A Capitol View: January 2023

Welcome to the January edition of A Capitol View

SMI got off to a big start in 2023 with some new additions to propel our growing record of securing federal funding and helping clients elevate their message on Capitol Hill and in the executive branch.

Karlee Popken, a former aide to Sens. Ed Markey and Bill Nelson, brings her expertise in appropriations, taxes, and trade. Samm Gillard is leveraging his deep experience at the Departments of Energy and Defense to advance our expanding clean energy practice.

SMI also rolled out its new strategic communications practice, led by veteran D.C. journalist Bryan Bender, which will assist clients in shaping the conversation in Washington and beyond around their investment and policy priorities.

“SMI is doubling down on our strengths and branching out to boost our unsurpassed success in navigating the federal government to benefit our clients,” said SMI CEO Bill McCann. “They have really great stories to tell, and we are investing in new ways to ensure the right lawmakers and agency officials hear it.”

Now for some fresh insights from one of the capital’s most seasoned government affairs teams:

SMI SPOTLIGHT

We caught up with SMI Vice President Maria Bowie, a veteran Capitol Hill budget wonk, on what to expect in the fiscal 2024 spending wars now that Republicans hold a slim majority in the House of Representatives.

What does your crystal ball tell you?

The political reality of the year ahead is that it will be characterized by razor-thin majorities, deal-making, and deadlines. The uncertainty surrounding those negotiations is likely to be a bumpy ride and touch all legislative priorities.

It will be difficult in the months ahead to define and pass a budget for fiscal 2024. The bipartisan agreements to get legislation over the finish line will be in short supply. Still, they ultimately will need to prevail to produce critical funding for defense, energy, and other federal agencies, as well as pass essential tax extenders and authorization for the agriculture and aviation industry.

What does this mean for your former boss, Rep. Ken Calvert, who chairs the defense funding panel?

As was the case last year, the House Republican majority will be under pressure to increase the Department of Defense’s budget to keep pace with inflation. In addition, the cost of personnel has also skyrocketed, leaving less of the defense budget for military programs and research and development of new projects.”

Chairman Calvert is going to quickly find out that with inflation and personnel costs it is going to eat into the amount they want. The apples-to-apples amount from last year is going to be significantly less.

The political divide also means a greater challenge in expediting arms contracts to Ukraine, which will receive more scrutiny.

What do you see ahead for energy programs?

Also on the agenda will be legislation to strengthen energy infrastructure and invest in energy technology. Congress will debate how much to allocate for research central to building a new wave of clean energy technologies and ensuring domestic energy security for decades to come.

Last year, Congress authorized programs to build on research in the areas of nuclear energy, energy storage, carbon sequestration, and other technologies. But funding was not included. Front of mind will be appropriations to assist key investors in clean energy technologies at different stages of research and commercialization and provide a direct way for the government to scale up American-made energy technologies.

Does that also go for new investments in critical mineral supplies?

The U.S. is overly reliant on foreign critical minerals, which have volatile prices and are often controlled by adversarial countries. Critical minerals are crucial for clean energy and semiconductor technologies.

The Infrastructure Investment and Jobs Act authorized $100 million from FY ‘22 to FY ‘24 for the DOE Critical Minerals Mining and Recycling Grant Program to fund pilot projects that process, recycle, or develop critical minerals.

This program has the potential to impact critical minerals used in a variety of clean energy and semiconductor technologies. Also up for debate will be the level of funding for scaling technologies that is not met by other programs in the IIJA.

SMI CLIENT SPOTLIGHT

The Worcester Polytechnic Institute (WPI) will be highlighting some of its major breakthroughs in sustainable technologies at a Washington event on Feb. 8, featuring Sen. Ed Markey and Rep. Jim McGovern.

With the help of targeted federal investments, WPI is proving out a series of new technologies to help tackle climate change, including turning bamboo, food, and yard waste into biofuels and developing regenerative concrete to dramatically reduce carbon emissions.

More details on the D.C. event here.

CLEAN ENERGY

We are deciphering several unfolding developments that could impact federal energy policy, investments and tax incentives.

EV tax credits: Sen. Joe Manchin, who chairs the Energy and Natural Resources Committee, introduced the American Vehicle Security Act of 2023 to mandate that the requirement for producers to source domestically to be eligible for clean vehicle tax credits be effective retroactively as of Jan. 1.

The background: The tax credit was a major win in last year’s Inflation Reduction Act for supporters of onshoring the clean energy economy and reviving domestic manufacturing. But U.S. allies claim it violates World Trade Organization regulations and some new EV assembly plants who rely on foreign-made components have also spoken out against the requirements.

Manchin’s bill is unlikely to gain much traction but does offer insight into his energy priorities.