April 22, 2012, the 43rd Anniversary of Earth Day, was an important reminder of the need to remain committed to our environment. Thankfully, Sens. Chris Coons (D-Del) and Ron Wyden (D-Ore) did not miss the opportunity, and spoke yesterday about what should be non-controversial legislation to allow alternative energy projects to benefit from a tax-advantaged financing structure that has been available to fossil fuel energy projects for decades.
What I’m referring to is something called a “master limited partnership” (or MLP). An MLP is an entity that is taxed as a partnership (in other words, no entity level tax), but which has widely held interests that can be traded much like shares of stock. Oil, natural gas, coal and pipeline projects have been using this structure to expand their access to capital since the 1980s. (For additional discussion of MLPs, see David Burton’s post of March 12, 2013 - “A Camel’s Nose Under the Tent: MLP Legislation”).
Sen. Coons announced yesterday that he, along with Sens. Jerry Moran (R- Kan), Debbie Stabenow (D-Mich) and Lisa Murkowski (R-Alaska), will introduce a bill in the Senate on Wednesday, April 24 that would extend the MLP structure to wind farms, solar energy facilities and other renewable energy projects. The bill is expected to be similar to a bill introduced by Coons in 2012, but with expanded reach to include waste-heat to power, carbon capture and storage, biochemicals, and energy-efficient building projects.
I hope Coons’ legislation will fare better this year than last. Sen. Murkowski says there is bi-partisan support in both houses of Congress for allowing clean energy companies to use the MLP structure. (Bloomberg Businessweek, “Murkowski Sees Wider Support for Clean Energy Tax Break,” April 22, 2013). Those who support the bill argue that by expanding the industry’s access to the capital markets, the bill will attract more investment in clean energy projects. Additional investment should lead to lower capital costs, which in turn should mean expanded project development in renewables.
It was encouraging to hear public support yesterday from Sen. Wyden, a member of the Senate Finance Committee and someone who is actively involved in energy tax reform. While Wyden will not add his name to the bill, he did comment that the idea of extending the MLP structure to clean energy projects is consistent with one of his key values. According to Bloomberg BNA’s Daily Tax Report (April 23, 2013), Wyden stated in an interview with reporters: “It would say renewables would get, in effect, parity with these other energy perks … which is really one of my bedrock principles.” Business Roundtable and Heather Zichal, the White House deputy assistant to the president for energy and climate change, are also reported as supporting expanded access to the MLP structure. (Bloomberg BNA’s Daily Tax Report (April 23, 2013); for more about Zichal, see David Burton’s post of April 9, 2013 – “White House Seeks to Expand Energy Tax Policy”).
Wyden’s comment about parity should be a wake-up call to all of us. Tax policy to encourage investment in clean energy need not be limited to controversial tax credits and other tax benefits that some claim are unfair subsidies to the industry (a topic for a different day). Passage of a bill that extends the MLP structure to alternative energy projects should be a no-brainer. In honor of Earth Day, we must not forget that the absence of parity has the effect of discouraging investments in the types of energy we need to develop for the sake of our environment.