Washington’s Biggest Clean Energy Lobbying Group Pushes Natural Gas-Friendly Policy

On two of the most consequential decisions facing Congress and the Biden administration on energy and climate change, the nation’s newest and largest clean power industry group has decisively aligned itself with companies that want to preserve markets for natural gas.

To the dismay of some in the clean energy community, the American Clean Power Association, or ACP, has praised House Republicans’ fossil-fuel friendly treatment of permitting reform, or the fast-tracking of big energy infrastructure projects crucial to both oil and gas, and wind and solar, companies. The benefits for clean energy will depend on the details of that policy, now being hammered out in the Democratic-led Senate after House Republicans passed their sprawling energy package as their first piece of legislation in this Congress. 

The ACP’s new CEO—longtime bipartisanship advocate Jason Grumet—has blasted progressives for their opposition, which he has termed “solution denial.” He portrays them as naive idealists, who fail to recognize that clean energy projects won’t move forward without a compromise that allows fossil fuel infrastructure to advance as well, which he calls the only energy policy that is politically viable in a closely divided Congress. 

“We’re bringing a lot of carrots to the table, and the carrots are going to rot on the table,” Grumet said recently on the public radio program Living on Earth. “Do we actually care about doing something about climate change? Or do we just want to talk about caring about doing something about climate change?”

On another issue that has received less attention but could decide the fate of one of the most lucrative incentive packages from last year’s Inflation Reduction Act—the so-called “clean hydrogen” program—ACP has staked out a position directly at odds with its own wind energy members. ACP is urging the Treasury Department and Internal Revenue Service to adopt lenient accounting rules on clean hydrogen that are supported by its big utility and gas industry members like utility giant NextEra Energy, and the oil and gas behemoth BP. Like these big energy players, ACP argues that “overly burdensome” regulations will make hydrogen production too costly, will discourage investment and slow the pace of hydrogen production.

The accounting method ACP favors would allow a large portion of more than $100 billion in tax credits in the program to flow to natural gas interests. Moreover, three separate peer-reviewed academic studies in the past year have concluded that the kind of hydrogen program being championed by ACP could have the perverse effect of generating higher carbon emissions than if there were no federal incentives for hydrogen at all.

The most recent of these studies, published in January and led by researchers at Princeton University, showed that federally subsidized hydrogen production from the fossil fuel-heavy locations on the electric grid like Wyoming and Colorado could result in greenhouse gas emissions four times higher than unsubsidized hydrogen production directly from natural gas.

Renewable energy industry companies—including some of ACP’s own members, turbine manufacturer Vestas and solar and storage project developer Intersect—have sided with most environmental groups in urging Treasury and the IRS to adopt rules keeping close track of whether hydrogen is produced with carbon-free energy. A tough regulation “is critical to the clean energy industry’s credibility and is essential to secure the emission-reducing intent of the Inflation Reduction Act,” the renewable energy companies said in comments filed with the IRS.

The arcane clean hydrogen accounting rules showdown could spell the success or failure of President Joe Biden’s signature climate legislation—last year’s Inflation Reduction Act, according to some who helped craft the package. “In the balance hangs President Biden’s climate legacy—and the possibility of going in the wrong direction on climate change,” wrote Leah Stokes, an adviser on the bill who is a political scientist at the University of California, Santa Barbara, in a recent New York Times op-ed.

And both the permitting and clean hydrogen battles reveal how ACP’s advocacy has been shaped by its effort to build a wide-ranging coalition for clean energy. Instead of giving renewable energy a bigger voice in Washington, ACP’s goal when it was formed two years ago, critics say the lobbying group risks being used to amplify the message of the biggest members of its coalition—the gas industry and utilities—under the banner of clean energy.

“There are different ways to do clean energy policy, and ACP, based on who it is—who its dues-paying members are—does just as you would expect,” says David Pomerantz, executive director of the Energy and Policy Institute, a nonprofit watchdog organization. “ACP supports policies that are pro-clean energy in a way that is maximally financially beneficial toward large monopoly utility companies.”

Who Is ACP?

ACP maintains it is not taking sides. “We represent all sectors of the clean energy industry,” said spokesman Jason Ryan in an interview. “Some of our members have legacy oil and gas assets, and others are purely renewable companies. We represent all of them, and don’t take favor to anyone.”

The varied energy advocacy groups decided to join forces in January 2021, just as Biden was taking office, with climate action high on his agenda. The aim was to create a more powerful voice for clean energy in Washington, D.C.  The former American Wind Energy Association, which always had members from utilities, finance and big diverse energy companies like BP, merged with the smaller U.S. Energy Storage Association and transformed into ACP.

ACP’s annual revenue of $32 million, according to its latest available IRS filing, is greater than that of the former wind and storage lobbying groups put together. ACP’s board includes representatives from BP and Shell, and is led by executives of big utilities and power generation companies, including Leonardo Moreno, the president of AES Clean Energy, serving as board chair, and other officers from Xcel and Southern Power. Those companies are making significant investments in renewable energy, to be sure, but also maintain substantial portfolios of natural gas assets and rely on them for much of their revenue.  

The point of ACP was to harness the synergy of different sectors of the energy industry working together for a cleaner future, according to its leaders at the time. 

“We are not the same clean energy industry that we were even 10 years ago,” said Heather Zichal, the first CEO of ACP, in an interview with Inside Climate News in January 2021. “We need to make sure that our advocacy efforts better reflect the diversity and scale of the modern renewable energy marketplace.”

Natural gas has a complex role in that marketplace, and therefore, has become a dividing line in the climate movement. Zichal, who served as a top climate adviser to President Barack Obama  from 2009 to 2013, was in the camp who saw natural gas as an important fuel on the road to decarbonization. In fact, after leaving the White House and before joining ACP, Zichal served on the board of Cheniere Energy, the nation’s largest gas export company.

Electricity produced with gas has half the carbon emissions of coal, so U.S. power generation has become cleaner as gas has displaced coal. But burning gas still causes carbon emissions; any net-zero emissions future involving natural gas assumes major advances and deployment of carbon capture technology. Moreover, methane, the primary component in natural gas, is a super polluter greenhouse gas over 80 times more potent than carbon dioxide over a 20-year time frame. Methane can greatly worsen global warming if it is not well-controlled. The Biden administration has ramped up regulations on methane emissions, but even small leaks can have a major warming impact.

Although most experts agree natural gas will be needed in the future, especially to address hard-to-control industrial emissions, climate advocates are greatly divided over whether it should have a major or minor role. From the start, ACP’s advocacy was about including natural gas-centric companies in the push to shape a clean energy future.

“Let’s not think about this through the lens of wind or through transmission or storage,” Zichal  said as she was taking the helm at ACP. “Let’s really think collectively about what we need to do to advance clean energy industry writ large, and make a meaningful contribution to achieving economic growth and tackling climate change at the same time.”

Last year’s passage of the Inflation Reduction Act, with its unprecedented $370 billion federal investment in clean energy, was a testament to the lobbying efforts of a large array of climate advocates, including ACP. 

But the organization parted ways from many others in the climate movement when it continued to push—unsuccessfully—for Congress to pass permitting reform legislation crafted by West Virginia’s Democratic Senator Joe Manchin. 

Manchin was especially focused on getting a big natural gas pipeline project in his state back on track; the Mountain States pipeline was singled out for fast-tracking in his bill. ACP argued that the promise of the Inflation Reduction Act could not be realized without a faster process for approving all critical energy infrastructure.

“Congress should finish the job and pass these critical bipartisan reforms,” Zichal said last September. But not one Republican in either the Senate or House stepped forward to support the Manchin bill. And a critical mass of House Democrats opposed the changes that the legislation would make to one of the nation’s bedrock environmental laws, the National Environmental Policy Act, saying it would cut off one of the main legal avenues for tribes and community groups to have sway over big energy projects.

About the time that the Manchin effort stalled last fall, Zichal announced that she was leaving ACP to take on a new role as global head of sustainability at JPMorgan Chase. And in December, after it became clear that the permitting reform debate would continue in a divided Congress (Manchin intends to reintroduce his bill), ACP’s board tapped as Zichal’s replacement someone who made his name in Washington promoting bipartisan solutions: Jason Grumet.

Grumet had founded and headed up a National Commission on Energy Policy, which developed a set of recommendations for advancing climate-friendly policy during President George W. Bush’s administration. Some of its ideas, including the first increase in fuel economy standards in two decades and a big biofuels program, made it into the bipartisan Energy Policy Act of 2005. In 2007, Grumet founded the Bipartisan Policy Center, extending his efforts to find common ground between Democrats and Republicans.

Clearly, Grumet’s approach appealed to consensus-minded Obama when he was running for president the following year. Grumet became his top campaign adviser on energy issues and led Obama’s energy transition team. But Obama learned a hard lesson in his first two years in office about the limits of bipartisanship on climate policy. His market-based climate plan, an escalating emissions cap that allowed trading of pollution allowances among industries, passed the House, but without Republican support. Mechanisms meant to make the program easier on industry and give the plan bipartisan appeal—some adopted directly from Grumet’s National Commission on Energy recommendations—made progressives unenthusiastic and were viewed suspiciously by Senate Republicans, including Arizona ‘s John McCain, who had been an early cap-and-trade advocate.

After Obama’s climate bill died in the Senate, he pursued climate policy exclusively with executive action. Grumet, back at the Bipartisan Policy Center, became a critic of the Obama administration on some energy issues—most notably, the president’s decision to reject the Keystone XL pipeline because of its greenhouse gas impact. “Those who believe we can accelerate the global transition away from fossil fuels by blocking critical pipeline infrastructure and market opportunities like the export of U.S. oil are simply wrong,” Grumet wrote as Obama was weighing the Keystone decision.

At ACP, Grumet has enthusiastically continued his advocacy for energy infrastructure; legislation that would speed up the permitting process is a top priority.

Permitting Reform and ‘the Gutting of NEPA’

The permitting issue has been difficult for climate activists because although many agree there is a need to help speed the process for approval of renewable projects, most proposals in Congress have involved changes to one of the nation’s bedrock environmental laws, the National Environmental Policy Act, or NEPA. The law, which requires federal agencies to analyze the environmental impacts of major projects that fall under their jurisdiction, has been a prime vehicle for communities and tribal groups to challenge large pipelines, export facilities and other energy infrastructure.

Renewable energy transmission projects have become caught up in NEPA delays just as fossil fuel projects have. This week, for example, the federal Bureau of Land Management, or BLM, gave final approval to the $3 billion TransWest Express high-voltage transmission line to deliver power from the largest onshore wind farm in the country, in Wyoming, to other western states. The approval process for the 732-mile transmission line took 18 years.

A study released in February by the Biden administration’s Department of Energy concluded that there was a pressing need to expand electric transmission capacity in nearly all regions of the country, not only to make the grid more reliable, but to better integrate renewable energy into the nation’s electricity mix. Research released last fall by Princeton University’s  Zero-carbon Energy Systems Research and Optimization Laboratory, or the ZERO Lab, concluded that 80 percent of the projected emissions reductions from the Inflation Reduction Act will depend on building electric transmission at more than double the current rate.

“It simply is procedurally impossible to hit our climate goals under our current system,” said Rep. Scott Peters, a California Democrat, at a forum on permitting reform Tuesday hosted by the U.S. Chamber of Commerce, the nation’s largest industry lobbying group. Peters has joined with Rep. Bruce Westerman of Arkansas, the Republican Chairman of the House Natural Resources Committee, in an effort to craft a bipartisan permitting reform bill.

But Republicans already included a permitting reform plan in the energy package they passed as their first legislation since taking over the House. The sprawling bill seeks to revive the Keystone XL pipeline, limit the president’s future ability to curb such projects, prevent restrictions on fracking, and directing the government to sell new leases for drilling.

Grumet and ACP have praised the permitting provisions of the House Republicans’ bill, characterizing it as a basis for a compromise that could be crafted in the Senate, a stand that has irked some Democrats and climate activists. For one thing, the House bill would reinstate and codify NEPA regulations that the Trump administration put in place that would, among other things, bar agencies from considering the indirect and cumulative climate impacts of big energy projects. And the House legislation does nothing to speed electric transmission—the main logjam for clean energy.

Rep. Raúl Grijalva of Arizona, the highest ranking Democrat on the House Natural Resources Committee, took ACP’s chief advocacy officer, JC Sandberg, to task at a hearing in February for supporting “what is essentially the gutting of NEPA.”

Sandberg replied with what has been a mantra for ACP: “I think there are ways to make common sense reforms to NEPA. Working with you and others, we can find a way to streamline the process without undercutting, as you said, our bedrock environmental statutes.”

In its public advocacy, though, ACP has mostly taken progressives to task, saying they fail to realize that to be politically viable, permitting reform legislation will have to speed up fossil fuel projects as well as renewable energy ones. “The economics are going to drive us towards clean power. We have to have the confidence that that is the case,” Grumet said on Living on Earth.

But other clean energy advocates who support permitting reform believe that major changes to the House legislation are needed to ensure that the drive toward clean power won’t stall. For example, the trade group Advanced Energy United argues that the legislation should specifically prioritize projects needed for clean energy—for example, the mining of critical minerals—rather than drilling for oil and gas. The group also wants the legislation to include provisions to foster reuse and recycling of those minerals. 

Harry Godfrey, managing director of federal affairs for Advanced Energy United, said the group does see the need for reform to NEPA, including the setting of deadlines for agency decisions on permitting and clarifying the rules on judicial review. But he said advocates for such reforms need to be mindful of why so many environmental advocates oppose change to NEPA.

“There is a long history in this country …  of projects adversely impacting low-income communities, and communities of color,” Godfrey said. “There’s more than a little bit of mistrust that exists there, and obviously that needs to be addressed.”

When Is ‘Clean Hydrogen’ Clean? 

The fight over the IRS clean hydrogen rules is a case where there is clearly discord within the big tent that ACP has tried to create on clean energy. Most experts see hydrogen as an important fuel in a clean energy future, especially for industrial applications that are hard to decarbonize, like the manufacturing of steel and cement. But the cheapest way to produce hydrogen is through steam reforming of methane, a process that produces carbon emissions.

Hydrogen also can be produced by running electric current through water to separate the hydrogen and oxygen molecules. The electrolyzer process is currently more expensive, but the emissions of hydrogen production could be zero if the system is tied directly to a wind or solar energy system.  However, the reality is that many of the proposals for electrolyzers would tie them to an electric grid that draws power from both clean and fossil energy sources.

The question before the IRS—which will determine distribution of more than $100 billion in subsidies meant to encourage “clean” production of hydrogen—is how to determine if the grid power that is running the electrolyzers to produce hydrogen is clean enough to qualify for the federal tax credits. 

ACP, like its big utility members and oil and gas company BP, is urging the IRS to look at the average emissions associated with such grid-connected systems over the course of a year to determine if the hydrogen is clean. NextEra Energy, one of the nation’s largest investors in clean energy, but a company that also relies on natural gas generation, told IRS that this so-called “annual matching” is “critical to ensuring clean hydrogen production technology can reach scale.”

“Requiring that time matching be too granular, such as hourly, would devastate the economics of clean hydrogen production and would not align with legislative intent to accelerate progress towards a clean hydrogen economy,” NextEra wrote in its comments to the agency.

But ACP’s pure renewable energy companies, like Vestas and Intersect, have urged the IRS to use hourly matching, which they say is  both economically and technically feasible. Standards that are too loose, the companies said, “will further erode electricity market functionality and exacerbate existing market stressors.”

The Princeton ZERO Lab’s modeling of the different clean hydrogen proposals showed that with annual matching, the risk was great that electrolyzers would run on a fossil fuel-heavy mix of electricity for large portions of the year. Researchers at the Technical University of Berlin and at the University of California, Davis, came up with similar results in separate studies last year.

ACP said it would not comment on the clean hydrogen rules beyond its comments filed with IRS supporting annual matching. Although ACP endorsed looser time matching standards, the advocacy group did acknowledge that there were differing views on the issue. It invoked a time-honored Washington tradition to resolve the dispute that had riven its own membership: ACP urged the IRS and the Department of Energy to put together a task force to study the costs and the benefits of different methods of determining whether clean hydrogen was truly clean.

A ‘Hard Conversation’ Ahead

The clean hydrogen dispute illustrates the pitfalls of ACP’s approach to clean energy advocacy, in the view of some climate action advocates: The big fossil fuel interests and the pure renewable interests who are both ACP members won’t always agree.

“If it’s a yes-no vote over broader clean energy interests and climate action, it’s not problematic,” Pomerantz said. “But there are going to be these other cases where it’s much messier or when they’re downright lobbying against the people who they represent.”

But Grumet has maintained that the only energy policy that is politically viable in a closely divided Congress will address the needs of both fossil fuel and renewable energy interests. Grumet made his pitch for bipartisan, all-of-the-above approach to the energy transition on stage Tuesday at the U.S. Chamber of Commerce event on permitting reform—an appearance that itself showed ACP aligned with the powerful business lobby that has been on the opposite side of climate advocates for many of the battles of the past 25 years.

“There is absolutely no coalition or constituency that can move legislation through Congress that is simply focused on fossil fuels,” Grumet said. “There is absolutely no possibility of moving legislation through that is only focused on clean energy. The truth is the only coherent transition from here to there is to start here, with the energy system we have, that is dominated by fossil fuels, and move rationally and aggressively to clean energy.”

With hearings expected in at least two Senate committees in the coming weeks on the permitting issue, Grumet expressed confidence that a bipartisan solution could be found. A number of speakers at the Chamber event acknowledged the need for compromise on both sides of the aisle, but Grumet—as has been his typical approach—stressed that climate advocates have to be willing to give.

“What you’re seeing is that the climate advocacy community is coming to grips with the desire to actually succeed, not just talk about succeeding,” Grumet said. “And that’s where we’re going to have a hard conversation over the next few months.”