House tax subcommittee chairman open to production tax credit extension as bridge to phaseout

Source: Nick Juliano, E&E reporter • Posted: Friday, April 27, 2012

A leading House Republican said yesterday that he is open to extending a key tax credit for the wind industry that is set to expire at the end of the year but that he wants to hear more from industry leaders on how many more years they will need the government’s support.

The production tax credit for wind energy was one of the most popular topics of discussion yesterday at a House subcommittee hearing on a variety of temporary tax breaks that will disappear at year’s end unless Congress intervenes.

Most of the two dozen House lawmakers who testified yesterday addressed the production tax credit, with several Republicans joining overwhelming Democratic calls to extend the credit beyond its current Dec. 31 expiration.

Members pointed to estimates that 37,000 jobs in the wind industry would be lost by the beginning of next year without an immediate PTC extension and to its ability to mobilize between $10 billion and $20 billion per year in private investment behind wind farm development. Several lawmakers also said they had been told by industry representatives that wind farm developers and turbine manufacturers are preparing to eventually thrive without government support, as long as the credit does not just suddenly disappear at year’s end.

“This is one of the very few groups that we’ve talked about … that have actually started a process and started to think about a phaseout of the tax extender,” said Rep. Dave Reichert (R-Wash.), who was testifying in support of his legislation that would extend the credit through 2016.

Rep. Tom Latham (R-Iowa) said the industry’s success in recent years put it on a path where it could eventually thrive with reduced or eliminated government support, as long as the credit does not disappear at the end of this year.

“The industry is looking for certainty, and if there is a phaseout of the credit over time where they can plan, then in fact it will work,” but the cliff coming at the end of the year is “devastating for the industry,” he said. “In my home state of Iowa, already jobs are being terminated because of no purchase orders for the next calendar year.”

The Ways and Means Subcommittee on Select Revenue Measures convened the hearing as an initial step in preparing a tax extenders package expected to be taken up during a post-election lame-duck session.

Subcommittee Chairman Pat Tiberi (R-Ohio) said after the hearing that he was intrigued by the arguments in favor of the credit extension. He said the credit was a good candidate for inclusion in an extenders package as a precursor to a more comprehensive debate over tax policy expected for next year that could include a PTC phaseout.

“I think, obviously, it’s in the mix, and we heard some information today about why it’s important to extend at least for a time,” Tiberi told reporters after the hearing. “The question is, what’s that time? Clearly, there was also a point made that this is not one that should be there forever. … That was interesting information, but the question is, is it a year, is it two years? I don’t know. There was no one clearly, from the members’ standpoint, that had that right answer. It will be interesting to hear from the industry what the right amount of time is.”

The wind industry’s primary lobbying focus through 2012 has been on urging Congress to extend the PTC beyond this year as soon as possible, arguing that jobs will be lost if an extension is not passed until a lame-duck session because of the minimum 12 to 18 months of lead time developers need to plan, site and construct a wind farm. Thousands of jobs already have been lost because developers are not ordering new turbines amid uncertainty about the credit’s future.

“We’ve always been clear we won’t need it forever. We’re committed to looking at options for the long-term future of the PTC. Let us finish the job first, though — of creating a new clean, affordable, homegrown energy source for America,” said Denise Bode, CEO of the American Wind Energy Association, in a statement to E&E Daily. “And to do that, we urgently need a full one-year extension now, without further delay.”

While the hearing was called to examine more than 100 temporary tax credits that expired at the end of 2011 or are set to expire this year, the PTC was clearly the most popular topic of discussion and had among the widest range of lawmakers showing up at the hearing to testify on its behalf

Along with Reichert and Latham, PTC defenders who spoke yesterday included Reps. Steve King (R-Iowa), Earl Blumenauer (D-Ore.), Dan Boren (D-Okla.) and Charles Bass (R-N.H.).

The hearing also featured testimony from one of the top critics of the PTC and other energy tax incentives. Rep. Mike Pompeo (R-Kan.) spoke on behalf of a bill he has introduced that he says would eliminate every tax subsidy for energy, including the PTC, along with benefits for the oil industry such as a credit to support extraction from marginal wells.