Grassley blasts Republican attacks on wind tax credits as industry searches for ‘parity’

Source: By Michael Copley, SNL • Posted: Tuesday, April 28, 2015

Republican Sen. Chuck Grassley of Iowa, the father of a tax credit prized by the U.S. wind industry, took aim April 23 at lawmakers in his own party who are trying to dismantle the subsidy while leaving in place incentives for other sectors of the energy industry.

Speaking a day after Republicans in the House of Representatives unveiled a bill that would cut the value of the production tax credit and abolish the incentive at the end of 2025, Grassley, a member of the Senate’s budget and finance committees as well as the Joint Taxation Committee, said Congress should only change energy policy in the context of comprehensive tax reform when all “special-interest provisions” are up for consideration.

Noting deductions the oil and gas industry can claim for things such as intangible drilling costs and well depletion, Grassley said some of his colleagues prefer debating energy policy in a vacuum.

“I’m sympathetic to the argument that the tax code has gotten too cluttered with too many special-interest provisions. That’s the reason many of us have been clamoring for tax reform. But just because we haven’t cleaned up the tax code in a comprehensive way does not mean that we should pull the rug out from under domestic renewable energy producers,” Grassley said at a policy forum hosted by the American Council on Renewable Energy in Washington, D.C.

“Businesses need certainty in the tax code so that they can plan and invest,” he added. “The only sound way to reach this goal is through a comprehensive tax approach. Targeting certain provisions for elimination outside of tax reform makes no sense.”

The production tax credit expired at the end of 2014, but developers could qualify projects by starting construction or incurring at least 5% of costs before the end of last year. Wind farms that are online by the end of 2016 will be able to collect credits, currently valued at $23 per MWh that a plant produces, without developers having to prove they worked on them “continuously.”

On April 22, Republican Reps. Kenny Marchant of Texas and Mike Pompeo of Kansas outlined a bill, known as the PTC Elimination Act, that would get rid of the credits’ inflation adjustment, effectively cutting the incentive’s value by about 35%, the lawmakers said. The bill, which would erase the PTC from the tax code in 10 years, also stipulates that developers had to have started construction, rather than make certain investments, by the end of 2014 in order to qualify projects.

Some doubt the legislation, the latest in a long-running fight between clean-energy advocates and some conservative lawmakers, will gain traction. Lobbyists say the wind industry has spread to enough states to enjoy broad bipartisan support.

Sen. Cory Gardner, R-Colo., on April 23 said he wants to extend the production tax credit as soon as possible. But Congress’ focus on overhauling the country’s tax code is complicating such efforts.

“Tax reform and the extenders are getting in the way of each other, and although we do know tax reform isn’t going to get done, both sides of Congress, they’re very serious about it and have decided, ‘We don’t really want to talk tax extenders until we’ve put [tax reform] to bed for this year,'” said Katie Cullen, a partner at the lobbying firm SC Partners. The “big question,” she said, is whether Congress puts tax reform to bed this summer or at the end of the year.

Gardner, a member of the Senate Energy and Natural Resources Committee, said he is frustrated by the approach. “Some things are important enough that they can’t wait” on sweeping legislation like tax reform, he said.

Even with such backing, there is a sense that the wind industry might have to accept a deal that phases the credit out, or at least reduces it, over a number of years. Congress generally does not consider policy changes when it extends temporary tax credits.

Xcel Energy Inc. Chairman, President and CEO Benjamin Fowke III said it seems appropriate to reduce the value of the PTC over a number of years before making it permanent.

“To me, that’s a reasonable compromise. I think it reflects where we are economically. And I think it avoids that cliff syndrome that every wind developer’s had to struggle with,” Fowke said at the conference.

“Renewables, basically, are in the money today,” he added.

Cullen said the wind industry would probably accept a “ramp down” of the PTC over three to five years.

“I’m happy to discuss a reasonable, multi-year phase out of the wind tax credit,” Grassley said. “But any phase out, from my point of view, must be done in the context of comprehensive tax reform where all energy tax providers are on the table.”

SunEdison Inc. President and CEO Ahmad Chatila said renewable energy companies are looking for equitable policy. “We just want parity with the fossil industry,” said Chatila, whose company moved into the wind space in 2014 when it agreed to buy First Wind Holdings Inc. for $2.4 billion. “We don’t want more. We just want parity,” he said.

Getting to that point likely will require more lobbying than the renewable energy industry has done in the past, said Mark Goodwin, president and COO of Apex Clean Energy.

“For too long, I think, our sector has relied heavily just on this notion that we’re the good guys and that we’ll win out,” he said. “But the game is harder.”