The Year Ahead: What to Expect from Washington

The Year Ahead: What to Expect from Washington

February 10, 2010

The Obama administration got off to a rousing start in 2009 with visible momentum for its programs. Many private equity fund investors came through Washington early in the year in an effort to keep an ear to the ground, since policy changes make winners and losers among investors. The financial capital seemed to shift to Washington. As the year ended, the gears of government seemed full of sand. Congress was gridlocked over health reform. The financial markets were making a gradual recovery. Republicans picked up a key Senate seat in Massachusetts that sent shock waves across the Capitol.

Nevertheless, many key issues that have the potential to make or break energy investments remain in play in Washington. Five veteran Washington lobbyists talked in mid-January about what to expect in 2010 as part of a webinar organized by Infocast. They are Joe Mikrut, a partner with Capitol Tax Partners, a premier lobbying shop for tax issues, Aaron Severn, director of federal legislative affairs for the American Wind Energy Association, John Shelk, president and CEO of the Electric Power Supply Association, the trade group for the US independent power industry, Jaime Steve, Washington office head for Pattern Energy, a US wind developer that spun off in 2009 from Babcock & Brown, and Jonathan Weisgall, vice president for legislative affairs for MidAmerican Energy Holdings Company, a large holding company with utilities in eight US states and the United Kingdom. The moderator is Keith Martin with Chadbourne in Washington.

MR. MARTIN: Jon Weisgall, there has been talk that the Democrats, who control Congress, will draw up a “jobs II” bill early this year to deal with high unemployment. Will there be a “jobs II” bill?

MR. WEISGALL: Absolutely, yes. It may end up a massive bill with a lot folded into it.

MR. MARTIN: Jamie Steve, was there a “jobs I” bill and, if so, what was it?

MR. STEVE: There was, but it was essentially just an exercise in more proposed stimulus spending by the House. The Senate isn’t expected to take it up given the growing concern about the federal budget deficit. There is pressure for another jobs bill, but it is not a foregone conclusion that there will be one. Parts of jobs I may be folded into any jobs II bill.

MR. MARTIN: Aaron Severn, was there anything in jobs I of interest to the wind industry?

MR. SEVERN: There were a number of items of interest, but the most important was probably restoration of $2 billion that was taken out of the Department of Energy loan guarantee program for renewable energy projects to fund the cash-for-clunkers program last August.

MR. MARTIN: Jon, what items of interest are in play for possible inclusion in the jobs II bill?

MR. WEISGALL: If we get an energy bill this year, it may end up as an add on to the jobs bill. The real question is whether we will get both an energy bill and a climate change bill this year and, if the answer is just an energy bill, then that is where I think you will see it, combined with jobs.

MR. MARTIN: Joe Mikrut, I am starting to get the feeling that jobs II will end up as the legislative vehicle for most of what remains of the domestic agenda this year.

MR. MIKRUT: I think that’s right, and I think it will include some tax provisions, like an extension of depreciation bonus, that help stimulate investment and put people back to work. It may also include more money for the section 48C investment tax credit — a 30% tax credit for building new factories that make products for the green economy — and perhaps some modifications to the 30% Treasury cash grant program for renewable energy projects.

MR. MARTIN: What’s the timing for jobs II?

MR. MIKRUT: Health care will be the main focus until it either gets enacted or jettisoned. Then there is the temporary spending authority for a large number of federal programs that expires on February 28 and must be addressed. After that, I think we are into March before we start to see consideration of a jobs II bill.

MR. MARTIN: Does everyone agree about the timing?

MR. WEISGALL: I think that’s optimistic. The other big item that will take up time is financial sector regulatory reform, and that’s not expected to emerge from committee in the Senate before late February and will probably not get to the Senate floor until early April. But, look, we are all reading the same tea leaves — certainly sometime in the spring for the jobs bill.

MR. STEVE: I agree with that. I think Joe was offering the most optimistic scenario. As Ronald Reagan once said years ago, anybody whose ever had his kitchen redone knows it takes longer to get things done than originally planned.

MR. WEISGALL: All of this has to be seen through the lens of growing dissatisfaction by the public with what it perceives as major government activism and big government solutions — whether it is the bank bailouts, auto bailout or health care, anger with the stimulus bill and anger with the soaring deficit. Congress has limited room to act. Whatever it does will have to be sold as a jobs measure.

MR. SHELK: I want to underscore what Jon just said because it is spot on. We are all focused on our individual wish lists of items we want to get into any jobs bill, but those of us on the two coasts underestimate the degree of public anger. Anything that looks like a subsidy for business, including some of the things we have just been talking about, will have a tough time getting through Congress, even if presented with a jobs spin.

Treasury Cash Grants

MR. MARTIN: Aaron Severn, one program of great interest to renewable energy developers is the 30% Treasury cash grants for new renewable energy projects that get under construction by the end of this year. What is your trade association telling its members about whether the deadline to start construction will be extended and, if so, when?

MR. SEVERN: Obviously, that is a huge priority for us. We think it is possible it will be extended as part of a jobs bill, but the problem is it is still not clear whether the tax committee staffs in Congress see the need to extend it before it is closer to expiring at year end. They like the stimulative effect of a short deadline.

MR. MARTIN: Jamie, is it clear that the deadline will be extended and it is just a matter of when?

MR. STEVE: I think so. The big question is not only when, but also for how long. What we have heard from the committee staff is they are comfortable with the program; they like it for a number of reasons, including that it costs the government less than production tax credits cost. If I had to put money on when it will be extended, I would bet not until late in the year.

MR. MARTIN: Joe Mikrut, if the cash grant program is extended, will it just be the deadline to start construction or will Congress also extend the deadlines to complete projects — currently 2012 for wind farms, 2016 for solar and fuel cell projects, and 2013 for other renewables? Also, how long of an extension do you expect for the construction start date?

MR. MIKRUT: I think only the construction start date will be extended. Congress usually extends expiring programs only for a year at a time. An extension or elimination of the construction date through 2012 is possible because that would match up with when production tax credits — for which the cash grants are a substitute — start to expire. An extension through 2012 should not have much revenue effect. A longer extension of the credit itself would add significantly to the budget deficit.

MR. MARTIN: Timing?

MR. MIKRUT: Late in the year. Congress generally acts when Congress needs to act — if not later.

MR. MARTIN: You said that you think the 50% depreciation bonus is likely to be extended as part of any jobs II bill. True?

MR. MIKRUT: Yes. It has only a modest revenue effect and the Obama administration is now calling on Congress to extend it.

MR. MARTIN: You also said that you think the jobs bill will provide more money for a 30% tax credit for building new factories that make wind turbine blades, solar panels and the like. Congress provided $2.3 billion in such credits as part of the stimulus last year. The IRS allocated all the credits in early January. How much more money do you think Congress will provide for it?

MR. MIKRUT: I think it will provide close to what the vice president requested, which is another $5 billion for the program. The $5 billion is roughly the dollar value of the qualified applications that the IRS received, but could not fund.

MR. MARTIN: The House voted in December to extend a large number of expiring tax benefits for one year, including tax credits for biodiesel and renewable diesel, but not ethanol. What will happen to the ethanol credits, and what will happen to the extenders bill as a whole?

MR. MIKRUT: The House bill addresses provisions that expired on December 31, 2009; ethanol expires after 2010. In addition, ethanol has always been much more popular in the Senate than in the House. The House knows that, so it is easy to omit it and then negotiate with the Senate. I expect to see an ethanol extension in a final bill, perhaps later in the year. With respect to extenders in general, a lot of the tax benefits expired at year end, like the R&D tax credit, other fuels credits and some important international tax provisions. Congress has let these provisions expire in the past and has then extended them retroactively. My bet is the 2009 extenders will be folded in with the spending authority that Congress has to address by February 28. The 2010 extenders likely will be addressed later.

DOE Loan Guarantees

MR. MARTIN: Next topic — DOE loan guarantees. Aaron Severn mentioned earlier that $2 billion of the $6 billion loss reserve that Congress set aside last year in the stimulus to fund federal loan guarantees for renewable energy projects that use commercially-proven technologies and large transmission projects was taken away to spend on the cash-for-clunkers program. The money would be restored as part of the jobs I bill, but the consensus was jobs I isn’t going anywhere. How and when does this money get restored?

MR. SEVERN: No one knows yet. All we know is that there have been public commitments by Obama, Pelosi and others to restore the funding.

Mr. MARTIN: John Shelk, the Department of Energy is taking a lot longer than Congress hoped to write any loan guarantees, and many developers have given up on the program. Is the situation attracting much attention on Capitol Hill?

MR. SHELK: The short answer is that Congress should be concerned. The department has had authority to write loan guarantees for projects using innovative technologies since August 2005. Years have passed and, if I am not mistaken, only one guarantee has been issued. The frustration in Congress with this chronic lack of action by the department can be seen in proposals to create a clean energy bank modeled on the US Export-Import Bank or Overseas Private Investment Corporation and moved outside the DOE bureaucracy. A lot of hardworking people at DOE have labored through two administrations to stand up the program, but there is just something wrong. There is frustration in Congress, as there should be.

MR. WEISGALL: The trade off is how long does it take to set up an entirely new agency versus give a kick in the pants to DOE. We have a Secretary of Energy who is painfully aware of the history here and who really does want to get the program moving. I think most lobbyists are concluding reluctantly that it is better to try to make the existing program work within DOE than to start over with an entirely new agency.

Climate Change

MR. MARTIN: The Copenhagen conference was a disappointment to many. Will the Senate vote on carbon controls this year? The House already passed a cap-and-trade regime in late June last year. If the Senate doesn’t act on it this year, when do you see Congress enacting a carbon bill?

MR. SEVERN: I don’t see the Senate tackling carbon this year unless Senate leaders feel they can get 60 votes, and they don’t have them today.

MR. MARTIN: Jaime Steve, in what year do you think Congress will deal with carbon?

MR. STEVE: This is a huge priority for the Obama administration. I think they will try like hell to get it done this year while they are still at a high water mark in terms of the number of Democratic votes in the House and Senate.

MR. SHELK: As a trade association, we would like to see Congress tackle carbon sooner rather than later. We can deal with a clear set of rules; it is uncertainty that is a problem. Being realistic, I think the other comments are right on the mark. If the vote were today or any time soon, the carbon bill is well short of the 60 votes it needs to pass the Senate. I have even heard speculation it may be well short of 50.

Your question assumes that if it doesn’t happen in 2010, then it will happen in 2011 or 2012. I don’t think that is a fair assumption for two reasons. First, we don’t know how the elections will turn out and, if there is a substantial shift in Congressional seats to the Republicans, then all bets are off and we move perhaps to a whole new way of approaching the topic. Second, as you said, Copenhagen was a disappointment and what happens this year in the international arena will affect how much appetite there is in Congress to tackle the issue. If the international aspect doesn’t come together better than it has thus far, a cap-and-trade bill will be very tough for Democrats in marginal seats to swallow.

MR. MARTIN: Jon Weisgall, has there been a shift in the politics of global warming? Is the pressure to act increasing or decreasing?

MR. WEISGALL: Let’s start with Copenhagen — vague emission commitments, no timetable, no specific cuts, China played hardball, and no agreement on independent international verification of emissions reductions, which is a huge issue for the Senate.

The most you can say about Copenhagen is that, while it was not a complete disaster, it certainly left the US Senate without any increased sense of urgency to act.

So that’s your starting point.

I was with the Senate majority leader, Harry Reid, in New York this week. He gave a speech to a group of geothermal developers. He seemed resigned to giving up on climate control this year. He didn’t say it outright, but he talked about trying to muster 60 votes and he praised Senator Kerry for trying to broker a deal with Republicans, but he doesn’t see those votes. I don’t see the votes.

I think you really have to rethink the whole thing right now. One option is a cap-and-trade bill like the Waxman-Markey bill that passed the House last June. A second approach is an energy-only bill that uses other tools, like continuing to encourage the shift to more renewable sources of energy as way of reducing greenhouse gas emissions without a cap-and-trade program. A third option that is definitely going to happen is the Environmental Protection Agency has started using its existing regulatory authority to limit greenhouse gas emissions. A fourth option is to look for a set of completely new approaches. I think the politics are moving away from a Waxman-Markey, 1,400-page, Rube Goldberg, cap-and-trade system.

MR. MARTIN: Joe Mikrut, there has been more talk in the last few months about a carbon tax as a more direct way to limit carbon emissions. Do you see it gaining momentum?

MR. MIKRUT: Almost everyone agrees that a carbon tax would be more efficient and easier to administer, but I don’t see it having any renewed momentum. There are too many people still here who remember the House Democrats who lost their seats after voting for the Btu tax proposed by the Clinton administration.

MR. MARTIN: Jon Weigall, you suggested one approach is to let the negotiations among Senators John Kerry, Joe Lieberman and Lindsay Graham play out. Where are they headed? Are they headed toward a big, 1,400-page cap-and-trade system?

MR. WEISGALL: Good question. They started with a very dramatic op-ed piece in The New York Times in mid-October and we haven’t really seen anything since then. There seem to be three key elements to whatever they are trying to do, all under the umbrella of energy independence. They are offshore drilling, a stronger nuclear industry and then something called climate change. The problem is Lindsay Graham’s idea of a workable climate change plan is nothing like John Kerry’s idea of a workable plan, and only God knows where Joe Lieberman is. It is now coming up on three months after the op-ed piece and we haven’t seen a white paper. I don’t give it a great chance of success.

MR. MARTIN: Aaron Severn, the House passed a cap-and-trade bill in June that would require a ratcheting down of US carbon emissions compared to 2005 levels. Do you recall the targets?

MR. SEVERN: Carbon emissions would have to be 3% below 2005 levels by 2012 and fall to 83% below 2005 levels by 2050.

MR. MARTIN: There are two levers the government has in a cap-and-trade system to affect emissions. One is the limit it sets on total emissions and the other is a requirement for anyone emitting carbon to have allowances to cover his emissions. The House set a cap, but then gave away most of the allowances for free, at least through the middle of the next decade, as a transition measure.

MR. STEVE: That is just a fact of life. It is how these bills move through Congress. The emissions cap still has meaning in the meantime.

MR. MARTIN: Senator Maria Cantwell was working on a different approach to cap-and-trade. I believe she proposes to have the government sell all the allowances but then turn 75% of the money back to US consumers. The other 25% would be used to fund research or projects that use new technologies. Is that her approach and does her bill have any legs?

MR. SHELK: She and Senator Susan Collins have introduced a bill that would regulate carbon upstream, not downstream like in the cap-and-trade bill that passed the House, so producers of coal and other types of fossil energy would buy allowances rather than require power plants that use the coal or other fossil energy to do so. They want all the allowances auctioned by the government. One thing you can say about a 100% auction is that you don’t get into the food fight we saw over the allocation of allowances in the House. Trading in allowances would be restricted to regulated entities, so Wall Street would be largely frozen out. There would be a cost collar, both a floor and a ceiling on how much the price for allowances could vary. The approach is as close to a carbon tax and you can get without calling it a tax.

Does the approach have legs? Senator Lisa Murkowski, the senior Republican on the Senate energy committee, had nice things to say about it. It is a fascinating new approach. It runs only 39 pages.

MR. MARTIN: Perhaps summing up, it sounds like there won’t be a combined carbon and energy bill, but just an energy bill and no carbon bill.

National RES

MR. WEISGALL: That’s how I read it. Senator Reid will have to decide, but he faces a carbon bill on the one hand that is clearly short on votes, and an energy bill, on the other, on which the Senate energy committee worked for more than 12 weeks, before reporting it to the full Senate. It cleared the committee in June last year with five Republican votes.

It would require utilities to supply 15% of their electricity from renewable energy, although a quarter of the goal can be met by taking efficiency measures to reduce electricity demand. That’s huge for the renewable energy industry. A federal RPS would do more for the industry than a cap-and-trade bill in terms of increasing demand for electricity from wind farms, solar panels and other renewable energy facilities.

If the Senate can get transmission planning and cost allocations straightened out, some liability protection for carbon capture and sequestration and even some provisions to encourage offshore oil and gas leasing, then you have yourself the makings of a pretty comprehensive energy bill that, even though it lacks cap-and-trade provisions, certainly offers tools to reduce greenhouse gas emissions. If Reid decides to let go of climate change, the odds of getting an energy bill through the Senate are pretty good this year.

MR. MARTIN: Aaron, the energy bill the House passed last June also had a federal renewable energy standard. Do you recall the percentages and when the program would go into effect? This is a requirement that utilities supply a certain percentage of electricity from renewable sources.

MR. SEVERN: The House bill requires that 6% of US electricity come from renewable energy by 2012, increasing to 20% in 2020. But there is lots of fine print. For one thing, it only applies to utilities that generate four million megawatt hours of electricity a year. Part of the standard can be met through efficiency measures. There is also the problem that some types of electricity generation, like from nuclear power plants, are taken out of the denominator in the fraction, which reduces the megawatt hours of renewable electricity required in the numerator. However, the House bill is stronger than what came out of the Senate energy committee. The Senate bill sets a standard of 3% in 2011 and increases to 15% in 2021.

On the House side, up to a quarter can be met through energy efficiency. However, the House would also allow the governor of each state to petition to allow up to 40% efficiency measures. On the Senate side, efficiency measures can be used to meet up to 26% of the target.

MR. MARTIN: Jaime Steve, what are you telling your CEO at Pattern Energy about whether Congress will enact a national renewable energy standard this year?

MR. STEVE: If it doesn’t happen this year, it will not happen. The House is at 20%. The Senate is at 15%. Maybe they will come out somewhere in between.

MR. SHELK: I agree that it will either happen this year or not at all, but I think it will be difficult to get through the Senate. You have a very well-financed natural gas coalition that will find it hard to swallow the notion that the federal government should carve out a portion of the electricity market for any one fuel. I don’t think the nuclear folks will be happy, either. The coal folks will not be happy. The odds are against anything happening this year.

MR. WEISGALL: John Shelk is absolutely correct. A large part of the south will fight a federal RPS and will view it as a wealth transfer from the south to places like California that already have lots of renewable energy.

MR. STEVE: Everything you said is accurate and nothing is easy around here, but let’s not lose sight that the President is for it, the speaker of the House is strongly for it, and the Senate majority leader is strongly for it. These people have a lot of power, and this is not one of those issues where the votes are divided along partisan lines. Lisa Murkowski, the ranking Republican on the Senate energy committee, voted for it.

MR. MARTIN: If a national RPS does move through the Senate, how likely are we to see the term “renewables” stretched beyond recognition to cover a lot of things that people might not normally think of as renewables?

MR. SHELK: Everything is renewable. It’s just a question of your perspective on timing. [Laughter.]

MR. WEISGALL: Coal is vintage biomass. [More laughter.]

MR. SHELK: We are all fossil fuels in the making. [More laughter.] Keith, your comment is right on target. Lisa Murkowski voted for the package, but it is perfectly legitimate for her to try to promote certain types of fuels. If the goal is really carbon reduction and a green economy and jobs, then lots of other fuels meet that broader objective than simply the ones that we traditionally think of as renewables.

MR. WEISGALL: A production tax credit or renewable portfolio standard is nothing more than putting the thumb on the scale to favor a particular set of technologies. If we do end up with carbon controls or a national RPS, will the tax committees in Congress continue keeping the thumb on the scale for renewables through tax subsidies?

MR. MIKRUT: The tax committee staffs are aware of this issue. I should observe that ethanol has a fuels mandate, a tax incentive and a tariff, which for us lobbyists is the triple crown. A national renewable energy standard would phase in over time. I think it is clear that the tax committee staffs would consider coordinating how the RES gets phased in with how the tax incentives are phased out.

Transmission

MR. MARTIN: Let’s move to transmission. Many people would like to see the federal government have the power of eminent domain to push through electric transmission lines like it has for gas pipelines. However, the politics in the Senate won’t allow for that. Where did the House energy bill passed last June end up on federal authority and where do you see the Senate going on this issue?

MR. WEISGALL: The House bill, for all of its 1,428 pages, had remarkably little on transmission. The transmission debate distills to three big issues: permitting, siting and cost allocation. There is no consensus about how to proceed on any of them.

One of the two main sponsors of the House energy bill — Congressman Ed Markey from Massachusetts — was most bothered by cost allocation. His view was, “If we are going to do renewables, we will do them offshore in New England. That’s where I want the jobs. I don’t necessarily want to support a transmission super highway that will help move electricity generated at wind farms in the midwest to the east coast.”

That’s one view, but there are lots of other views. Wind farms tend to be distant from population centers. You need additional transmission capacity to move the electricity. As I have said before, you can’t love renewables and hate transmission. The issue is who pays the cost.

Congress is not making particularly good progress on transmission. The Senate energy committee tried to address cost allocation in its version of the bill, but then Senator Corker added an amendment at the last moment that undid a lot of the progress by requiring proof of actual benefit to ratepayers before a transmission expansion is built. The full Senate may end up tinkering with the language.

Let’s not forget we also have a federal agency called the Federal Energy Regulatory Commission that is tasked with figuring these things out. Another way Congress could go is to say to FERC, “We want to encourage renewables. You figure out the transmission side of the equation.” Right now it’s a bit of a mess.

MR. MARTIN: So Congress is really not giving much clear direction. John Shelk, there are three parties who may be asked to bear the cost of new transmission lines: the generators whose projects necessitate adding new lines, the shareholders or the utilities that own them, and the ratepayers. Is your trade association in the middle of that debate and, if so, how do you see it coming out?

MR. SHELK: Middle of the debate internally, and I can tell you this is one that, like a lot of issues, where you stand is where you sit. It has been difficult for our trade association to reach a unified view. Congress is having no easier time reaching consensus than we are.

Swaps and Hedges

MR. MARTIN: Changing subjects, the House has been wrestling with financial sector regulatory reform. I know that energy companies have been concerned about whether they would have to run swaps and hedges through exchanges and central clearing houses. Why is it such a big issue and where does it seem headed?

MR. SHELK: I’m glad you brought it up because this is one issue on which the power industry is united. The financial services bill presents problems in a number of areas, but this is the most likely one to be fixed. The House proposed requiring anyone entering even into bilateral swaps or hedges — for example, of gas or electricity — to run the transactions through central exchanges or clearing houses. Participants in such transactions would have to meet margin requirements and post billions of dollars in collateral that we do not think are necessary or appropriate. If the government wants transparency, there are other ways to do it, through contract repositories and databases. I think we got where we needed when the financial sector reform bill was taken up on the House floor, but we will need to educate people all over again in the Senate.

MR. WEISGALL: The problem has been that one person’s exemption is another person’s loophole. No one wants to penalize airlines hedging on jet fuel or a utility that hedges by buying natural gas strips. What the House did was provide an exemption for participants in commodity hedges and swaps who are end users of the commodities.

The retirement announcement by the Senate banking committee chairman, Chris Dodd, greatly increases the odds that we will get a financial regulatory reform bill this year. Dodd will no longer feel beholden to the left wing and feel the need to thump his chest and go after Wall Street. The retirement also helps because the senior Republican on the committee can now relax; he will not be handing a victory to an incumbent Democrat if he lets the bill out of committee. The bill will not cost a lot of money. Finally, Wall Street bankers are not very popular at the moment with all the news stories about huge bonuses to executives at institutions that were taking government bailout money barely a year ago, so this will be an easy vote.

MR. MARTIN: Is it clear that anyone entering into an electricity price swap or hedge today would be exempted from this bill for no other reason than the swap was executed before the bill was enacted?

MR. WEISGALL: The retroactivity issue is a huge one. The House bill is silent on the question of retroactivity. We have been working hard to secure a grandfather provision. Congress may want to pick a retroactivity cut-off date — something like June 1, 2009 — to avoid shenanigans, but it needs something. Unless this is cleared up, the silence may lead to litigation. Every one of these contracts has a winning party and a losing party. A bill that is silent about retroactivity may allow the losing party to claim a regulatory out.

New Taxes?

MR. MARTIN: Switching topics again, Joe Mikrut, will Congress be forced by expensive health reform, the huge amount of stimulus spending and the wars in Iraq and Afghanistan to adopt a national value-added tax?

MR. MIKRUT: We will see how the Obama budget, due out in a month, attempts to address the projected budget deficits. One factor is that the Bush tax cuts that were enacted in 2001 and 2003 expire at the end of this year. Not extending them fully would bring in more money for the government. I don’t sense much interest in a value-added tax as long as there are other ways to address deficits.

MR. MARTIN: What are the odds of a value-added tax at this point — 20%? Less? More?

MR. MIKRUT: Over the next 10 years, 20% is not a bad guess. In the short term, the odds are much less.

MR. MARTIN: What are the odds of a corporate tax rate increase?

MR. MIKRUT: A corporate tax rate increase is unlikely. There is growing concern among policy makers that the corporate tax rate is higher in the United States than in other countries with whom we compete. Charlie Rangel, the chairman of the House Ways and Means committee introduced a bill he calls the “mother of all tax reform” that would reduce the corporate rate from 35% to 30%, and he suggested he might even be willing to go lower to 28%. S