U.S. Senators Chris Coons (D-Del.) and Jerry Moran (R-Kan.) introduced legislation Thursday to level the energy playing field by giving investors in renewable-energy projects access to a decades-old tax advantage now available only to investors in fossil fuel-based energy projects. The Master Limited Partnerships Parity Act is a straightforward, powerful tweak to the federal tax code that could unleash significant private capital by helping additional energy-generation and renewable fuels companies form master limited partnerships, which combine the funding advantages of corporations and the tax advantages of partnerships.
"Despite all the political rhetoric about the need for an all-of-the-above energy strategy, our current tax code clearly picks winners and losers in the energy space," Senator Coons said. "The MLP Parity Act helps level the playing field by giving investors in renewables and non-renewables access to the same highly attractive master limited partnership business structure. Congress should be setting a realistic and stable policy pathway to sustain innovations in domestic energy development, and help the market work to its fullest potential. That starts with leveling the playing field and giving renewable energy the same shot at market success as fossil fuels."
"Master limited partnerships have been largely responsible for the tremendous growth in our country's energy infrastructure," Senator Moran said. "In order to grow our economy and increase our energy security, sound economic tools like the MLP should be expanded to include additional domestic energy sources. This legislation simply builds on a successful model, and I look forward to working with my Senate colleagues on policies that will drive innovation, create American jobs, and grow our economy."
A master limited partnership (MLP) is a business structure that is taxed as a partnership, but whose ownership interests are traded like corporate stock on a market. By statute, MLPs have only been available to investors in energy portfolios for oil, natural gas, coal extraction, and pipeline projects. These projects get access to capital at a lower cost and are more liquid than traditional financing approaches to energy projects, making them highly effective at attracting private investment. Investors in renewable energy projects, however, have been explicitly prevented from forming MLPs, starving a growing portion of America's domestic energy sector of the capital it needs to build and grow.
A more detailed white paper on the MLP Parity Act can be downloaded here: http://coons.senate.gov/download/mlp-white-paper
Senators Jon Tester (D-Mont.), Al Franken (D-Minn.), Amy Klobuchar (D-Minn.), Sheldon Whitehouse (D-R.I.), and Jeanne Shaheen (D-N.H.) are original cosponsors of the legislation, which can be downloaded as a PDF here: http://coons.senate.gov/download/mlp-parity-act
The MLP Parity Act has been endorsed by the American Wind Energy Association, Third Way, Solar Energy Industries Association, Biomass Power Association, Biotechnology Industry Organization, Ocean Renewable Energy Coalition, American Council on Renewable Energy, Natural Resources Defense Council, Advanced Biofuels Association, Offshore Wind Development Coalition, and the Advanced Ethanol Council.
David Crane, president, NRG Energy: "The MLP Parity Act is a phenomenal idea. It's a fairly arcane part of the tax law, but it's worked well and has been extremely beneficial to private investment in the oil and gas space. The fact that it doesn't currently apply to renewables is just a silly inequity in our current law."
Josh Freed, vice president for clean energy, Third Way: "There are 2.3 trillion reasons the United States should grow our domestic clean energy market. That's the potential size of the global clean energy market. We can win a huge share of it if our national energy policies put clean and fossil technologies on a level playing field and we get more private investment into the clean energy market. That's why Third Way proposed expanding Master Limited Partnerships, which help finance oil and natural gas development, to include wind, solar, and other clean energy projects. This is a commonsense idea that will give mature clean technologies access to the cheap, private capital they need to get built. We're thrilled Senator Chris Coons, an honorary co-chair of Third Way, and Senator Jerry Moran are taking the lead to build a bipartisan consensus on this issue that will help clean energy, the economy, and the country."
Rhone Resch, president and CEO, Solar Energy Industries Association: "This bill is an excellent step toward leveling the playing field between renewable and incumbent energy sources by providing the solar industry with private capital in the same manner enjoyed by the oil and gas industry. The solar industry employs 100,000 Americans, costs for consumers are dropping nationwide and solar deployment grew by 109% last year. Senator Coons' MLP proposal would build on this success, and SEIA applauds him for putting forward an idea that has the potential to attract additional private sector investment in solar projects. We look forward to working with Senator Coons and other stakeholders to use smart policy to add market liquidity for renewable energy projects and to efficiently utilize tax incentives."
Bob Cleaves, president, Biomass Power Association: "The Biomass Power Association lauds Senator Coons for taking the lead on this very important issue. His legislation, which harmonizes the Internal Revenue Code to make Master Limited Partnership arrangements available to renewable electricity developers, simplifies the tax laws and moves away from picking energy winners and losers. By obtaining easier access to capital, renewable energy facility developers will be able to replace fossil fuels, reduce greenhouse gases, and secure the electrical grid with stable, baseload power."
Mike McAdams, president, Advanced Biofuels Association: "We are grateful for Senator Coons' leadership at a critical point for America's domestic biofuels industry as we are moving from the beaker to the barrel, in record time. The Coons legislation provides an innovative financial mechanism that could significantly reduce the cost of financing as companies are reaching a game-changing milestone. Substantial investments by private companies in research and development have been the catalyst for today's success in bringing advanced biofuels to commercial markets, but stable and consistent public policies are crucial to encourage and allow additional investment dollars that will help get us across the finish line. By creating a new and more appealing option for investors, the Coons bill helps level the playing field and ultimately promotes a more cost competitive advanced biofuel alternative to conventional fuel."
Anthony J. Orlando, president and CEO, Covanta Energy: "I want to congratulate Senators Coons and Moran for their efforts to level the playing field for renewable energy development. Master Limited Partnerships have been available since 1986 to help incentivize oil and natural gas development, and now, thanks to Senators Coons and Moran, we have legislation extending the availability of MLPs that will allow for the expansion of investment opportunites that could provide the capital necessary to promote further development of renewable energy sources, including new and expanded waste-to-energy facilities."
Jim Lanard, president, Offshore Wind Development Coalition: "MLPs will help to support the establishment of a sustainable offshore wind industry, since they can reduce the cost of capital and attract more investors. While extension of the Investment Tax Credit (ITC) remains our industry's number one legislative priority, MLPs will serve as a nice complement to ITCs."
Brooke Coleman, executive director, Advanced Ethanol Council: "The Advanced Ethanol Council strongly supports the Master Limited Partnership Parity Act filed today by Senator Coons. If MLPs continue to be available for fossil fuel extraction projects, they should also be offered to renewable energy development. We applaud Senator Coons and the bill cosponsors for leveling the playing field for emerging technologies when it comes to this important project development tool."
Brent Erickson, executive vice president, Biotechnology Industry Organization: "BIO applauds Senator Coons' thoughtful proposal to level the playing field in the tax code and allow advanced biofuels and bioenergy to participate in Master Limited Partnerships -- just as oil and gas companies can. Tax policy should be focused on driving innovation to reduce our dependence on foreign oil and create high quality U.S. based career opportunities. Senator Coons' bill creates parity among energy producers, allowing renewable producers equal access to lower cost capital and ensuring that technology developed here in the U.S. can be deployed here at home to ensure our energy security."
Sean O'Neill, president, Ocean Renewable Energy Coalition: "The Ocean Renewable Energy Coalition (OREC) strongly supports the legislation introduced today by Senator Coons and others to allow master limited partnership investment in renewable energy. It makes sense to encourage a diverse energy generation portfolio and begin to move towards an even playing field with regard to federal mechanisms that support private investment in all forms of energy production. Extending the MLP market-based incentive structure to qualified renewable technologies, such as wave, tidal and ocean current convertors, will stimulate investment in the renewable energy sector and provide the U.S. with more home grown energy choices. The members of OREC appreciate the effort behind this legislation and will do all we can to support its passage and signature into law this year."
Doug Sims, Natural Resources Defense Council: "NRDC strongly endorses the MLP Parity Act. The tax code currently enables the well-established fossil fuel industry to have this financing advantage while denying its use for the newer, cleaner forms of energy that Americans want and need to encourage. That makes no sense. Master Limited Partnerships should be one of the tools available to develop clean, renewable energy. MLPs provide a low risk way for Main Street to invest in renewable energy. This will create jobs and new investment opportunities while reducing pollution. Sen. Coons is right to propose this forward-looking and fair-minded step to ensure that the today's clean, domestic energy sources have the same opportunities to succeed as the fossil fuel sources of the past."
Denise Bode, CEO, American Wind Energy Association: "We commend Senator Coons for his leadership in promoting the eligibility of master limited partnerships (MLPs) to include renewable energy projects. America's wind energy sector is a success story that has proven its strength by recruiting $15.5 billion in annual investment in America's energy infrastructure in recent years despite short-lived policy certainty. MLPs work well for conventional energy infrastructure and will work best to spur more renewable energy investment and job creation if structured properly to match renewable tax incentives. We look forward to working with Senator Coons to enable wind power developers to efficiently utilize MLP structures."
Judith Albert, executive director, Environmental Entrepreneurs: "The members of Environmental Entrepreneurs are supportive of Sen. Coons' MLP Parity Act. This bill would allow renewable energy companies access to a financing structure -- Master Limited Partnerships -- that has long been available to the fossil fuel industry. Access to this structure will expand the sources of private capital that renewable energy companies can tap and reduce the cost of financing new, job-creating projects. If passed, this important measure would be a significant step toward continued development of clean, renewable energy."
Vice Admiral Dennis McGinn (USN-Ret.), president and CEO, American Council On Renewable Energy: "We commend Senator Coons for his leadership in introducing important legislation to level the playing field and promote greater private investment in our nation's abundant and affordable renewable energy resources and fuels. Enabling master limited partnership investment in renewable energy and infrastructure can help lower project costs, leading to more economic investment and a more diverse energy mix."
Barry Granger, vice president for government affairs and government marketing, DuPont: "We appreciate Senator Coons thoughtful, constructive legislation to facilitate the commercialization of advanced biofuels and biopower technologies by extending the tax-efficient Master Limited Partnership structure to investments in these forms of energy. These tax policies have proven effective in encouraging investment in oil and gas infrastructure and can similarly help the domestic advanced biofuels industry."
Felix Mormann and Dan Reicher, Stanford University Steyer-Taylor Center for Energy Policy and Finance: "There's another benefit to expanding the pool of renewable energy investors: It would help democratize, and thus build support for, these new energy sources. Today, all American taxpayers fund renewable energy subsidies, but only a deep-pocketed few can cash in on the tax benefits. Publicly traded master limited partnerships would empower all Americans to invest and have a stake in the transition to cleaner energy."