Company behind Capitol Hill memo won $25 million green grant from Biden admin
A company that embraced the Biden administration’s efforts to force climate-friendly requirements on residential appliances is behind a last-ditch lobbying effort to save a controversial rule targeting gas-powered residential water heaters—even as other industry manufacturers say that rule will cost them millions of dollars.
A.O. Smith, the nation’s largest water heater manufacturer, circulated a memorandum to Republican Senate offices last week, imploring lawmakers to support the Biden-era regulations and, in particular, to vote against Sen. Ted Cruz’s (R., Texas) bill that would overturn those regulations. A.O. Smith vice president Joshua Greene, a former Democratic congressional aide, authored the memo in mid-January, a Washington Free Beacon review of the document’s metadata found.
The effort is noteworthy because it reveals how federal regulations, including those designed to fight global warming, can be weaponized to boost a company’s bottom line. It also puts a spotlight on A.O. Smith’s coordination with the Biden administration as it sought to crack down on appliances and funnel taxpayer funds to climate programs.
In August, the Department of Energy awarded A.O. Smith with a $25 million green energy grant to expand its electric heat pump water heater manufacturing capabilities, something that likely makes it easier for the company to move on from manufacturing the gas-powered models impacted by the regulations finalized in December. An industry source familiar with A.O. Smith’s business told the Free Beacon that the company has agreed in recent years to stop manufacturing most of its gas-powered tankless water heater models—the same ones targeted by the Biden-era regulations—in favor of tank water heaters and electric heat pump water heaters. In other words, the company is largely insulated from the rules.
Rinnai America—a water heater manufacturer that, unlike A.O. Smith, largely sells gas-powered tankless models—is not. Rinnai told the Free Beacon last month that the Biden administration’s regulations “make no sense” and would cost the company tens of millions of dollars. Rinnai also joined a lawsuit filed last month by Republican-led states and industry groups challenging the rules.
In comments submitted to the Department of Energy in 2023, Rinnai, which owns a much smaller market share than A.O. Smith, estimated that the regulations would render its gas-powered water heater manufacturing plant in Georgia obsolete, costing the company between $30-36 million per year.
“There are always some manufacturers that see an advantage in these regulations, but it’s not the role of the government to create a captive market for more expensive products,” Ben Lieberman, a senior fellow at the Competitive Enterprise Institute, told the Free Beacon in an interview. “It’s the role of the government to maintain a free market and a free market is best served without these regulations.”
“So, I hope no Republican takes this lobbying seriously, but I think what’s going on here is the swamp in action,” he added.
A.O. Smith’s lobbying push also runs counter to the Trump administration’s prioritization of consumer choice. On his first day in office, President Donald Trump signed an executive order to safeguard the “American people’s freedom to choose from a variety of goods and appliances.”
Cruz’s resolution represents the first opportunity for the new Congress to pass a bill rolling back Biden-era environmental regulations. The Senate could hold a floor vote on the bill as early as this week.
“This is what it looks like,” a Republican congressional aide told the Free Beacon. “A career Democrat lobbyist who has spent decades in the swamp is trying to undermine the Republican push to roll back appliance regulations, which is so important President Trump put it in an executive order.”
Greene, the lobbyist for A.O. Smith, worked in legislative affairs for Rep. Jerry Nadler (D., N.Y.) and former Rep. Eliot Engel (D., N.Y.).
The Air-Conditioning, Heating, and Refrigeration Institute, the trade association that represents water heater manufacturers, said in a statement that it supported the Department of Energy’s regulations. The group’s statement closely mirrored the language used in A.O. Smith’s memo to lawmakers.
A.O. Smith has outsized influence at the institute. The company is the largest water heater manufacturer in North America, and its CEO Kevin Wheeler recently served as the trade association’s chairman. A.O. Smith president and COO Stephen Shafer serves on the group’s board of directors.
Under the regulations, roughly 40 percent of the new instantaneous tankless water heaters currently on the market will be banned by 2029 and, on average, consumers will be forced to pay $450 more when purchasing a new water heater after the rules are implemented.
A.O. Smith and Greene did not respond to a request for comment.
