October 26, 2017 Read More →

Move in Congress to Open an Oil-and-Gas Industry Tax Break to Solar and Wind Too

Washington Post:

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.

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.

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

Comments are closed.