House passes extension of tax breaks through year’s end; Senate likely to go along
The House bill, H.R. 5771, passed 378-46, with 26 Republicans and 20 Democrats dissenting. It is expected to clear the Senate next week.
“It’s another example of where we’re in this squirrel cage,” said Rep. Earl Blumenauer (D-Ore.), a strong supporter of the PTC, other clean energy incentives and benefits for transit users.
Some Senate Democrats had said they would fight the House’s approach and seek at least a two-year extension to the PTC and the more than 50 other tax breaks in the package, collectively known as tax extenders, arguing that the end of this year was inadequate.
“If it’s good policy for three weeks, why isn’t it good policy for two years?” Sen. Michael Bennet (D-Colo.), who chairs the Finance subcommittee on energy, said in a floor speech yesterday.
But after the overwhelming House vote, Wyden effectively threw in the towel on trying to find an alternative approach. A committee spokeswoman said Wyden last Sunday offered a bipartisan, two-year extenders bill that would have made permanent the research and development tax credit and additional permanent provisions for working individuals, families and businesses. But that offer was not accepted.
“We are disappointed that at this point there doesn’t appear to be a procedural path forward,” spokeswoman Lindsey Held said in an email.
Sens. Tom Udall (D-N.M.) and Ed Markey (D-Mass.) will appear today with clean energy advocates to highlight the shortcomings they see in the House bill.
But with just a week remaining until Congress is scheduled to adjourn for the year, it appears unlikely that lawmakers would be able to agree on any alternative to the House bill. Sen. Orrin Hatch (R-Utah), who will take over as Finance chairman in January, said too little time remained in the year and predicted the House bill ultimately would be adopted.
Clean energy supporters worry that the truncated House bill raises the likelihood that the PTC would not win another extension in the next session of Congress, when extenders and tax reform again will be on the agenda with Republicans in charge of both the House and Senate. While the credit enjoys support from some GOP lawmakers hailing from windy states, it has become a growing target of attacks from conservative groups, which say it is too expensive (E&E Daily, Dec. 3).
Opponents of the credit see their chances of success improving.
“I think there’s a growing weariness with these persistent efforts to pretend that wind is an infant industry and that rich wind developers need big tax subsidies in order to invest. It’s time for it to stand on its own,” Sen. Lamar Alexander (R-Tenn.), one of the credit’s leading opponents, said in an interview yesterday. “And I think, in a Republican Congress — I hope that we phase it out. I certainly am going to push to do that. I would end it.”
A broader, bipartisan extenders agreement that was being brokered last week would have gradually reduced the value of the PTC through 2017 and then eliminated it, but that deal fell apart following unrelated White House objections. Alexander said he had not seen all of the details of the phaseout approach but stressed that his preference would be to just not extend the credit at all beyond this year. He said he had not decided how to vote on the House-passed bill.
The American Wind Energy Association says its companies would shed 30,000 jobs without at least a two-year extension, based on previous experience when the credit was extended too late. But the nonpartisan Joint Committee on Taxation estimates that even the brief renewal would spur significant activity in the industry, pegging the cost of H.R. 5771’s PTC extension at $6.4 billion; that’s a downward revision from an earlier $9.6 billion estimate after a calculation error was discovered (E&ENews PM, Dec. 3).
The credit would apply to any qualified project — wind, biomass, and certain other sources — where construction begins by the end of this year. Developers could also make a 5 percent “safe harbor” investment to protect their ability to claim the $23-per-megawatt-hour credit, and anyone who would qualify this year likely would take that route given the limited amount of time.
In a blog post yesterday, AWEA Director of Research Michael Goggin argues that there is too little time remaining this year for companies to take advantage of the credit. Getting ready to break ground on a project takes at least several months, and even then, companies would be unlikely to make safe harbor investments, which typically involve inking turbine-purchase contracts, in the little time remaining this year.
“While five percent may not sound like a lot of money, in reality, it represents a significant investment and assumption of risk on the part of a project developer, risk and dollars that developers are unlikely to take on for a project without having already lined up a buyer for the power,” he wrote. “It would be like you making a non-refundable down payment on a house with no guarantee that you could actually move in — not a financial move many could afford to make.”