Dems, companies push more tax provisions onto FAA bill

Source: Geof Koss, Christa Marshall and Marc Heller, E&E reporters • Posted: Wednesday, April 6, 2016

As senators wrestle with the scope of tax provisions to accompany legislation to reauthorize the Federal Aviation Administration, energy interests are scrambling to hitch a ride on one of the few must-pass legislative vehicles of the year.

Democrats are pushing to include incentives for certain power sources — including geothermal, biomass and fuel cells — that lawmakers left out of last year’s spending and tax compromise legislation (E&E Daily, April 5).

Even though negotiations continue on the subject, Senate Commerce Chairman John Thune (R-S.D.) told reporters he hoped the minority wouldn’t block a procedural vote this morning.

“At this point, that’s still a work in progress,” Thune said about talks on tax provisions. “It’s going to take 60 votes to get this done.”

Senate Democratic Leader Harry Reid (D-Nev.) told reporters that including investment tax credit extensions in the FAA bill was a make-or-break issue for his caucus.

“We have to have that done,” Reid said. “There was a mistake in the drafting.”

Even though some Republicans dispute that leaving the provisions out was an error, Reid said Senate Majority Leader Mitch McConnell (R-Ky.) “has acknowledged that” and Speaker Paul Ryan (R-Wis.) “has said that he will go along with whatever we send him, he said that to a large audience.”

Finance Committee ranking member Sen. Ron Wyden (D-Ore.), however, is also pushing for extending a suite of other energy tax breaks. Thune acknowledged the pressures.

“There aren’t many tax titles moving. This is what [Democrats] always viewed as the best opportunity to get some of these things left out of last year’s extenders bill done,” he told reporters.

Majority Whip John Cornyn (R-Texas) said the Democrats’ push added “a layer of controversy” to the FAA debate. “We’re going to keep plowing ahead, but that’s going to create some challenges,” he told reporters.

“There’s other people that have amendments, national security and other amendments, this obviously is a must-pass piece of legislation,” said Cornyn. “But the danger is if it gets too burdened with extraneous provisions, it looks like my guess is we’re in extension mode, and I don’t think that’s optimal.”

Biofuel credits

Among the provisions Wyden is pushing include certain biofuel credits, although he declined to identify which ones. “We’re not going to negotiate in public,” Wyden said. “I think we’re making good progress.”

Five credits dealing with so-called second generation biofuel production, biodiesel fuels and other aspects of biofuels expire at the end of this year unless Congress renews them.

Congress extended those credits last year for two years. That’s in contrast to other energy tax credits that Congress extended until 2019.

The longer-lasting credits include the Second Generation Biofuel Producer Tax Credit, the special depreciation allowance for second generation biofuel plant property, the Biodiesel and Renewable Diesel Fuels Credit, alternative fuel and alternative fuel mixture excise tax credits, and the Alternative Fuel Vehicle Refueling Property Credit.

Six biofuel trade associations wrote House and Senate leaders yesterday, urging a multiyear extension. Ed Hubbard, general counsel for the Renewable Fuels Association, said groups crafted the letter before the FAA bill appeared as a possible vehicle for tax provision extensions.

“This short-term expiration of tax incentives is jeopardizing the long-term investment necessary for advanced biofuels,” said the groups. “This creates uncertainty for investors and industry about the availability of these credits in the future.”

Carbon capture

Separately, a broad coalition of fossil fuel companies, labor groups and environmentalists is making another push to boost tax credits for trapping industrial CO2 emissions.

It says carbon capture and sequestration (CCS) efforts are facing a looming expiration date, similar to the renewable industry’s dilemma last year before the extension of solar and wind tax credits.

In a letter to Finance Chairman Orrin Hatch (R-Utah) and Wyden this week, 22 entities ranging from Occidental Petroleum Corp. to the Natural Resources Defense Council urged an extension and strengthening of the 45Q tax credit.

That provision gives companies a credit of $10 per ton of stored CO2 used in enhanced oil recovery projects and $20 per ton for carbon dioxide stored underground in deep rock reservoirs.

The program expires once companies store 75 million tons of CO2. Various industrial projects have claimed about half of the available credits.

The cap provides a disincentive for CCS developers to start new projects, advocates say, because they might not be able to claim the tax credit years later.

“Without widespread deployment of carbon capture technologies, we will simply fail to meet global mid-century goals for mitigating carbon emissions from electric power generation and a wide range of industrial activities,” said the letter.

Texas Republican Rep. Michael Conaway introduced legislation, H.R. 4622, in February that would make the 45Q credit permanent and eventually increase the credit value for CO2 storage through enhanced oil recovery to $30 per ton.

Sens. Heidi Heitkamp (D-N.D.) and Shelley Moore Capito (R-W.Va.) are exploring a companion bill in the Senate. The letter called for lawmakers to address the CCS credit “through any legislative vehicle for energy tax provisions.”

Reporter George Cahlink contributed.