Twelve years ago, a hurricane barreled through the Houston area and opened the door for companies near the Texas Gulf Coast to use a little-known financial instrument to help rebuild after the disaster.

Back then, a New Jersey-based firm called NRG Energy took advantage of this tax-free tool, called private-activity bonds (PABs), to build the nation’s first large-scale “clean coal” facility just outside Houston.

The hurricane that spurred that project was Ike in 2008. NRG Energy’s Petra Nova plant, which captures carbon dioxide from coal combustion and pumps the gas to nearby oil fields to help recover petroleum from underground, became operational in January 2017.

Seven months after that, an even more destructive storm, Hurricane Harvey, made landfall near Houston. 

After Harvey and two other major hurricanes swept through the Caribbean and Gulf, carbon-capture advocates -- as well as lobbyists from a broad swath of other industries -- called on Congress to revive the use of PABs in Houston and other hurricane-ravaged areas. At least two disaster-relief bills are pending before the House that would activate PABs for disaster zones following the severe 2017 hurricane and wildfire seasons.

Yet House lawmakers are poised to undermine reviving the financial tool before the effort gains traction in Congress. Among the ways House Republicans decided to change the tax code in the tax overhaul bill passed in November was to scrap the use of PABs for the construction of everything from highways to seaports.

So what? In the balance hangs millions of dollars in tax savings if PABs were to disappear for works of infrastructure that President Trump says he supports —  including "clean coal" projects many emissions counters say are necessary for forestalling the worst effects of climate change.

PABs are an old-school tool. Municipal bonds are issued by public institutions (think a municipality) for a public purpose (that city’s water treatment plant). A private-activity bond, in contrast, lets private firms raise money cheaply for a project that serves a public purpose, such as low-income housing.

When in the 1970s the Clean Air Act, the nation’s landmark air pollution law, demanded that power plants and other polluters serve a public purpose, too — that is, cut emissions of smog-forming pollutants — they often turned to PABs to cheaply finance air pollution measures during the 1970s and 1980s.

“Private power plants faced big obligations under the Clean Air Act,” said Dan Reicher, executive director of the Steyer-Taylor Center for Energy Policy and Finance at Stanford, who has helped draft recent carbon-capture proposal in Congress. “So they pushed to get access to this very attractive financing tool.”

But in 1986, as smog in Los Angeles and other U.S. cities lessened, President Ronald Reagan and Congress narrowed the use of PABs during the last major rewrite of the tax code.

The 1986 tax restructuring act still allowed states and municipalities to issue PABs for carbon-capture projects under special circumstances — such as following disasters. NRG Energy used such a bond, in addition to $190 million in grants from the Energy Department, to pay for the “clean coal” plant in Thompsons, Tex.

Now, some other carbon-capture developers are eager to repeat NRG’s success.

They include Durham, N.C.-based Net Power, which is interested in building a commercial natural gas-fired plant that, if it works as designed, would produce 300 megawatts of electricity while capturing all the carbon dioxide it produces. Net Power is putting the finishing touches on a demonstration plant in La Porte, Tex., along the Gulf Coast.

PABs, Net Power chief executive Bill Brown said in an email, “have helped rebuild communities in the face of horrible devastation. They spur investment in new valuable infrastructure and create high value employment opportunities, all while helping to accelerate the development of leading-edge industries.”

But not every project using the nascent technology shares NRG’s success. In June, Southern suspended a flagship power plant in Mississippi meant to showcase “clean coal” after running $4 billion over budget and three years behind schedule.

As the law is written, firms such as Brown’s have access to the bonds only after a disaster. But starting in 2015, a bipartisan cadre in Congress, led by Sen. Rob Portman (R-Ohio) and Michael Bennet (D-Colo.), introduced legislation granting carbon-capture projects access to PABs, with or without a disaster being designated.

“The expanded use of private-activity bonds as a way to rebuild after hurricanes has been used effectively in the past,” Portman said in October. “However, I believe that the entire country should be eligible for private activity bonds to encourage carbon capture and sequestration projects on power plants and manufacturing plants because it’s a win-win for jobs and the environment.”

Despite environmentalists’ distaste for any measure meant to prop up fossil fuels, some Democrats have embraced carbon capture as one of the few areas of agreement with Republicans on energy policy since the GOP took control of Congress. In recent years, Senate Democrats have sponsored tax credits for carbon-capture projects and, like Bennet, pushed for better access to PABs for businesses trying to sequester carbon dioxide.

“There's resistance on both sides,” Bennet said in October. “My argument to them would be, as long as we are burning molecules of carbon, we should be making it more likely that those molecules are captured and sequestered.”

Although the House bill eliminates PABs, the Senate tax bill would leave them intact -- leaving them one of the many issues to be resolved in conference.

Meanwhile, a group of 21 House Republicans, led by Rep. Randy Hultgren (R-Ill.), urged GOP leaders to restore PABs in the tax bill's final version.

“Private activity bonds finance exactly the sorts of public private partnerships of which we need more of,” they wrote last week to GOP leadership, “not less.”

Correction: NRG Energy used private-activity bonds following Hurricane Ike, not Hurricane Rita as the story originally stated.


--Monuments update: A pair of Senate Democrats want President Trump to provide further details on why he will remove protections for U.S. Forest Service land from the Bears Ears National Monument, as The Post's Juliet Eilperin reports. Trump will visit Utah today to announce his plans to shrink Bears Ears between 77 and 90 percent, as well as downsize the Grand-Staircase Escalante monument to half its size.

“In advance of any decision to attempt to modify the boundaries of national monuments, we write to seek specific details regarding your plans for treatment of certain acres within five national monuments that are managed by the U.S. Department of Agriculture’s Forest Service,” Sens. Debbie Stabenow (Mich.), the top Democrat on the Senate Agriculture Committee, and Michael Bennet (Colo.) wrote in a Friday letter.

The letter includes requests for information about whether Trump plans to recommend removal of the Forest Service acres from the “current boundary of Bears Ears,” whether he will recommend removal of Forest Service acres from the any of the four national monuments under review in California, and why he plans to recommend removal of Forest Service acres where the USDA did not recommend removal.

-- Republicans are as close as ever to allowing oil and gas drilling in the Arctic National Wildlife Refuge. Senate Republicans passed a tax overhaul package early Saturday that included a long-sought provision from Sen. Lisa Murkowski (R-Alaska) to allow drilling.

“This small package offers a tremendous opportunity for Alaska, for the Gulf Coast, and for all of our nation,” Murkowski (R-Alaska) said before the overnight vote, according to the Washington Examiner

Meanwhile, major conservation groups did not hold back their ire. “Opening the Arctic to drilling as part of this tax plan is simply shameful. The Arctic Refuge isn’t a bank—drilling there won’t pay for the tax cuts the Senate just passed,” National Audubon Society president and chief executive David Yarnold said in a Saturday statement.

What's next? The House could simply pass the Senate bill, which would be sent to Trump's desk for his signature. Or differences between the House and Senate versions of the bill will be hammered out in conference committee (something GOP leaders have promised). Warning sign: A dozen House Republicans wrote a letter to objecting to the to the plan, however. “Potential efforts like this by the Administration could threaten imperiled species and fragile habitat," they wrote. 

-- An “absence of American leadership:” Speaking at an event in Paris over the weekend, former President Barack Obama took a veiled shot at President Trump over his decision to withdraw from the Paris climate agreement.

“I grant you that at the moment we have a temporary absence of American leadership on the issue,” Obama said at the invitation-only event, per Reuters.

He added that “you're seeing American companies and states and cities continuing to work" to meet the standards set by the accord. 

-- The corn wars never end: The EPA announced its decision on final biofuel volumes last week, but representatives of the oil refining industry are set to continue lobbying Trump on the issue. 

The president has agreed to meet with a group of senators, including Ted Cruz (R-Tex.), Reuters reports, setting "the stage for negotiations over possible legislation to overhaul" the renewable fuel standard. Another Texas Republican, Gov. Greg Abbott (R), sent a letter to the EPA requesting a waiver from the RFS mandate.

-- The latest on Puerto Rico: Vivian Graubard and Emma Coleman break down in a Politico op-ed why having a single vendor handle relief for Puerto Rico is a “big mistake”  following Hurricane Maria. The day before Thanksgiving, the Federal Emergency Management Agency asked for public comment on granting a single contract for all shipping, transportation, logistics, and delivery of disaster relief to Puerto Rico and the U.S. Virgin Islands for a year. FEMA gave the public six days to comment on the proposal.

Coleman and Graubard write: “Behind this rushed and opaque process is an idea just as flawed: hiring a single vendor to take on such a monolithic task. The idea could prove disastrous because one company rarely possesses all the skills necessary to complete every aspect of the rebuild, especially the cultural and contextual understanding to get locals what they need. It also represents a missed opportunity to use the rebuilding process to help the Puerto Rican economy. In the post-disaster rebuild, the federal government has a rare opportunity to do things differently, and to turn the recovery into an economic opportunity in itself, by bringing in a diverse group of Puerto Rican companies to do the work.”

The price tags: up to $65 billion for coal and $4.8 billion for nuclear.
In the years leading up to Hurricane Harvey, a wrinkle in the federal flood-mapping system helped a company build homes in an at-risk Houston suburb.
The New York Times

-- Rising seas threaten thousands of historical landmarks, according to a new study, which could be submerged in water this century. There are 13,000 archaeological and historical sites on the Atlantic and Gulf coasts that could be threatened, writes Charles Q. Choi for Live Science. He continued: “The study found that only relatively minor increases in sea level, on the order of three to 10 feet, were necessary to threaten these iconic places. Other important cultural landmarks at risk include Charleston, S.C., and St. Augustine, Fla., the oldest continuously occupied European settlement in the Americas.disappearance."


Coming Up

  • The Senate Energy and Natural Resources Committee holds a hearing on the nomination of Timothy R. Petty to be Assistant Secretary of the Interior for Water and Science and Linda Capuano to be the administrator of the Energy Information Administration on Tuesday.
  • The Senate Energy and Natural Resources Subcommittee on Energy holds a hearing on various bills on Tuesday.
  • The American Enterprise Institute holds an event on "Conservation programs, the waters of the United States, and the Renewable Fuel Standard" on Wednesday.
  • The House Natural Resources Subcommittee on Water, Power and Oceans will hold a legislative hearing to review the extension of endangered fish recovery programs on Wednesday.
  • The Senate Indian Affairs Committee holds a legislative hearing on Wednesday.
  • The Senate Environment and Public Works Committee holds a hearing on the nomination of R.D. James to be Assistant secretary of the Army for Civil Works on Wednesday.
  • The Senate Committee on Environment and Public Works Subcommittee on Superfund, Waste Management, and Regulatory Oversight will hold a hearing on “Challenges Facing Superfund and Waste Cleanup Efforts Following Natural Disasters” on Wednesday.
  • The Center for Strategic and International Studies will host the launch of OPEC’s World Oil Outlook 2017 on Thursday.
  • The House Natural Resources Subcommittee on Federal Lands holds a legislative hearing on Thursday.

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