Legislation to provide renewable energy developers tax benefits that the oil and gas industry receives has picked up bi-partisan support in Congress. Republicans from oil and gas producing states have signed on as co-sponsors to the Master Limited Partnerships Parity Act. The bill also has the backing of the American Petroleum Institute (API). The bill will make it easier for green energy projects to access private investor capital.
Republicans supporting green energy? Either something is wrong with the bill or we are in the end of days after all.
Bill gives tax code parity to clean energy
The bill, introduced in the Senate last week, would allow renewable and clean energy-related companies to structure their businesses as master limited partnerships (MLPs) — avoiding double taxation while also trading ownership interests on the market, similar to corporate stock, Bloomberg BNA reported.
This treatment is currently only available to oil and gas projects and a limited number of traditional fossil fuel-related industries. Master limited partnerships will give green energy developers access to private capital at a much lower cost than investors in other energy projects, said Senator Chris Coons, Democrat from Delaware, the bills main sponsor.
Oil and gas companies have used the master limited partnership to finance their exploration and production operations for years. This bill will put renewable energy projects on parity with fracking operations. The bill could result in a loss of $1 billion in federal revenue over 10 years, however.
Coons said that starving a growing and vital part of our domestic energy sector of the capital that it needs to grow” just doesn’t make any sense.”
Representative Ted Poe, a Republican from Texas, is a co- sponsor of the parallel bill being introduced in the House. He supports the effort even though his constituents have strong ties to the oil and gas industries. That’s because “the tax code currently hinders the United States’ ability to develop all energy and be more energy- independent,” he said at a press conference last week.
Bi-partisan support but passage not assured
The bill has received support from both parties, including Republican co-sponsors Senator Lisa Murkowski of Alaska, the ranking member of the Committee on Energy and Natural Resources, and Senator Jerry Moran, a Republican from Kansas, whose home state serves as headquarters to Koch Industries, the major fossil fuel manufacturer headed by billionaires Charles and David Koch. Senator Debbie Stabenow, a Democrat from Michigan, is another co-sponsor.
The American Petroleum Institute publicly announced its support for expanding the partnership structures to renewable energy projects April 23, while more than 236 renewable energy- related groups signed an April 24 letter to Congress in support of the bill.
There is likely to be opposition from other Republicans who are opposed to renewable energy all together. Others will look at the loss of $100 million a year in tax revenue saying it will make balancing the budget harder. It is a drop in the bucket to the $4 billion a year in subsidies the oil and gas industry receive.
Bill could reduce cost of green energy
Andrew Savage, a spokesman for Vermont-based solar technology manufacturer AllEarth Renewables, told Bloomberg that MLPs could drive down the cost of renewable energy by driving down the cost of capital for those projects, “which is an exciting thing for the industry,” he said.
Investment in solar projects in 2012 dropped 50% from the previous year’s level. Federal support is drying up due to opposition by Republicans in Congress, so this bill is crucial for the renewable industry to raise capital.
The structure will be “particularly important in creating a strong new market (now virtually non-existent) for owners of existing and even recently completed projects to sell those projects to an MLP, thereby accelerating the investment of capital into new projects, the group of renewable energy-related groups said in the letter it sent Congress in support of the bill.
Hopefully support from Republicans from oil patch states will help pass this bill.
If you like this article share it, “like” me on Facebook, or follow me on Twitter.