On July 17, the Congressional Research Service released a report: Energy Policy: 113th Congress Issues. The report is available here.
The report has little analysis and mostly summarizes the current energy debate between those concerned about greenhouse gasses and those concerned about the economic costs of addressing the same.
Oddly, the report mischaracterizes the extension of the production tax credit (PTC) that was enacted this January: “The 112th Congress[‘s] … most significant action was extension of energy tax credits, including the PTC for wind energy, to January 1, 2014, as part of P.L. 112-240, the American Taxpayer Relief Act of 2012.” The PTC was not extended “to January 1, 2014” it was extended for projects that start construction before January 1, 2014.1 The “start of construction” distinction is important: projects that are in service in 2014 or even later can qualify, if construction commenced in 2013. For a discussion of the “start of construction” rules, see our client alerts available here and here.
The quoted sentence’s use of the phrase “extension of energy tax credits” is also questionable. That could sound like all the energy tax credits were extended. Significantly, the 30 percent investment tax credit (ITC) for solar was not extended. The 30 percent ITC for solar continues only to apply to projects that are placed in service by the end of 2016.
A significant omission in the report is its failure to include the proposed Master Limited Partnership Parity Act (H.R. 1696 and S. 795). These bills are slightly modified version of bills first introduced last year (H.R. 6437 and S. 3275). The proposed legislation expands the master limited partnership tax rules to apply to renewable energy projects, so that such projects could be owned by publicly traded vehicles subject to only tax at the unit holder level. The legislation has bipartisan and bicameral support with the lead advocate being Sen. Coons (D-DE) and appears to be supported by Heather Zichal, deputy assistant to the president for energy and climate change.2 The proposed MLP legislation is discussed in my blog post available here and could significantly change the operations and economics of the renewables industry.
Here are some of the more salient excerpts from the report:
- “Energy policy in the United States has focused on three major goals: assuring a secure supply of energy, keeping energy costs low, and protecting the environment.”
- “Implementing these programs has been controversial because of varying importance given to different aspects of energy policy. For some, dependence on imports of foreign oil, particularly from the Persian Gulf, is the primary concern; for others, the indiscriminate use of fossil fuels, whatever their origin, is most important.”
- “Coal for many years supplied half the electricity generated nationally. In recent years its share has declined; it was about 42% in 2011, and about 36% through September 2012. Generation by natural gas has risen in importance, supplying about 25% in 2011 and 31% in 2012. To those who regard global climate change as an urgent issue, this trend is important because generating electricity from coal emits roughly twice the carbon dioxide per kilowatt-hour than generating from natural gas. Nuclear fission supplies about 20%, hydropower less than 10%. Petroleum, an important generating fuel in the 1970s and early 1980s, now contributes less than 1% of electricity generation. A surge of construction of wind-powered generating capacity has brought its share of total generation to about 3%.”
- “An additional issue involving oil and gasoline prices is the role of the Strategic Petroleum Reserve (SPR), which was set up after the Arab oil embargoes to fill temporary interruptions in the supply of oil. In principle releases from the SPR are limited to cases in which a physical lack of supply exists, but some have argued that it can be used to dampen surges in world oil prices even when current supply is adequate to meet demand. The June 2011 release of 30 million barrels from the SPR in response to the Libyan civil war has been deemed by some critics as such an attempt to influence the market when U.S. supplies were adequate.”
- “Limits on cross-state emissions of sulfur dioxide and nitrogen oxides, emissions of mercury and other hazardous pollutants, and regulation of greenhouse gas emissions, among other proposed regulations, have been characterized by critics as a regulatory ‘train wreck’ that would impose excessive costs and lead to plant retirements that could threaten the adequacy of electricity capacity (i.e., reliability of supply) across the country, although some in the electric power industry consider those concerns overstated.”
1 I.R.C. §45(d)(1) (“the construction of which begins before January 1, 2014”).