Thursday, June 7, 2012
Floor Speech: Senator Coons introduces bill to spark investment in renewable energy projects
As delivered on June 7, 2012
Mr. President, when it comes to America’s energy policy, Republicans and Democrats alike have made it clear that they support an all-of-the-above energy strategy.
As you know, Mr. President, from serving on the Energy Committee along with me, there is broad agreement on the need for a comprehensive approach that will develop secure, home-grown, efficient energy sources for our next generation. And I believe an across the board policy that accepts the likely reality of our current dependence on fossil-based fuels going forward, as well as the vitalneed to develop and deploy new, promising clean energy fuels of the future, is essential. Such a policy will provide certainty to our markets, opportunity to our families and companies and communities, and ensure that we're not, as some would say, picking winners and losers in the energy space.
Yet, there is today an obstacle standing in the way of a truly comprehensive strategy that both parties say they want. It's a provision in our federal tax code that has its metaphoric thumb on the scale, tipping the balance in favor of traditional fossil fuels. That's why I am so glad I've been able to work with my colleague and friend, Senator Moran of Kansas, to today introduce bipartisan legislation that will level the playing field and bring parity to one piece of federal tax policy relating to energy.
Mr. President, investors in oil, natural gas, coal and pipelines have for nearly 30 years been able to form publicly traded entities called master limited partnerships or MLPs. These partnerships include a pass-through tax structure that avoids double taxation and leaves more cash available todistribute to investors. They have for investors the liquidity and the return that's commonly associated with equity and the tax advantage that's associated with partnerships. And they’ve been able to aggregate and deploy a significant amount of private capital in the traditional fossil fuel marketplace—roughly $350 billion today across 100 MLPs. They have access to private capital at a lower cost, something that capital-intensive alternative energy products in the United States badly need now more than ever. As a result, MLPs should be a great source for raising private capital for cleanenergy projects, as well as they have been for fossil fuel projects.
The only problem is, under current law, only fossil fuel-based energy projects can attract this type of energy investment, can take advantage of these so-called MLPs. That’s right, we are currently in our tax policy working against our broadly stated commitment as a country to an all-of-the-above energy policy, with a statute that explicitly excludes clean energy projects from forming these MLPs. This inequity is starving a growing portion of America’s domestic energy sector of the very capital that it needs to build and grow and compete. So, Senator Moran and I along with other colleagues decided to fix it. We came together and said it was time to level the playing field.
Sometimes, when I have the opportunity, I've gone for a run here in Washington or even better, in my home state in Delaware, and something any runner can tell you is that going up and down hills is what saps your strength. When a surface is flat, you can go farther, you can go faster, and it's the same, Mr. President, with our federal tax code.
And when it comes to evening things out, we have two choices. We can either lower everything to a common level by eliminating MLPs, by saying this tax advantage shouldn't be given to its traditional beneficiaries in gas and oil and coal or we can raise the level of opportunity and attract greater investment by broadening the fields that can take advantage of MLPs to include wind and solar, biomass, geothermal, cellulosic, biodiesel. In my view, the better strategy, the better approach is the bipartisan one that takes our colleagues at their word and says that we intend to stop picking winners and losers and instead really embrace an all-of-the-above energy strategy. Senator Moran and I have chosen this option and believe that rather than eliminating MLPs, bringing everything together and making renewables on a same level playing field with fossil fuels has a better promise for the future of the American energy economy.
This is a relatively straightforward proposal. Our bill, the Master Limited Partnerships Parity Act, will bring new fairness to the tax code in this specific area. It recognizes revenue from projects that sell electricity or fuels produced from clean energy sources as qualifying MLPs. This change will encourage investment in domestic energy resources and could bring substantial new private capital off the sidelines to finance renewable projects ranging from wind and solar to geothermal and cellulosic ethanol just at a time when we so badly need them.
Harnessing the power of the private market is essential if alternative energy projects are to grow and create jobs all across America. Two experts in energy finance, Felix Mormann and Dan Reicher from Stanford’s Steyer-Taylor Center for Energy Policy and Finance wrote an op-ed just this past week in the New York Times endorsing this legislation. They said “if renewable energy is going to become fully competitive and a significant source of energy in the United States, then further technological innovation must be accompanied by financial innovation, so that clean energy sources gain access to the same low-cost capital that traditional energy sources like coal and oil and gas have traditionally enjoyed.”
In a search for common ground on energy policy, this kind of simplefairness is the sort of thing I hope we can all agree on.
That's why the MLP Parity Act carries the strong support of a wide range of business groups, financial experts and energy organizations. David Crane is the CEO of Fortune 300 company NRG Energy. NRG has generating assets across a wide range of traditional fuel sources and clean and alternative energy sources. Mr. Crane said “the MLP Parity Act is a phenomenal idea. It’s a fairly arcane part of the federal tax code, but it's worked well and has been extremely beneficial toprivate investment in the oil and gas base. The fact that it doesn't currently apply to renewables is a silly inequity in our current law.”
We're also grateful for the support of national organizations like the American Wind Energy Association, the Solar Energy Industries Association, the American Council on Renewable Energy, and many others and thank them for their hard work in promoting this common sense energy future for our country.
I'd also like to specifically thank Dr. Chris Avery and Franz Wuerfmannsdobler who have worked in my office so well in preparing this andmoving this forward as public policy, and I’d like to thank Josh Freed of Third Way for bringing this to our attention and producing one of the first policy papers on how master limited partnerships can be a great financing vehicle for clean energy.
Mr. President, I have no doubt that there is significant, growing opportunity worldwide in alternative fuels. There is a clean energy future coming. The only question is whether American workers, American communities, American companies will benefit from this or will simply be bystanders and watch our competitors pass us by.
I think if we're going to lead, we have to work together. The private sector can and will provide the financing and the researchers to develop critical innovations and deploy them, but the federal government, the Congress in particular, must set a realistic and positive policy pathway to sustain these innovations and let the market work to its fullest potential.
The Master Limited Partnership's Parity Act moves us toward that goal. By leveling the playing field for fair competition, this market-driven solution could provide vital and needed support for the kind of comprehensive energy strategy we need to power our country for generations to come.
Some of us who will support this bill also support things like the ITC, the PTC and other clean energy financing vehicles. Others may not. On the specific question of master limited partnerships, the bill that we introduced today simply allows us to come together in a bipartisan way to open it up to all energy sources and to build a sustainable energy financing future on this platform.
Once again, I want to thank my cosponsor, Senator Moran, and I look forward to working with all of my colleagues on the Energy Committee and throughout the Senate and the House to move forward this important legislation.
With that, Mr. President, thank you very much, and I yield the floor.
###