A subsidy that benefits the wind energy industry is likely to be renewed by the House on Wednesday, but it will be on the chopping block in the next Congress.
The House is due to vote on a year-long extension of expiring or lapsed tax credits, known as extenders. The most expensive is a credit for electricity generated from renewable sources, mainly wind power. It is unclear whether House Democrats will offer an alternative.
This production tax credit already expired this year. The extension would be retroactive, even though many House Republicans would like it to stay dead.
It may get killed when the Senate changes hands next year. Conservatives say the production tax credit distorts electricity markets and wastes money. The Joint Committee on Taxation prices a one-year extension at $9.6 billion, upward of a fifth of the entire $44.7 billion package covering more than 50 provisions.
“The strategy come January is to make sure that this thing doesn’t come back,” Rep. Mike Pompeo, R-Kansas, told the Washington Examiner.
Groups allied with the conservative billionaire Koch brothers have ramped up lobbying against the credit in recent years, raising its profile among rank-and-file lawmakers. Midwest Republicans used to champion the credit but many now stay quiet on the issue. In August, 54 House Republicans signed a letter Pompeo wrote to GOP leaders in the House and Senate urging them to kill the credit.
It’s not clear whether Republicans intend to repeal it completely, but lawmakers of both parties say its days may be numbered.
“We’ve got a Republican majority in the House and a Republican majority in the Senate. And for the most part they’re strongly opposed [to the production tax credit], so that’s ominous,” Rep. Peter Welch, D-Vt., said.
Still, compromise is possible.
A deal Senate Finance Committee Chairman Ron Wyden, D-Ore., and House Ways and Means Committee Chairman Dave Camp, R-Mich., floated last month included an extension through 2015, with a phaseout by 2017. The White House threatened a veto, however, because the main package lacked permanent credits for families with children or for low-income families.
The Wyden-Camp plan borrowed some elements from a plan that Sen. John Thune, R-S.D., proposed in April, and Republicans expect a phase-out of the credit will be discussed alongside a cold-turkey end to it.
“In some fashion, it’s going to be on some phaseout path,” Sen. John Hoeven, R-N.D., said.
Even the wind industry’s main lobby group, the American Wind Energy Association, said it was open to a long-term phaseout – though chief executive Tom Kiernan said the group prefers a two-year extension that Wyden proposed and passed through the Finance Committee earlier this year.
“A phase-out of sufficient length and design that provides an appropriate glide path is something that could also work for the wind industry. AWEA welcomes analyzing any proposal that is long-term and fair,” Kiernan said, without detailing specifics.
Democrats might agree to a phaseout, with caveats. They understand that their bargaining position will be weakened when Capitol Hill is controlled by Republicans from January.
“We’ll use what we have. But we certainly are going to be in a different position next year,” Sen. Debbie Stabenow, D-Mich., who serves on the Finance and the Energy and Natural Resources committees. “Wind and solar are so competitive now and growing so much that I think, you know, a long-term phaseout is OK. But I think it ought to be for every energy tax credit.”
Democrats and Republicans from windy states have generally supported the credit, which pays producers 2.3 cents per kilowatt-hour for 10 years if developers have spent at least 3 percent of a wind project’s cost by the credit deadline. Supporters of the credit claim it helps diversify power sources, reduce greenhouse gas emissions and create manufacturing jobs all along the wind industry supply chain.
Republicans are rolling up their sleeves for major tax reform in the new Congress. Lawmakers, lobbyists and aides say the House GOP’s tax extenders proposal Wednesday is an attempt to start fresh on reform next year, and that it will provide some tax certainty for small businesses worried about credits due to end Jan. 1.
Democrats would like to extend the credits two years because it takes time to plan wind projects. The credit also helps to establish predictability, as AWEA said the industry lost 30,000 jobs and wind turbine installations dropped 92 percent when the credit lapsed this year. When the credit was more certain in 2012, it leveraged $23 billion in private investment, according to AWEA.
“I think most of us in our caucus would like to see Sen. Wyden and [Finance Committee ranking member Sen. Orrin] Hatch [R-Utah] re-engage and see if that’s in the realm of the possible and if it is, to pursue it,” Sen. Tom Carper, D-Del., told reporters Tuesday.
Wyden wouldn’t say whether he would revive his two-year extension plan for the whole list of tax provisions to counter the House bill.
“My hope is that as members get into some of the specifics, they’re going to see that the House proposal on a number of important particulars really clobbers working-class families,” Wyden told reporters in the Capitol.
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