Governors' Wind Energy Coalition

While comprehensive tax reform has been on Congress’ back burner for most of the year, a Senate hearing this week could shed some additional light on what an eventual overhaul of the tax code would mean for oil companies, renewable energy developers and others in the energy industry.

The Finance Committee on Wednesday will hear from industry representatives and economists on the dozens of permanent or temporary incentives sprinkled throughout the tax code designed to support all types of energy, from the permanent deduction oil companies can take to cover “intangible drilling costs” to the now-expired production tax credit for wind, biomass and other renewable electricity.

Among those scheduled to testify are former Sen. Don Nickles (R-Okla.), a onetime chairman of the Budget Committee who also served on the Finance and Energy and Natural Resources panels. Now a lobbyist, Nickles has represented several energy companies through the years, and he previously served on the board of directors of Chesapeake Energy Corp.

This week’s hearing will be the first on energy tax policy since Sen. Ron Wyden (D-Ore.) took over as chairman of the Finance Committee, following Max Baucus’ departure in February when he became the U.S. ambassador to China.

Wyden laid out his approach to energy tax policy in an April speech at a summit hosted by Bloomberg New Energy Finance. He said his two main principles were bringing “parity and predictability” to the tax code and outlined a variety of examples where those are lacking. For example, he said a popular oil and gas tax break available when companies establish master limited partnerships should be either extended to clean energy firms or eliminated altogether (E&E Daily, April 8).

The road ahead for tax reform remains unclear — and will be influenced heavily by who controls the Senate after the midterm elections — but Wyden has said he worked with Baucus on an energy tax proposal the former chairman floated just before he decamped for China. Baucus’ plan would have replaced virtually every incentive for fuel and electricity production currently in the tax code with two credits whose value was tied to the energy sources’ greenhouse gas emissions; a third credit would have encouraged carbon capture and sequestration for power plants (Greenwire, Dec. 18, 2013).

Wyden’s immediate goal, though, remains extending the dozen or so energy tax breaks, including the PTC, that are part of a broader “tax extenders” bill. Partisan bickering over procedural rules sunk the extenders bill earlier this summer, but Senate Majority Leader Harry Reid (D-Nev.) has promised to bring it back up in a post-election lame duck session (E&ENews PM, Sept. 4).

The House has taken a narrower approach to tax extenders, seeking renewal of just a handful of the business tax breaks and none of the energy ones, but it remains to be seen how or whether the two chambers would be able to work out an agreement before the end of the year.

Schedule: The hearing is Wednesday, Sept. 17, at 10:15 a.m. in 215 Dirksen.

Witnesses: Former Sen. Don Nickles (R-Okla.), president and CEO, the Nickles Group; Norman Augustine, retired chairman and CEO, Lockheed Martin Corp.; Gilbert Metcalf, professor of economics, Tufts University; Ethan Zindler, head of policy analysis, Bloomberg New Energy Finance; and David Kreutzer, research fellow in energy economics and climate change, Center for Data Analysis, the Heritage Foundation.