rise, they will compound the significant 
economic and employment benefits of paper recycling. In addition to the 
63,000 direct jobs PRC members support, the sector influences another 
615,000 jobs across the recycling supply chain (collection, processing, 
and manufacturing), totaling nearly 680,000 U.S. jobs.\1\ The annual 
economic impact of the paper recycling supply chain amounts to a 
staggering $150 billion.\2\
---------------------------------------------------------------------------
    \1\ See EPA, ``Recycling Economic Information Report'' (2016), 
https://www.epa.gov/smm/recycling-economic-information-rei-report.
    \2\ See EPA Smart Sectors, ``Paper and Wood Products'' (2020), 
https://cfpub.epa.gov/wizards/smartsectors/woodpaper/#Chart; ISRI, 
``The Economic Impact of the Scrap Recycling Industry in the United 
States--Paper'' (2019), https://www.isri.org/docs/default-source/
engage_toolkits/paper-isri-recycling-economic-impact.pdf?sfvrsn=4.

The domestic paper recycling sector is primed to drive $4.1 billion 
into recovered fiber investment between 2018-2022. These investments 
will add 7 million tons of additional U.S. manufacturing capacity in 
the form of new mills, new paper machines, paper machine conversions 
and the re-starting of idle mills. In fact, according to at least one 
industry survey, over a dozen domestic recycling mills representing 
millions in new investments will be coming online between 2018 and 
2021, much of it able to process mixed paper feedstocks that used to be 
exported to China.\3\ Further, 5 out of the last 6 paper mills opened 
in the U.S. are 100% percent recycled. These facilities were planned 
and built without federal subsidies or intervention.
---------------------------------------------------------------------------
    \3\ Scrap Magazine, ``Gearing Up'' (July/August 2019).

Paper recycling also delivers real environmental benefits for the 
American people. By recycling paper and turning it into new 100 percent 
recycled paper products, PRC members prevent it from being landfilled 
where it degrades, producing methane, a potent greenhouse gas. Further, 
even as the paper recycling sector has continued to add capacity in the 
form of new mills, machines, and related infrastructure, it has 
nevertheless improved its energy efficiency, resulting in reduced 
energy usage and reduced greenhouse gas emissions. In fact, the 
production of 100 percent recycled paperboard and containerboard 
---------------------------------------------------------------------------
products results in net negative greenhouse gas emissions.

The impressive economic and environmental benefits of paper recycling 
are directly tied to the availability of a clean and stable supply of 
recovered fiber collected for recycling. For that reason, the PRC's 
mission is to promote recycling education and to prevent market-
distorting government subsidies from diverting recyclable paper from 
the supply chain. Diverting this feedstock from the circular economy to 
landfills or for waste-to-energy eliminates opportunities to recycle 
these materials and turn them into valuable new products, such as 100 
percent recycled paper and packaging products.

 The Section 45 Credit for Municipal Solid Waste Creates the Wrong 
                    Incentive--Not to Reuse Recyclable Paper

It is the mission of the PRC to protect the supply of recyclable paper. 
That is why the PRC continues to have serious concerns about the 
section tax credit for electricity produced from WtE facilities. The 
provision provides an incentive to incinerate any municipal solid 
waste--including recyclable paper that has not been separated from the 
MSW stream. This dramatically reduces the amount of paper available for 
recycling, and in some cases leads to an erosion in the quality of the 
recyclable paper that is recovered. There simply is no sound policy 
justification for this approach.

Congress has made efforts to clarify that section 45 should not act as 
an incentive to burn recyclable paper. In 2012, as part of the enacted 
American Taxpayer Relief Act of 2012, Congress amended section 45 to 
limit the availability of the credit for the production of energy from 
municipal solid waste that includes paper that is commonly recycled and 
that has been segregated from other solid waste. This clarification was 
intended to ensure that the federal government does not incentivize the 
burning of paper that should be recycled.

Unfortunately, residual ambiguity in the law means that recyclable 
paper continues to be burned for energy production. Instead of 
separating paper from waste as Congress intended, in some cases paper 
continues to be commingled--or ``mixed''--with waste for energy 
production purposes. As an added negative, commingling in many cases 
contaminates recyclable paper and leaves it unusable as a feedstock for 
recycled packaging and products.

 The Section 45 Credit for Municipal Solid Waste Should Not be Extended 
                    Without Reform

In evaluating clean energy tax credits, the Committee should consider 
not only the original purpose of these policies but also any unintended 
consequences they create. The section 45 credit for WtE and other 
``clean'' resources was conceived to incentivize the environmental and 
economic benefits of renewable energy. But those benefits are seriously 
undermined by the provision's subsidy for the burning of recyclable 
paper for energy production. Further, WtE presents sobering 
environmental justice concerns that are increasingly coming to 
light.\4\
---------------------------------------------------------------------------
    \4\ Politico, ``Burning Trash is Good. The Law Says So'' (February. 
9, 2021), https://www.politico.com/newsletters/the-long-game/2021/02/
09/burning-trash-is-good-the-law-says-so-491693.

If Congress continues to renew the section 45 credit for WtE facilities 
without modification, it will continue to provide an incentive for this 
counterproductive and harmful activity. Section 45 is thus a 
prototypical example of a tax policy that should not be continued 
---------------------------------------------------------------------------
without reform.

The PRC supports bipartisan legislation--the PAPER Act (S. 1396, 116th 
Cong.)--to clarify that the section 45 credit is not available for WtE 
facilities that burn commonly recycled paper that has been segregated 
from solid waste, or that burn solid waste that has been mixed with 
garbage. By eliminating the incentive to burn paper for electricity, 
the legislation better protects recyclable paper, thus coming closer to 
Congress' original intent for the provision.

The PAPER Act was previously sponsored by current Finance Committee 
members Senator Stabenow, Senator Cassidy, and Senator Carper. Senators 
Boozman and Baldwin were additional co-sponsors last Congress (as was 
former Senator Isakson). This same group of Senators plans to 
reintroduce the PAPER Act this spring. We urge the Committee to include 
this reform should it decide to extend the section 45(c)(1)(G) tax 
credit.

Ultimately, since section 45 provides an incentive for energy 
production and not recycling, the PRC does not support the continued 
extension of the tax credit for WtE facilities. If Congress does act to 
continue this incentive, it is essential to include the modifications 
reflected in the PAPER Act. This commonsense proposal is the only way 
to bring coherence to a policy that would otherwise prioritize energy 
production over recycling in contradiction to EPA's Waste Management 
Hierarchy.\5\
---------------------------------------------------------------------------
    \5\ https://www.epa.gov/smm/sustainable-materials-management-non-
hazardous-materials-and-waste-management-hierarchy.

In closing, we hope the Committee will take this opportunity to either 
eliminate the harmful WtE incentive entirely, or to modify it in a way 
that protects America's vibrant and growing recycling industry. We 
stand ready to work with you and your staff as you examine these 
---------------------------------------------------------------------------
issues.

Please do not hesitate to contact us with any questions, or if we can 
provide additional information about our industry or the negative 
effects caused by the section 45 WtE credit.

Sincerely,

Brian McPheely                      Michael P. Doss
Chairman, Paper Recycling 
Coalition,                          Vice Chairman, Paper Recycling
Inc.                                Coalition, Inc.
Global CEO, Pratt Industries        President/CEO, Graphic Packaging 
                                    Int'l,
                                    LLC

Terese Colling
President, Paper Recycling 
Coalition, Inc.

                                 ______
                                 
                  Permian Basin Petroleum Association

                              P.O. Box 132

                           Midland, TX 79701

                           https://pbpa.info/

                              432-684-6345

Who is PBPA

The PBPA is the largest regional oil and gas association in the United 
States. Since 1961, the PBPA has been the voice of the Permian Basin 
oil and gas industry. The PBPA's mission is to promote the safe and 
responsible development of our oil and gas resources while providing 
legislative, regulatory, and educational support services for the 
petroleum industry. The PBPA membership includes the smallest 
exploration and services companies as well as some of the largest 
companies with world-wide operations. The Permian Basin is the largest 
inland oil and gas reservoir and the most prolific oil and gas 
producing region in north America.

Benefits of Permian Supply for the Nation

Today, oil and natural gas operations are the lifeblood of the American 
economy.
The Permian is a Key Contributor . . .
The Permian Basin accounts for about 60% of oil production and 20% of 
natural gas production in the United States. In New Mexico, the 
industry accounts for roughly 134,000 jobs. In Texas, the industry 
account for roughly 400,000 jobs.

Nationally, the Permian Basin supplies America's energy needs at a low 
cost for millions of families, as household energy costs have decreased 
15 percent in the last decade alone. It has given the United States 
enviable energy independence and, as a result, enhanced national 
security.

Production of oil and gas provides much-needed tax revenues for 
federal, state, and local governments to fund education, infrastructure 
projects, and helps to provide salaries for teachers and first 
responders.

In Texas, the oil and gas industry contributes over $13 billion 
annually to the state Treasury. In New Mexico, the industry contributes 
nearly $3 billion annually to the state in taxes and royalties. 
Specifically as to the Permian Basin, absent taxes and royalties paid 
on operations a family of three, on average, would either have to pay 
around $1,000 more in taxes every year in Texas and $1,500 more in New 
Mexico, or accept a lower amount of services from state and local 
governments.

In New Mexico, these revenues provide for one-third of the funding for 
schools, roads, public safety and healthcare. In Texas, local school 
districts received more than $2 billion in property taxes on oil and 
gas interests in 2020 and the Permanent School Fund and Permanent 
University Fund, which support Texas public education, together 
received over $1.7 billion from royalties paid on oil and gas 
production.

Consider that the vast majority of the 275 million vehicles registered 
in the United States--vehicles that will be on the road for decades to 
come are oil and gas powered. This includes the trucks that transported 
and delivered the key commodities that kept America functioning for the 
past year of the COVID pandemic. They provide fuel for the trains and 
the airplanes that are essential for interstate and international 
commerce. They fuel the vessels that transport America's exports and 
imports.

Yet, consider that less than half the content of a barrel of oil goes 
towards gasoline, as the industry produces products used to make 96% of 
everyday essential items, including: agricultural fertilizers, 
pharmaceuticals, shampoo, eye glasses and a host of pivotal 
technologies, production of synthetic fibers in clothes and sportswear, 
medical supplies, computer and cell phone components, and chemicals 
that are essential for a modern country.

Modern renewable technologies wouldn't exist without the utilization of 
hydrocarbons. The industry provides lubricants in wind turbines, 
hydrocarbon precursors are used for manufacturing of synthetic blades, 
and the raw earth materials that are essential in the electronic 
components of wind turbines and solar blades are mined, refined and 
created by machinery and equipment powered by hydrocarbons.

Reinvestment Is Key to a Continued Supply

As it is they are used extensively by renewable energy operations, the 
use of tax treatments--including target deductions--are important tools 
in the small and medium oil and gas operators' efforts to continue 
reliable and environmentally safe oil and gas production in the U.S. 
Key among them are IDC, percentage depletion and enhanced oil recovery.
IDC
Since 1913, a drilling and development costs deduction has been allowed 
as an ordinary and necessary business expense for those costs where 
there is no remaining equipment to value (salvage value) when an oil or 
natural gas well is completed.

Because there is nothing tangible to value, these costs are generally 
called ``intangible drilling costs'' or IDC. For the past 35 years, 
American tax policy has shortened the depreciation period for equipment 
to allow capital to be recovered and reinvested in new American 
projects. Like other rapid depreciation schedules in the tax code, the 
drilling cost deduction allows for investment capital to be immediately 
recovered and encourages its reinvestment. This is the same concept 
adopted as Bonus Depreciation in the 2017 Tax Reform Act. It is neither 
a ``tax subsidy'' nor a ``loophole.'' For American independent 
producers expensing has resulted in facilitating reinvestment in new 
American projects at rates up to 150 percent of American cash flow.

Our tax code is designed to levy taxes on net profits, not on dollars 
used for operational costs or capital expenditures. Every business 
since the inception of the tax code, has used cost recovery provisions 
like IDC.

The expensing of IDC allow companies to recover costs such as labor, 
site preparation, equipment rentals, and other expenditures for which 
there is no salvage value. It is important to note that 80 percent of 
IDCs are associated with labor costs. It is also important to note that 
the independent oil and gas industry, which accounts for 80 percent of 
our nation's oil production and 90 percent of its natural gas 
production, would be hit hardest by the elimination of this provision. 
IDC often represent 60 to 80 percent of total production costs and 
repealing them could result in the loss of over a quarter million jobs 
by 2023.
Percentage Depletion
Depletion, like depreciation, allows for the recovery of capital 
investment over time. Percentage depletion is used for most mineral 
resources including oil and natural gas. It is a tax deduction 
calculated by applying the allowable percentage to the gross income 
from a property. For oil and natural gas the allowable percentage is 15 
percent.\1\
---------------------------------------------------------------------------
    \1\ For marginal wells, the allowable percentage is increased (from 
the general rate of 15 percent) by one percent for each whole dollar 
that the average price of crude oil for the immediately preceding 
calendar year is less than $20 per barrel. In no event may the rate of 
percentage depletion under this provision exceed 25 percent for any 
taxable year. The term ``marginal production'' for this purpose is 
domestic crude oil or domestic natural gas which is produced during any 
taxable year from a property which (1) is a stripper well property for 
the calendar year in which the taxable year begins, or (2) is a 
property substantially all of the production from which during such 
calendar year is heavy oil (i.e., oil that has a weighted average 
gravity of 20 degrees API or less corrected to 60 degrees Fahrenheit). 
A stripper well property is any oil or gas property which produces a 
daily average of 15 or less equivalent barrels of oil and gas per 
producing oil or gas well on such property in the calendar year during 
which the taxpayer's taxable year begins.

Depletion has been a part of the tax code since its inception. 
Initially, the only form of depletion was cost depletion; however, it 
limits depletion to the capital cost of a project. After World War I, 
Congress recognized that too many natural resources were being 
abandoned because of cost depletion limiting the economic viability of 
projects. Consequently, it began to allow forms of value depletion to 
---------------------------------------------------------------------------
be used as well. In 1926, it settled on percentage depletion.

Percentage depletion has changed over time. Current tax law limits the 
use of percentage depletion of oil and natural gas in several ways. 
First, the percentage depletion allowance may only be taken by 
independent producers and royalty owners and not by integrated oil 
companies. Second, depletion may only be claimed up to specific daily 
American production levels of 1,000 barrels of oil or 6,000 mcf of 
natural gas. Third, the net income limitation requires percentage 
depletion to be calculated on a property-by-property basis. It 
prohibits percentage depletion to the extent it exceeds the net income 
from a particular property. Fourth, the deduction is limited to 65% of 
net taxable income. Percentage depletion in excess of the 65 percent 
limit may be carried over to future years until it is fully utilized.

Despite these limitations, percentage depletion remains an important 
factor in the economics of American oil and natural gas production. 
Most independent producers do not exceed the 1,000 barrel per day 
limitation. Yet, these producers are a significant component of 
America's oil and natural gas production. For example, they are the 
predominant operators of America's marginal wells. Over 85 percent of 
America's oil wells are marginal wells--producing less than 15 barrels 
per day, averaging about 2.5 barrels per day. Yet, these wells produce 
about 10 percent of American oil production. About 75 percent of 
American natural gas wells are marginal wells (averaging about 22 
mcfd), producing approximately 10 percent of American natural gas.

Marginal wells are unique to the United States; other countries shut 
down these small operations. Once shut down, they will never be opened 
again--it is too costly. Even keeping them operating is expensive--they 
must be periodically reworked, their produced water (around 9 of every 
10 barrels produced) must be disposed properly, the electricity costs 
to run their pumps must be paid. The revenues retained by percentage 
depletion are essential to meet these costs. For larger wells, 
percentage depletion provides more revenues to be used to find new oil 
and natural gas in the United States.

In addition to independent producers, royalty owners can take 
percentage depletion on wells producing their mineral assets. Royalty 
owners can take percentage depletion on wells regardless of whether the 
producer is an independent or integrated company. One reason that 
percentage depletion draws attention is the revenue estimate associated 
with it; however, the revenue estimate never separates its evaluation 
between producers and royalty owners.

Enhanced Oil Recovery

Various legislative proposals have called to preclude Enhanced Oil 
Recovery techniques from qualifying for the Section 45Q tax credit, a 
bipartisan provision to incentivize carbon capture and sequestration. 
American energy innovation has led to a reduction of greenhouse gas 
emissions by 30 percent in the last few decades and the oil and gas 
industry has led the charge in the research, development, and 
utilization of new carbon capture technologies. By allowing carbon 
sequestration for EOR, producers are simultaneously reducing emissions 
while also efficiently recovering more resources, leading to lower 
energy prices for consumers. It should be celebrated by those concerned 
about carbon emissions, and even by critics of the industry, that oil 
and gas producers are able to help Americans realize the benefits of 
affordable, efficient, and reliable energy, while making strides 
towards carbon neutral production. An industry that invests billions of 
dollars in this new technology must be encouraged to continue these 
game-changing developments, not punished.

Conclusion

Eliminating or reducing the present-law percentage suite of targeted 
tax deductions--not subsidies, where the government gives direct cash 
payments to an industry--which allow small to medium size operators 
like our members to keep more of their hard earned monies for continued 
safe and environmentally responsible energy production would greatly 
harm the U.S.' economic competitive disadvantage.

Most directly and immediately: the combined impact of countless lost 
jobs and federal, state, and local revenues at time of an ongoing 
pandemic would be an especially short sighted act by Congress.

However, it is more than jobs. It is about maintaining real energy 
security for future generations.

Lest we forget how far we have come in our nation's drive for energy 
independence, a short history lesson is in order. American oil 
dependency after 1970 led to fifty years of international security 
issues where America's foreign policy choices depended on its effect on 
oil supply. Two clear crises were oil embargoes in 1973 and 1979.

By 2007, the United States was importing 65 percent of its oil supply. 
While much of it came from Canada and Mexico, significant amounts came 
from the Middle East where relationships were tenuous or hostile. The 
shale oil revolution changed international energy security dynamics 
significantly, positioning the United States today much more securely.

However, new efforts to suppress American oil and natural gas supply 
could reverse these important policy shifts. Demand drives the need for 
oil and natural gas supply. Crushing American supply will not reverse 
American demand. Instead, America will need to meet its energy demand 
by returning to imports. Global greenhouse gas emissions will not be 
reduced, but will likely increase and American energy security will be 
threatened again like the fifty years following 1970.

Elimination of tax deductions discussed above could easily lead to a 
rise in oil and gas imports, while delivered via large tankers from 
foreign, less environmentally conscious, nations because eliminating 
percentage depletion or the other treatments will not curb demand.

In addition, increased costs for commodities and higher prices for 
consumers will continue to rise, thereby imposing an unnecessary burden 
on the United States' economy.

In short, we cannot over-emphasize the importance of energy production 
to the people and economy of our nation.

For all these reasons, the energy tax treatments discussed here are 
vitally important to U.S. prosperity, and must be retained.

Regards,

Ben Shepperd, President

                                 ______
                                 
                        Resources for the Future

      Emissions Projections for a Trio of Federal Climate Policies

New modeling by Resources for the Future shows that three prominent 
climate policy proposals, either in isolation or combined, do not 
reduce emissions enough to meet the Biden administration's new climate 
goals.

Issue Brief (21-02) by Wesley Look, Karen Palmer, Dallas Burtraw, 
Joshua Linn, Marc Hafstead, Maya Domeshek, Nicholas Roy, Kevin Rennert, 
Kenneth Gillingham, and Qinrui Xiahou.

This issue brief was published by Resources for the Future (RFF) in 
April.
_______________________________________________________________________

With the Biden Administration's recent announcement of the American 
Jobs Plan and nationally determined contribution (NDC) under the Paris 
Agreement, and as Congress begins to seriously consider legislation to 
advance clean energy and cut greenhouse gas emissions, RFF researchers 
have been investigating environmental outcomes under various policy 
scenarios. In this issue brief, we provide a snapshot from this work--
including estimates of energy-related CO2 emissions and 
cost-effectiveness.

Policy Scenarios

We compare three prominent proposals being discussed by federal 
policymakers:

      A simplified version of the recently re-introduced Clean Energy 
for America Act (CEAA), which provides tax incentives for renewables, 
energy efficiency, electric vehicles and more.

      A Clean Electricity Standard (CES) based on the 2019 Smith-Lujan 
proposal, which stipulates a schedule for the decarbonization of the 
electricity sector

      An economy-wide carbon tax starting at $15 per ton and rising at 
5 percent real per year (C$15).

We model energy-related US CO2 emissions under each of these 
policies, various combinations thereof, and business-as-usual (BAU) 
assumptions. In our ``All-in'' scenario, we also include federal 
spending on electric vehicle charging infrastructure and residential 
building weatherization. Table 1 summarizes the policy scenarios 
included, with more detail in the appendix. Note: this analysis is 
calibrated to pre-COVID projections (see appendix), which yields 
conservative emissions estimates.


           Table 1. Policy Scenarios Included in This Analysis
------------------------------------------------------------------------
  Abbreviation          Policy Scenario              Key Features
------------------------------------------------------------------------
BAU               Business-as-usual/          Calibrated to AEO 2019 and
                   Reference case              2020
------------------------------------------------------------------------
CEAA              Clean Energy for America    Clean electricity and
                   Act (CEAA) *                energy storage tax
                                               credits, extension of 30D
                                               EV incentives, EE tax
                                               credits
------------------------------------------------------------------------
CES               Clean Energy Standard       80% clean by 2032, with
                   (CES)                       banking
------------------------------------------------------------------------
C$15              Carbon tax                  Starting price: $15, gr.
                                               rate: 5% real
------------------------------------------------------------------------
CEAA+CES          Combined CEAA and CES       See above
------------------------------------------------------------------------
All-in            C$15 + CEAA + CES +         See above
                   weatherization and EV
                   charging infrastructure
                   spending
------------------------------------------------------------------------
* This is an incomplete representation of the CEAA, see appendix for
  details.

Energy-Related Emissions Estimates Under the Various Policy Scenarios

As shown in Figure 1, all policy scenarios make progress cutting 
emissions from BAU. Across the policy scenarios studied, estimates of 
economy-wide energy-related CO2 reductions in 2030 range 
from roughly 10 to 25 percent from BAU and 30 to 40 percent from 2005 
levels.

The CES and $15 carbon tax produce similar emissions trajectories 
through 2035, with steeper reductions than the CEAA early-on and after 
2030. The CEAA and CES combined are an improvement over all individual 
policies, reducing emissions by approximately 37 percent from 2005 
levels in 2030. The All-in scenario, which combines all three policies 
and federal spending on weatherization and EV charging is estimated to 
cut 2030 emissions by 41 percent from 2005.

While all scenarios make progress on emissions goals, none hit the NDC 
target of a 50-52 percent reduction from 2005 levels by 2030, 
indicating that additional policies and/or greater policy ambition are 
needed.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


Additionally, none of the policy scenarios maintain a reduction 
path commensurate with what would be needed to reach net-zero by 2050 
(as projected linearly from 2020), however a number of scenarios do 
maintain such a path through 2025 and one (All-in) through 2030. While 
not shown here, even if a CES were designed to achieve 100% clean by 
2035 and combined with all the other policies we study, emissions would 
still not be on track to hit the midcentury target--policies that 
substantially cut emissions from sectors other than electricity will be 
needed as well.

One reason for misalignment with midcentury targets is that almost all 
policy scenarios hit a plateau around 2030. This is largely because 
these policies--even when combined--lose their effectiveness in the 
electricity sector over time (discussed below), and the vast majority 
of emissions reductions come from electricity through 2035.

Indeed, as shown in Figure 2, under the All-in scenario, about 75 
percent of 2035 reductions from BAU come from electricity. The next 
greatest portion (13 percent) comes from the industrial sector, driven 
exclusively by the carbon tax. Reductions in the transportation sector 
are mostly driven by existing policy, which includes the national fuel 
economy/GHG standards for passenger vehicles and the Zero Emission 
Vehicle (ZEV) program, which sets sales targets for electric vehicles 
in California and 12 other states. New policy, particularly subsidies 
for electric vehicles, largely shifts costs of meeting the national 
standards and ZEV requirements from automakers and consumers to 
taxpayers, without substantially reducing national emissions--the All-
in scenario only reduces 2035 emissions 6 percent below BAU (driven 
entirely by the carbon tax). With electricity emissions declining so 
much (in this and other scenarios), the major challenge going forward 
will be to reduce emissions from the transportation and industrial 
sectors--which, under All-in, represent nearly 80 percent of US energy-
related CO2 emissions in 2035.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


In Figure 3, we take a closer look at the electricity sector. Of 
the individual policies, the CES reduces emissions most, both in the 
near- and long-term. And, because the CES and the CEAA together cut 
electricity emissions so significantly, the addition of the modest $15 
carbon tax in the All-in scenario has little to no additional effect on 
electricity emissions.

None of the policy scenarios studied achieve the Biden goal of net-zero 
carbon electricity by 2035, but they make solid progress--between a 65 
and 85 percent reduction in CO2 emissions by 2035 (from 2005 
levels).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


As mentioned above, all policies lose effectiveness over time in 
the electricity sector--indicated by flattening (and in some cases 
rising) curves after 2025. Why is this? Both the CES and the CEAA 
promote clean electricity, which primarily replaces coal in the early 
2020s, and natural gas in the late 2020s and 2030s. This declining 
carbon intensity of the replaced electricity partially accounts for the 
decreasing emissions slopes. Additionally, by the 2030s, most 
renewables that are cheaper than natural gas (including tax credits) 
have been built; and the remaining gas in the system is either cheaper 
than renewables, or necessary for system balancing.

Post-2030, more stringent carbon pricing, richer tax credits, steeper 
CES requirements, or policies that target natural gas electricity 
emissions or promote clean firm resources--such as energy storage--
would be necessary to achieve the 100% clean goal by 2035.

 Cost-Effectiveness of Policy Scenarios in Reducing Electricity 
                    Emissions

Considering electricity sector effects only, Figure 4 displays cost-
effectiveness of the policy scenarios discussed above, along with two 
additional scenarios--one which assumes a higher tax credit for clean 
electricity (6 cents per kWh, or $60 per MWh), and a CES with no credit 
banking.

We measure cost-effectiveness as the change in total resource cost \1\ 
from BAU (discounted over the 10-year budget window) divided by the 
cumulative emissions reduction from BAU. A lower number on the vertical 
axis indicates greater economic efficiency in achieving a given 
emissions reduction.
---------------------------------------------------------------------------
    \1\ Resource costs are the sum of electricity sector fuel costs, 
variable operations and maintenance costs, fixed operations and 
maintenance costs, and annualized capital costs.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


Policies that provide incentives to pursue numerous options for 
emissions reductions tend to be more cost-effective than narrowly 
targeted approaches. The CES is more cost-effective (and more effective 
at reducing emissions regardless of cost) than the CEAA because it 
applies to a broader set of clean generators, including existing 
nuclear, although it also gives credits to existing renewable resources 
that may not need further incentives to generate. It also provides some 
incentive to move from coal to natural gas by providing partial credits 
to efficient natural gas plants. The carbon tax is more cost-effective 
than the CEAA because it increases the market price of all emitting 
generation, whereas the CEAA simply changes the price of renewables 
constructed in 2022 or later. We also find the CEAA energy efficiency 
incentives to be inefficient at reducing emissions, but may be 
necessary to meet electrification and equity goals. When coupled with a 
carbon tax or CES, the CEAA amplifies emissions reductions and 
---------------------------------------------------------------------------
increases the cost per ton of achieving those reductions.

The CES performs comparably to a modest carbon price and, when credits 
are bankable, cumulative emissions are reduced by an additional 40 
percent below BAU while only increasing the average cost by roughly $2 
per ton. Enabling banking for any multipolicy scenario involving a CES 
also leads to greater reductions in emissions and relative costs. To 
achieve CES (with banking) levels of cost-effectiveness and emissions 
reductions using tax credits alone would require the CEAA's PTC to be 
raised by over 150 percent of its current level to $60/MWh.

Conclusion

The policy scenarios discussed in this brief produce reductions in 
energy-related CO2 emissions between 10 to 25 percent from 
BAU--and 30 to 40 percent from 2005--by 2030. None of these scenarios 
achieve reductions commensurate with the recently announced 2030 NDC, 
the Biden administration 2035 target for electricity, or midcentury 
emissions targets identified by IPCC scientists to avoid potentially 
catastrophic climate change.

One reason for this may be the fact that we calibrate our models to 
pre-COVID energy and emissions projections (see appendix), which 
produces conservative estimates in all years of our analysis. 
Uncertainty remains about the pace and shape of the economic recovery, 
as well as the extent to which COVID-induced behavior changes (e.g., 
working from home) will persist even after society restabilizes, and 
how this may effect emissions in 2030 and 2035.

In any case, greater ambition under this suite of policies is one way 
to reduce emissions further--for example, by increasing tax credit and/
or carbon price levels, or by designing a CES with a more stringent 
decarbonization path than the one we model here (as current approaches 
indeed propose).

Another approach would be to broaden the set of policy tools beyond 
what we study here (which we recognize is a small sample of the climate 
policy ideas being discussed in Washington). With electricity emissions 
declining 65-85 percent by 2035 (from 2005 levels) under the scenarios 
we study, leaders will need to devote attention to other sectors, 
including the transportation and industrial sectors which together 
account for 70-80 percent of emissions in 2035 under the scenarios we 
analyze.

Our research also indicates that policies which incentivize a diversity 
of decarbonization pathways tend to be more cost-effective than more 
narrowly targeted approaches.

While the policies we study may not achieve the administration's 
emissions goals, they represent a significant down payment on those 
goals, and they show that--with additional policy and refinements to 
existing approaches--these goals are within reach.

Appendix

In this appendix, we list key assumptions applied in our analysis 
(organized by reference and policy cases), and we provide brief 
descriptions of the models used.

Assumptions Regarding the Reference Case

Model reference case (or business-as-usual, BAU) assumptions are 
calibrated to EIA's Annual Energy Outlook (AEO) 2019 and 2020 reference 
cases. This means the models do not take into consideration the effects 
of COVID-19 on the economy or emissions (which are incorporated for the 
first time in AEO 2021). To give a rough sense of scale, pre-COVID BAU 
emissions projections are about 10 percent higher in 2020, and 3-4 
percent higher in each of 2025, 2030 and 2035, compared to post-COVID 
projections.

Electricity and transportation models--AEO 2019

The electricity and light duty transportation models calibrate to AEO 
2019. This implicitly includes the following major policy assumptions 
(think of these as policies included in the reference case):

      No Clean Power Plan.
      Obama CAFE standards still in effect.
      ZEV mandate in effect and federal plug-in vehicle tax credit 
(30D) phases out after manufacturers exceed 200,000 sales.

For assumptions about other policies assumed active in AEO 2019: 
https://www.eia.gov/outlooks/archive/aeo19/assumptions/pdf/summary.pdf.

For additional general AEO 2019 assumptions see: https://www.eia.gov/
outlooks/archive/aeo19/assumptions/.

Economy-wide model--AEO 2020

The economy-wide model calibrates to AEO 2020. This implicitly includes 
the following major policy assumptions:

      No Clean Power Plan.
      Obama CAFE standards still in effect.
      ZEV mandate not in effect (Trump administration refusal to renew 
CAA Sec. 209 waiver)

For assumptions about other policies assumed active in AEO 2020: 
https://www.eia.gov/outlooks/archive/aeo20/assumptions/pdf/summary.pdf.

For additional general AEO 2020 assumptions see: https://www.eia.gov/
outlooks/archive/aeo20/assumptions/.

Assumptions Regarding Modeled Policy Scenarios

Carbon Tax

      Policy start: January 1, 2023
      Starting tax rates: $15 per metric ton
      Real annual growth rate: 5%

Clean Energy for America Act (CEAA)

      Electricity generation PTC and ITC
          Policy start: January 1, 2023
          PTC
                Qualifying Fuels: Wind, Solar, Hydro (Non-
buildable), Nuclear (Non-buildable), Geothermal (Non-buildable), 
Biomass
                Price: $24 (2020$)/MWh starting in 2023 (assumes 
full value of tax credit goes to generators, which may not be the case 
in the context of tax equity market transaction costs and mark-downs)
                New plants qualify for 10 years of credits
          ITC
                Qualifying Fuels: Battery Storage
                Price: 30% discount on capital costs beginning in 
2023 (assumes full value of tax credit goes to generators, which may 
not be the case in the context of tax equity market transaction costs 
and mark-downs)
                New plants qualify for 10 years of credits
      Energy efficiency tax credits
          Policy start: January 1, 2022
          New Homes
                Whole-home energy reduction
                10% more efficient than IECC 2021  $2,500
          Home Improvements
                Replacing heating and cooling systems
                    Min (30% of the replacement, $500) per appliance
                    Up to $800 for air source heat pumps and ductless 
mini-split heat pumps
                    Up to $10,000 for ground source heat pumps
          New Commercial Buildings
                25% more efficient than ASHRAE 90.1-2016 -> $1.75/
sqft
      Electric vehicle tax credits
          Policy start: January 1, 2022 and ends December 
31, 2031. Vehicle tax credits are available for all plug-in vehicle 
purchases, regardless of manufacturer's cumulative sales.

Clean Energy Standard (CES)

      Policy start: January 1, 2022
      Starting Requirement: 44% of national retail sales must be clean 
generation in 2022.
      1st Segment: linear increase to 80% clean generation by 2032 
(3.6% /year)
      2nd Segment: linear increase to 100% clean generation by 2050 
(1.11% per year)
      Benchmark Emission Rate: .4 metric tons / MWh (modeled as .44 
short tons / MWh)
      Banking and no-banking scenarios considered

Other

      EV charging infrastructure spending is included in the All-in 
scenario. Spending assumptions: $1 billion per year from 2022 through 
2031. Each charging station costs $50,000, and charging stations are 
allocated across regions according to the region's share in total new 
vehicle sales in 2018. The effect of charging stations on EV sales is 
calibrated based on regional trends from 2015-2018.
      Weatherization spending ($5 billion per year) is included in the 
All-in scenario.

Model Descriptions

The following models were used for this analysis. Results from each of 
these three models were combined to produce the estimates discussed 
above.

E3 Computable General Equilibrium (CGE) Model (Marc Hafstead)

The Goulder-Hafstead Energy-Environment-Economy E3 CGE Model is an 
economy-wide model of the United States with international trade. The 
model has two key features that distinguish it from most other CGE 
models. First, it combines a detailed description of domestic energy 
supply and demand with a detailed treatment of the US tax system, which 
allows for a careful examination of the interactions between climate 
and fiscal policies. Second, the model combines capital adjustment 
costs and perfect foresight to consider the dynamics of investment and 
disinvestment in response to climate policy. The current iteration of 
the model is benchmarked to 2018 data from the BEA and is carefully 
calibrated to both benchmark year data on energy use by fuel and sector 
from the EIA and EIA's AEO 2020 projections of energy use and GDP.

 Haiku Electricity Sector Model (Karen Palmer, Dallas Burtraw, Maya 
                    Domeshek, Nick Roy)

The Haiku model is a detailed dynamic linear programming model of the 
US electricity sector. The model solves for investment and retirement 
of generation capacity over a 25-year horizon, with annual operation of 
the electricity system represented in eight time-blocks in each of 
three seasons (winter, summer and spring/fall). Electricity market 
equilibria are solved at the state level, allowing for state-level 
representations of environmental policies and regulatory practice, with 
interstate transmission capability calibrated to observed transactions 
in recent data. The model includes representations of existing power 
plants categorized by technology and fuel, and new options for 
investment in both fossil plants and various renewable options that 
capture costs and performance characteristics including resource 
availability by location and time block. Forecasted demand for 
electricity is fixed in any given model solution based on forecasts 
from EIA and is modified across scenarios to reflect the effects of 
policies such as vehicle electrification or increased investment in 
energy efficiency. The model solves for generation by model plant, 
costs and emissions of CO2 based on fuel type and heat rates 
at emitting generators.

Energy Efficiency Model (Kenneth Gillingham, Qinrui Xiahou)

The energy efficiency modeling uses a back-of-the-envelope approach 
that accounts for four tax credits in the CEAA--those that apply to: 
new homes, home improvements, weatherization, and new commercial 
buildings.

For new homes and weatherization, the analysis is conducted at the 
climate zone level. The total energy saving is the weighted sum of the 
product of energy intensity savings, the number of new homes, the 
average floor area and participation rates. Energy intensity savings 
come from DOE's analyses of building codes; participation rates are 
estimated based on the energy efficiency distribution from the 2015 
RECS Survey and existing WAP practice; and other parameters are 
acquired from the U.S. Census Bureau.

For home improvements, the calculations use empirical results on the 
effect of rebate policies on the sales share of Energy Star appliances. 
Along with efficiency improvement and sales data from the Energy Star 
website, the total energy saving is the sum of efficiency gains 
deriving from additional sales over major heating and cooling systems.

For commercial buildings, the parameters are collected and calibrated 
for each building type. The total energy saving aggregates the 
participation rates estimated based on the energy efficiency 
distribution from the 2012 CBECS Survey, the energy intensity savings 
from DOE's estimations, and the number of buildings and average floor 
area forecasted with historical data from EIA.

In all the analyses, it is assumed that savings for each energy type 
(natural gas, petroleum, electricity, etc.) are proportional to their 
shares of residential/commercial energy consumption at the national 
level.

Light-Duty Vehicle Model (Josh Linn)

The transportation model embeds a model of the new vehicle market in a 
representation of the on-road fleet of light-duty passenger vehicles. 
In the model of the new-vehicle market, vehicle manufacturers maximize 
profits by choosing the prices and fuel economy of their vehicles while 
complying with federal fuel economy/GHG standards and the ZEV program. 
Consumers in the model choose a vehicle that maximizes their own 
subjective well-being. All parameters of the model have been estimated 
or calibrated using a unique data set that is derived from survey data 
from approximately 1.5 million car-buying households from 2010-2018. 
For a given set of policy and fuel price assumptions, the model 
characterizes the equilibrium prices, sales, and GHG emissions rates of 
new vehicles by year and demographic group from 2017-2035.

Emissions of the on-road fleet are estimated from a model of the stock 
of light-duty vehicles. The stock evolves over time as new vehicles are 
purchased and older vehicles are scrapped. Utilization of each vehicle 
in the fleet depends on total national vehicle miles traveled (VMT), 
driving preferences of demographic groups, and fuel costs of the 
vehicle relative to other vehicles. For each scenario, key inputs to 
the model include a) projected aggregate VMT and fuel prices from the 
2019 AEO; b) sales and GHG emissions rates of new vehicles as described 
above; and c) scrappage rates. Emissions are calculated for each policy 
scenario and year from 2017-2035.

                                 ______
                                 
                Zero Emission Transportation Association

                             659 C St., SE

                          Washington, DC 20003

                            (p) 703-328-8016

                       https://www.zeta2030.org/

May 11, 2021

The Honorable Ron Wyden
Chairman
U.S. Senate
Committee on Finance
Washington, DC 20510

The Honorable Mike Crapo
Ranking Member
U.S. Senate
Committee on Finance
Washington, DC 20510

Chairman Wyden, Ranking Member Crapo, and honorable members of the 
Committee, thank you for holding this hearing on these important issues 
and for providing the opportunity to provide this statement for the 
record.

The Zero Emission Transportation Association (ZETA) is a public 
interest non-profit of 55 member companies advocating for 100% electric 
vehicle (EV) sales by 2030. Our membership spans the entire EV supply 
chain and includes critical materials, charging companies, utilities, 
vehicle manufacturers, and battery recyclers.

We are dedicated to strengthening our nation's domestic EV industry to 
ensure the United States swiftly decarbonizes its transportation sector 
and maintains its edge in an increasingly competitive global auto 
market. At the start of this year, ZETA launched a comprehensive 
federal roadmap to achieve 100% electric vehicle sales by 2030.

ZETA's Roadmap to 2030 articulates the importance of strong incentives 
to electrify the transportation sector, provide benefits to consumers, 
create hundreds of thousands of 21st-century jobs, and drive down 
harmful emissions to improve public health while addressing climate 
change. A number of our recommendations rely on adapting the tax code 
to better serve the American consumer in order to drive domestic 
manufacturing and electrification in a swift and equitable manner.

ZETA views the tax code as the federal government's most powerful tool 
to invest in strong domestic manufacturing and drive deployment of 
electric vehicles. ZETA applauds the creative proposals put forth in 
both Chairman Wyden's Clean Energy for America Act and Ranking Member 
Crapo's Energy Sector Innovation Act that would peg clean energy 
incentives to concrete outcomes like emissions reduction and market 
penetration, rather than arbitrary expiration dates or caps as they 
have been to date.

We support the reforms to the plug-in electric vehicle tax credit and 
new incentives for commercial vehicles in the Clean Energy for America 
Act. While we support the spirit of the Energy Sector Innovation Act, 
especially the focus on the 48C Investment Tax Credit reform, we would 
like to see it include transportation technologies, especially for zero 
emission drivetrains and batteries.

We also support the bipartisan American Jobs in Energy Manufacturing 
Act led by Senators Manchin, Stabenow and Daines, that would 
incentivize domestic manufacturing of advanced energy technologies with 
targeted investment in rural communities across America that have 
suffered from a decline in manufacturing and traditional energy sector 
jobs. The important resources allocated to this fund will provide 
certainty and spur immediate manufacturing investment that otherwise 
may have been put off.

It is fiscally responsible to phase out subsidies for mature 
technologies with nearly 100 percent market saturation and reinvest the 
savings toward emerging sectors with high returns on investment like 
clean energy--which is a category that should include advanced 
batteries and zero-emission vehicles.

We believe that the Clean Energy for America Act, the American Jobs in 
Energy Manufacturing Act, and the Energy Sector Innovation Act can 
complement each other with smart revisions. Together, they can 
accelerate the development of new, domestic clean energy technologies 
from early-stage emergence to commercial deployment. With some 
additional calibration they can begin creating new domestic 
manufacturing jobs and ensure America maintains its edge in this 
increasingly competitive global clean energy race of the 21st century.

Sincerely,

Joe Britton
Executive Director

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