Manchin: My Problem is not With Electric Vehicles. My Problem is This Administration Breaking the Law.

January 11, 2024

Manchin: My Problem is not With Electric Vehicles. My Problem is This Administration Breaking the Law.

Washington, DC - Today, the U.S. Senate Energy and Natural Resources Committee held a hearing to examine federal electric vehicle (EV) incentives including the federal government's role in fostering reliable and resilient electric vehicle supply chains. During the hearing, Chairman Joe Manchin (D-WV) discussed his concerns with the Administrationbreaking the law by issuing proposed rules not in line with the electric vehicle tax credit provisions in the Inflation Reduction Act (IRA), China's dominance over EV supply chains and how unlawful proposed rules are driving up the cost of the IRA.

"When it comes to EVs, this administration is implementing the Build Back Better approach they wanted, not the Inflation Reduction Act law that passed. The Inflation Reduction Act had three purposes: 1) Reduce our debt; 2) Secure our energy and produce cleaner in America than anywhere else; and 3) Bring back manufacturing of the building blocks that run our country and made us the superpower of the world. While some may believe I just have a vendetta against EVs, I just think we got way ahead of our skies on this," said Chairman Manchin. "Alternative fueled vehicle technologies like EVs, hydrogen vehicles, and hybrids can play an important role in lowering emissions while providing an opportunity for the United States to maintain our status as an automotive powerhouse, re-shore our manufacturing base, and create good paying jobs. My problem is not with EVs. My problem is this Administration's crusade to convert everyone over to an EV regardless of where the battery came from or what the law actually says."

Chairman Manchin further discussed how the Administration is violating the IRA by issuing guidance that cuts the mineral sourcing percentage requirements in half and harms our ability to reduce our reliance on China-controlled EV supply chains.

"First, in proposed guidance the administration has cut the IRA critical mineral sourcing percentage requirements in half-which is a blatant violation of the numbers that Congress wrote directly into the law. They are also pretending battery component manufacturing is the same as critical minerals processing. Extraction and processing are different than manufacturing and it's stated in the bill that manufacturing has to be done in North America to get the $3,750. They are proposing fake "critical minerals free trade agreements." Indonesia is controlled by China. You can't think that Indonesia is going to be a free trade agreement country, these are the things we are talking about," said Chairman Manchin. "And, most recently with their proposed rules on Foreign Entities of Concern, the administration is delaying deadlines we wrote into the IRA to remove China completely from our battery supply chains. As shown in the chart behind me, under the weakened Foreign Entity of Concern rules, vehicles that contain battery minerals and components from China and other adversaries can qualify for years longer than the law allows. The Biden Administration didn't write this bill and, quite frankly, it seems like some of the people implementing the law haven't read it or really understand what our intentions were."

Chairman Manchin also commented on how the IRA is bringing new investment to America and can continue to do so if implemented as written.

"Now let me be clear, just because this Administration has broken the law implementing certain aspects of the IRA, it does not change how proud we all should be of the law we actually passed. There's no question the IRA is doing what we hoped it would in many respects, and it will do so much more if this administration follows the law of the land. The IRA raised $687 billion in revenue, invested $384 billion in energy security while also improving our environment, invested another $64 billion in healthcare-and with the balance, paid down $239 billion in debt. These are things you never hear anybody talk about. Today we are producing more energy than ever before in America, you don't hear anybody bragging about that, we're more independent today than we ever have been in the history of the United States. In 2023, we produced 37 trillion cubic feet of natural gas, 4.7 billion barrels of oil, record amounts of solar power and battery storage-and we're continuing to innovate to make our energy even cleaner. We're transitioning the proper way but not giving up our energy dominance, that's what makes us the superpower of the world," said Chairman Manchin.

During the hearingChairman Manchin asked The Honorable Adewale O. Adeyemo, Deputy Secretary of the U.S. Department of the Treasury, about how taxpayers can take advantage of the 30D EV tax credit in ways that differ from the IRA, with only temporary guidance being issued.

"I'm deeply concerned that Treasury is allowing taxpayers to claim Inflation Reduction Act credits in the current tax year based on "proposed" rules, not final rules. I cannot think of any other federal agency that operates this way. If FERC [Federal Energy Regulatory Commission] proposes a policy change, or EPA [Environmental Protection Agency] proposed a regulation, or DOE proposes a grant program, only once the proposal is final does it actually come into effect. Do you agree it is abnormal to rely on "proposed" rules for programs that are already in effect, like the IRA tax credits? Is Treasury using "proposed" rules to try to avoid legal challenges??" asked Chairman Manchin.

"We have a proposed rule out there for comment and what we've asked for is that stakeholders like you provide us with comments that will then put us in a position to revise and provide a final rule as soon as possible. Our goal is to try and finalize these rules as quickly as possible to give taxpayers as much certainty as possible," replied Deputy Secretary Adeyemo.

"Taking two or three years to get input before you make a final rule is going to put an awful lot of people who are making investments in our country in jeopardy if they base it off the way the bill (IRA) is written. That's my concern sir, and we've talked about this," said Chairman Manchin.

Chairman Manchin questioned The Honorable David M. Turk, Deputy Secretary of the U.S. Department of Energy, about the use of EV tax credits to benefit China.

"Some U.S. automakers and battery producers have said there's just no way we can make these EV batteries without China. That makes no sense to me at all since most of this technology was started here in America and then taken to China and other foreign countries of concern. Do you agree with some automakers that it's okay for U.S. tax credits to benefit these countries of concern such as China, Russia, North Korea, Iran or another such as that?" asked Chairman Manchin.

"I think we can absolutely do it without China. We talked about the fact that graphite right now, the processing, is 100% in China. Just from the investments, the tools that you've given us so far, right now our projection is that 16% of the graphite that will be used in passenger vehicles in the U.S. by 2027 will be U.S. [graphite]. That goes from basically zero to 16% just with the investments we've made so far," said Deputy Secretary Turk.

"Why do you think the [critical minerals sourcing requirement] numbers were cut in half then? Why do you think they defied the law? Do you think we can't do it quick enough?" asked Chairman Manchin.

"The way we look at it, it's the tax incentives but it's also the grant funding through the bipartisan infrastructure legislation, it's our loan program, the Defense Department has some funding as well to help on critical minerals that they're using for a graphite mine in Alaska right now. So it's all of these tools together, trying to get our percentages up as quickly as we can, understanding we have not had an active policy or tools in our toolbelt to do anything about this," replied Deputy Secretary Turk.

Chairman Manchin also asked about recent projections that show the total cost of the consumer EV credit under current proposed guidance would be more than double the Congressional Budget Office score.

"When the Congressional Budget Office scored the Inflation Reduction Act in August of 2022, they said the total cost of the consumer EV credit would be about $7.5 billion dollars, and in FY24 we would spend roughly $451 million on the credit. Recently, your agency announced that so far 272,000 vehicles have been produced that could be eligible for the consumer EV credit in 2024. If they get the full credit of $7,500, if they qualify, that would be $2 billion just in one year. If they only got half of it, that would be $1 billion. You're going to run out of money in 3.5-4 years based on CBO scoring. Should you amend your proposals to match the letter of the law to stay within the confines of the money we allotted?" asked Chairman Manchin.

"I do think that one of the most important things you did in the Inflation Reduction Act was raise additional revenue, and the biggest source of that additional revenue was of course the IRS where you provided $80 billion in resources. My view is we are actually going to raise more revenues through the Inflation Reduction Act than the CBO scored largely because they undervalued the technology investments being made at the IRS that are leading to additional revenue. We've seen already revenue come in from millionaires and billionaires who have previously not paid taxes. The IRS has already made these investments and we think that will lead to additional deficit reduction over time," said Deputy Secretary Adeyemo. "I can't tell you exactly how much money is going to be spent here in terms of the electric vehicle tax credit. That's going to be a factor of what happens with regard to demand from American consumers and also to a degree what happens to cost over time and I think the 45X credit is going to bring down costs dramatically because of what it does to batteries."

The hearing featured witnesses from the U.S. Department of the Treasury and the U.S. Department of Energy.

To watch the hearing in full, please click here.

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