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Tax incentives for CCS, small-scale renewables sought in aviation bill


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Tax incentives for CCS, small-scale renewables sought in aviation bill

Industrygroups are pushing lawmakers to add tax incentives for carbon capture andsequestration and small-scale renewable energy sources as part of areauthorization bill for the Federal Aviation Administration headed to thefloor of the U.S. Senate.

Thenegotiations come after Congress voted to extend investment and production tax credits for solarand wind energy facilities as part of a fiscal year 2016 budget bill thatPresident Barack Obama signed into law in December 2015.

"Thereis an effort to help technologies left out late last year to give parity withsolar," said Lloyd Ritter, managing partner at policy advisory firm GreenCapitol LLC, which works with the Distributed Wind Energy Association. "Thesituation is still fluid, but lots of members on a bipartisan basis are inagreement that policy needs to support the various clean energy technologies,and not skew the marketplace."

Rittersaid small wind power producers want incentives similar to what the solarindustry received in last year's omnibus bill. The investment tax credit forcommercial solar facilities was alteredto take effect when construction begins, rather than operations, and was set ata rate of 30% through 2018 before gradually falling to 10% in 2022 and beyond. Credits for residential solarwere extended through 2021, with the same reductions in credits, but would notsee the 10% credit in 2022 and beyond. The current investment tax credit for smallwind, which is defined as projects with up to 100 kW of capacity, is set toexpire after 2016.

Inaddition to potential incentives for small wind projects, the fiscal year 2017aviation bill could include "left-out tax provisions" for geothermalheat pumps, combined heat and power-producing systems, microturbines, and fuelcells, according to the law firm Bracewell LLP.

Adraft of the tax provisions was still being negotiated late on April 5 betweenSenate Finance Committee Chairman Orrin Hatch, R-Utah, and committee rankingmember Sen. Ron Wyden, D-Ore., according to Bracewell senior counsel CurtisBeaulieu, who is a former staff member on the Senate Finance Committee. Biofueltrade groups are also pressing Congress for a multiyear extension of advancedbiofuel tax credits that expire at the end of 2016.

"Theirmain focus is on FAA taxes, then whether to include other amendments like a fixto the renewable tax credits," Beaulieu said. A committee spokeswoman hadnot responded with comment as of press time.

Taxincentives for residential and commercial geothermal heat pumps are set toexpire Dec. 31. An industry group called the Geothermal Exchange Organizationwrote Wyden on March 21 urging Congress to extend those credits to "fixthe inequity" created when the solar industry received a five-yearextension to its investment tax credit to 2021 as part of the fiscal year 2016omnibus.

Geothermalheat pumps can be used to heat and cool buildings. Those pumps can reduceresidential and commercial heating and cooling bills by 40% to 70%, accordingto U.S. DOE estimates provided by Bracewell, which represents some of theindustry groups (especially the geothermal heat pump ones) seeking theextensions. The U.S. EPA has said geothermal heat pumps can cut energy consumptionby up to 44% compared with conventional air source heat pumps and as much as72% compared to electric resistance heating with conventional air conditioningequipment.

Industrygroups are also pushing for CCS tax incentives in the aviation bill. Acoalition of coal and oil producers and enhanced oil recovery proponents wrotean April 4 letter to Hatch and Wyden asking that Congress include an extensionto the Section 45Q tax credit for CCS in "any legislative vehicle for taxprovisions that emerges in 2016." The current 45Q tax credit provides atax credit for each ton of CO2 stored underground through enhanced oilrecovery, but the credit will expire the year that a total of 75 million tonsCO2 is sequestered. Roughly half those credits had already been claimed as of2014, and new investment in CCS will suffer without a permanent extension tothe credit that excludes any cap on total tons stored, the coalition said inits April 4 letter.

Abipartisan group of U.S. House of Representatives members introduced abill in Februaryseeking similar reforms, including an increase in the credit to $30 per ton ofCO2 stored over a 10-year period. Coal-state Sens. Heidi Heitkamp, D-N.D., andShelley Moore Capito, R-W.Va., are exploring the creation of a companion billin the Senate.

Supportersof the credit hope it will "catalyze new projects" and provide moreincentive for CCS facilities about to come online, such as the project in Texas,said Kurt Waltzer, managing director of the Clean Air Task Force, which is oneof the groups pushing for the 45Q extension.

TheSenate voted early April 6 to advance consideration of the FAA bill. The taxtitle will be an amendment to that legislation.