Manchin Slams Treasury For Effort To End-Run Around Congress

West Virginia Democratic Sen. Joe Manchin, the Chairman of the Senate Energy and Natural Resources Committee, slammed the Treasury Department Monday for what he says is an attempt to circumvent the “clear purpose” of the Inflation Reduction Act’s language requiring domestic content in electric vehicle battery components.

In previous remarks on April 20, Manchin described the concept behind the language thusly: “The EV tax credits for cars, my personal belief is we didn’t need any. But with that being said, I said if we’re going to do it, let’s get something for it. And changing to electric [vehicles] when we had dependence on a foreign supply chain, mostly China — that doesn’t make any sense. So, we put this together saying $3,750 would come if you secured and sourced and do the processing in North America or countries with a free trade agreement. And then the other $3,750 would be for manufacturing the battery in North America.”

An End-Run In The Making

Upon reviewing its new rulemaking, Sen. Manchin now believes the Treasury department is not making a good faith effort to interpret the law as it was written.

“Regrettably, it appears that the Treasury has seriously misconstrued the plain language and clear purpose of the critical minerals and battery component requirements in subsection (e),” Manchin said Monday in written comments. “Either that or the Treasury thinks it has a better approach than the one enacted by Congress and it is using its subsection (e)(3) rulemaking authority to substitute its approach for the one that Congress enacted into law. But the Treasury has no such power.”

Manchin further points out that “Congress rewrote section 30D to promote reliable critical mineral and battery manufacturing supply chains needed to supply the growing demand for electric vehicles,” one of the stated objectives of President Joe Biden himself, who promised in July 2021 to mount a “whole of government approach” to achieve that specific goal. In submitting these written comments, Sen. Manchin essentially accuses Treasury officials of ignoring the President’s commitment and pursuing their own, separate agenda.

Three Key Deviations

Specifically, Manchin details three key ways in which Treasury’s proposed rulemaking deviates from or conflicts with the clear language in the IRA:

• First, Manchin notes the proposed rule contains a “50% value added test” to help regulators determine whether the critical minerals requirement in the revised Section 30D has been met. But, the Senator says, “This new test is not found in section 30D(e) or anywhere else in the law. It is purely of the Treasury’s own making. This new, unauthorized, and unlawful test frustrates the purpose of the statutory test.”
• Second, Manchin notes that, in constructing its rulemaking specific to the IRA, has incorporated a “constituent materials” test that is contained in the 2021 Infrastructure Investment and Jobs Act, but for an entirely different purpose. Noting that “Congress legislates with knowledge of its prior laws,” Manchin condemns Treasury’s attempt to apply this test contained in a different statute for a different purpose as an improper effort to go around the IRA’s clear intent.
• Third, Manchin objects to Treasury’s effort to impose its own reinterpretation of the meaning of “countries with a free trade agreement” in a way that would essentially allow regulators to ignore the clear traditional definition.

“Although the term “free trade agreement” is not defined in the statute, it has a well-established meaning, Manchin says. “A ‘free trade agreement’ is an agreement between two or more countries in which each removes tariff and other restrictions on ‘substantially all’ trade between the parties, not just a mineral here or a mineral there.”

The Senator points out that Treasury, in its proposed rulemaking, would already include Japan as a country with a free trade agreement even though no such agreement currently exists between it and the United States. Treasury’s new definition would also enable to it to add countries in the future based on its own internal judgment and little else.

The Bottom Line

As noted in his office’s Monday press release, Sen. Manchin has repeatedly made his dissatisfaction with the Biden Administration’s regulatory implementation of the IRA known since he made the fateful decision to become the deciding vote enabling the law’s passage last August. By surrendering the massive leverage he had to that point possessed to influence U.S. energy policy, Manchin put his political future in peril as he faces re-election in heavily-Republican West Virginia in 2024.

If congress still engaged in a real budgeting process, Manchin would still be able to exert real influence by threatening to hold up funds through the appropriations process, but congress has surrendered its authority on that front consistently for almost 20 years now.

Thus, while this latest round of sound and fury emanating from Manchin’s office is a newsworthy event, whether it will ultimately signify any real influence over the process seems highly questionable.