Illustration: Shoshana Gordon / Axios
Republican senators are considering relaxing restrictions on House-passed supply chain rules that energy companies say would render IRA energy credits inaccessible.
Why it matters: Foreign entity of concern, or FEOC, restrictions bar the tax credits from benefiting projects that import materials from China or U.S. adversaries.
- They're one of the sticking points as the Senate Finance Committee hashes out a deal on the credits.
- Solar companies, grid manufacturers, investors, and 13 House Republicans have criticized the House-passed reconciliation bill's provisions as overly stringent.
What they're saying: "We're looking at FEOC," Sen. Steve Daines, a Finance member, told Axios.
- The goal is "thoughtful consideration to make sure that we minimize any unintended consequences of the policy," Daines said.
- Bill Cassidy, another Finance member, told Axios: "We want to make sure that we don't — in an effort to do something positive to address foreign entities of concern — create an inability to accomplish a project."
Zoom in: Options on the table include phasing in an FEOC prohibition over a few years.
- Lawmakers could also require a certain percentage of content to be sourced from the U.S. or a friendly country by a certain year.
- Groups that have spoken with Senate Republicans said they see an openness to broadening prohibitions to cover components of products instead of subcomponents.
Cassidy declined to give details, but pointed to nuclear energy — a major priority for President Trump.
- At a nuclear plant, "you have 120,000 parts sourced, and you gotta track all 120,000 — that could be tough," Cassidy said. "And some of those parts are probably not totally integral to the security of it."
- "So there has to be some discussion with stakeholders to make sure you get it right," he said.
The big picture: Letters have been pouring in pressing the Senate to relax the FEOC language.
- The Data Center Coalition said Monday that FEOC rules, if passed, would be "unnecessarily restricting access to critical technologies and materials or requiring time-consuming interpretation by federal agencies."
- Mike Reynolds, a partner at Ultra Capital who met with Finance Committee Republicans last week, told me that the FEOC rules create "uncertainty [that] would scare away tax equity. It would make investors really wary of even investing in projects that rely on tax credits."
What we're watching: Finance Chair Mike Crapo is expected to brief senators Thursday afternoon on the panel's progress.
The bottom line: Talks are extremely fluid right now, and there's no guarantee any changes will be made.
