Texas Democrats balance oil industry and climate concerns with IRA bill - The Texas Tribune

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WASHINGTON — Texas’ oil and gas Democrats have a balancing act to play.

On one hand, they represent some of the country’s most important hubs for the global oil and gas industry, with significant swaths of their constituencies employed in the sector. On the other, they belong to a party that has put combating climate change at the forefront of its agenda.

The handful of Texas Democrats includes members of the powerful House Energy and Commerce Committee and representatives from some of the top oil producing, refining and transporting regions of the state. They continue a tradition of speaking out in defense of their home state’s oil and gas sector even when it puts them at odds with their own party orthodoxy.

It has been a tension on display as Democratic leadership hemmed and hawed for the past year on a massive legislative package that would be the biggest investment in combating climate change in the nation’s history.

The landmark legislation is expected to hit the Senate floor this weekend and then make its way to the House later next week, where Texas Democrats could play a critical role in its success or failure. Not all Texas Democrats in the House are ready to commit, and every vote counts in such a thinly divided House. (Five defections are enough to tank a bill in the lower chamber.)

The bill, dubbed the Inflation Reduction Act, offers a suite of tax incentives to encourage more wind, solar and other clean energy technology and to make sure parts for those sectors are manufactured in the United States. It also includes tax benefits to help consumers make their homes more energy efficient and switch to electric vehicles. Democrats predict it can reduce the nation’s carbon emissions by 40% by 2030.

“It”s fair to say that this is a game changer,” said Tom Buttgenbach, CEO of 8minute Solar Energy, which has solar projects throughout Texas.

It’s the latest iteration of President Joe Biden’s Build Back Better agenda, which died last year over the objections of West Virginia Sen. Joe Manchin, another Democrat known for breaking with the party on energy issues. Manchin and Senate Majority Leader Chuck Schumer, D-N.Y., stunned Washington and elated climate activists late last month when they revived the legislation as the Inflation Reduction Act, a compromise that also expands health care and corporate taxes.

In addition to incentives for a transition to clean energy, the bill also includes a controversial fee mechanism that would charge fossil fuel companies for their methane emissions. Texas’ oil and gas operations are responsible for a massive share of the country’s methane, particularly in the Permian Basin, which emits 1.4 million metric tons of the gas per year, according to an analysis published by the Environmental Defense Fund. Methane is more than 25 times more potent than carbon at warming the atmosphere.

Several Texas Democrats raised concerns last year with early drafts of the methane fee provision, saying it could harm the state’s oil and gas industry just as consumer prices spike and global energy markets face volatility over the war in Ukraine. And Reps. Henry Cuellar, D-Laredo, and Vicente Gonzalez, D-McAllen, both of whom represent the oil producing regions of South Texas, are still keeping their cards close to the chest on the final bill.

“My priority is ensuring this bill would not raise energy prices or hinder American energy jobs at such a critical time,” Gonzalez said in a statement to The Texas Tribune. “These are the people and values I represent and will continue to fight for.”

Cuellar’s office also demurred when asked if he plans to support the bill.

“The Congressman will be reviewing the bill once the final version comes over to the House from the Senate,” his office said in a statement.

Other vocal members close with the industry — U.S. Reps. Lizzie Fletcher of Houston, Marc Veasey of Fort Worth and Colin Allred of Dallas — said they intend to vote for the bill.

But that support comes as they’ve advocated against previous iterations of the methane fee and worked to make it more in line with what the industry felt was realistic.

The oil and gas industry initially criticized the methane fee as it appeared in the Build Back Better bill as heaping undue financial burden on the sector. Fletcher and Veasey, who both sit on the influential Energy and Commerce Committee, wrote to party leaders last September echoing industry complaints.

“The tax changes being proposed will further cut domestic production and endanger domestic refining capacity while increasing demand from the Organization of the Petroleum Exporting Countries,” the Democrats wrote to House Democratic leadership on Sept. 13. Cuellar and Gonzalez also signed the letter, along with Allred; Rep. Sylvia Garcia, D-Houston; and then- Rep. Filemon Vela, D-Brownsville.

Several of the biggest oil and gas industry groups, including the American Gas Association and the Independent Petroleum Association of America, sent a similar letter to congressional leadership about the methane fee the same day.

Garcia’s office did not respond to the Tribune’s query on whether she would support the final legislation, but she voted for the first House version and has indicated support for measures bringing down fuel and health care costs in public statements. Rep. Sheila Jackson Lee, another Houston Democrat who has been a vocal advocate for the state’s oil and gas sector, wrote on Twitter that she would support the bill, citing its health care benefits, particularly for the uninsured.

Cuellar ended up joining the rest of the Texas Democrats in voting for the first iteration of the Build Back Better bill, which passed the House in November on party lines. But he never reneged on his misgivings about the methane fee and said at the time he would try to get the Senate to ax it.

“The proposed methane fee will affect energy independence, increase gas prices, and hurt job opportunities,” Cuellar tweeted in December. “We must support climate friendly policies while protecting jobs.”

Cuellar and Gonzalez both face competitive races in South Texas, where Republicans are tapping into the region’s social conservatism, strong energy focus and border proximity to make headways. U.S. Rep. Mayra Flores, R-Los Indios, flipped the 34th Congressional District in a special election this summer after an influx of GOP cash. And Republicans have long made the methane fee out to be a punitive tax on the country’s oil and gas industry, which Cuellar frequently points out accounts for over 40,000 jobs in his district alone.

But not all oil and gas Democrats are in the same boat. While Cuellar’s and Gonzalez’s districts include numerous smaller oil and gas companies and independent drilling operations, Fletcher’s business-focused Houston district houses corporate heads of multinational oil majors, and she often brings global economic perspectives to her own party’s discussions on energy policy.

During an April House Energy and Commerce hearing with the top executives of the country’s biggest oil firms, Fletcher pushed back on the party-line back-and-forth between Democrats, who accused oil firms of greedily inflating prices, and Republicans, who accused the Biden administration of actively killing oil production.

“I am so disappointed that much of the questioning today has centered around scoring political points and blaming others rather than taking a serious look at the challenges we face and their drivers, as well as how we can actually address them,” Fletcher said during the hearing.

When the House voted in May on a bill to combat gasoline price-gouging by oil companies and lower costs for consumers, Cuellar and Gonzalez voted for the bill while Fletcher was one of only four Democrats to vote against it. Major industry groups rejected the premise of the bill, saying oil companies were subject to complex global market forces in setting prices rather than maliciously milking Americans of extra cents per gallon — a point Fletcher reiterated in justifying her vote.

“I worked really constructively with [fellow Democrats] to ensure that our knowledge and experience from here in Texas is reflected in the policies to reduce emissions and achieve climate goals,” Fletcher said in an interview. “And that the energy provisions that we were talking about in terms of this policy were workable with how the energy industry actually operates.”

Texas Democrats often find themselves in an educating role on how the energy industry works, Allred said.

“I have literally been a part of my clutches, if you will, on the House floor, where like, Lizzie and I, maybe Henry, are explaining to our colleagues why certain things are actually good that are happening in the oil and gas sector or why it’s not as simple as sort of national talking points might seem,” Allred said.

Fletcher’s and Veasey’s seats on the Energy and Commerce Committee also gave them major roles in editing the methane fee to make it more fair for individual drilling companies and creating the version that ended up in the final House bill text passed by the lower chamber last year.

The newest iteration of the bill that the Senate takes on this weekend includes even further changes to the methane fee to win over fossil fuel interests, including doubling the amount of grant money available for smaller drilling operations in places like South Texas to meet emissions targets. It also offers an opt-out in case the Environmental Protection Agency creates new methane guidelines for the industry after several of the fee’s critics said it would be redundant with pending EPA rules.

Sen. Tom Carper, D-Delaware, one of the chief architects of the methane fee, negotiated with Manchin for months after the initial Build Back Better package collapsed at the behest of Biden and Schumer to craft the version palatable to the West Virginian, a Senate Democratic aide said.

“When designing the methane emissions reduction program, we did so in a way that would reward those in the oil and gas industry that embrace this technology and take early action and then, over time, charge those that don’t,” Carper said in a statement. “The program has a little-to-zero impact on consumers and will reduce the amount of domestic energy wasted every year.”

Those changes won greater support from industry, with the Interstate Natural Gas Association of America calling the changes “considerable improvements” to the House version. Fletcher, who is in regular contact with some of the biggest oil and gas interest groups, told the Tribune that the industry appears largely on board with the new methane fee.

Gonzalez also said in his statement to the Tribune that there are “certainly improvements to the Methane Fee and the overall effect this bill has on the energy industry” but added that “there are still some concerning provisions.” James Rivera, a spokesperson for Gonzalez, didn’t go into what those provisions were but said, “We are closely following what is happening in the Senate. In the end, we just want to make sure this helps South Texans.”

Still, Allred and Veasey said they were confident their fellow Texas Democrats would support the bill, with Veasey saying there was “something there for everyone.” The bill mandates oil and gas lease sales in federal waters, which is a major win for the industry after months of complaints that the administration was dragging its feet on leasing new tracts. And beyond energy, the bill also expands the Affordable Care Act program for three years and lowers prescription drug prices.

“At the end of the day, it’s going to be something that we can all be proud of, and it’s something that President Biden made a big part of his agenda,” Veasey said when asked if he was worried about any defections in his caucus. “So I have no concerns at all in that area.”

Disclosure: The Environmental Defense Fund has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.

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