The Obama administration thinks Sen. Chuck Schumer can’t see the wind farms for the turbines. The New York Democrat doesn’t want taxpayer funds spent to ship jobs to China.
The disagreement between the two camps stems from Schumer’s insistence that money from the $787 billion stimulus bill should not subsidize wind energy plants in the U.S. if they create more jobs in other countries than they do here.
Talks are ongoing in an attempt to reach a compromise, numerous sources confirmed Wednesday to The Daily Caller, though a deal does not appear imminent.
“We are open to conversations about how to move the program forward in a way that boosts wind power production capacity and creates American jobs,” said an administration official.
A Schumer aide said that “there have been discussions where they have explained their point of view, and we have explained ours.”
“But there has not been any compromise solution proposed yet.”
Schumer himself, in a statement e-mailed late Wednesday, said the administration’s statement to The Daily Caller was a “change in policy” reflecting a willingness to consider revising its position. The White House did not respond when asked if this was a fair characterization.
The Obama administration is a difficult spot on an issue that contains cross-currents of numerous alliances and objectives.
The White House aims to take steps toward energy independence to grow less reliant on oil-rich countries in the Middle East. But the point of the stimulus was to create more jobs at home. Furthermore, organized labor, which does not like the idea of outsourcing jobs, is one of their biggest allies.
At the same time, Schumer’s crusade against China – he says subsidies for wind plants create jobs in China, which is true but China is ninth on the list of top exporters of turbines to the U.S. – does not help President Obama in his outreach to Beijing on issues of both protectionism and sanctions against Iran’s nuclear program.
The clash exposes a rift between the White House and the man who is angling to become the next Senate majority leader in the event that Harry Reid loses his reelection bid in Nevada this fall.
Multiple sources told to the Daily Caller that Schumer’s talk of China as a major threat to U.S. competitiveness in turbine manufacturing may be at its core a political ploy.
“The prevailing view in the business community is that he has turned a molehill into a mountain,” said William Reinsch, president of the D.C.-based National Foreign Trade Council.
A House Democratic aide said that Schumer “just believes it’s a good issue.”
“And he’s right. Taking on China is a political winner,” the aide said.
Schumer is correct that the biggest job impact of wind farm production is in the manufacturing phase. Turbines are complicated pieces of machinery and require skilled labor.
But the administration says that the only way a turbine manufacturing sector will grow in the U.S. is if the government continues to help along the construction of more wind farms here that rely on the existing supply line, which is mostly in other countries.
“You have to create the U.S. market, then manufacturing migrates here, then, as manufacturing migrates here, the supply chain will be developed here,” Energy Secretary Stephen Chu said last month.
“If you have a moratorium on that, I am a little afraid that will kill a lot of jobs. A lot of stuff in the pipeline will be put on hold,” Chu said.
In fact, the wind industry has argued that if Schumer’s succeeds – he is co-sponsoring a bill with three other Democratic senators that they will likely try to attach to an upcoming piece of legislation – it would eliminate thousands of jobs in New York and across the country.
The Schumer aide, who did not want to be identified talking about sensitive negotiations with the administration, downplayed the loss of jobs if “Buy American” requirements are placed in the Energy Department’s grant program, which is actually administered by the Treasury Department.
“The program, as it is currently being administered, puts Chinese and other foreign manufacturers of these turbines at an even greater advantage compared to domestic manufacturers,” the aide said. “Everyone agrees with the need to boost domestic production of clean energy, but we don’t need to do it at the expense of U.S. manufacturing.”
“It is hard to argue that U.S. companies might benefit down the road from giving $450 million to their Chinese competitors.”
U.S. domestic production and exports of wind turbines are growing at a fast clip, and imports of the same are declining.
Turbine imports to the U.S. fell 8.9 percent from 2008 to 2009, from $2.5 billion to $2.3 billion, while exports from the U.S. to other countries rose by 430 percent, from $22 million to $117 million, according to U.S. International Trade Commission statistics provided to The Daily Caller.
An ITC report from June 2009 showed a total of 5 companies, both U.S.- and foreign-owned, had established manufacturing plants in the U.S., with another six in planning process.
That data could be used to argue both ways on the argument between Schumer and the White House, either as support for the claim that the domestic manufacturing base is growing and does not need help, or for Schumer’s point of view that the government should further accelerate the trend through its policies.
But the American Wind Energy Association has said that if Schumer’s proposal became law, the current U.S. manufacturing capacity could produce less than 1,000 turbines a year, far below the 5700 turbines that were installed in 2009.
Schumer has been insistent, ever since first raising the issue last fall, following a report by the Investigative Reporting Workshop in late October that showed 84 percent of the first $1 billion awarded in grants — $849 million — had gone to foreign wind companies. The report estimated that as many as 4,500 overseas jobs had been created through the money.
At the same time last fall, a consortium of American and Chinese companies announced plans for a $1.5 billion wind farm in Texas, using $450 million in grants from Obama’s stimulus program. The plant would create 330 U.S. jobs at the Texas plant but around 3,000 jobs in China to build the turbines, according to Schumer’s office. Companies directly involved insist that at least 70 percent of each wind turbine will be manufactured in the United States and the most jobs created will be in the U.S.
Schumer sent a letter in November to Energy Secretary Chu. In March, Schumer proposed his legislation, following a follow up report by IRW in February that said the 79 percent of the $2.1 billion in grants awarded to date had gone to foreign-owned companies.
Schumer does not oppose stimulus money going to foreign-owned companies, only companies that assemble 90 percent of their turbine value outside the U.S.
Schumer’s talk of Chinese jobs being a major problem rubs against the fact that China is nowhere near the top of the list of turbine exporters. Denmark dominates the market, with $785 million worth of exports to the U.S. in 2009. Japan exported $581 million, Spain $303 million and India $244 million, according to the ITC stats.
China’s turbine exports to the U.S. in 2009 amounted only to $6.5 million, down 54 percent from 2008, when they exported $14.3 million worth of turbines to the U.S.
Reinsch, who is a member of the U.S.-China Economic and Security Review Commission, said of the Texas wind plant that Schumer “has taken a single case and turned it into a big issue.”
Both Schumer and the administration made statements of goodwill Wednesday, saying they want to work with the other, but at the same time holding fast to their current positions.
“We’ve already made progress in increasing domestic content and would like to maximize it, within the context of what is possible today,” said the administration official.
Said Schumer: “We look forward to working with the administration because we believe we can have both wind power and a stronger American industry that creates jobs long after the last stimulus dollars are spent.”
Jonathan Strong contributed to this report.