Scheduled to leave town at the end of the week for a two week recess, Congress will focus its work this upcoming week on clearing a continuing resolution that will fund the government beyond the current FY 2013 Continuing Resolution (CR; 112-175) set to expire on March 27, 2013. The Senate last week was unable to clear the measure (HR 933), which includes five appropriations bills and a CR. Before passage of the bill early this week, Senate leadership must craft a strategy to address the close to 100 filed amendments on the bill. House leadership has indicated its willingness to take up the measure later in the week, assuming it does not exceed the $984 billion discretionary spending level and also excludes any controversial legislative riders. In other budget related news, the President, in a sign of proactive and renewed engagement with Capitol Hill and desirous of obtaining an overall compromise to reduce the budget deficit, spent a significant amount of time meeting with House and Senate lawmakers, from both parties, in various meetings last week.

On the nominee front, while a formal date has not been officially set, Washington sources are talking about a potential confirmation hearing date during the week of April 8, 2013 before the Senate Environment and Public Works Committee for Environmental Protection Agency (EPA) Administrator nominee, Gina McCarthy. While a difficult confirmation process is still expected, Washington insiders anticipate that McCarthy will be confirmed.

Critics and Supporters of Biofuels Mandate Continue In Their Respective Efforts

Among the various amendments being considered on the Senate CR bill is an amendment from Senate Republican Patrick Toomey (PA) that would transfer $60 million from a Department of Defense (DOD) biofuel account to a DOD operation and maintenance account. The monies in the biofuel account result from the National Defense Authorization Act for FY 2013 (P.L. 112-239) compromise, which, allowed the military to purchase biofuels and eliminated a House language prohibition that would have restricted the purchase or procurement of biofuels if these are costlier than petroleum-based fuels. In exchange, the Departments of Defense, Energy and Agriculture were given authority to fund the construction of a biofuels refinery project, albeit with the assurance that each agency would provide matching funds. DOD funds for the project were to be released when the two other agencies matched its funds; USDA’s funding was in place through the Commodity Credit Program, but DOE’s funds have not yet transferred. The Toomey amendment is expected to fail.

Separately, pro-ethanol stakeholders from the American Coalition for Ethanol held their annual visit to Washington this past week, meeting with 120 congressional offices evenly split along both chambers. Their message, also shared with EPA officials focused on refuting arguments from ethanol detractors and emphasizing the viability of the Renewable Fuel Standard (RFS) and the safety of gasoline with 15 percent ethanol, popularly known as E15. The House is still expected to hold hearings on the RFS and potentially move legislation focused on RFS reform.

House and Senate Budget Chairs Release Budget Proposals; Both Include Energy Related Priorities

House Budget Chair Paul Ryan (R-01-WI) and Senate Budget Chair Patty Murray (D-WA) released their respective fiscal year 2014 budget proposals, which serve as markers to guide the rest of the budget process. Ryan’s proposal, which cleared the House Budget Committee without approval of any of the more than 20 Democratic amendments, has a strong pro-energy component. The House measure, which would reduce the deficit by $4.6 trillion over a 10-year period beginning in 2014, calls for increased oil drilling, approval of the Keystone XL pipeline and decreased funding for renewable energy investments, as part of its energy priorities. The Senate budget resolution, which also cleared its respective committee along party lines, would replace sequester cuts with $1.85 trillion in savings over 10 years through a combination of tax revenue increases and spending cuts. In contrast to Ryan’s proposal, it includes increased funding for renewable energy priorities and initiatives to combat climate change. The Senate measure is expected to be debated on the Senate floor this week once the stopgap funding measure clears.

Efforts To Advance and Rebuff Carbon Tax Legislation Continue

It is unlikely that Congress will reach an agreement on carbon tax legislation. Nevertheless, with overall tax reform on the table during the 113th Congress, efforts to promote or reject a carbon tax continue. The co-chairmen of the Bicameral Task Force on Climate Change, Senator Sheldon Whitehouse (D-RI) and Rep. Henry Waxman (D-33-CA), along with Senator Brian Schatz (D-HI) and Rep. Earl Blumenauer (D-03-OR), released a carbon tax discussion draft last week giving a target date of April 12, 2013 for feedback on the measure. Different from the recently released Boxer/Sanders carbon tax bill (S.332), which placed a $20-per-ton fee at the point of emissions, this downstream-focused bill would assess the carbon “fee” on greenhouse gas emissions from sources that currently report more than 50,000 GHG tons annually. Impacted facilities would be required to obtain “carbon pollution permits” for each GHG emission ton, with unlimited permits made available each year, or pay a penalty. Among the questions asked is how the carbon tax revenue should be expended with various options offered.

In other carbon tax related news, House Republican Rep. Scalise (R-01-LA) and 104 other House co-sponsors introduced H.Con. Res. 24 expressing the sense of Congress that a carbon tax is not in the nation’s interest and “would be detrimental to the United States economy.”

Finalization of EPA’s New Power Plant Greenhouse Gas (GHG) Emission Regulation Expected To Be Delayed and May Be Revised

As observed in last week’s Washington Energy Update, the expectation in Washington continues to grow that EPA is unlikely in the short term to finalize the New Source Performance Standard (NSPS) for GHG emissions for electric generating units. Further, there is growing speculation that EPA may re-propose a revised rule. The rule, proposed in April of 2012, set a GHG emission standard based on a combined cycle natural gas unit or a coal-fired unit using carbon capture and storage (CCS) technology, which is currently not commercially available. Observers suggest that delay and a potential revision may be designed to ease the confirmation path for Gina McCarthy, the EPA Administrator nominee, and strengthen the legal and technical gaps in the proposal. Contrary to recent press reports, informed parties believe a revised rule is unlikely to be less restrictive or onerous. By quirk of the Clean Air Act, the NSPS is retroactively effective to the date of proposal, meaning the proposal is already in effect as a practical matter, and providing the Agency further impetus to delay finalizing the rule.

President Obama Announces Energy Security Trust

As expected, Obama announced his vision for an Energy Security Trust that would fund alternative vehicle fuel research financed with offshore drilling revenue consistent with the Administration’s current five-year plan, which eliminates most of the East and West coasts from oil and gas leasing. During the same address, the President provided more details regarding the energy platform he discussed during the January 2013 State of the Union address. In other revenue sharing news, Senator Lisa Murkowski (R-AK), the senior ENR Republican, and Senator Mary Landrieu (D-LA) continue to work on a revenue sharing bill that would, among its various provisions, direct a portion of offshore revenue toward alternative energy technologies.