Tax debate opens door for renewables to get same break as fossil fuels

Source: By Dino Grandoni, Washington Post • Posted: Thursday, October 26, 2017

Sens. Jerry Moran (R-Kan.), left, and Chris Coons (D-Conn.), right, talk with Steve Case, the co-founder of AOL and a member of President Obama’s Council on Jobs and Competitiveness before a news conference on Capitol Hill in 2012. (Andrew Harrer/Bloomberg)

As solar and wind power make up a small but increasing share of U.S. electricity generation, at least one member of the Trump administration has pointed out that the renewable energy sources are propped up by federal tax subsidies.

“I’d let them stand on their own and compete against coal and natural gas and other sources,” Environmental Protection Agency chief Scott Pruitt said of solar and wind energy this month.

Left unmentioned are the several ways in which the U.S. government subsidizes fossil-fuel energy.

One of the biggest boons for the oil-and-gas sector is the use of a legal entity called a master limited partnership, or MLP, which allows firms to lighten their tax loads and get easier access to investment in pipelines and other projects.

Now a group of bipartisan senators wants to let alternative sources of energy use that investment and tax vehicle, too.

On Wednesday, Sens. Christopher A. Coons (D-Del.) and Jerry Moran (R-Kan.) will introduce a bill designed to allow firms building wind turbines, solar farms and other alternative energy projects to use MLPs.

The legislation has been introduced in past Congresses, but had always been delayed until a larger tax package is under consideration.

“For the previous two Congresses, I’ve been blessed to have great partners in both the House and the Senate,” Coons said in an interview with The Energy 202. “But at the end of the day, the chairs and ranking [members] of [the House] Ways and Means and [Senate] Finance,” the two committees with dominion over tax policy, “told all of us, ‘You have to wait for comprehensive tax reform.’ “

Now, that moment seems to be here.

Despite President Trump’s open feud with two Republican senators, the White House and Congress are trying to make headway on their next big legislative agenda item: rewriting the nation’s tax code. With the tax door open, interest groups — including those backing expanding MLPs — are urging legislators to enact some ideas that have been collecting dust on the shelf.

Normally, money made by a publicly traded company is taxed twice — both the corporation and its shareholders pay their own separate tax bills.

But an MLP qualifies as what’s known as a “pass through” company — earnings pass through the partnership to the shareholders without being taxed.

Since the 1980’s, oil and gas firms create MLPs for individual pipelines, refineries and other energy infrastructure projects. But the current tax code prevents their use in wind, solar hydropower, fuel cell, waste-heat-to-power and energy-efficient building projects — all targets of the Coons-Moran proposal.

Unlike other limited partnerships, MLPs can sell off shares in the venture. With access to this particular corporate entity, renewable energy projects could raise capital more easily than they do today.

“The United States has the largest and most efficient capital markets in the world,” Moran said in a statement, “yet our renewable energy companies rarely have access to those markets.”

Right now, only large institutional investors, such as Google and Goldman Sachs, can make investment plays that take advantage of renewable tax credits. The MLP proposal would, in contrast, “open up to regular people the ability to invest in clean energy,” said Dan Reicher, executive director of the Steyer-Taylor Center for Energy Policy and Finance at Stanford University who helped craft the Coons-Moran proposal.

At the same time, a subsidy may lure more of those big institutional funders. “Just allowing these technologies to access MLPs signals to investors to put money into even earlier-stage projects,” said Kurt Waltzer, managing director of the Clean Air Task Force, an environmental group.

If the expanded subsidy became law, it would arrive just as solar and wind tax credits are scheduled to wind down over the next five years.

Renewable energy advocates like to note that the subsidies propping up wind and solar are temporary while those for oil and gas, like MLPs, are permanent. So they see two paths to parity in the industry: expanding MLPs to nearly all forms of energy, or getting rid of them for everyone.

The oil and gas sector, and its allies in Congress, appear to have erected few, if any, roadblocks in the way of going down the first road. The bill throws the oil and gas sector a few bones by granting firms the ability to use MLPs for technologies the sector is developing, including carbon capture and storage, combined heat and power and algae-based fuels.

In addition, expanding the use of MLPs builds a bigger coalition of industries willing to fight to preserve it.

Rep. Ted Poe (R-Texas). (AP Photo/Andrew Harnik, File)

Rep. Ted Poe, who represents much of Houston, is the lead Republican co-sponsor in the House, for example. Other Republicans from oil and gas country, including Senate Energy and Natural Resources Chairwoman Sen. Lisa Murkowski (R-Alaska), have backed past iterations of the language.

“I think this is a neutral issue” for oil and gas, Coons said. “In fact, some folks who are strong allies of oil and gas and the traditional fossil-fuel industry like Ted Poe have supported this bill because they see it as a way to strengthen and make permanent” MLPs.

The U.S. Chamber of Commerce, which has more than a few fossil-fuel members, backed MLP parity in a 2014 report. The American Petroleum Institute has not taken a position on past versions from Coons and Moran, spokesman Michael Tadeo wrote by email.

Democrats’ progressive wing may have more doubts. In 2012, Sen. Bernie Sanders (I-Vt.) and Rep. Keith Ellison (D-Minn.), now deputy chair of the Democratic National Committee, put forward a bill that would strip nearly all subsidies for the fossil-fuel sector, including the formation of MLPs. (Sanders’s office did not reply to a request for comment.)

There are some drawbacks to an MLP expansion — for one, it’s expected to dampen tax revenue. But proponents argue that nonpartisan Congressional Budget Office gave a past version of the bill a “modest” score, estimating that it would cost the federal government $1.3 billion over 10 years.

And of course, there’s the biggest wild card of them all: President Trump. When asked whether Moran would push to have the expanded subsidy included in the president’s tax overhaul, a Moran spokesman simply said the senator from Kansas “thinks this is sound policy that should become law.”


Ryan Zinke speaking during an event at the Heritage Foundation in September. (Zach Gibson/Bloomberg)

— Questionable: Interior Secretary Ryan Zinke has directed millions of dollars in donations to political operatives who have been accused of misleading donors, Politico reported. One such beneficiary includes groups linked to Scott B. Mackenzie, who Politico notes has been charged with operating “scam PACs” that raise money only to spend the contributions on consultants and overhead costs rather than on any given cause. Zinke’s own PAC has spent much of its small contributions on consultants, per the report.

Politico’s Ben Lefebvre and Nick Juliano continue: “The details about Zinke’s fundraising and spending practices have not been previously reported, nor has his years-long relationship with Mackenzie’s Virgin Islands Republican Party, a group that some Republicans in the Caribbean island chain have accused of misrepresenting itself to donors. POLITICO’s analysis of Federal Election Commission filings, plus interviews with campaign finance lawyers and people familiar with the Virgin Islands group’s fundraising, offer a deeper picture of the political activism of the retired Navy SEAL who serves in President Donald Trump’s Cabinet.”

Some may remember the Virgin Islands as one of the locations where Zinke took private flights.

And there’s more: Following news that a small company from Zinke’s hometown was awarded a $300 million contract to help repair Puerto Rico’s electric grid, Sen. Maria Cantwell (D-Wash.), ranking member of the Senate Energy and Natural Resources Committee, is calling for an investigation into the deal. “Today I am calling on the Government Accountability Office to investigate the circumstances surrounding the multi-million dollar contract awarded to Whitefish Energy — a brand new company with two employees,” Cantwell said in a statement on Tuesday.

The top Republican and Democrat on the House Natural Resources Committee Chairman are looking into the deal too, according to the Washington Examiner.

The Atlantis oil and gas production platform in the Gulf of Mexico. (Marc Morrison/BP)

The biggest deal: The Interior Department announced it will propose the largest oil and gas lease sale in the country’s history by opening up nearly 77 million acres in the Gulf of Mexico, off the coasts of Texas, Louisiana, Mississippi, Alabama and Florida. From the Associated Press: “The sale, scheduled for next March, includes all available unleased areas on the Gulf’s Outer Continental Shelf, a reflection of the Trump administration’s strategy to maximize oil and gas drilling on federal lands and waters.”

But with oil price hovering around $50 per barrel, there may not be at the moment much pent-up demand for more drilling. The AP continues: “Even so, only a small fraction of the tracts available are expected to receive bids. A similar lease sale in August drew bids on just 90 offshore tracts totaling about a half-million acres — less than 1 percent of the 76 million acres available.”

Meanwhile, The Post’s Darryl Fears reflects on the legacy of the 2010 Deepwater Horizon explosion and spill: “Years later, the spill’s effects are still being felt, according to a report by the nonprofit group Oceana. Scientists have detected hydrocarbons from the well in 90 percent of pelican eggs more than 1,000 miles away in Minnesota, where the birds spend summer after wintering along the gulf. Dolphins living in Barataria, La., have experienced mortality rates 8 percent higher than dolphin populations elsewhere, and their reproduction success dropped 63 percent.”

Arizona Democrat Rep. Raúl Grijalva charged Zinke with taking credit for an Obama-era plan. “Republicans spent eight years alleging the Obama administration was killing oil and gas when they knew it wasn’t true,” said the top Democrat on the House Natural Resources Committee. “Now they’re taking credit for lease sales made under the Obama leasing plan. Tomorrow they may as well claim credit for capturing Osama bin Laden.”

Sen. Lisa Murkowski (R-Alaska) speaks to reporters. (REUTERS/Joshua Roberts)

–“Climate change is real:” That’s what Lisa Murkowski, the Republican senior senator from the state where its effects are seen most starkly, said at the Alaska Federation of Natives convention over the weekend.

Murkowski broke with some members of her own party who doubt the conclusion of climate scientists, and warned the convention’s attendees to begin to take action.

“While health care has been the issue that has been dominating our days, it isn’t the issue that is defining our time,” she said, according to KTOO Public Media. “Our world is changing. The world around us is changing: socially, economically and ecologically. And we all know that climate change is at the heart of this change.”

But: Murkowksi is one of the biggest advocates for the oil industry in the Senate, and recently scored a long-sought political victory after the chamber voted last week to raise revenue by drilling in the Arctic National Wildlife Refuge in her state.

A view of a collapsed fence by the flood of the river at the Luis M. Santiago school which remains closed while today the department of education resumes classes during the aftermath of Hurricane Maria in Toa Baja, Puerto Rico on Oct. 24. (David Santiago/Miami Herald via AP)