Midterm elections are always a closely watched political event. Despite a series of successes, including passage of the Infrastructure Investment and Jobs Act (IIJA), the CHIPS Act, and the Inflation Reduction Act (IRA), there is no doubt that President Biden and his Democratic Colleagues, who currently control both the House and Senate, faced difficult headwinds coming into the 2022 midterm elections. Historically (since World War II), the President’s party has lost an average of 26 seats in the House and four in the Senate in the mid-term elections. The midterm elections resulted in a Republican-controlled House (222-213) and Democratic-controlled Senate (51-49) with tighter margins than expected in the House.
For the Biden Administration, which thus far has utilized Democratic control of Congress to implement their policy agenda, we will see a clear shift to a regulatory approach. Republican control of the House means that most non-essential pieces of legislation—other than must-pass appropriations and defense bills—will be stuck in limbo. Regarding the President’s climate agenda specifically, we expect several forthcoming rulemakings to address energy and environmental concerns including emissions from power generation, methane waste, PFAS, and vehicle emissions.
What does Republican control of the House mean for the Inflation Reduction Act?
Please see the interview below with Dave Hoppe for his take on the results, but an important point to make upfront is that the Inflation Reduction Act and the policies it creates are SAFE.
While Republicans opposed the legislation throughout the process, there has been no indication from Republican leadership that clean energy provisions within the IRA are being targeted for action next year. It is also important to keep in mind that, even if Republicans made repeal their priority, any legislation that is passed by Congress to undue these policies would be immediately vetoed by President Biden.
Further, it is our strong belief that as the IRA is implemented, and companies begin to make investments and create jobs all over the country, including in red states, the notion of unwinding the law will be deeply unpopular with Republicans and Democrats alike.
Nonetheless, we advise companies and organizations to think proactively about how to build relationships with their Congressional delegations. This is especially important because, while we don’t anticipate a concerted effort to overturn the law, we do expect robust oversight activity by a Republican Congress. This would mean hearings and committee reports that investigate way the Biden Administration implements their clean energy programs. This is especially true of the robust funding made available through the infrastructure law.
Republicans sent a letter to the Biden Administration seeking further information about a recent DOE report which found that battery technology developed by the Pacific Northwest National Laboratory is now being utilized by Chinese companies. While this initiative is not the result of the infrastructure law, it is an example of the type of oversight we expect to see over the next two years.
In setting a strategy for Republican outreach, we work with our clients to develop proactive plans to introduce their companies and organizations, with the goal of building long-term bipartisan champions for their technologies and goals.
Interview with Dave Hoppe
Question: Dave, before we begin, can you tell those who haven’t had the chance to meet you yet, a little bit about your background?
DH: I joined 38 North as a Senior Principal in 2018, after serving as Chief of Staff to House Speaker Paul Ryan (R-WI). This experience capped an almost 30-year career on Capitol Hill where I’ve been fortunate enough to work with some of the most talented members of the party, including serving as Chief of Staff to Senator Trent Lott (R-MS), when he was Senate Majority Leader and Chief of Staff for Senator Jon Kyl (R-AZ). In fact, I am the first person to have served as Chief to a Senate Majority Leader and a House Speaker.
At 38 North, I work with clients to ensure they understand the policy priorities of the Republican Caucus, and how to position them to succeed.
Question: With it looking likely that the Republicans are going to win back the House of Representatives, and quite possibly the Senate as well, can you give our clients a sense of how the party has viewed the climate policies enacted over the last two years?
There is no question that the Republican Caucus has been frustrated by the Democrats approach over the last two years. Not surprisingly, the use of the filibuster to pass the Inflation Reduction Act was a major point of contention since it removed the possibility of finding a bipartisan compromise. Republicans would have preferred legislation that supported an “All of the Above” approach, over legislation that was heavily focused on renewable energy.
Nonetheless, the bipartisan infrastructure law (The Infrastructure Investment and Jobs Act) and the CHIPS Act, were both passed with significant Republican votes, and those policies continue to be deeply supported.
Question: Do you think the Republicans plan to make any of these policies a focal point of their legislative strategy in January?
I do think the Republicans will take a close look at components of the Inflation Reduction Act they feel were misguided. For example, the provisions within the law that allows Medicare to negotiate drug prices and for the expansion of the IRS workforce are at the top of the list.
In terms of the provisions that expand the tax code to incentivize clean energy technologies, I think it is unlikely that Republicans will make moves to repeal or reduce their value. First, such steps would be immediately vetoed by the President, and secondly, we are seeing many of the projects spurred by passage of the law occurring in red states, this complicates the picture for Republicans who may not support the creation of these credits, but now realize the tremendous economic value to their states.
Question: How would you advise our clients to maneuver in this new era of divided government?
Engagement is key. I strongly encourage our clients to spend time building relationships with Republicans, speaking to them frankly about their business and vision. While some are skeptical about new technologies and their ability to overtake and replace fossil energy, we have seen that through relationship building, Republicans can become some of our clients’ strongest allies. For example, Senator Susan Collins (R-ME) was integral in the passage of the Storage Investment Tax Credit and the Better Energy Storage Technology Act (BEST Act). Her support and advocacy for these bills emerged from a dedicated effort by key stakeholders in the storage industry who cultivated a relationship with the Senator and her staff over time.
While the election results do not impair the new clean energy policies we support, they do provide an opportunity for companies and organizations to expand their outreach. The important policies created over the last two years will be deeply impactful to the growth of the clean energy sector and we are optimistic about what lies ahead.