U.S. Senator Chris Coons (D-Del.) testified before the Senate Energy and Natural Resources Committee on Thursday about his bipartisan Master Limited Partnerships Parity Act, which would move the federal government toward an all-of-the-above energy strategy by allowing clean and renewable energy projects to take advantage of the same tax-advantaged business structure currently utilized by fossil fuel projects.
"Access to low-cost financing will define our nation's energy future," Senator Coons said. "It will determine how, when, and which energy sources emerge as the central players in the American energy marketplace in the long term. I believe it's up to us to ensure that our vast supply of clean, renewable power, as well as energy efficiency, is a vital part of that equation."
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.
The MLP Parity Act would modernize the tax code to allow new and developing clean energy technologies to take advantage of the MLP structure.
"I think your work is especially timely right now," Energy Committee Chairman Ron Wyden told Senator Coons after his testimony. "All senators have been asked by Senator Baucus and by Senator Hatch to make submissions with respect to tax reform, and so that, obviously, incorporates energy policy. One area that I feel very strongly about is to try to find ways to -- if not to secure parity between the various energy sources -- let's at least narrow the gap, because there are some energy sources that in effect get subsidy levels up here, and are permanent, and there are some energy sources that have this level of subsidy and are kind of on a year-to-year roller-coaster. What you seem to be doing in the bipartisan work that you're discussing with MLPs, is you're saying "here's an opportunity to again try to level the playing field and to bring more people into the debate,' and I intend to study closely your legislation."
Chairman Wyden was one of several senators from both parties to speak positively about the legislation during the hearing.
Senator Coons reintroduced the bill in April with Senators Jerry Moran (R-Kan.), Debbie Stabenow (D-Mich.) and Lisa Murkowski (R-Alaska). Senator Stabenow is the chair of the Senate Finance Subcommittee on Energy, Natural Resources, and Infrastructure, and Senator Murkowski is the Ranking Member on the Senate Energy and Natural Resources Committee.
"There is little debate about America's potential to lead the world in clean energy development and deployment," Senator Coons said at Thursday's hearing. "We have unparalleled ingenuity. We have some of the most advanced clean energy technologies in the world. However, our innovations, and the very real potential energy they represent, are struggling in part--in deployment--because of the absence of a reliable source of financing. I think they need a catalyst -- the catalyst of a clear, stronger regulatory and statutory structure that allows access efficiently to long-term financing."
The bill is supported by a wide array of businesses, energy trade associations, environmental advocates, and think tanks. A complete list can be found at http://coons.senate.gov/mlp.
Senator Coons' full testimony is below:
- As Delivered on July 18, 2013 -
It's great to be back with you here at the Energy and Natural Resources Committee. For those keeping score at home, this is my second time speaking before the committee in the last month, which is an accurate reflection of what I view as its central importance, and reflects how much I enjoyed my time here and the spirit of cooperation and collaboration that this committee has demonstrated.
So I'm grateful for the chance today to offer brief testimony on what I believe is one of the most fundamental challenges facing the development and deployment of clean energy technology: access to reliable, long-term financing.
This committee has considered this issue before. In 2011, we held an oversight hearing on the concept of a Clean Energy Investment Fund and in 2012, another hearing on the role of the federal government in spurring American innovation. I was encouraged by the ideas brought forward during those hearings, and I'm looking forward to the renewed discussions that will take place at this hearing later this morning.
There is little debate about America's potential to lead the world in clean energy development and deployment. We have unparalleled ingenuity. We have some of the most advanced clean energy technologies in the world. However, our innovations, and the very real potential energy they represent, are struggling in part--in deployment--because of the absence of a reliable source of financing. I think they need a catalyst -- the catalyst of a clear, stronger regulatory and statutory structure that allows access efficiently to long-term financing.
Today's energy market, broadly, is defined by narrow profit margins and established technologies supported by low-cost, long-term financing. If clean and renewable sources of energy are to grow and compete in the American energy marketplace, and thus also around the world, we have to make sure they are given a level playing field on which to operate.
The Master Limited Partnerships Parity Act of 2013, S.795, which I reintroduced in April with Senator Murkowski, Senator Stabenow, and Senator Moran, would do just that. It is a strikingly simple, bipartisan bill that modernizes a section of our tax code to make it consistent with the "all-of-the-above" energy strategy that so many of us have endorsed as the blueprint for energy independence and our energy future.
The Master Limited Partnerships Parity Act would allow clean energy projects to utilize MLPs, a beneficial tax structure that taxes a project like a partnership -- a pass through -- but that trades its interests like a corporate stock, a C-corp. This prevents double taxation, allows access to the liquidity of equity markets, and leaves more cash available for distribution back to investors. For the last 30 years, MLPs have given the natural gas, oil, and coal industries access to private capital at a lower cost, something other capital-intensive projects badly need. It is a well-developed, well-established financing vehicle. There are roughly a hundred MLPs at a market cap of about $450 billion at the moment.
The extension of access to this financing vehicle to energy efficiency technologies, energy storage, solar power, and a very wide range of other alternative and renewable energy sources has the real potential to bring a significant wave of private capital off the sidelines and into the renewable energy marketplace. It would not only level the playing field, but would also increase access to low-cost capital for all energy sources in our marketplace.
I am so thankful to Senator Murkowski, to Senator Stabenow, and to Senator Moran for their tireless partnership in this effort -- for working with me and my staff on this bill-- and to Chairman Wyden for his ongoing support of our efforts and for the opportunity to appear before you this morning. Bipartisan companion legislation led by Congressmen Ted Poe, Mike Thompson, Peter Welch, Cory Gardener, and Chris Gibson, which is three Republicans and two Democrats, was reintroduced in the House earlier this year as well.
Access to low-cost financing will define our nation's energy future. It will determine how, when, and which energy sources emerge as the central players in the American energy marketplace in the long term. I believe it's up to us to ensure that our vast supply of clean, renewable power, as well as energy efficiency, is a vital part of that equation. Thank you.