Wind Power Wants U.S. Oil Tax Break

Source: Bloomberg, Richard Rubin  (7/20/11)

"Wind power companies want to follow in tapping a Reagan-era tax break for oil and gas companies."


Bloomberg, Richard Rubin

Wind-power companies want to follow KKR & Co. and Blackstone Group LP in tapping a Reagan-era tax break for oil and gas companies when U.S. renewable energy tax credits start expiring at the end of this year.

Developers of wind farms and solar power plants have begun lobbying for legislation that would let them form master limited partnerships (MLPs), a financial structure used by pipeline operators, drillers and mine operators, as well as private-equity companies. The publicly traded equities, valued at more than $230B at the end of last year, pay no corporate taxes, passing tax liability directly to investors.

Eliminating the corporate tax burden increases the potential profit of MLPs and makes them appealing to wealthy investors. The tax vehicles were responsible for building much of the U.S. oil and gas pipeline networks, and they may deliver the same boost to alternative energy projects.

Expanding the partnerships to renewable energy projects may not be high on the agenda of the Obama administration and lawmakers, who are focused on the debt ceiling, reducing the deficit and debating what tax breaks should be eliminated.

Wind and solar projects currently qualify for tax grants from the U.S. Treasury of as much as 30% of their construction costs. That program is set to expire at the end of this year. Underlying tax credits expire for wind in 2012 and for solar in 2016.

Under a 2008 law, Congress added industrial carbon dioxide, transportation biofuels, alcohol and certain other alternative fuels. All of this has helped wind and solar industry lobbyists make their case for inclusion.