Senate Bill Would Require Renewable Energy Projects to "Buy American"

A bill introduced in the U.S. Senate this week would add a “Buy American” requirement to the Section 1603 grant program created by the American Recovery and Reinvestment Act of 2009, which directed the Treasury Department to award cash grants in lieu of tax credits for renewable energy projects.

Under Section 1603, eligible recipients are entitled to receive cash grants generally equal to 30 percent of the cost of specified energy property as long as the projects are either placed in service or under construction (and placed in service by specified post-2010 deadlines) by Dec. 31, 2010.

The bill (S. 3069), titled the American Renewable Energy Jobs Act, is sponsored by Sens. Charles Schumer, D-N.Y., Sherrod Brown, D-Ohio, Robert Casey, D-Pa., and Jon Tester, D-Mont. If enacted, it would affect pending grants for which applications have already been submitted. In a letter dated March 2, 2010, the sponsoring senators asked Treasury Secretary Timothy Geithner to place a moratorium on grant payments until Congress considers this proposed legislation.

Because Section 1603 requires grants to be paid within certain time limits, we do not expect the Treasury Department to change its Section 1603 grant application review process, or place a moratorium on making grants, as a result of the sponsors' March 2 letter.

If enacted, S. 3069 would:

• Make grant awards discretionary (currently awards are mandatory if eligibility requirements are satisfied). ¹
• Require all iron, steel and manufactured goods for a project, with limited exceptions, to be produced in the United States. (Please see our prior advisory, "'Buy American' Requirements of Stimulus Law: Trouble Ahead?".)
• Prevent the Treasury Department from paying any grant unless it has taken into consideration domestic job preservation and creation provided by the project with respect to production and installation of equipment and operation of the project. The Treasury Department’s analysis of job creation would have to be submitted to the Senate Finance and House Ways and Means Committees within 30 days after a grant application is filed (and within 30 days of enactment of the bill for applications filed before enactment).
• Apply to any grant for which full payment has not yet been made by the Treasury Department.

Sen. Schumer has been trying to block a $1.5 billion, 648-megawatt wind project in Texas from receiving a Section 1603 grant because most of the turbines for the project will be manufactured in Shenyang, China. Administration officials say the Texas project has yet to apply for a Section 1603 grant and contest many of Sen. Schumer’s claims regarding the impact of the Section 1603 program on American jobs. Energy Secretary Steven Chu has asserted that halting the program would have a negative impact on American job creation.

The United Steel Workers and the International Association of Machinists and Aerospace Workers have issued statements in support of the bill. Renewable energy trade groups, including the American Wind Energy Association and the Solar Energy Industries Association have issued statements strongly opposing it.

The prospects for enactment of the legislation are unclear. However, at a minimum, Sen. Schumer’s efforts will likely make it more difficult to extend the Section 1603 grant program, as has been proposed by Sens. Diane Feinstein, D-Calif., and Jeff Merkely, D-Ore., in S. 2899, without the inclusion of some type of Buy American requirement.

FOOTNOTE

1 By making awards discretionary, S. 3069 raises the possibility that award decisions could become subject to the requirements of the National Environmental Policy Act (NEPA).