Recurring GOP bill updated to include wind tax credit phaseout

Source: Nick Juliano, E&E reporter • Posted: Monday, May 27, 2013

A House Republican has updated his recurring energy bill this year to include a phaseout of a key renewable energy tax credit, marking the first inclusion in formal legislation of an idea the wind industry floated last year.

Rep. Mac Thornberry (R-Texas) introduces his “no more excuses” energy bill every Congress, outlining a lengthy wish list of policies for oil, natural gas, nuclear and renewable energy, including calls to allow expanded oil drilling on federal lands and waters and to extend targeted renewable electricity and alternative fuel tax credits.

Thornberry is not a member of committees with jurisdiction over energy or tax policy, and previous versions of his legislation have gained little traction in the House. This year’s version, H.R. 2081, seems likely to follow a similar trajectory, but it is notable in its inclusion of a proposal to phase out the production tax credit for wind energy, an issue that could gain more attention in the context of comprehensive tax reform.

The bill would reduce the value of the PTC for wind — currently worth 2.3 cents per kilowatt-hour — by 10 percentage points per year between 2014 and 2017, leave it in place at 60 percent of its value in 2018 and end it beyond 2019. For other technologies eligible for the PTC, such as geothermal, biomass and waste-to-energy, the credit would be extended at full value until 2019.

Previous versions of the legislation included straightforward extensions of the PTC with no reduction in the credit’s value.

In December, the American Wind Energy Association released a letter to Congress outlining a phaseout of the credit by 2019 identical to the language included in Thornberry’s bill, although the letter presented the phaseout as an idea to be considered in the context of a comprehensive tax-reform bill that would eliminate tax incentives across the energy industry (E&E Daily, Dec. 13, 2012).

Since winning a one-year PTC extension in January, the wind industry has dialed back its PTC lobbying efforts to focus on developing a long-term strategy to guide the industry away from its boom-and-bust reliance on federal support (Greenwire, May 9). Industry lobbyists continue to monitor ongoing negotiations over comprehensive tax reform, which could include a PTC phaseout, but they also are ready to push for a shorter-term renewal as part of a smaller “tax extenders” bill next year if comprehensive tax reform falters.

 LNG tax parity

In addition to the PTC provision, Thornberry’s bill proposes a reduction in the excise tax on liquefied natural gas to make it equivalent to the tax on diesel based on energy content. Currently, both LNG and diesel are taxed at the same 24.3-cents-per-gallon rate, but LNG provides about 58 percent as much energy per gallon.

Thornberry yesterday introduced a stand-alone bill focused solely on the LNG parity issue. It would effectively lower the tax on a gallon of LNG to about 14 cents per gallon. That bill, H.R. 2202, was co-sponsored by Rep. John Larson (D-Conn.), a member of the tax-writing Ways and Means Committee, and companion legislation in the Senate is expected to be introduced by Sens. Michael Bennet (D-Colo.) and Richard Burr (R-N.C.), according to a statement from Thornberry’s office.

The lawmakers are offering the language as a candidate for inclusion in the tax reform effort, an aide said, and it echoes comments from natural gas transportation supporters who urged the Ways and Means energy working group to provide parity between LNG and diesel taxes.

“This bill provides a fair, market-centered solution to fix the tax disparity between diesel and LNG,” Thornberry said in a statement. “I think this change will encourage more private sector investment in LNG infrastructure and production, and that will be a real positive effect on our economy.”