What's Next for Energy and Transport Policy?

Speaker 1:
Welcome to TD Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.
John Miller:
Hello, my name's John Miller. I cover ESG and sustainability policy here at TD Cowen's Washington Research Group. Today I'm going to be holding two interviews to discuss the political framework and outlook as it impacts climate, clean energy, transport, and infrastructure post the 2024 election cycle. Really excited that we'll have two interviews. First, I'll sit down and speak with Alex McDonough. Alex is a partner with Pioneer Public Affairs and prior to his time there, he was the Vice President of policy at Sun Run. And before that, spent more than 11 years in the US Senate working in Harry Reid's office.
After speaking with Alex, I'll then connect with Kellie Donnely. Kelly is an Executive Vice President of General Counsel at Lot 16. Before her time at Lot 16, she spent more than 20 years working in the US Senate as Chief Republican counsel for the Senate Energy and National Resources Committee, along with time spent at Senate Environment and Public Works and the US Department of the Interior.
All right, Alex, so we're through the November 2024 election cycle. What should we be looking for from the Biden administration as we now entered this lame duck end of year 2024 period?
Alex McDonough:
Yeah, so the Biden administration has been getting prepared one way or another to do a round of finalizing clean energy tax credit, rules and guidance in particular, and getting grant money out the door for Inflation Reduction Act and IIJA programs. So a lot of what they would've seen as end of year housekeeping, keeping the ball moving on these big major statutory programs. Now with an incoming Trump administration and losing trifecta government, there is substantially more pressure on finalizing some of the biggest items that will hopefully kind of form in the long term their legacy, namely the big clean energy tax credits for wind solar batteries, the deployment, the investment tax credit and production tax credit, the tech neutral, transition to tech neutral tax credits. They're going to want to finalize those rules. There are a slew of other tax credits that were proposed rules that they'll try to lock in and make it as difficult as possible for the incoming administration to make any changes to those.
Additionally, the pressure to get grant money out the door, even obligated funding, moving that from the obligated funding column to into the awardees bank accounts, especially looking towards programs from the Environmental Protection Agency, the Greenhouse Gas Reduction Fund, the kind of so-called Green Bank and Solar for All programs. They're going to be really working to make sure that those dollars are in grantees hands.
I'd also look to the Department of Energy if you are the benchmark for, even though the Trump campaign disavowed Project 2025, looking at all the proposed changes to the Department of Energy, restructuring it organizationally, getting rid of offices like the Grid Deployment Office, which received significant programmatic funding for transmission grid programs. I think they're going to be looking very hard at what they can do over the next couple of months to get the funding out the door and lock in as much progress as they can.
John Miller:
So when we were speaking to the Clean Energy Tax Credits under the Inflation Reduction Act, you were mentioning 48E and 45Y, the Clean Electricity, ITC and PTC, which stands for Investment Tax Credit and Production Tax Credit. The other target is really around 45V, clean hydrogen. Do you see that as a end-of-year target to move forward? And do we still expect to see the Biden Administration's three-pillar process even though we do anticipate Republicans would probably pretty quickly move to make changes there?
Alex McDonough:
Yeah, I think so. I think that the Biden Administration will move to finalize 45V. They put a lot of work and dealt with a lot of controversy along the way in order to get to that three-pillar structure. So I think that they probably will move to finalize 45V. This raises another risk to finalizing these tax credits, and I don't think it will or these rules, I don't think it will necessarily inhibit them, but the Congressional Review Act, anything finalized roughly after this August is susceptible to a Congressional Review Act vote in Congress in which Congress with a majority vote, can nullify a recently finalized rule. And the statute, the Congressional Review Act statute allows rules finalized roughly towards the end of the previous Congress will roll over to the next Congress. And so we expect to see a round of final Biden administration rules challenged under the CRA. It has never happened before that a tax implementation rule has been challenged by the CRA successfully. And so it'll be kind of on the Congressional Republicans in the Trump Administration to decide if they start. Why raise that here in the context of 45V is that that would be their first opportunity to nullify the 45V three-pillars rule and consider an alternative structure.
John Miller:
So I'm interested in your thoughts on how climate, clean energy, clean transport played into the 2025 election cycle and really where national level Democrats, Democrats in DC go from here? What's the message we should be looking for in 2025 as they're a minority in both chambers of Congress?
Alex McDonough:
There's been a lot of commentary, hand-wringing about Democrats' ability to effectively message their gains, the progress that they made through investments under the IRA, the tax incentives. Some point to the fact that a lot of those funds haven't been deployed. Some point to the fact that industry didn't necessarily make their jobs easier by doing a lot of ribbon cuttings or inviting them. I'm not going to opine on whether one or the other is correct, but what I do believe is that Democrats still will want to take credit for these investments and the projects and when new factories are launched, they're factories in many, many states. A lot of them are in red states, but battery manufacturing facilities, fully integrated solar supply chain coming out of Georgia in the near future in which they're producing not just the modules, but also the cells, and the ingots and the wafers.
We're seeing a lot of the components in the supply chain for various clean energy products being manufactured in the United States right now. And I do think that the Democrats going forward will want to more effectively message around that, but I don't think they're going to walk away from it. I would expect, and there's already a lot of work on this to talk about address the new load growth from AI and data centers and new manufacturing, which is energy intensive, how vital it is that we bring new capacity on the grid and how we're not able to interconnect it fast enough, driving a lot of the demand for permitting reform. I would expect to see a continuation of the messaging that these laws are delivering, these incentives are delivering and standing by them. People always like to talk about jobs, but I do think that it'll really come down to affordability, resilience, reliability, and keeping up with growing demand.
John Miller:
You have an idea of maybe state level Democrats to watch. How will they step into this slight void here in DC and what type of policies will they be discussing and pushing forward as party priorities into 2026?
Alex McDonough:
Yeah, that's a good question. I mean, in the run-up to President Biden endorsing VP Harris, there was speculation looking at what governors are the most likely to be a contender to become nominated for the presidential campaign? You have Whitmer out there, you had Pritzker, you had a lot of talent sitting in those governor seats, and they're not going to be sitting idly by watching what Republicans do, a Republican trifecta government in DC kind of taking back programs that they had really built their own agendas around in some cases, Whitmer in Michigan really embraced clean energy as a way to grow the economy and personally lent herself her office into capturing clean energy programs, clean energy incentives, loans, the whole suite of things offered by the EPA, DOE and Treasury. And I would imagine that we see them kind of grab the mantle here and one, look for opportunities to show national leadership are the Democratic Party is going to be looking for its national leaders, its big voices and who's next, and people who can take the recent wins, turn the messaging around, make it effective, and capitalize on that and build political power around that. I think those folks will get traction. So yeah, I would see that coming out of the states in a big way.
John Miller:
Perfect. Thank you Alex. Always appreciate the insights. Great insights from Alex McDonough Pioneer Public Affairs.
Alex McDonough:
Thank you.
John Miller:
Wrapping up with the 2025 outlook for the Biden Administration and Dems going forward. We're going to flip over now to the Republican perspective with a focus on Donald Trump and Congress in 2025.
All right, so Kelly, what should we really be looking for here in the first 100 days of the Trump Administration? This is the key question over the past few weeks post-election, what should we be looking for? What's kind of noise, what's going to be real?
Kellie Donnely:
Well, thanks, John for the first 100 days of the Trump Administration should be a wild ride, I think. So buckle up. Well, what I think what he's going to do initially is have some executive orders on day one, not unlike President Biden did when he first came in, but the first executive order I think will be on immigration will be try to address the border. I also think you could see an executive order or possibly an emergency declaration on trade and have some tariffs imposed unilaterally by this administration. Some other things I would expect to see in the first 100 days would be the president withdrawing from the Paris Agreement. Importantly, it is not the treaty, so he can do that unilaterally as well. I also think he will lift President Biden's moratorium on LNG export licenses. And then of course the main thing he really needs to do in the first 100 days is to stand up his government. We've seen a lot of nominations already or potential nominations in the press, and one thing the President is doing is asking the folks who are running for Senate Majority Leader right now to allow the use of recess appointments to try to move things along even further. So I think there'll be a lot of activity in the first 100 days of this incoming administration.
John Miller:
We've heard a lot from President-elect Trump about the largest deregulatory program in the history of the United States. Do you mind speaking to that a little bit? Do you think that's a day one, week one kickoff? And what are the process and tools he'd have?
Kellie Donnely:
There are a lot of tools available to this incoming administration on a regulatory front. On day one, I do think the President will issue an executive order very much like what Biden did in his first day, and that would be directing the agencies to hold all the regulations that they're working on right now that are in place in advance and asking all the agencies to take a look at all the work that they are doing on that. And so for existing regulations, what the administration could do is promulgate new ones. They could revise or they could just jettison them and start fresh. For instance, the NEPA regulations, this is something that Trump 1.0 did NEPA regulations, the Biden Administration redid them. And so I think what Trump is going to come in and do is to do those NEPA regulations again, other things that he can do for any regulations that have not yet been published in the Federal Register that may be perhaps pending at the Federal Register that's easy enough to claw back.
For regulations that are still in litigation, for instance, EPA's Clean Power Plan 2.0, the President could ask the courts to hold those cases in advance and ask for the regulations to be remanded to the agency and they could redo them that way or they could allow a bad lower court decision to stand and just not defend the Biden Administration's regulations.
And then the other thing I think people need to be aware of is the litigation front. A lot of these regulations are already in litigation, but we are now in a post-Chevron world. And so I think a lot of those regulations are going to be subject to defeat in litigation because you don't have the congressional backing that is now going to be required.
John Miller:
So a lot of tools, a lot of tools to address the regulatory state and allows-
Kellie Donnely:
John, we didn't even talk about the Congressional Review Act and that is also something that is going to be available to this President because the House has now been called for the Republicans. And so this is a red sweep. A Congressional Review Act typically only works when one party is in control. And this will allow the Trump Administration to do a look back on the Biden regulations that were finalized in the last 60 session days of the 118th Congress. And the Congressional Research Service is now saying that that date is about August 1st. So things like the FERC transmission rule makings and the EPA rule makings would not be part of a CRA look back, but things like Basel III or the Federal Acquisition Regulations or any of the IRA related guidance and regulations that have not been finalized by the end of this Congress or finalized within that 60 day session. The new 119th Congress would be able to claw those back and it's a simple majority vote. They'll do disapproval resolution and then it's just like enacting something into the law President would have to sign it. But once something is successful under the CRA, it's a big tool because the effect is then that agency is prohibited from promulgating anything substantially similar in the future. So it's a very big tool and it's one that the first Trump Administration has used the most out of any presidential administration in history.
John Miller:
So they have a history of moving through this process. So you did bring up and mentioned the Republican sweep, a Republican House, Republican Senate, and President elect Trump coming into the White House. So that opens the door to the biggest question we've really have been receiving into 2025 and the reconciliation process. So it's unfortunately a two-part question for you. Maybe you could help us out just rekindle that part of our brain about how reconciliation works and Republicans, what they need to do on the front end and then where you see that piece of legislation going really for the climate and energy components of the Inflation Reduction Act?
Kellie Donnely:
Sure. So reconciliation is another tool that really only works when you have unified government. And this is, it's a streamlined measure, particularly in the Senate where you only need a majority of votes. So you don't need a 60 vote filibuster proof threshold, and these need to be budget related matters. And so for instance, the Inflation Reduction Act, the reason it didn't get any Republican votes last Congress was because it was done by budget reconciliation, it allows the majority party to bypass the minority party. That's what it's designed to do. That's why it's expedited. There are some rules associated with this. Again, it needs to be just budget related. You've got something called the Bird Rule that takes that extraneous material so it can get complicated, but tax provisions fit very neatly into reconciliation. And not only was IRA done through the reconciliation process, but so was the Tax Cut and Jobs Act in the first Trump administration.
So reconciliation is absolutely back on the table with a Republican sweep, but it's a multi-step process. It's really only expedited until you're ready to go on a Senate floor. But what Congress is going to have to do first is pass a budget, and with that budget we'll have reconciliation instructions to various committees of how much money they have to raise or how much money that they can spend. Those are then reported out by individual that their pieces are reported out by individual committees to the budget committee that then packages it up and then sends it to either the House floor or the Senate floor. And then again, it's just like how a bill becomes a law, but simple majority votes are needed bypassing the 60 vote requirement in the Senate. And again, it's been used successfully in untaxed before. I think it will absolutely be on the table for the expiration of the Tax Cut and Jobs Act, which is expiring at the end of 2025.
And that's where it gets tricky for the IRA because even though no Republicans voted for it last Congress, we have seen where the investments have really gone to red states and red districts to Republican controlled states and districts. Some members in particular have seen the benefit of that and are not on board with scrapping the IRA altogether. And you've seen Speaker Johnson saying things like, "We should take a scalpel and not a sledgehammer to the IRA."
So I think it can be surgical, but there are going to be some credits that are going to be potentially on the chopping block, particularly as payfors for what the Republicans are going to want to do with the Tax Cut and Jobs Act. And so the IRA tax credits that I think could be in jeopardy are the EV tax credits certainly, but also the tech neutral tax credits, which by the way, that NOPA, those regulations had not yet been finalized. Tech neutral is transitioning in 2025. The issue there is no timeline, there's no deadline on that. So it's very open-ended because it is emissions based, and I could see the Republicans maybe not repealing the tech neutral tax credits, but putting an end date on it and getting some pay for monies that way, it's going to be a big tax year and it was going to be a big tax year in the 119th Congress regardless of who won. But now with a full sweep, that tax package is going to be accomplished through reconciliation.
John Miller:
So I fully recognize this is not entirely a fair question, but asking you now with what you know now and your outlook at the moment, what kind of timelines are you seeing for this Republican led reconciliation process? Is it really the April timeframe that we're hearing from some leadership or is it going to take a little bit longer in your perspective?
Kellie Donnely:
Reconciliation always takes longer than people want it to, but the necessary first step is passing a budget resolution. And to do that, you're going to need to have fiscal '25 appropriations set. And right now we don't have those that done. We're on a continuing resolution through the end of December, December 20th, and now the question will be for this congress, this lame duck Congress of whether or not it's going to be a CR, continuing resolution into the first quarter or next year, or whether it'll be an omnibus appropriations measure that'll take care of the entire fiscal year.
There is a tool of thought that says an Omni would be better for Republicans because it would clear the deck and let them start with a budget resolution as soon as they come in, in the 119th Congress and allowing them to start reconciliation. And under that scenario, April was certainly possible. That would be pretty quick, but it's possible. But what I'm starting to hear is that no, that really the Omni is not going to happen because the Republicans, particularly Speaker Johnson, who does have a speaker's race, I mean it's going to be small margins in the house, and he does not want to have an Omni that could act as a Christmas tree as we've seen in previous years, that gives priorities to the Democrats, or to Biden, or to Schumer because that could hurt him in his speaker's race. So I'm thinking that we're going to have a CR until March, and that's just going to delay reconciliation. Reconciliation could certainly get done in the first session, the first year of the Trump administration, but under that scenario, I think April is very difficult to reach.
John Miller:
Kellie, amazing insights as always, really appreciate your time. We appreciate you addressing those questions and giving your views on timelines.
Kellie Donnely:
Thank you, John.
John Miller:
Thanks everyone for listening today's episode. Until next time.
Speaker 1:
Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.

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