[Senate Hearing 114-663]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 114-663
 
                  ENERGY TAX POLICY IN 2016 AND BEYOND

=======================================================================

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 14, 2016

                               __________







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                          COMMITTEE ON FINANCE

                     ORRIN G. HATCH, Utah, Chairman

CHUCK GRASSLEY, Iowa                 RON WYDEN, Oregon
MIKE CRAPO, Idaho                    CHARLES E. SCHUMER, New York
PAT ROBERTS, Kansas                  DEBBIE STABENOW, Michigan
MICHAEL B. ENZI, Wyoming             MARIA CANTWELL, Washington
JOHN CORNYN, Texas                   BILL NELSON, Florida
JOHN THUNE, South Dakota             ROBERT MENENDEZ, New Jersey
RICHARD BURR, North Carolina         THOMAS R. CARPER, Delaware
JOHNNY ISAKSON, Georgia              BENJAMIN L. CARDIN, Maryland
ROB PORTMAN, Ohio                    SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania      MICHAEL F. BENNET, Colorado
DANIEL COATS, Indiana                ROBERT P. CASEY, Jr., Pennsylvania
DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
TIM SCOTT, South Carolina

                     Chris Campbell, Staff Director

              Joshua Sheinkman, Democratic Staff Director

                                  (ii)
                                  
                                  
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Wyden, Hon. Ron, a U.S. Senator from Oregon......................     2
Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman, 
  Committee on Finance...........................................     4

                               WITNESSES

Zycher, Benjamin, John G. Searle chair and resident scholar, 
  American Enterprise Institute, Washington, DC..................     6
Miller, Steve, chief executive officer, Bulk Handling Systems, 
  Eugene, OR.....................................................     8
Kennedy, Susan, chief executive officer and board member, 
  Advanced Microgrid Solutions, San Francisco, CA................     9
Harbert, Hon. Karen Alderman, president and chief executive 
  officer, Institute for 21st Century Energy, U.S. Chamber of 
  Commerce, Washington, DC.......................................    11

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Coons, Hon. Christopher A., and Hon. Jerry Moran:
    Prepared statement...........................................    23
Harbert, Hon. Karen Alderman:
    Testimony....................................................    11
    Prepared statement...........................................    24
    Responses to questions from committee members................    30
Hatch, Hon. Orrin G.:
    Opening statement............................................     4
    Prepared statement...........................................    31
Kennedy, Susan:
    Testimony....................................................     9
    Prepared statement...........................................    33
Miller, Steve:
    Testimony....................................................     8
    Prepared statement...........................................    34
    Responses to questions from committee members................    35
Schumer, Hon. Charles E.:
    Prepared statement...........................................    37
Wyden, Hon. Ron:
    Opening statement............................................     2
    Prepared statement...........................................    38
Zycher, Benjamin:
    Testimony....................................................     6
    Prepared statement...........................................    39
    Responses to questions from committee members................    58

                             Communications

Advanced Biofuels Business Council et al.........................    59
Alliance for Industrial Efficiency...............................    60
American Public Power Association (APPA).........................    63
Biomass Thermal Energy Council (BTEC)............................    68
Biotechnology Innovation Organization (BIO)......................    70
Boland...........................................................    72
Business Council for Sustainable Energy (BCSE)...................    74
Capital Review Group (CRG).......................................    74
The Center for Fiscal Equity.....................................    76
Coalition to Extend and Improve the 179D Tax Deduction for Energy 
  Efficient Buildings............................................    79
Concord Engineering Group, Inc...................................    81
Controlled Air, Inc..............................................    82
Electric Drive Transportation Association (EDTA).................    84
Geothermal Energy Association....................................    86
Havtech Inc......................................................    87
Hearth, Patio, and Barbecue Association (HPBA)...................    89
Heat is Power Association (HiP)..................................    90
Large Public Power Council (LPPC)................................    91
MDR Specialty Distribution.......................................    92
National Biodiesel Board (NBB)...................................    94
National Hydropower Association (NHA)............................    95
National Propane Gas Association (NPGA)..........................    97
The Pew Charitable Trusts........................................    98
PMH Associates, Inc..............................................   101
RSC Architects...................................................   102
Shepps, Joseph...................................................   103
Spalding, Brian..................................................   104
Wendel, LLC......................................................   104


                  ENERGY TAX POLICY IN 2016 AND BEYOND

                              ----------                              


                         TUESDAY, JUNE 14, 2016

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:05 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. 
Orrin G. Hatch (chairman of the committee) presiding.
    Present: Senators Grassley, Crapo, Enzi, Thune, Toomey, 
Scott, Wyden, Schumer, Stabenow, Cantwell, Menendez, Carper, 
Cardin, Bennet, and Casey.
    Also present: Republican Staff: Chris Campbell, Staff 
Director; and Jim Lyons, Tax Counsel. Democratic Staff: Ryan 
Abraham, Senior Tax and Energy Counsel; Robert Andres, Tax and 
Economic Policy Adviser; Michael Evans, General Counsel; and 
Joshua Sheinkman, Staff Director.
    Senator Grassley [presiding]. In this short absence, I 
should say, of the chairman, his staff has asked if I would 
proceed, and we do it with the okay of the minority. Senator 
Wyden, as well, has said we should go ahead.
    I do not have an opening statement. It is my job to 
introduce the witnesses, and then we will go to the testimony.
    Our panel is a highly qualified group of witnesses. Thank 
you all for coming.
    We will hear from Dr. Ben Zycher, the John G. Searle chair 
and resident scholar at AEI. Dr. Zycher specializes in energy 
and environmental policy, while simultaneously working as a 
senior fellow at Pacific Research Institute. He is a former 
senior economist at Rand; a former adjunct professor of 
economics at the University of California-Los Angeles, as well 
as the California State University-Channel Islands; and is a 
former senior economist at the Jet Propulsion Laboratory, 
California Institute of Technology. He has also served as 
Senior Staff Economist for the President's Council of Economic 
Advisers, where he also specialized in energy and environmental 
issues.
    We will hear, following Dr. Zycher, from Mr. Steve Miller, 
CEO of Bulk Handling Systems. Mr. Miller has 25 years of 
experience in the management of recycling and manufacturing 
facilities. Mr. Miller has led Bulk Handling Systems since 
2005.
    Third, we will hear from Ms. Susan Kennedy, CEO of Advanced 
Microgrid Solutions. Ms. Kennedy has served for 2 decades in 
State and Federal Government, most recently as Chief of Staff 
for Governor Arnold Schwarzenegger, Cabinet Secretary and 
Deputy Chief of Staff for Governor Gray Davis, and 
Communications Director for our colleague, Senator Feinstein.
    Last, we will hear from the Honorable Karen A. Harbert, the 
president and chief executive officer of the U.S. Chamber of 
Commerce's Institute for 21st Century Energy. Ms. Harbert leads 
the Institute's effort to build support for energy action 
nationally and internationally through policy development, 
education, and advocacy. Ms. Harbert is the former Assistant 
Secretary for Policy and International Affairs at the U.S. 
Department of Energy.
    The committee thanks you all for taking time from your busy 
schedules to be in attendance today.
    I should ask Senator Wyden for his opening statement. As 
you can see, Senator Hatch asked me to proceed while he is on 
his way, I guess.

             OPENING STATEMENT OF HON. RON WYDEN, 
                   A U.S. SENATOR FROM OREGON

    Senator Wyden. I am looking forward, as always, to working 
with you, Mr. Chairman, and I appreciate it.
    In my view, there are two parts to the energy debate today. 
The first is where energy policy needs to go in the long term, 
and I want it understood that I think it is time to take the 
energy provisions in the tax code and throw them in the trash 
can.
    It is a mishmash, a crazy quilt of distorted incentives, 
and I think what we ought to be doing is substituting a very 
different approach, a tech-neutral approach that cuts the costs 
of these energy subsidies in half and promotes a clean energy 
economy.
    I call it ``more green for less green.''
    The second part of the energy debate is about creating the 
running room in the short term to make it possible to achieve 
that long-term goal that I just described.
    Now, I am going to talk about both today, and we will start 
with the short term. At the end of last year, Democrats and 
Republicans came together and began to move away from the same-
old same-old cycle of energy tax extenders.
    Congress decided on a bipartisan basis that another weeks- 
or months-long renewal of the renewable energy tax incentives 
was not good enough. Incentives for wind and solar, which have 
grown to become major parts of America's energy portfolio, got 
5 years of certainty, and other clean technologies got 2.
    The result has been dramatic. New solar installations are 
projected to double this year, and, for the first time, new 
solar generation will exceed natural gas.
    Now, in the short term, it is important to remember that 
there is leftover business that needs to be addressed. Certain 
renewable technologies were left out of last year's package: 
fuel cells, geothermal, and more. The clock is ticking down to 
another round of expirations at the end of this year.
    For example, bipartisan legislation on waste-heat-to-energy 
that passed this committee was left out. The sooner Democrats 
and Republicans come together, take care of these energy 
extenders, and clear the decks, the sooner it will be possible 
to find a smarter, fresher approach to long-term energy policy.
    So let me just wrap up with a few more quick comments about 
the long-term part of this debate.
    In my view, the key to a long-term sustainable approach on 
energy policy is going technology-neutral. The system on the 
books today distorts energy markets, picks winners and losers, 
and especially holds back America's innovators. That ought to 
change, and that is why I put forward a tech-neutral plan that 
will be radically simpler and more efficient. Gone, as I 
indicated, will be today's Byzantine web of 44 separate energy 
tax breaks. In their place will be three long-term incentives 
built around clear goals, cleaner energy, cleaner 
transportation, and energy efficiency.
    I especially appreciate so many of my colleagues being here 
from the other side of the aisle, both here and in the Energy 
Committee. I think some of my colleagues know I chaired the 
Energy Committee for a period of time. I have heard constant 
refrains about cutting subsidies. It is time to cut subsidies; 
we all ought to agree on cutting subsidies.
    What my proposal does is, it cuts the amount of subsidies, 
$125 billion every decade, in half. It is a market-oriented 
system. It, in my view, is going to unleash the innovators with 
big ideas.
    Now, the Finance Committee is lucky to be joined today by 
the heads of two companies that are doing exciting work in the 
field of renewable energy. We are very pleased that Bulk 
Handling Systems is here. They are based on Eugene, OR. The 
waste Americans produce every day can be recycled and turned 
into energy. Even the trash trucks run on renewable fuel. 
Advanced Microgrid Solutions is at the forefront of a 
technology that has long been overlooked by our tax policies, 
and that is energy storage.
    I began years and years ago to offer various energy storage 
proposals, because the fact is, the sun does not always shine 
and the wind does not always blow. So energy storage is a must.
    In summary, these are the kind of 21st-century innovations 
that right now are disadvantaged by outdated policies or, in my 
view, just get ignored all together.
    But with a tech-neutral policy, the unfair market 
distortions go away, the incentives will be predictable, and 
the goals will clear. The cleaner your energy, the cleaner your 
transportation fuel, the more efficient your home or office 
building, the larger the tax break. That goes for everyone. I 
hear some questions by colleagues who are concerned about the 
implications for fossil fuels. This applies to everyone.
    A natural gas facility that invests in a highly efficient, 
next-gen turbine, or an oil company that sets out to make the 
clean transportation fuels of the future, both qualify for this 
fresh approach that I am describing.
    The bottom line is that energy in America is being 
transformed. The threat posed by climate change grows every 
day. New technologies are being developed. Investors see 
enormous economic opportunity in renewable energy.
    So it is time to play some catch-up ball and ensure that 
the energy tax policies, these outdated energy tax policies, 
keep up. It is time to stop clinging to yesteryear, like the 
naysayers who saw the first automobiles hit the road a century 
ago and said, ``Hey, the horse is here to stay.''
    What is needed are policies to support those who are at the 
forefront and the innovators.
    I look forward to hearing from our witnesses. I am very 
glad to hear that Eugene, OR is out in force at the witness 
table, and I look forward to their ideas on how to address both 
concerns: a smart, fresh energy approach for our long term, and 
dealing with these crucial tax extenders, which, in effect, 
give you a bridge to get to the long term.
    Mr. Chairman, it sounds like you have gotten through the 
early morning of your day, and I look forward to working with 
you.
    [The prepared statement of Senator Wyden appears in the 
appendix.]

 OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM 
              UTAH, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. Well, thank you; same here.
    This is not the first hearing we have had on these issues 
during my time on the Finance Committee, nor is it likely to be 
the last. Members on both sides of the aisle have a keen 
interest in this area, and for good reason. The energy-related 
provisions in our tax code impact a variety of industries 
throughout our economy and affect the lives and livelihood of 
the majority of all of our constituents.
    It is, therefore, important that we continually examine 
these provisions to make sure we are getting things right and 
that resources do not go to waste.
    I am really pleased that Senator Grassley opened this 
hearing for me, since I was detained.
    I will start today's discussion by reiterating my overall 
position. Generally speaking, when it comes to energy policy, I 
have always said that we need an all-of-the-above approach. 
Unfortunately, not everyone shares this view.
    For example, leaders in the current administration, 
including President Obama himself, have said that they are for 
an all-of-the-above approach, yet clearly, when it is time to 
draft policies, the administration seems far more interested in 
punishing the production and use of fossil fuels, even if it 
means higher energy costs for our hardworking taxpayers.
    We see this across the board in the administration's 
environmental policies, its regulatory war on coal, its refusal 
to allow construction of the Keystone Pipeline, and what is 
more relevant to today's discussion, its tax policy proposals, 
which consistently include higher taxes at virtually all steps 
of the energy supply chain.
    Whether it is an increased per-barrel tax on oil production 
or higher per-gallon taxes charged on gasoline at the pump, the 
Obama administration seems intent on raising the cost of 
producing or consuming energy from fossil fuels, even if it 
means increased hardships on middle-class and lower-income 
families.
    More recently, the President proposed a $10 per-barrel tax 
on oil, an idea that virtually all economists agree would 
directly result in higher energy prices for families and 
consumers. Of course, this proposal would also be harmful to 
American businesses, particularly those in the manufacturing 
sector that rely on fossil fuels.
    The President and those who serve in his administration 
presumably know that this is the case. Yet, they are 
undeterred, and, quite frankly, these proposals are just the 
tip of the iceberg when it comes to the President's efforts, 
not to mention those of many of his supporters here in 
Congress, to use the tax code to further an ideological attack 
on American energy producers. This is, of course, not a 
surprise. After all, back when he was a candidate for 
president, then-Senator Obama said, in so many words, that the 
centerpiece of his energy policy, the so-called cap-and-trade 
proposal, would, quote, ``necessarily'' cause energy prices to, 
quote, ``skyrocket.''
    The President's first Energy Secretary, before he was 
appointed, argued on the record in favor of purposefully 
raising gas prices to European levels. All of this is meant to 
serve an agenda focused on ideology and not on the day-to-day 
needs of the American people and is, quite simply, the opposite 
of what our country needs.
    Instead of discouraging the domestic production of oil and 
gas, we should welcome it. By reducing our dependence on 
foreign oil, creating many high-paying jobs, and bringing down 
the cost of living for U.S. households, increased domestic 
energy production can protect our national security and provide 
greater economic stability.
    The President's first major attempt to overhaul America's 
energy policy, the aforementioned cap-and-trade proposal, 
thankfully, failed to pass through Congress, even when the 
Democrats controlled the House and had a filibuster-proof 
majority in the Senate. Since then, proponents of this horribly 
misguided policy have tried to repackage cap-and-trade, instead 
calling it a, quote, ``carbon tax.''
    As an aside, I have to say that when it comes to these 
``carbon tax'' proposals, I am a little disappointed in my 
friends on the other side of the aisle. Typically, when they 
have a proposal they know is going to put the financial screws 
to the American people, they give it a more clever name. The 
so-called Affordable Care Act comes most immediately to mind.
    However, with the various ``carbon tax'' proposals, my 
friends are telling the American people exactly what they will 
be getting: higher taxes in the form of increased energy costs 
and reduced wages relative to the cost of living.
    In addition to increasing costs particularly on middle-
class and lower-income earners, the President's energy tax 
policy also seems hyper-focused on picking winners and losers 
and handing over taxpayer resources to unproven ideas and 
technologies that far too often are completely unable to 
compete in the energy marketplace.
    Do not get me wrong. I am all for promoting innovation and 
advancing alternative energy sources.
    Like I said, I want an all-of-the-above approach. However, 
I do not believe we should be purposefully raising the cost of 
existing and proven energy sources and adding to the cost of 
doing business or raising a family in the U.S. in order to make 
alternative energy sources more attractive.
    In addition, I have serious concerns about the way in which 
the administration has overseen the use of the subsidies it 
designed to promote alternative energy. Most notably, as 
chairman, I am currently investigating the administration of 
cash grants awarded under the section 1603 program and energy 
tax credits based on evidence from the Treasury Inspector 
General for Tax Administration and elsewhere that suggests 
possible misuse.
    So far, $25 billion has been awarded under the cash grant 
program since it was established in the so-called stimulus that 
passed in 2009. We need to know more about where those 
resources have gone.
    Ultimately, the energy-related provisions in our tax code, 
like everything else, will have to be reconsidered as part of 
our ongoing tax reform efforts. In our attempt to make the tax 
code fairer, simpler, and more conducive to economic growth, I 
am willing to consider any reasonable alternatives. However, 
that is a long-term effort that will likely not bear fruit in 
the immediate future.
    In the meantime, I think we need to work to ensure that our 
tax code is designed so that it does not punish the production 
of any viable energy source.
    In the end, it is easy for politicians in Washington to sit 
in an ivory tower and say that people are not currently paying 
enough for their energy and they should pay more in order to 
further some ideological agenda. However, I think the vast 
majority of American workers and families would strongly 
disagree with that notion.
    As always with these energy hearings, I expect that we will 
have a spirited discussion of all of these issues here today.
    I think we have assembled a very good panel of witnesses to 
represent various viewpoints, and I look forward to hearing 
their views on these and other matters.*
---------------------------------------------------------------------------
    * For more information, see also, ``Present Law and Analysis of 
Energy-Related Tax Expenditures,'' Joint Committee on Taxation staff 
report, June 9, 2016 (JCX-46-16), https://www.jct.gov/
publications.html?func=startdown&id=4915.
---------------------------------------------------------------------------
    [The prepared statement of Chairman Hatch appears in the 
appendix.]
    The Chairman. With that, we will just turn to our first 
witness, and you can begin, sir.

STATEMENT OF BENJAMIN ZYCHER, JOHN G. SEARLE CHAIR AND RESIDENT 
     SCHOLAR, AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC

    Dr. Zycher. Thank you, Mr. Chairman and distinguished 
members of this committee.
    Since the early 1970s, there have been seven central 
rationales for energy tax policy and subsidy interventions 
prominent in the public discussion. All of them suffer from 
fundamental analytic weaknesses.
    First, energy independence is irrelevant, particularly for 
energy forms traded in international markets. Changes in market 
conditions have identical price impacts on different economies, 
regardless of the degree of foreign dependence, an economic 
truth demonstrated by the historical evidence.
    Second, the infant industry argument for subsidies in the 
early periods during which technologies are proven and scale 
and learning efficiencies are achieved is a non sequitur. 
Capital markets can sustain promising industries or 
technologies in their infancy, and, in the context of wind and 
solar power, there is little evidence that there exists 
additional learning or skill efficiencies remaining to be 
exploited in any event.
    Third, there is no analytic evidence that renewable 
electricity suffers from a subsidy disadvantage relative to 
conventional energy sources. The data reported by the Energy 
Information Administration suggests the reverse strongly, and 
the central subsidies for conventional fuels that often are 
cited are not subsidies, defined properly, as a matter of 
economic analysis.
    Fourth, with respect to the environmental externalities, 
wind and solar power create their own set of significant 
environmental problems. And even in terms of conventional 
pollutants and greenhouse gasses, the evidence suggests that 
they do not yield an advantage relative to conventional 
generation. This is the case, in particular, because of the up-
and-down cycling of conventional units needed to back up 
renewable power systems due to their inherent unreliability. 
And those backup costs, which are economic externalities 
inflicted upon the economy, are substantially larger than the 
environmental costs of conventional power, even under extreme 
assumptions.
    Fifth, the sustainability of resource depletion arguments 
for renewable subsidies make little sense analytically. The 
market rate of interest provides powerful incentives to 
conserve resources for future periods, and the sustainability 
rationale is inconsistent with the historical evidence in any 
event.
    Sixth, the green jobs employment rationale for renewable 
subsidies makes no analytic sense at all. We cannot increase 
aggregate employment by making energy more expensive. Because 
resources are limited always and everywhere, a shift of 
resources into the production of politically favored power must 
reduce employment in other sectors, and the taxes needed to 
finance the subsidies cannot have favorable employment effects. 
Moreover, the historical evidence on the relationships among 
GDP employment and electricity consumption do not support the 
green jobs argument.
    Finally, the newest environmental rationale for renewable 
subsidies, the effect of greenhouse gas emissions on 
prospective climate phenomena, is deeply problematic. In 
particular, the Obama administration estimate of the social 
cost of carbon is the single most dishonest exercise in 
political arithmetic that I have ever seen emerge from the 
Federal bureaucracy. It suffers from three central benefit-cost 
analytic flaws: the application of assumed benefits global 
rather than national, the failure to use an appropriate 
discount rate, and the inclusion of such co-benefits as 
particulate reductions in the calculation of benefits.
    Moreover, the policies proposed to reduce emissions of 
greenhouse gasses would have temperature effects by the year 
2100 trivial or immeasurable even at the international level. 
That is the straightforward prediction that we derive from the 
EPA's own climate model under assumptions highly favorable to 
the policy proposals, and that is what the EPA itself admits in 
its regulatory impact analyses.
    I urge policymakers to adopt a straightforward operating 
assumption. The market allocation of resources in energy 
sectors is roughly efficient in the absence of two compelling 
conditions.
    First, some set of factors clearly has distorted those 
allocational outcomes substantially. Second, government actions 
with high confidence will yield net improvements. Given the 
weak history of analytic rigor in the context of energy tax and 
subsidy policies, greatly increased modesty on the part of 
policymakers would prove advantageous.
    Thank you again, Mr. Chairman. I will be very pleased to 
address any questions that you or your colleagues may have.
    [The prepared statement of Dr. Zycher appears in the 
appendix.]
    The Chairman. Thank you so much.
    Mr. Miller?

   STATEMENT OF STEVE MILLER, CHIEF EXECUTIVE OFFICER, BULK 
                  HANDLING SYSTEMS, EUGENE, OR

    Mr. Miller. Thank you, Chairman Hatch, Ranking Member 
Wyden, and the rest of the committee. It is a pleasure to be 
here today.
    My company is actually a group of four companies, with 
operations based in Eugene, OR and manufacturing operations in 
Oregon, Tennessee, and California. Together, our companies 
design, engineer, manufacture, and install systems that process 
municipal solid waste streams, extracting the value from what 
is thrown away and minimizing the amount that is sent to 
landfills. While our products are produced here in the United 
States and most of our business is domestic, we also operate 
globally and today are fulfilling orders on five continents.
    One of our companies is focused on anaerobic digestion, or 
AD, technology. In this group, we build systems that convert 
organic waste into biogas, which is then used to produce either 
electricity or transportation fuel that would replace diesel in 
a waste truck fleet. In each of the systems, the resulting 
materials after biogas is extracted are organic solids, which 
we then turn into compost, and that material is then used in 
the agricultural sector to replenish soils and retain water.
    So while I am here today to talk about anaerobic digestion, 
biomass, and tax credits that might be available, our systems 
do much more than simply produce renewable energy. They 
substantially increase diversion of material from landfills. 
They manage the production of methane from the breakdown of 
organic waste so that it is not released to the atmosphere.
    We produce a base load electricity, as well as 
transportation fuels. And we produce organic compost to both 
replenish soils and retain water.
    Despite the overall attractiveness of the products that we 
create, our development has been slowed due to the headwinds 
caused by pricing: low prices for electricity, low prices for 
natural gas, and low prices for oil. Since the renewable 
products that we produce compete with these fuels, we are 
challenged to provide our customers the economics that they 
need to fund projects.
    So that really brings me to my central point. And while I 
appreciate the Senate's attentiveness to this issue and the 
policies that were adopted at the end of 2015, they simply do 
not do enough as it relates to the biomass sector.
    To correct this, we really need two simple things. First 
and foremost is certainty of the credit, and second is parity 
with other renewable energy technologies so that we can attract 
the capital needed for these projects.
    The way the current credits are structured, we do not 
achieve either of these outcomes. The Production Tax Credit and 
Investment Tax Credit for wind and solar received long-term 
extensions, while credits for the biomass industry were 
extended only to the end of 2016 and only applied to the 
renewable energy portion of the project. Since development of 
these projects takes several years, this makes the credit 
limited and really, today, of not much value.
    Additionally, all of our systems are required to deal with 
the solid material and produce compost. Thus, the cost to build 
an AD system must necessarily also include the compost system 
capacity.
    I think the intention of the credit is to provide value 
across the whole project, but the way it is now structured, it 
does not do so. To make it useful, it needs to include all of 
the necessary elements of a renewable energy system.
    So, while the credit established for the biomass industry 
expires at the end of this year, the credits for wind and solar 
were extended for 5 years. This is on top of the many years 
that they have received these benefits. To develop our project 
and our process, we simply need a longer ramp-up time. And I 
would suggest that if Congress wants to support renewable 
energy in the biomass sector, these advantages should be 
removed.
    In conclusion, I would ask you to consider the following. 
First, ensure parity across all renewable energy technologies. 
If wind and solar are given credits, then they should similarly 
apply to the biomass sector.
    Second, extend the PTC for biogas technologies for 5 years, 
with no phase-out, and ensure that the legislation allows 
technologies to convert the PTC into an ITC.
    Third, allow biogas to be used as a transportation fuel to 
obtain these credits, similar to if we were producing 
electricity.
    Lastly, allow the credit to apply to the costs to develop 
the compost portion of the project so that we can use it in the 
entirety of the project.
    Thank you again for the opportunity to speak today, and I 
hope you can help us develop this important industry.
    [The prepared statement of Mr. Miller appears in the 
appendix.]
    The Chairman. Thank you, Mr. Miller.
    Ms. Kennedy?

 STATEMENT OF SUSAN KENNEDY, CHIEF EXECUTIVE OFFICER AND BOARD 
    MEMBER, ADVANCED MICROGRID SOLUTIONS, SAN FRANCISCO, CA

    Ms. Kennedy. Mr. Chairman, Senator Wyden, committee 
members, thank you for inviting me to participate in today's 
hearing.
    Advanced Microgrid Solutions is a company that finances, 
designs, installs, and manages advanced energy storage systems 
for commercial industrial customers, hospitals, and 
universities. We use best-in-class battery technology and 
advanced analytic software to manage demand to provide reliable 
backup power and optimize onsite resources, such as solar, 
wind, and fuel cells.
    AMS designs energy storage projects for grid support. So we 
are building the first fleet of hybrid electric buildings in 
the world for Southern California Edison this year.
    Prior to founding AMS, I was the Chief of Staff to Governor 
Arnold Schwarzenegger. I also served for several years on the 
California Public Utilities Commission that regulates investor-
owned electric, gas, telecommunications, and water utilities. 
Before that, I served as cabinet secretary to another 
California Governor, Gray Davis, during the ugly days when 
California experienced rolling blackouts.
    Watching California's economy drop to its knees during the 
energy crisis was a seminal experience for all Californians. We 
learned in a very painful way that the electric grid is the 
most critical of all critical infrastructure in the United 
States. It is the lifeblood of economic growth, providing the 
backbone for every vital sector: finance, health care, 
transportation, telecommunications, public safety.
    Whether the grid is brought down by poor regulation, 
overheated transformers, squirrels, or wildfires, billions of 
dollars are lost and people die. The U.S. endures more 
blackouts today than any other developed nation, and the U.S. 
grid loses power 285-percent more today than it did in the 
1980s, costing the economy between $80 billion and $150 billion 
per year.
    The root causes of the increasing number of blackouts are 
aging infrastructure, the changing nature of supply and demand, 
extreme weather, and lack of investment in the distribution 
system.
    The distribution system, the electric grid as a whole, was 
designed around the concept that energy cannot be stored. We 
move electrons by the millisecond to balance supply and demand, 
frequency, and voltage. There is more than $0.5 trillion in 
redundancy built into the grid to manage fluctuations in power 
flow. And now, with more renewable generation on the grid, grid 
operators are having to build even more layers of redundancy 
into the grid in case a large cloud takes a solar field offline 
somewhere on the grid for even a few minutes.
    Advanced energy storage will change everything about our 
electric grid. It is now possible to store energy at every 
level--at the consumer level, the distribution level, the 
transmission level--giving grid operators, utilities, 
businesses, and residential customers the tools to manage 
demand and cost-effectively store electricity when it is cheap 
and abundant for use when and where it is needed.
    Advanced energy storage is the only technology that 
provides tools that reduce costs for consumers and provides 
multiple functions for grid operators, while simultaneously 
building layers of resiliency into the grid.
    Energy storage is no longer an experimental technology. 
Because of advancements in lithium ion chemistry used in 
laptops, cell phones, and electric vehicles, grid-scale energy 
storage is now 
market-ready.
    The need for investment in the distribution system to 
handle a dramatically changing electric grid is in the hundreds 
of billions of dollars each year. In 2014 alone, U.S. utilities 
spent more than $100 billion maintaining the distribution 
system, and utilities nationwide are going to need to spend 
close to $1 trillion over the next decade to modernize and 
maintain the electric grid. Advanced energy storage will be the 
core technology at the foundation of a modern electric grid.
    The grid was built by private-sector capital, and it will 
be 
private-sector capital that builds the electric grid of the 
21st century. Federal tax policy is the single most important 
tool to attract investment in new technologies and scale them 
for commercial deployment. Whether you agree with targeted tax 
incentives or not, they are often the only tool government has 
to induce private-
sector investment.
    For most of the 20th century, energy tax policy served us 
well in promoting domestic oil and gas reserves and production. 
The solar ITC alone has induced a 6,500-percent growth in solar 
installations since its implementation in 2006. Today, directly 
resulting from the ITC, solar energy has reached grid parity 
and is available in the market today for under 3 cents a 
kilowatt hour.
    Consistency in Federal tax policy is what is needed to fuel 
billions of dollars in investment in development and deployment 
of advanced energy storage, and until Congress reforms the 
entire tax code and passes a comprehensive tax policy aimed at 
the energy sector across all sectors, the primary tool for 
incentivizing private investment in our Nation's grid is the 
ITC. The single most important impactful measure the Federal 
Government can take to spur short-term deployment of advanced 
energy storage is to make it consistently available for all 
advanced technologies.
    Congress has effectively used the ITC to change the 
electric grid, and now it must use that tool to secure the 
electric grid.
    Thank you.
    [The prepared statement of Ms. Kennedy appears in the 
appendix.]
    The Chairman. Thank you.
    Ms. Harbert?

 STATEMENT OF HON. KAREN ALDERMAN HARBERT, PRESIDENT AND CHIEF 
  EXECUTIVE OFFICER, INSTITUTE FOR 21ST CENTURY ENERGY, U.S. 
              CHAMBER OF COMMERCE, WASHINGTON, DC

    Ms. Harbert. Thank you, Chairman Hatch and Ranking Member 
Wyden and the entire committee, for including me in this 
hearing. I applaud you for this timely hearing, because the 
U.S. is really at an energy policy crossroads.
    Much of our energy economy is governed by laws and 
regulations that are many decades old and not suited to our 
newfound abundance. Fiscal policy tends to be nimble, but even 
it can be outdated by today's energy abundance, which has 
changed so rapidly and is slated to continue.
    So as we think about energy tax policy, it should not be 
considered in a vacuum. We should be looking at it in the 
context of much-needed comprehensive tax reform that lowers 
taxes for all businesses, shifts to a more internationally 
competitive system, reduces the cost of capital, and decreases 
complexity--and refrain from trying to tackle this on a 
piecemeal basis.
    However, in looking at energy tax policy specifically, 
there are some tenets we think you should consider. First and 
foremost, it should be results-oriented and not proscriptive. 
We have not been overly successful in predicting technology 
success in the past and certainly did not predict today's 
energy abundance, and we certainly do not want to forestall the 
new technology surprises ahead of us.
    Secondly, Congress should avoid taxing one industry in an 
effort to support another, and I will have more on that later.
    Third, Federal energy policy must maximize all of our 
energy resources, which have allowed this country to 
industrialize, improve our quality of life, and develop those 
technologies that have allowed us to improve our environment. 
But today we see laws and regulations constraining access to 
resources, consideration of punitive taxes, and Byzantine 
regulations.
    Fourth, Federal policy must look to the future and allow 
technology evolution and commercialization, and tax policy 
plays a very important role in that.
    Fifth, we should be very wary of creating or distorting 
markets. And last, we must avoid unintended consequences. And 
an example of an unintended consequence is the well-intended 
Production Tax Credit of 1992, intended to expand wind and 
renewable technologies and diversify our portfolio. And to the 
extent that that was the purpose, it has been very successful, 
bringing wind from almost zero to almost 5 percent today.
    However, it is now having a perverse consequence in that it 
is challenging the grid. With today's stagnating economy and 
excess electrons, grid operators are forcing generators to pay 
them to take their electrons.
    For the wind operators, they can recoup their losses from 
the PTC. Coal and gas generators can either shut down or force 
themselves to pay the costs. The nuclear operators do not have 
that option.
    So today we are actually causing today's only carbon 
emissions-free base-load power to be economically uncompetitive 
in places around the country. We have eight nuclear power 
plants that are today either closing or about to close, and 17 
that are vulnerable because of this unintended consequence.
    I want to go back to the one thing I said about not tearing 
down one industry to build another. Today, America is blessed 
with the huge asset of our abundant resources. We have more 
oil, gas, and coal than any other country. We are the largest 
producer of oil and natural gas in the world.
    When you look at today, the U.S. derives 81 percent of its 
energy from either oil, natural gas, or coal. If we are going 
to increase taxes on those forms of energy, it will only serve 
to make foreign energy cheaper, increase imports into the 
United States, and export jobs and economic growth abroad.
    By 2040, the picture does not look much different. The 
Energy Information Administration says we will still rely on 
those forms of energy for 78 to 80 percent of our energy needs. 
So in effect, raising taxes on those forms of energy will raise 
taxes on the entire economy.
    This industry, the oil and gas industry, represents 8 
percent of the U.S. GDP. So raising taxes on that amount of GDP 
will certainly reverberate throughout the entire economy and 
have an outsized effect on growth.
    This industry was also the industry that hired the most 
people throughout a recession. Today, even in the low-price 
environment, it supports 9 million well-paying jobs in every 
single one of our 50 States, and some of those will be 
jeopardized.
    It also contributes a significant amount of government 
revenue. In 2015, this industry provided more than $7.6 billion 
in government revenue through royalties, rents, and bonuses. 
That is on top of the $300 trillion of Federal income and 
excise taxes it paid.
    This industry pays an average tax rate of 44.5 percent. If 
we increase taxes on that industry, that significant component 
of our economy, there is no doubt that not only gasoline prices 
will go up, electricity prices will go up, commodity prices 
will go up, but we will be importing more energy from places 
that do not like us so much, and that certainly puts us at a 
disadvantage.
    So let us not look too far into the past, with the Windfall 
Profits Tax that was put in place in the 1980s, which served to 
actually decrease domestic production by 8 percent and increase 
imports by 13 percent, which is why it was repealed 6 years 
later.
    So in summary, let me just say that Federal tax policy can 
be a very potent energy policy tool, but it must be part of 
comprehensive tax reform. We have to be very sober about the 
unintended outcomes. We have to focus on results rather than 
picking technologies, and we must make sure that we can secure 
our energy future by growing our economy rather than letting 
others grow at our expense.
    Thank you very much.
    [The prepared statement of Ms. Harbert appears in the 
appendix.]
    The Chairman. Thank you. We appreciate all the testimony 
here today.
    Let me start with you, Dr. Zycher. A number of tax policy 
experts believe that the tax system should only be used to 
raise the revenue necessary to fund the Federal Government and 
not get involved in social engineering through the tax code.
    Now, these experts suggest that energy policy should not be 
run through the tax code. As part of the tax reform exercise, 
this is one approach toward dealing with energy tax provisions.
    Let us have your thoughts on such an approach to tax 
reform.
    Dr. Zycher. Thank you, Mr. Chairman.
    I think the general view among economists that you 
summarize is largely correct. Government makes efforts, 
sometimes justified, sometimes less so, to change resource 
allocation that would otherwise emerge from market competition, 
and the purpose of the tax system is to raise the necessary 
revenues to fund those spending activities in a way that 
minimizes economic distortions.
    What you have called, in your question, social engineering 
through the tax code, I might change a little bit in terms of 
verbiage to call it distortionary effects of tax policies.
    Those effects take two forms: one, distortions in resource 
allocation in the private sector that yield less productivity; 
and second, a distortion in the signals that taxes send to 
policymakers with respect to the mix of public services that 
taxpayers prefer.
    So I agree with you that one way to approach thinking about 
reform in this area would be to, gradually or in one bill, if 
that is even possible, eliminate or substantially reduce the 
use of tax policies to affect energy markets and to shift 
efforts to change resource allocation in energy markets from 
the tax side of the budget to the spending side of the budget.
    The Chairman. Thank you.
    Let me ask a question to Ms. Harbert first, and then again, 
back to you, Dr. Zycher.
    What economic effect would a carbon tax have on U.S. 
workers, consumers, and businesses?
    Ms. Harbert. Well, I think we have seen the President come 
forward with a very specific proposal in the little over $10 
tax per barrel, which is, in effect, a carbon tax. So when you 
look at that, the immediate effect is, obviously, raising the 
price of gasoline, upon which every business and family 
depends, about a quarter for every gallon of gas you put in 
your tank.
    But it is not limited to the gas tank, because our entire 
economy, the backbone of our entire economy, is based on fossil 
fuels. We are still going to be relying on them, according to 
EIA, into the middle part of this century to move things around 
this country, to move milk, move eggs, move our groceries, move 
all these things, and making the types of technologies and 
components for the advanced technologies of tomorrow.
    So it would have a very serious effect on certainly the 
poor, the elderly, who pay more of their income into energy, 
but it would have a constraining effect on our overall economy.
    The businesses in Europe that are moving to the United 
States because we have affordable electricity, affordable 
natural gas, would turn around and go back and go somewhere 
else.
    So we will stifle investment here, stifle competitiveness, 
reduce our trade balance, and certainly provide attacks on 
every American family and business.
    The Chairman. Dr. Zycher?
    Dr. Zycher. I agree with most of those comments. A carbon 
tax or a per-barrel import fee applied also to domestic 
production or refining activities would have the effect of 
reducing GDP growth, reducing employment, and increasing the 
poverty rate, which is something that does not get mentioned, I 
think, often enough in the public discussion.
    A carbon tax, in particular, would not yield any 
environmental benefits--we can discuss this later, if you would 
like. It would not yield any environmental benefits that would 
be measurable.
    So I think from the social standpoint, it would be all cost 
and no benefit.
    The Chairman. Dr. Zycher, I hope we are able to tackle tax 
reform in the near future. But regarding energy policy in tax 
reform, what do you think is the most important piece of advice 
for us to keep in mind as we try to do that?
    Dr. Zycher. I think that the most important single message 
I would leave with you is that all, and I do mean all, of the 
traditional and modern rationalizations for Federal meddling 
through the tax code and other policies in energy sectors are 
very, very weak analytically, and it really would be better for 
Congress to extract the Federal Government from energy markets, 
to the degree that it is possible.
    The Chairman. Thank you.
    Senator Wyden?
    Senator Wyden. Thank you very much, Mr. Chairman.
    I want to start with you, Mr. Miller, and you, Ms. Kennedy, 
because I think it is striking. You both actually run 
companies. You are innovators, and I think it is particularly 
important, as Congress moves to what is the perpetual ritual of 
energy policy: we wait until the last minute.
    There is this song-and-dance of tax extenders, and there 
are more than a dozen of them that are going to expire in 
December, and it is estimated that the Federal Government is 
going to spend more than $125 billion over the next 3 decades 
on these provisions. So I continually hear from business people 
that this just defies common sense, because they do not have 
certainty and predictability.
    What I have proposed--and more than 30 United States 
Senators are now on board on this--I have said, enough already, 
let us just throw the tax provisions, the energy tax 
provisions, in the trash can--there are more than 44 of them--
and substitute the 44 for three: essentially clean power, clean 
transportation fuel, and energy efficiency.
    It comes in at half the cost. I call it ``more green for 
less green.'' And my question to you is, would something like 
this be preferable to what we have because we get out of the 
business of picking winners and losers, remain neutral between 
clean energy technologies, and, best of all, cut the costs in 
half?
    Ms. Kennedy, would this be better for you?
    Mr. Miller. Can I take that?
    Senator Wyden. You guys are like the Senate: you yield to 
each other. [Laughter.]
    Mr. Miller. Yes, it would be. Really, the key for us is 
certainty of the credit. In our case, each of the projects is 
financed independently, and so we need to really look at the 
economics of each thing independent of any other activity.
    If we know those credits are going to be there and we can 
rely upon them, then we can fund the projects. And it is really 
that simple.
    I will add the point that because, in this particular case, 
we are looking at an investment tax credit, we only will be 
able to benefit from it if we are earning income and paying 
taxes.
    The simple truth of it is that there is no negative 
associated with it. If we do not build the project, well, then 
there is no tax credit and there are no taxes for anybody. So 
if this inspires or makes the economics work for a project, 
then it seems to me it is a plus all the way around.
    Senator Wyden. Ms. Kennedy?
    Ms. Kennedy. I agree. It would be beneficial to have a 
consistent, across-the-board clean energy tax policy that was 
technology-neutral and attracted investment for advanced 
technologies.
    The danger is if it is drafted in a way that assumes you 
know what those advanced technologies are today, then in 2 
years, it may not be suitable and it may not attract the kind 
of investment in technologies that are not commercially ready 
today, but they could be in 2 years.
    Senator Wyden. You raise an important point. The value of 
what has been proposed is, Congress finally gets out of picking 
winners and losers. Congress will not be in the business of, in 
effect, saying, ``Oh, this technology sounds like a winner,'' 
and that really is because Senator So-and-so is powerful and 
Senator So-and-so is not powerful.
    It basically says, we are going to be tech-neutral and we 
are just going to have three priorities: clean energy, clean 
transportation fuels, and energy efficiency.
    I appreciate your bringing it up, because getting away from 
picking winners and losers is the prerequisite to having a 
technology-neutral policy.
    Now, one question for you, Mr. Miller, since we are so 
pleased about what you all are doing in Eugene.
    Talk a little bit about the costs of uncertainty. What I am 
struck by when I am home is--and I was home for a big chunk of 
the last few weeks--business people tell me if you get out of 
picking winners and losers and just give me some certainty, I 
will go away happy. Then you all will have the debate about 
rates and all the rest.
    But what are the costs of uncertainty given the 
groundbreaking work that you are doing, the innovation you have 
achieved?
    Let me just wrap up by having you lay out the costs of 
uncertainty.
    Mr. Miller. I appreciate that. Obviously, for us, it means 
that nothing really happens. So if we cannot see what is going 
on in the future, we just cannot get the financing needed for 
these projects.
    By way of example, we built, about a year and a half ago, a 
system that takes municipal solid waste and produces a 
transportation fuel; very low carbon--actually, a negative-
carbon fuel that is used by a waste truck fleet. It is the 
first one in the world.
    So that innovation just would not occur unless we knew that 
we could line up all of the resources needed to bring that 
project to bear.
    Senator Wyden. I am over my time. Thank you, Mr. Chairman.
    The Chairman. Senator Grassley?
    Senator Grassley. I have had a longtime and deep interest 
in supporting homegrown energy production. I have authored and 
championed some of the most transformative energy incentives, 
including the wind Production Tax Credit, the biodiesel and 
biofuel tax incentives, and incentives for energy efficiency.
    But I also and always have been taking the approach that 
our Nation needs energy from all sources. I truly support all-
of-the-above energy policies, whereas I run into a lot of 
people who support everything above the ground but nothing 
below the ground, or the other way around: people supporting 
everything below the ground but nothing above the ground.
    So I want you to know I support oil, gas, nuclear, 
hydropower, wind, solar, and biofuels. If it helps our economy 
grow and provides diversity and reliability, I am for it.
    Now, what irritates me then is when experts criticize 
subsidies for one type of energy while disregarding market-
distorting benefits provided to other sources, and nuclear is a 
prime example.
    Ms. Harbert, in your testimony, you claim that the wind PTC 
is undercutting base-load power, notably nuclear. I disagree. 
It seems to me that nuclear is being harmed primarily by cheap 
natural gas, transmission congestion, and stagnant electricity 
demands, much more than the wind PTC.
    In fact, if you take a close look at where most retiring 
nuclear energy plants are located, you will see that they are 
in places like Florida, Vermont, Massachusetts, New Jersey--
places that have little or no wind energy generation. It seems 
to me that then you are trying to tear down renewable to 
elevate nuclear, which would contradict your testimony that we 
should not damage one technology to elevate another.
    You further argue that Congress should be wary of creating 
or dislodging markets. Since 1957, nuclear energy has 
benefitted from more than $70 billion in taxpayer-funded 
research and development and Price-Anderson liability 
insurance. You make no mention of these market distortions in 
your testimony.
    So a simple question. Why the double standard? Given that 
that insurance premium is paid by plant operators or reduced, 
is Price-Anderson market-distorting?
    Could nuclear energy be competitive in the United States 
without a Federal liability cap? The Nuclear Energy Commission 
has concluded that the liability limits constitute a subsidy. 
Would other energy sources, like wind, have become more 
competitive earlier if nuclear did not have the liability cap?
    Ms. Harbert. Senator, I appreciate the question, and I can 
say I am in violent agreement, and we are in violent agreement 
with you on a true all-of-the-above energy policy, because we 
will need all forms going forward, as demand here and around 
the world will continue to increase.
    In regard to my specific comments on the Production Tax 
Credit, well-intended policy put in place in 1992 has been re-
upped 10 times and has accomplished a huge increase in the very 
commodity that it was hoping to increase, which was also 
intended to diversify our grid.
    What we worry about is--and because of the PTC, other State 
policies, and low natural gas prices; that is part of this 
equation--we then see a consequence of those policies and 
markets edging out 20 percent of our Nation's electricity, 
which is 60 percent of our emissions-free technology. Houston, 
we have a problem. We need to look at that and make sure--this 
was instituted in 1992; we are now well beyond that--what the 
effect is in the marketplace.
    Senator Grassley. You concentrate on Price-Anderson being a 
subsidy for nuclear.
    Ms. Harbert. Every single fuel source, as laid out in your 
great staff committee report, enjoys some sort of tax 
treatment, one way or another, whether it is wind, whether it 
is nuclear, whether it is carbon capture, et cetera. There are 
different risks, and there are different tax treatments for 
those risks.
    I am not singling out one. I am simply pointing out, as we 
take a fresh look at this, we need to look down the road so 
that we do not, by some imagination, disadvantage a really 
important resource for us down the road, because we are seeing 
those nuclear power plants close, and that is very unfortunate 
for the future of emissions-free electricity in this country.
    Senator Grassley. Dr. Zycher, do you believe that Price-
Anderson for nuclear is essentially a market-distorting cost-
reduction mechanism? Should not an analysis of the playing 
field include a nuclear subsidy?
    Dr. Zycher. Well, that is two separate questions, Senator.
    With respect to your first question, is the Price-Anderson 
liability limit a subsidy, the answer is ``no,'' regardless of 
the fact that it is quite widely misconstrued as one.
    The Price-Anderson liability limit in a strict insurance 
market is a way of allocating liability in a way that minimizes 
the sum of accident costs and accident avoidance costs.
    I do not know that $400 million is the right number--that 
is a different question--but conceptually, the liability limit 
is correct.
    Suppose you had an individual who at zero cost or very, 
very easily could move away from a nuclear power plant, thereby 
avoiding the adverse effects of a possible future accident, 
that individual should be induced to do that, because that 
individual, at a social cost very low or at zero, can avoid the 
cost of a future nuclear accident.
    If you think through the analytics of a liability limit, 
that is what Price-Anderson does. It is not a subsidy, properly 
defined. It is a way of minimizing the sum of accident costs 
and accident avoidance costs, although, again, I do not know 
that $400 million or whatever the number is now is the right 
number.
    With respect to your broader question, it is certainly the 
case that most of what people call subsidies for nuclear power 
or the nuclear power industry have taken two forms: research 
and development subsidies of one kind or another, which are not 
limited to nuclear power--all industries get research and 
development tax credits and all the rest--and various forms of 
accelerated depreciation that are more important for the 
nuclear power sector because nuclear power is so capital-
intensive.
    Now, you can argue that that is a subsidy for nuclear 
power, but it is really a subsidy, or a tax preference I think 
is a better word, for all sectors, and the fact that nuclear 
power is more capital-
intensive than other sectors is neither here nor there in terms 
of determining whether or not there is a distortion in Federal 
policies.
    Let me make one more point. With respect to the all-of-the-
above approach with respect to which there seems to be 
unanimity minus me in this room, which is a condition I am 
quite used to, I should add, really, we ought to be supporting 
all of the competitive.
    If we are going to support all of the above or everything, 
then it does not matter what a given energy form costs, we are 
going to subsidize it, and I think that is really not a very 
useful way for policymakers to proceed.
    We ought to let market prices determine which energy forms 
are competitive and let the market weed out the winners from 
the losers.
    Thank you, Senator.
    The Chairman. Senator Schumer?
    Senator Schumer. Mr. Chairman, I would just ask--as you 
know, I care very much about fuel cells being left out of the 
section 48 package.
    I do not have time to stay, but I would like to ask 
unanimous consent to put a statement in the record.
    The Chairman. Without objection, that will be the case.
    [The prepared statement of Senator Schumer appears in the 
appendix on p. 37.]
    The Chairman. Senator Enzi?
    Senator Enzi. Thank you, Mr. Chairman. Thank you for 
holding this hearing today.
    I thank all of you for your testimony. All of it has been 
very helpful. I like some of the comments, like ``we get 
whatever we are willing to pay for,'' ``we should not pick 
winners and losers,'' and ``we are holding back innovators.''
    I know we have two innovators on the panel, and I 
appreciate the people who are actually doing work out there in 
the private sector.
    Mr. Miller, I want to tell you about a company you might 
want to take a look at. That is one from Gillette, WY that 
works with fly ash and recycles it. They found that there is 
gold and platinum in fly ash and they are able to get 10 ounces 
out of a ton. And then they take the fly ash, and they process 
that into other products. So there is no fly ash problem 
anymore.
    Mr. Miller. I will be happy to look into that.
    Senator Enzi. I will give you more information.
    Ms. Kennedy, you mentioned that there are more blackouts in 
the United States than any other country and suggested that we 
need some targeted tax incentives.
    I agree with you and hope that we can get the storage of 
energy solved. I can give a few examples in Wyoming where we 
have some people working on some different battery things that 
I would like to introduce you to.
    Dr. Zycher, you said that we cannot increase employment by 
making energy more expensive.
    Ms. Harbert, you mentioned that we are doing things to the 
base load. The base load is going to be important. But we also 
are not using the innovation that this country is known for.
    I just saw a report last week where they found that they 
can inject CO2 into basalt and it turns to rock, and 
it turns to rock much quicker than they ever expected; in fact, 
just 1 year or 2.
    Of course, trees and plants absorb CO2 and put 
out oxygen, and I was always concerned at the climate 
conferences that I went to that they would not allow the United 
States to count new trees that they planted as part of the 
solution.
    But I have a kid in Wyoming who found a way to grow plants 
vertically. He puts these tubes on walls and the plants grow 
out this way, essentially.
    I asked him how many of those he could put in a greenhouse, 
and he said, ``Oh, I cannot; they would suffocate--not enough 
CO2.'' So I have suggested that he look into a 
greenhouse next to a power plant to capture the CO2 
and the residual heat.
    There are solutions out there, but we are not doing much 
for them.
    There is a section 45Q tax credit, and that is to encourage 
people to capture CO2 and also use it for other 
beneficial uses. In Wyoming, they are injecting that down into 
oil wells and getting 20 percent more oil out of the ground.
    Unfortunately, that 45Q tax credit is capped at 75 million 
tons. If we have something we want to happen, why do we say 
``but you can only do it so much and then we want nothing to 
happen?''
    Ms. Harbert, will extending the 45Q tax credit provide some 
financial certainty and effectiveness needed to drive private-
sector innovation and investment in the commercial deployment 
of carbon capture in power plants and industrial facilities?
    Ms. Harbert. You raise one of the most important points, 
which is, the future of all of this lies at the base of 
technology in developing today's fuel sources and investing in 
those fuel sources of tomorrow.
    When you look at carbon capture, we are going to have to 
find more ways, more effective ways, more affordable ways, to 
capture CO2, and if we can do that by actually 
having it have a commercial purpose, like enhanced oil 
recovery, which then generates money for the government, that 
is sort of a trifectca, which is, it is developing technologies 
we need here and are needed all around the world, as the world 
is going to use more and more coal.
    If we can be the leader in technology, deploy those 
technologies around the world, we are really leading on 
solutions, technology solutions, not picking winners and 
losers.
    So that is an example of something we should be investing 
in that really makes a tremendous amount of sense for us here 
and around the world.
    Senator Enzi. Thank you. I will have some specific 
questions for the others. I am an accountant. I like to work 
with the numbers. I have found that usually puts people to 
sleep, so I usually contain those to the written questions.
    I do thank you for participating, and I have learned a lot, 
and it should be useful.
    I yield back my time.
    The Chairman. Thanks, Senator.
    Senator Menendez?
    Senator Menendez. Thank you, Mr. Chairman. I appreciate 
your convening the hearing.
    I think that the choices that we make in this committee 
have a significant role in determining the Nation's energy 
future, and I believe it is well past time for us to reconsider 
some of these choices.
    First, the question of oil subsidies. In spite of low 
prices in oil, big oil is still making billions of dollars of 
profit, and the end-of-the-year tax deal gave them a $500-
billion fiscal stimulus in the form of ending the crude oil 
export ban.
    So giving these same companies billions of dollars in tax 
breaks, to me, makes no financial sense, but that is exactly 
what we are doing. So that is why I have introduced legislation 
called the Close Big Oil Tax Loopholes Act, which would end tax 
give-aways for the largest class of oil companies and would 
save taxpayers over $20 billion, and I hope that we will get to 
consider that as part of any reform of our tax code.
    Secondly, we need to provide an extension for the 13 clean 
energy tax credits that will expire at the end of this year. A 
number of these credits were, I am told, inadvertently left out 
of the tax bill that was passed last year, and my understanding 
is that there was a commitment made by the Majority Leader to 
correct this oversight in the first tax vehicle that moved this 
year. And while that did not happen, I am hopeful this 
commitment will ultimately be upheld.
    I also hope we can avoid any talk of additional concessions 
to move these extenders forward, concessions that were already 
made as part of a larger package, and that agreement, I think, 
needs to be fully honored before we move on to additional 
negotiations.
    Finally, we need to reconsider more broadly the way we 
handle our renewable energy tax credits. While all tax credits 
are permanent, in some cases going back 100 years, we have made 
our clean sources of energy choose between year-to-year 
uncertainty or a slightly longer extension period, with phase-
out.
    We should not be phasing out support for nascent industries 
that will help us build a clean energy economy of the future 
while continuing to subsidize fossil fuels of the past.
    So I wanted to take advantage of the hearing, and, Mr. 
Chairman, I appreciate while you are here, hopefully, your 
consideration of some of those things.
    I do have a quick question. Ms. Harbert, your testimony is 
comprehensive about what you see as the virtues of oil and gas, 
but I do not see anything in your statement about the costs. 
And in any ROI, we look at costs as well as the benefits.
    There is nothing about the health impacts of continuing to 
burn fossil fuels; nothing about the economic and safety risks 
to our communities from oil spill or an oil train derailment; 
nothing about the threat of climate change.
    Now, in your testimony before the Senate Foreign Relations 
Committee in 2014 and in a subsequent question that I submitted 
for the record, the Chamber's position on climate change, to 
me, was unclear.
    So to clarify, does the U.S. Chamber of Commerce agree with 
the overwhelming scientific consensus that climate change is 
real and is caused by human activity?
    Ms. Harbert. Senator Menendez, thank you for the question. 
I am happy to be able to have this conversation once again with 
you and hopefully to clear up any muddy waters.
    Senator Menendez. So that would be either a ``yes'' or a 
``no.'' That would clear it up very concisely.
    Ms. Harbert. And very concisely, the climate is changing, 
has changed, will continue to change. Human activity is 
contributing to the changing climate.
    That is where the conversation should begin, but normally, 
with people in the environmental community, that is where it 
ends.
    We want to talk about the solutions to addressing our 
climate and technology, et cetera. When I talk to my friends in 
the environmental community, they want to shrink our toolbox in 
addressing climate change. They want to relegate it to just 
wind and solar.
    We at the Chamber of Commerce believe in these businesses 
and want to see the development of advanced technologies and 
see those actually permeate the marketplace to address climate.
    So those who want to put the Chamber of Commerce in the 
climate denier box are simply wrong.
    Senator Menendez. So then let me ask you. Why has the 
Chamber chosen to exclude any consideration of the risks 
associated with continual reliance on fossil fuels and climate 
change from this testimony? I never see in any of the Chamber's 
testimony any consideration of the risks. You would not do that 
in any other business enterprise. To the extent that we are 
making tax policy, it seems to me that we should be considering 
the risks.
    Why is it that you do not include the risks in any of your 
testimony?
    Ms. Harbert. Every form of energy--every form of energy--
has a risk. You also have to weigh the benefits, and if you 
look at the benefits of what fossil fuels have brought to our 
country----
    Senator Menendez. Even if any form of energy has a risk, 
you still do not mention the risks in any of them, and you 
certainly do not mention it with fossil fuels.
    So I think it is intellectually misleading--I will leave it 
at that, not to be harsher--that there is no consideration of 
the down side.
    So I hope we can get to a better place where the testimony 
is more balanced at the end of the day.
    I appreciate, Ms. Kennedy, your Advanced Microgrid 
Solutions. We saw in New Jersey after Sandy that Princeton 
University was able to keep the lights on through its 
resiliency program, but large parts of the State could not, 
including our mass transit system. So I would love to hear from 
you--not now, because we have a vote--but I would love to hear 
from you on what type of tax policy could help us move in the 
right direction in that regard.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator. And to the panel, thanks 
so much. We appreciate having you here.
    We are adjourned.
    [Whereupon, at 11:15 a.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


 Prepared Statement of Hon. Christopher A. Coons, a U.S. Senator From 
       Delaware, and Hon. Jerry Moran, a U.S. Senator From Kansas
    Thank you, Chairman Hatch and Ranking Member Wyden, for the 
opportunity to provide testimony for the record as a part of your 
oversight hearing on Federal energy tax policy on June 14, 2016. As you 
consider principles for energy tax reform, we are grateful for the 
chance to offer our perspective on a potentially powerful policy 
enhancement to the tax code that we believe could drive significant, 
new investment in clean and renewable energy. That legislation is the 
Master Limited Partnerships (MLP) Parity Act (S. 1656), which includes 
support from a bipartisan group of Senators.

    The United States is experiencing a resurgence in domestic energy 
innovation, exploration, and production. With this growth, more 
Americans are going to work in the development of our country's vast 
natural resources, both traditional and renewable. There is little 
debate about America's potential to lead the world in clean energy 
development and deployment. We have unparalleled ingenuity. We are 
among the world's leaders in advanced clean energy technologies. But we 
many times struggle to deploy these innovations--and miss out on the 
very real economic and sustainability opportunities they represent--in 
part, because of the absence of a reliable source of financing. To 
advance, our technology needs a catalyst--the catalyst of a clearer, 
stronger regulatory and statutory structure that allows efficient 
access to long-term financing.

    Today's energy market is largely defined by narrow profit margins 
and established technologies supported by low-cost, long-term 
financing. If clean and renewable sources of energy are to grow and 
compete in the American energy marketplace, and around the world as 
well, we have to make sure they are given a level playing field on 
which to operate.

    The MLP Parity Act is a strikingly simple, bipartisan bill that 
modernizes a section of our tax code, harmonizing it with the ``all-of-
the-above'' energy strategy that so many of us have endorsed as the 
blueprint for energy independence and our energy future. This is a 
clear opportunity for Congress to take action to level the playing 
field and give all sources of domestic energy--renewable and non-
renewable alike--a fair shot at success.

    The legislation is a powerful change to the Federal tax code that 
could unleash significant private capital into the energy market. It 
would level the playing field between traditional and new energy 
businesses by helping energy projects form MLPs, which combine the 
funding advantages of corporations and the tax advantages of 
partnerships.

    By statute, MLPs are currently only available to investors in 
energy portfolios such as oil, natural gas, coal extraction, and 
pipeline projects. These projects get access to capital at a lower cost 
and are more liquid than traditional financing approaches to energy 
projects, making them highly effective at attracting private 
investment. Investors in renewable energy projects, however, have been 
explicitly prevented from forming MLPs, starving a growing portion of 
America's domestic energy sector of the capital it needs to build and 
grow.

    Our MLP Parity Act would allow clean energy projects to utilize 
MLPs, a beneficial tax structure that taxes a project like a 
partnership--a pass through--but that trades its interests like a 
corporate stock, a C-corp. This allows access to the liquidity of 
equity markets, prevents double taxation, and leaves more cash 
available for distribution back to investors. It is important to note 
that MLPs do not represent a ``tax break'' for those industries 
eligible for the MLP tax structure. Rather, MLPs are a tax 
simplification structure that concentrates tax at the investor level, 
and significantly broadens the potential investment base. For the last 
30 years, MLPs have given the natural gas, oil, and coal industries 
access to private capital at a lower cost, something other capital-
intensive projects badly need. This is a well-
developed, well-established financing vehicle. There are now roughly 
150 MLPs in existence with market capitalization of more than $480 
billion.

    The extension of access to this financing vehicle to a very wide 
range of renewable energy sources, energy storage, energy efficiency, 
and other options has real potential to bring a significant wave of 
private capital off the sidelines and into the renewable energy 
marketplace. It would not only level the playing field, but would also 
increase access to low-cost capital for all energy sources in our 
marketplace. MLPs have aided in the construction and operation of much 
of our modern oil and gas infrastructure, most recently fueling the oil 
shale revolution. In 2012 alone, MLPs raised more than $23 billion for 
eligible projects. That's $23 billion spent developing and modernizing 
the backbone of oil and gas infrastructure--$23 billion spent on 
production, pipelines, gathering and storage facilities, and 
refineries. MLPs work and they should be diversified to support the 
rest of the rapidly growing energy sector.

    Again, we are so thankful for the support of Senators Bennet, 
Collins, Gardner, Heinrich, King, Murkowski, and Stabenow for their 
tireless partnership in this effort and for working closely with us on 
this bill. Bipartisan, companion legislation has also been introduced 
in the House and is led by Congressman Ted Poe (R-TX) and Congressman 
Mike Thompson (D-CA).

    In summary, access to low-cost financing will define our Nation's 
energy future. It will determine how, when, and which energy sources 
emerge as the central players in the American energy marketplace in the 
long term. We believe it is up to us to ensure that our vast supply of 
clean energy is a vital part of that equation. Given this demand, we 
urge your support for the bipartisan, bicameral MLP Parity Act. Thank 
you.

                                 ______
                                 
Prepared Statement of Hon. Karen Alderman Harbert, President and Chief 
 Executive Officer, Institute for 21st Century Energy, U.S. Chamber of 
                                Commerce
    Thank you, Chairman Hatch, Ranking Member Wyden, and members of the 
committee. I am Karen Harbert, president and CEO of the Institute for 
21st Century Energy (Institute), an affiliate of the U.S. Chamber of 
Commerce, the world's largest business federation representing the 
interests of more than 3 million businesses of all sizes, sectors, and 
regions, as well as State and local chambers and industry associations, 
and dedicated to promoting, protecting, and defending America's free 
enterprise system.

    The mission of the Institute is to unify policymakers, regulators, 
business leaders, and the American public behind common sense energy 
strategy to help keep America secure, prosperous, and clean. In that 
regard we hope to be of service to this committee, this Congress as a 
whole, and the administration.
                              introduction
    The United States is at an energy policy crossroads. Much of our 
energy economy today is governed by laws and regulations that are many 
decades old and not suited to America's new-found energy abundance. 
While fiscal policy tends to be relatively nimble when compared to 
other aspects of energy policy, it also frequently fails to keep pace 
with market developments and outlives its usefulness, necessitating 
frequent review. This is especially true given how rapidly and 
drastically our energy landscape has changed in the last decade, and 
how much change is expected in the future. I applaud the committee for 
holding this hearing and contemplating today's energy tax policy and 
looking ahead to what it should look like in the future.

    U.S. fiscal policy can aid in securing our energy future, but 
unintended consequences can also constrain economic growth, reduce 
economic and energy security, and weaken geo-political leverage.
                              federal role
    While a tradition of federalism rightly reserves much, if not most, 
energy policy decisions to the States, the Federal Government maintains 
a significant and growing role. When crafting energy policy of any 
stripe, however, it is important to determine what the Federal 
Government's underlying role should be. Because of energy's vitality to 
our economy and everyday lives, it's crucial for Congress to consider 
policy that benefits U.S. energy security and ensures all Americans 
have access to a reliable, affordable, and diverse energy supplies. 
Moreover, Federal energy policy must also enable our dynamic economy to 
maximize output, increase efficiencies, and promote, not hinder, 
economic growth and development. Additionally, Federal energy policy 
must look to the future and allow technological evolution and 
commercialization.
                            energy security
    To ``provide for the common defense'' is clearly one of the Federal 
Government's most fundamental and indisputable obligations. Securing 
America's energy future is a concomitant obligation. Not only are 
secure, reliable, and diverse energy supplies essential to our 
military, they are equally essential to our economic well-being. Energy 
security is sometime hard to define, which is why in 2011 the Energy 
Institute published our first annual Index of U.S. Energy Security Risk 
to create an objective and uniform method for quantifying risk to our 
energy security across nearly 40 metrics. Each annual installment 
provides a moving trend that shows whether our energy security risk is 
increasing or declining.

    Reliance on energy imports is a central aspect of ``energy 
insecurity,'' but it is certainly not the only measure. Inputs as 
varied as energy prices, efficiency, capacity, and even production of 
scientists and engineers are all important indicators of energy 
security. Most of these components are frequently overlooked when 
policy is formulated, to the detriment of the country. Our Index shows 
that the energy revolution has led to a sharp decrease in overall U.S. 
energy security risks. Indeed, just last week we released the 
international version of this index, and it shows how America, now 
ranked number 4 out of 25 other top energy users, has improved its 
standing since the ``Shale Gale'' first began to blow about a decade 
ago.
                            economic growth
    Through both fiscal and monetary policy, the Federal Government can 
foster economic growth. Energy is the lifeblood of an economy. 
America's dominant energy resource base, the largest in the world, has 
provided the foundation for industrialization and dramatic improvements 
to our environment and our quality of life. In recent years, however, 
Federal energy policy has also hindered further economic growth by 
constraining accesses to energy resources, implementing punitive fiscal 
policies, and issuing Byzantine and outsized regulations. When 
considering future energy tax policy, it is important to ensure that it 
encourages economic growth rather than constrain it.
                         technology development
    Within the balance of federalism and private sector investment, the 
Federal Government's size and resources give it a unique role in 
shepherding and spurring energy technology development. Research, 
Development, and Demonstration has been, and should continue to be, a 
driving focus of Federal energy policy while tax and other policies 
need to continue to play a central role in breaking down barriers to 
commercialization.
                                  rd&d
    The United States continues to maintain some of the highest quality 
and important energy research and development laboratories in the 
world. While rooted in developing defense technologies, they have 
evolved to create or improve nearly every energy technology we use 
today. This role is as important today as ever. With a growing focus on 
public-private collaboration, the Department of Energy's National 
Laboratories must continue to be central to developing the energy 
technologies of tomorrow. While the U.S. is blessed with the largest 
energy resource base in the world, it is the technologies developed by 
the National Labs, the private sector, and academia that will ensure we 
are able to continue harnessing this resource to provide cheaper, 
cleaner, and more reliable energy for the country.

    While the National Labs have a central and coordinating role, 
Federal tax policy provides a necessary tool in incentivizing private 
sector development of energy technology. Making the Research and 
Development Tax Credit permanent last year was an important and 
foundational step in lifting a private-sector barrier to developing the 
future energy technologies.
                             fiscal policy
    When considering tax policy more broadly, energy tax policy cannot 
be considered in a vacuum. All changes to the Internal Revenue Code 
must be considered in the context of much needed comprehensive tax 
reform, which ultimately must lower rates for all businesses, shift to 
a more internationally competitive system, reduce the cost of capital, 
and decrease complexity. While there could be new tax policy that would 
benefit the country's energy economy, we believe Congress should avoid 
undertaking tax reform on a piecemeal basis.

    To the extent that Congress does tackle energy tax policy within 
the context of comprehensive tax reform, there are some tenets it 
should rely on. Foremost, it should be results oriented and not 
proscriptive. The Federal Government has a checkered history of 
technology development prediction. Who could have guessed how the 
emergence of hydraulic fracturing, horizontal drilling, and advanced 
seismic imaging would lead to the energy revolution now underway. It 
was not that long ago that ``peak oil'' was all the rage. No one's 
speaking about peak oil anymore, and all because of a technology 
revolution that took most analysts in and out of government by 
surprise. Who can say what technology surprises the future has in 
store? It is because we do not know that answer to that question that 
any energy tax policy must be technology neutral and focused on the 
underlying desired result.

    Moreover, taxing one industry in an effort to support another is a 
recipe for higher prices, less economic growth, and diminished energy 
security. The U.S. greatly relies on energy diversity and attempting to 
tax one or more forms out of existence puts the county on a path to a 
much less secure energy future.
                        unintended consequences
    All too often, the Federal Government has lacked the foresight to 
see the unintended consequences of well-intentioned policy. The section 
45 Production Tax Credit (PTC) was first enacted in 1992 and designed 
to incentivize investment in electricity generation from wind and 
close-loop biomass. Originally set to last 7 years, it has since been 
extended 10 times. In 1992, it was not fully anticipated that many 
States would de-regulate their electricity markets in favor of greater 
competition.

    One of the intents of the PTC was to diversify the U.S. generation 
portfolio and to increase renewable generation. To that end, the PTC 
has been successful. In conjunction with various State mandates, wind 
generation has increased from negligible net generation to nearly 
200,000 gigawatt hours last year, bringing it from nothing to 4.7% of 
total U.S. net generation.

    If the sole intent of the PTC is to incentivize more wind 
generation, then it has been successful. However, another justification 
for the PTC cited with increasing frequency is the desire to increase 
generation from emissions-free sources. In this respect, the PTC has 
produced an unintended consequence that is actually producing the 
opposite intent. While wind capacity has been growing rapidly because 
of the PTC and other incentives, U.S. electricity demand has been 
stagnating owing to the recent recession. In many electricity markets 
additional wind generation often creates gluts of electrons. Since the 
electricity grid must precisely balance supply with demand, it cannot 
accept more electricity than what is being used. When supply outstrips 
demand, prices actually go ``negative,'' that is, the grid operator 
requires an electricity generator to pay it to take additional 
electrons, creating severe market dislocations.

    In these cases of negative pricing, wind generators are often able 
to pay the grid operator to take wind-generated electricity. It is not 
often a business can pay its customers to take its products, but wind 
generators are able to recoup a profit on the back-end thanks to the 
PTC.

    However, in pushing prices negative, every other generator also is 
forced to pay the grid to take their respective electrons or power 
down, but they are not made whole via the PTC. Not only does this harm 
other generators like coal and gas, but it specifically hurts nuclear.

    Nuclear generation provides nearly 20% of total U.S. generation and 
the nuclear fleet operates in excess of a 90% capacity rate, by far the 
highest of all sources. More importantly in the context of the PTC, 
nuclear generation provides more than 60% of all emissions-free 
generation, making it the king of emissions-free energy. Yet when 
prices go negative, nuclear generators have little choice but to pay 
the grid to take their generation because shutting down the reactor is 
a very complicated undertaking that could result in it going offline 
for several days to several weeks, something no nuclear facility can 
afford.

    Even when prices are not negative, the PTC-induced wind generation 
is glutting many power markets, depressing wholesale power rates. While 
these lower wholesale rates rarely result in lower retail rates paid by 
end-users, they are artificially distorting some power markets and 
Regional Transmission Organizations (RTO) making a significant number 
of nuclear reactors much less competitive. According to the Nuclear 
Energy Institute, eight reactors have either closed or are scheduled to 
close, and up to 17 are vulnerable to premature closure. Nuclear plants 
have closed or are likely to close in Illinois, California, 
Massachusetts, New Jersey, New York, Vermont, and Wisconsin.

    The average wind turbine being built today in the United States 
today is rated at about 2 megawatts, and typically a U.S. turbine 
operate about 32% of the time. Shutting down a 1 gigawatt reactor that 
operated at an industry-average capacity factor of 92% and replacing it 
with wind would require the construction some 1,450 wind turbines. But 
even then it is not a realistic comparison because the wind turbines 
produce electricity only under certain conditions whereas the power 
produced at a nuclear reactor is ``base load'' and available on demand. 
So in a practical sense, then, intermittent wind power cannot really 
``replace'' nuclear power. Ultimately, the PTC is a leading contributor 
to these reactor closings, inherently reducing the net-generation from 
non-emitting sources, running counter to one of its primary intents.
                             making markets
    When developing all energy policy, including tax policy, it is also 
important for the Federal Government to be wary of creating markets. If 
a technology or application is favored via policy, it has a tendency to 
crowd out competition, which disadvantages consumers and harms energy 
security. Congress should avoid policies that create or dislocate 
markets.
                        concessionary financing
    While it lies beyond the jurisdiction of this committee, it is 
important to mention another tool the Federal Government can and should 
wield when designing energy policy. Concessionary financing has the 
potential to provide a necessary bridge to bring energy technology from 
the laboratory to the market. To be clear, the Federal Government 
should not look to create a market or select technologies for the 
country; the market will always do that more efficiently. However, by 
using existing and potentially new mechanisms, the Federal Government 
can help bridge the proverbial ``valley of death,'' that too often 
prevents markets from ever entertaining new technologies.
                   breaking down regulatory barriers
    Similarly, another tool the Federal Government has used to 
unintentionally hamper technology development and investment in energy 
and infrastructure is the ever-increasing regulatory burden businesses 
must shoulder and navigate. Reforming both structural as well as 
specific regulatory regimes can be accomplished while maintaining the 
safeguards they were intended to establish. Without such reform, 
capital investment will continue to lag threatening our energy future.
                             energy reality
Largest Resource Base
    America's energy resource base is truly one of its greatest assets. 
We currently are blessed with technically recoverable resources that at 
current consumption rates would supply 120 years of natural gas, 200 
years of oil, and over 450 years of coal. That is energy we know where 
to find and can extract today with existing technology. Even more 
remarkable, the United States has in-place resources--energy we can 
find but have yet to develop technology to extract economically--that 
would provide over 580 years of natural gas, 530 years of oil, and over 
9,800 years of coal.

    According to the Congressional Research Service, the United States 
maintains the largest fossil energy resource base in the world. While 
Russia is a close second, every other country has less than half that 
of the United States. This plentiful and diverse resource base provides 
a tremendous competitive advantage as well as a much-needed safety net. 
Increasing taxes on energy production will only serve to make foreign 
energy cheaper and increase imports into the United States, and export 
jobs and economic growth abroad.
                            fossil backbone
    When contemplating the energy tax policy of the future, it is 
important to appreciate the energy disposition of today, as well as 
tomorrow. As we sit here today, the United States derives 81% of its 
energy needs form oil, natural gas, and coal. According to the Energy 
Information Administration's Annual Energy Outlook 2016, by 2040 we 
will still rely on these sources for 78% to 80% of our energy needs, 
that's even if the President's Clean Power Plan is implemented as 
written.
                  don't tear down one to build another
    The overriding focus of any energy tax policy should be to avoid 
damaging one technology or industry in the pursuit of elevating 
another. The United States is blessed with an incredibly diverse energy 
portfolio, especially when compared to other countries. This diversity 
creates competition and thus lower prices for consumers. Diversity also 
insulates against supply disruption, which helps insulate consumers and 
businesses from price shocks. This predictability encourages greater 
capital investment from the private sector.

    As the largest economy in the world, we must continue to rely on 
and encourage further diversity within our energy supply if we are to 
maintain that status. Fiscal policy that seeks to penalize one form of 
energy or energy production detracts from our diversity, decreasing 
competition and increasing prices and price volatility. This is 
detrimental to economic growth and energy security.

    We need not look too far in our history to see the detrimental 
impacts of punitively taxing energy production. The Windfall Profits 
Tax (WPT) implemented in 1980 operated as an excise tax on domestically 
produced oil and provides a solid historical reference to judge the 
impacts of recently proposed new taxes and fees.

    In 2006, the Congressional Research Service estimated that 
implementation of the WPT resulted in as much as an 8% decline in 
domestic crude production and as much as a 13% increase in imports. In 
1986 imported oil as a share of total U.S. consumption jumped from 32% 
to 38% from the previous year. This 19% increase is one of the largest 
annual increases on record and one of the primary reasons the WPT was 
ultimately repealed in 1988.

    Yet countless proposals included in each of the President's 
proposed budgets as well as dozen of bills proposed in Congress would 
create new taxes and fees while repealing several long-standing tax 
rules for companies that incur significant economic risk in exploring 
for oil and natural gas without any guarantee of cost recovery.

    The elimination of these tax rules is not about ``closing 
loopholes,'' as some have suggested. These provisions--which are 
similar to rules that apply to other industries and are not targeted 
for elimination--were specifically crafted by Congress to create and 
preserve American jobs and to increase the country's energy security by 
supporting greater domestic production. Thus, the new tax changes being 
proposed would disproportionately target one industry but harm the 
entire country.

    Efforts to raise taxes on energy production foreshadow a less 
secure energy future. History has demonstrated that arbitrary tax 
increases that raise the costs of doing business in this country are 
counterproductive, forcing increased oil imports, significant job 
losses, and more expensive energy bills. These detrimental impacts are 
magnified at a time when the oil and gas industry is still suffering 
from its own success in producing more American oil and gas than anyone 
had ever predicted, causing a precipitous price decline. While this has 
marginally benefitted some sectors of the economy, it has resulted in 
an estimated 150,000 direct jobs lost in addition to another 50,000 to 
100,000 indirect jobs.

    The number of drilling rigs currently active has declined 78% 
percent since the end of 2014 to the lowest level in half a century. 
Taxing energy production is always bad policy, but doing it now is 
exponentially more so. Rather, energy tax policy should focus on 
achieving a targeted objective, while allowing the technologies or 
applications to compete in the market to fulfil that objective.
     oil and gas are the country's economic and security lifeblood
    Oil and natural gas not only provide a growing competitive 
advantage and are increasing U.S. energy security, but they also 
literally and figuratively lubricate our economy. Taxing oil and 
natural gas serves to increase production costs domestically, making 
foreign production cheaper. Because oil is priced globally, taxing its 
production domestically will not impact global prices, and therefore 
have no impact on domestic consumption. Instead, increasing taxes on 
domestic oil production only changes where the oil we consume is 
produced. The less oil we produce for our own consumption, the fewer 
jobs will be created or supported, the less economic growth we will 
realize, the less government revenue will be collected, and the less 
leverage we will have geo-politically.
                 densest, cheapest, and most plentiful
    While wind has increased exponentially in the 2000s and continues 
to grow at a brisk pace and solar generation is now increasing very 
fast, together they are projected to provide less than 10% of U.S. 
primary energy consumption in 2040, even with the aid of the Clean 
Power Plan. This is not to say renewable energy is not important, but 
rather to demonstrate the size of the U.S. energy economy. It takes 
many decades of exponential growth to begin to truly impact our energy 
consumption ratios. Therefore, it is important to be tempered when 
estimating how impactful fiscal policy can be in advancing alternative 
energy sources. The simple reality is that fossil fuels are the most 
energy-dense, plentiful, and economical energy resources available.
                                  jobs
    The oil and natural gas industry supports some 9 million jobs in 
the U.S. While many have been lost during the recent downturn, on 
average, they pay nearly double to U.S., median wage. During the energy 
renaissance of the last decade, areas of production have expanded from 
traditional places like Texas, Wyoming, and Utah to new hotbeds like 
Pennsylvania, Ohio, and Colorado, creating thousands of new, high-
paying jobs. (It is fair to point out that even with these job losses, 
Bureau of Labor Statistics data show that employment in the oil and gas 
sector is still about 23% higher than it was at the end of 2007 while 
employment in the rest of the non-farm economy is just 5% higher. 
Clearly, the oil and gas sector has been, and continues to be, a bright 
spot in an otherwise dreary economic landscape.)

    While we are cautiously optimistic that the labor market in the oil 
patch has stabilized, one of the quickest ways to create more pink 
slips is to raise taxes on oil and natural gas production.
                                economy
    The oil and natural gas industry contributes 8% of U.S. GDP. 
Punitive taxes that further decrease capital investment from such a 
large share of the economy are likely to have an outsized effect on 
growth. While we will not appreciate the full extent of the damage for 
some time, the current and prolonged decline in oil and gas capital 
investment is clearly contributing to anemic economic growth.
                           government revenue
    In 2015, oil and natural gas production provided more than $7.6 
billion in government revenue through royalties, rents, and bonuses. 
This is in addition to the Federal income and excise taxes paid, which 
was estimated to total over $300 trillion in 2012. The industry 
averaged a staggering 44.5% effective tax rate from 2008 to 2013. 
Increasing taxes on the oil and gas industry will result in higher 
production costs, less production, and ultimately less government 
revenue.
                      geo-political considerations
    Finally, while difficult to quantify, the import and export of oil 
and natural gas have a precipitous impact on the executive branch's 
ability to influence geo-political affairs abroad. Since 2006, U.S. oil 
imports have declined by nearly one-third. Imports from OPEC countries 
have declined 44% with crude from Nigeria, Algeria, and Libya having 
been nearly eliminated. Not only has then insulated U.S. consumers from 
price shocks created by supply disruptions around the world, but it 
also lifts constraints on U.S. foreign policy.

    Indeed, the changing geo-political equation has been nothing short 
of astonishing. It was not all that long ago, in March 2012, that 
President Obama declared in his weekly address to the Nation, ``But you 
and I both know that with only 2% of the world's oil reserves, we can't 
just drill our way to lower gas prices--not when we consume 20 percent 
of the world's oil.'' From the end of 2011, a few months before the 
president made that claim, to 2015, U.S. crude oil production jumped by 
3.8 million barrels per day, an astonishing two-thirds higher, with 
production from Texas, North Dakota, Oklahoma, and Colorado leading the 
way.

    This rising output from North America (Canada, too, increased its 
oil output substantially--about 800,000 barrel per day--over this time 
period) came during a time of rising tensions in the Middle East, 
supply disruptions, and increasing demand from large emerging economies 
like China that normally would squeeze spare global oil production 
capacity and send prices sky-high. Because of greater North American 
production, that didn't happen. And while it is likely that we will see 
continued firming of oil prices over the next few months, it is 
unlikely that they will breech $100 per barrel anytime soon simply 
because the U.S. oil and natural gas firms are so good at what they do. 
They are a national economic and geo-political asset.

    The lifting of the ban on crude oil exports also will result in 
greater U.S. participation in global oil and natural gas markets on the 
supply side to limit the use of energy as a geopolitical weapon and 
smoothing out volatility. U.S. producers are now shipping domestically 
produced oil to Asia, Europe, South America, and Israel. Likewise, in 
2016, domestic producers began shipping natural gas for the first time 
from the Continental United States, with shipments landing in Asia, 
South America, and soon to Europe. By providing an alternative source 
of oil and natural gas on the world market, U.S. producers are helping 
to deleverage energy states like Russia and Venezuela and thereby 
increasing U.S. foreign policy leverage.

    However, increasing taxes on oil and natural gas production will 
quickly eliminate both of these advantages. If production costs 
increase domestically via higher taxes, domestic production will 
decline, hampering our export advantage and requiring increased imports 
that will increase our exposure to global uncertainty. Both will 
significantly harm U.S. geo-political leverage.
                               conclusion
    Federal tax policy can be a potent energy policy tool. If crafted 
as part of comprehensive reform, with a sober understanding of 
unpredictable outcomes, focused on discreet results while not selecting 
the technological path to that end, tax policy can help secure our 
energy future. Conversely, punitive taxes that ignore history and 
economic realities will severely harm the country's economy, energy 
security, and global standing.

                                 ______
                                 
   Questions Submitted for the Record to Hon. Karen Alderman Harbert
                Questions Submitted by Hon. Dean Heller
    Question. Though geothermal and solar production is steadily 
increasing in the Silver State, natural gas is the primary fuel for 
power generation in my home state. In 2014, Nevada generated 63% of its 
electricity from natural gas. That cheap base-load energy allows the 
state to also utilize renewable without decreasing reliability and 
increasing consumer costs.

    Answer. This last sentence (in italic) is incorrect. If the 
conventional base-load capacity allows for increased renewable 
generation without a reduction in reliability, then the conventional 
units must be cycled up and down depending on whether renewable power 
is available. That cycling increases the cost (and polluting 
characteristics) of the base-load generation. Moreover, the renewables 
themselves are high-cost, a reality not changed by the availability of 
inexpensive base-load power. The fact that the high cost of the 
renewable electricity can be hidden by averaging it with the low costs 
of the base-load generation does not ``reduce costs''; it merely masks 
them. The assertion that ``renewable'' (sic) can be ``utilize[d] . . . 
without . . . increasing consumer costs'' is false unless we exclude 
the subsidies from the definition of ``consumer costs,'' an approach 
that is incorrect analytically.

    Question. Additionally, Nevada is one of the world's largest 
sources of gold, producing over 80% of the gold mined domestically, and 
is the 2nd largest producer of silver in the United States. Domestic 
mining also utilizes this incentive.

    Ms. Harbert, the Chamber members include many companies, including 
both mining and energy companies, that utilize the percentage 
depletion. What role does this tax incentive play in the economics of 
an individual mine or well?

    Answer. The percentage depletion allowance essentially is a form of 
depreciation for the capital assets represented by extractive resource 
geologic formations; this tax treatment is available to all extractive 
industries. It may or may not be the case that a particular legal 
depletion percentage is correct analytically--the allowance can result 
in a deduction in excess of the incurred capital costs--but the 
percentage depletion allowance as a method for the depreciation of an 
extractive capital asset conceptually is not a ``subsidy.''

    Question. If this tax incentive is eliminated, how would it affect 
future domestic natural resources development?

    Answer. Because the depletion allowance is a form of depreciation, 
it is not a ``tax incentive'' defined properly. If such capital assets 
as natural resource formations are not allowed a reasonable 
depreciation schedule, then development would decline, other factors 
held constant, an effect the magnitude of which is difficult to 
determine in advance.

    Question. What tax incentives are essential to ensuring our Nation 
continues to lead the world in natural resources development?

    Answer. Tax policy should not have as a goal ``ensuring our Nation 
continues to lead the world in natural resources development.'' Such 
outcomes in resource allocation should be driven by market prices, at 
least as the processes and implications of market competition 
traditionally are envisioned at a normative level. Given that most 
natural resources traded in international markets cannot be 
``embargoed'' with respect to a given nation, it is unlikely that a 
sound national security rationale can be specified for such tax 
incentives.

                                 ______
                                 
               Questions Submitted by Hon. Mark R. Warner
    Question. Ms. Harbert's testimony notes that energy tax policy 
should be ``results-oriented and not proscriptive,'' that we as 
policymakers have not historically been good at predicting 
technological developments in the energy sector, and that there are 
often unintended consequences to well-intended energy policy. With that 
in mind, I am interested in the witnesses' answers to the following 
questions.

    How do we accomplish energy tax reform that successfully 
incentivizes companies to make meaningful investments toward energy 
efficiency while increasing our efficiency standards and also cutting 
down on abuse of energy tax credits?

    Answer. I know of no sound argument to the effect that market 
prices yield too little investment in energy ``efficiency,'' a term 
that is misleading in any event in that such artificial ``energy 
efficiency'' driven by government policy is inconsistent with broader 
economic efficiency.

    Question. How do we incorporate phase-outs to ensure that a 
particular energy tax credit does not outlive its useful life?

    Answer. I know of no way to do this given that a current Congress 
cannot bind a future Congress. In any event, such energy tax credits do 
not have ``useful'' lives as a general condition because they are 
inefficient and thus waste resources. The only ``phase-outs'' that work 
are those not implemented in the first place.

                                 ______
                                 
              Prepared Statement of Hon. Orrin G. Hatch, 
                        a U.S. Senator From Utah
WASHINGTON--Senate Finance Committee Chairman Orrin Hatch (R-Utah) 
today delivered the following opening statement at a hearing to examine 
energy tax provisions:

    I'd like to welcome everyone to this morning's hearing on energy 
tax policy.

    This isn't the first hearing we've had on these issues during my 
time on the Finance Committee, nor is it likely to be a last. Members 
on both sides of the aisle have a keen interest in this area, and for 
good reason. The energy-related provisions in our tax code impact a 
variety of industries throughout our economy and affect the lives and 
livelihoods of the majority of all of our constituents.

    It is, therefore, important that we continually examine these 
provisions to make sure we're getting things right and that resources 
do not go to waste.

    I'll start today's discussion by reiterating my overall position.

    Generally speaking, when it comes to energy policy, I have always 
said that we need an all-of-the-above approach. Unfortunately, not 
everyone shares this view.

    For example, leaders in the current administration, including 
President Obama himself, have said that they are for an all-of-the-
above approach. Yet, clearly, when it's time to draft policies, the 
administration seems far more interested in punishing the production 
and use of fossil fuels, even if it means higher energy costs for 
hardworking taxpayers.

    We see this across the board in the administration's environmental 
policies, its regulatory war on coal, its refusal to allow construction 
of the Keystone Pipeline, and, in what is more relevant to today's 
discussion, its tax policy proposals, which consistently include higher 
taxes at virtually all steps of the energy supply chain.

    Whether it's an increased per-barrel tax on oil production or 
higher per-gallon taxes charged on gasoline at the pump, the Obama 
administration seems intent on raising the cost of producing or 
consuming energy from fossil fuels, even if it means increased 
hardships on middle-class and lower income families.

    Most recently, the President proposed a $10 per-barrel tax on oil, 
an idea that virtually all economists agree would directly result in 
higher energy prices for families and consumers. Of course, this 
proposal would also be harmful to American businesses, particularly 
those in the manufacturing sector, that rely on fossil fuels.

    The President and those who serve in his administration presumably 
know that this is the case, yet they are undeterred. And, quite 
frankly, these proposals are just the tip of the iceberg when it comes 
to the President's efforts--not to mention those of many of his 
supporters here in Congress--to use the tax code to further an 
ideological attack on American energy producers.

    This is, of course, not a surprise.

    After all, back when he was a candidate for President, then-Senator 
Obama said in so many words that the centerpiece of his energy policy--
the so-called cap-and-trade proposal--would ``necessarily'' cause 
energy prices to ``skyrocket.''

    And, the President's first Energy Secretary, before he was 
appointed, argued on the record in favor of purposefully raising gas 
prices to European levels.

    All of this is meant to serve an agenda focused on ideology and not 
on the day-to-day needs of the American people and is, quite simply, 
the opposite of what our country needs.

    Instead of discouraging the domestic production of oil and gas, we 
should welcome it. By reducing our dependence on foreign oil, creating 
many high-paying jobs, and bringing down the cost of living for U.S. 
households, increased domestic energy production can protect our 
national security and provide greater economic stability.

    The President's first major attempt to overhaul America's energy 
policy--the aforementioned cap-and-trade proposal--thankfully failed to 
pass through Congress, even when the Democrats controlled the House and 
had a filibuster-proof majority in the Senate.

    Since then, proponents of this horribly misguided policy have tried 
to repackage cap-and-trade, instead calling it a ``carbon tax.''

    As an aside, I have to say that, when it comes to these ``carbon 
tax'' proposals, I'm a little disappointed in my friends on the other 
side of the aisle. Typically, when they have a proposal that they know 
is going to put the financial screws to the American people, they give 
it a more clever name.

    The so-called Affordable Care Act comes most immediately to mind.

    However, with the various ``carbon tax'' proposals, my friends are 
telling the American people exactly what they'll be getting: higher 
taxes in the form of increased energy costs and reduced wages, relative 
to the cost of living.

    In addition to increasing costs, particularly on middle-class and 
lower-income earners, the President's energy tax policy also seems 
hyper-focused on picking winners and losers and in handing over 
taxpayer resources to unproven ideas and technologies that, far too 
often, are completely unable to compete in the energy marketplace.

    Don't get me wrong, I am all for promoting innovation and advancing 
alternative energy sources. Like I said, I want an all-of-the-above 
approach. However, I do not believe we should be purposefully raising 
the cost of existing and proven energy sources--and adding to the costs 
of doing business or raising a family in the United States--in order to 
make alternative energy sources more attractive.

    In addition, I have serious concerns about the way in which the 
administration has overseen the use of the subsidies it designed to 
promote alternative energy. Most notably, as chairman, I am currently 
investigating the administration of cash grants awarded under the 
section 1603 program and energy tax credits based on evidence from the 
Treasury Inspector General for Tax Administration and elsewhere that 
suggests possible misuse. So far, $25 billion has been awarded under 
the cash grant program since it was established in the so-called 
stimulus that passed in 2009. We need to know more about where those 
resources have gone.

    Ultimately, the energy-related provisions in our tax code--like 
everything else--will have to be reconsidered as part of our ongoing 
tax reform efforts. In our attempts to make the tax code fairer, 
simpler, and more conducive to economic growth, I'm willing to consider 
any reasonable alternatives. However, that is a long-term effort that 
will likely not bear fruit in the immediate future. In the meantime, I 
think we need to work to ensure that our tax code is designed so that 
it does not punish the production of any viable energy source.

    In the end, it is easy for politicians in Washington to sit in an 
ivory tower and say that people aren't currently paying enough for 
their energy and they should pay more in order to further some 
ideological agenda. However, I think the vast majority of American 
workers and families would strongly disagree with that notion.

    As always with these energy hearings, I expect that we'll have a 
spirited discussion of all of these issues here today. I think we've 
assembled a very good panel of witnesses to represent various 
viewpoints, and I look forward to hearing their views on these and 
other matters.

                                 ______
                                 
   Prepared Statement of Susan Kennedy, Chief Executive Officer and 
               Board Member, Advanced Microgrid Solutions
    Mr. Chairman, Senator Wyden, and distinguished Committee members, 
thank you for inviting me to participate in today's hearing on energy 
tax policy, including the Investment Tax Credit (ITC) for advanced 
energy storage. My name is Susan Kennedy, and I am the CEO and founder 
of Advanced Microgrid Solutions (AMS). Prior to founding AMS, I served 
as Chief of Staff to Governor Arnold Schwarzenegger and was a 
Commissioner at the California Public Utilities Commission, which is 
the agency that regulates investor-owned utilities in California.

    AMS finances, designs, installs, and manages advanced energy 
storage systems for businesses, utilities and government entities. Our 
systems are technology-
agnostic and source-neutral. We use best-in-class technology and 
advanced analytics software to charge batteries when energy is 
plentiful and discharge them during peak demand hours. Advanced energy 
storage is the only resource that serves multiple grid functions 
including reducing customers' peak demand, providing them with reliable 
back-up power in case of grid outages, and optimizing intermittent and 
on-site generation. Of greater interest to this committee, however, are 
the myriad benefits that energy storage provides to the Nation's 
electrical system as a whole.

    In Southern California, the decommissioning of the San Onofre 
Nuclear Power Plant in 2013 and last year's Aliso Canyon gas leak 
underscore the need to build a stronger, more resilient electrical 
grid. But this is far from a California issue--as this committee is 
well aware, energy security is a national concern. Natural disasters, 
cyber-security attacks, terrorism, and even human error can take down 
our electrical grid, threatening national security, public safety, and 
our economy. The U.S. Department of Energy has estimated the annual 
cost of power outages to be approximately $150 billion. In 2012, 
Hurricane Sandy knocked out power for more than 8 million people, from 
North Carolina to Maine and as far west as Illinois and Wisconsin. Grid 
modernization is critical to promoting economic competitiveness and 
energy security.

    As established in the Department of Energy's Quadrennial Energy 
Review, which was released in April 2015, distributed energy 
resources--including energy storage--play an important role in building 
a stronger, more resilient grid. For the first time, electric utilities 
are able to tap into energy stored by their own customers to inject 
stability and resiliency into the grid. When demand is high, storage 
can turn buildings into virtual power plants, providing immediate and 
secure grid support. Under the traditional model, electric utilities 
have peaker plants on spinning reserve to meet increased demand. Now, 
we can take entire city blocks off the grid for any length of time, 
reducing the need to invest in excess, redundant peaker plants. Storage 
systems also provide commercial and industrial facilities, as well as 
government institutions, with ``reservoirs'' of back-up power, 
protecting against unexpected grid outages.

    Energy storage is a $528-million industry, and it is expanding at a 
rapid pace. Last year alone, the U.S. energy storage market grew by 
243%. By 2021, it is expected to be worth $2.9 billion, six times its 
current value. This rapid growth presents an important opportunity for 
investors, businesses, and the economy as a whole, but the storage 
market still faces significant barriers to widespread deployment. The 
costs of battery systems are dropping, but are still too prohibitive to 
make economic sense in most parts of the Nation. Improved Federal 
incentives are necessary to make energy storage more attractive to 
consumers and more affordable for investors, supporting the 
technological development that we need for scaled deployment of energy 
storage.

    Federal tax policy is the single most important tool to attract 
investment in critical infrastructure, including the electric grid. For 
most of the 20th century, energy tax policies promoted domestic oil and 
gas reserves and production. After the 1970s, the focus shifted towards 
energy conservation and alternative energy sources. The solar ITC alone 
has helped annual solar installations grow by over 6,500% since its 
implementation in 2006. Providing targeted and efficient incentives for 
truly innovative, source neutral technologies like energy storage will 
spur competition and attract the private investment we need to build a 
more resilient and efficient grid, help control electricity usage and 
costs, and move towards energy security and independence.

    Thank you again for the opportunity to discuss how we can use tax 
policy to unlock competition in the energy sector and build tomorrow's 
grid. I look forward to working with the committee on initiatives that 
will further support U.S. leadership in energy storage.

                                 ______
                                 
     Prepared Statement of Steve Miller, Chief Executive Officer, 
                         Bulk Handling Systems

    Thank you, Chairman Hatch, Ranking Member Wyden, and the rest of 
the committee, for the honor of speaking today.

    I am the CEO of Bulk Handling Systems and our subsidiaries, a group 
of four companies with more than 275 employees and operations in the 
States of Oregon, Tennessee, and California. The company was 
established in 1976, supplying conveying and sorting equipment mostly 
to the timber and wood products industry, and began exporting equipment 
in the early 1980s. During the late 1980s and 1990s, we pivoted to 
supply equipment to the quickly-growing recycling industry which makes 
up the bulk of our business today. Together our companies design, 
engineer, manufacture and install systems to extract and sort valuable 
commodities from municipal solid waste streams; maximizing value from 
what is thrown away and minimizing the amount of materials sent to 
landfill. The majority of our employees are engineers, welders, 
technicians and fabricators. We also outsource a significant amount of 
work locally to other metal fabricators and so are responsible for 
additional job creation by affiliated companies in our areas. Through 
anaerobic digestion technology, our Lafayette, California-based Zero 
Waste Energy, LLC transforms organic materials--such as source-
separated organics, and yard waste and food waste separated from the 
municipal solid waste stream by our recycling equipment--into biogas 
that is used to produce electricity or compressed natural gas to fuel 
vehicles. The remaining solid organic material in our systems is used 
to produce nutrient-rich compost for agricultural use. In addition, our 
company is involved in the conversion of the remaining elements of the 
waste stream into an EPA-approved Engineered Fuel product out of waste, 
which is suitable for use by utilities to produce electricity as a 
clean burning supplement to coal. While our products are produced in 
the United States, we export our equipment around the world and today 
are fulfilling orders on five continents.

    My focus today relates to the work that my company is doing to 
produce renewable energy and compost from the solid waste stream; and 
describe opportunities that changes in tax policy will have to 
accelerate our efforts. Through our anaerobic digestion process we 
create base-load renewable fuel and/or electricity from the large 
percentage of food waste and other organic materials in our waste 
stream that would otherwise decompose for years in a landfill, leaking 
methane and carbon dioxide into the atmosphere. We have successfully 
built projects that produce electricity and compressed natural gas 
(CNG) that is used to provide fuel for waste truck fleets as a 
replacement for diesel. In each of our systems, the resulting solid 
material is turned into compost which is used to return nutrients to 
the soil and aid in water retention. In short, our anaerobic digestion 
systems substantially increase diversion of material from landfills, 
manage the production of methane from the breakdown of organic waste so 
that it is not released in the atmosphere, produce valuable baseload 
electricity and transportation fuels, and produce organic compost to 
both replenish soils and retain water in the agricultural sector. 
Despite the overall attractiveness of the products that we create, our 
development has been slowed by low prices for electricity, oil and 
natural gas. Since the renewable products that we produce compete with 
these fossil fuels, we have been challenged to provide our Customers 
the economics needed to fund projects.

    Unlike wind and solar, anaerobic digestion produces electricity in 
all weather conditions, 24 hours a day, 7 days a week, and 365 days a 
year. Despite the significant advantages of our proven technology, it 
has been difficult to compete for scarce investment dollars against 
solar and wind. While I certainly appreciate the Senate's attentiveness 
toward renewable energy generally, the policies adopted at the end of 
2015 do not do enough. For example, while the PTC and ITC for wind and 
solar received long-term extensions, biogas credits were extended to 
only the end of 2016 for the biomass industry and only applied to the 
renewable energy portion of the project. Since development of such a 
project takes several years, the early expiration of the credit makes 
the value extremely limited from a planning and development 
perspective. Additionally, all of our systems are required to produce 
compost as a byproduct of the renewable biogas production process. 
Thus, the cost to build an anaerobic digestion system must necessarily 
also include compost system capacity. While the intention of the credit 
is to provide value across the whole project, limiting the credit to 
only the energy portion and ignoring the compost element puts the 
renewable energy portion at risk. To make the credit useful, it needs 
to include all necessary elements of the renewable energy system. As 
such, we would ask you to consider the following:

        Extend the PTC for biogas technologies for 5 years with no 
phase-out;
        Give those technologies an equal credit to wind per kilowatt-
hour;
        Ensure that the legislation that allows technologies to 
convert a PTC into an ITC is extended;
        Allow biogas that is used as transportation fuel to qualify 
for both the PTC and ITC--currently it only qualifies if used for 
electricity; and
        Include the cost to develop the compost and nutrient recovery 
technology portion of the renewable energy project. Extension of the 
credit to include compost technologies would significantly expand the 
development of waste to energy and compost facilities.

    Your help will be impactful on many levels--including:

        Increasing diversion of material from landfills to a 
beneficial use;
        Reducing greenhouse gas emissions from organic wastes;
        Creating high-paying domestic jobs for companies like mine as 
well as our owner/operator customers;
        Increasing renewable fuel production;
        Increasing base-load renewable power generation; and
        Increasing nutrient-rich compost generation for agriculture.

    I hope that you can help us develop this important domestic 
industry. Thank you again for the opportunity to speak here today.

                                 ______
                                 
           Questions Submitted for the Record to Steve Miller
                 Question Submitted by Hon. Dean Heller
    Question. I strongly believe that tax reform, done the right way, 
can improve our fiscal picture. The recent certainty provided to the 
solar industry, through the investment tax credit, is projected to 
provide 180,000 more jobs over the next 5 years and over $30 billion in 
investment annually in the economy because of this credit. Do you 
believe that the investment tax credit, section 48, would provide 
economic growth if scored dynamically?

    Answer. Renewable energy projects by their very nature are capital-
intensive and thus benefit from the application of section 45 
Production Tax Credits and section 48 Investment Tax Credits which 
reduce the cost of project financing.

    The ability to lower the cost of financing for biomass and 
anaerobic digestion projects over a reasonable and predictable 
timeframe will accelerate their deployment and increase the number of 
orders and contracts for specialized equipment and construction 
services in the United States.

    While Bulk Handling Systems is not an expert on Federal budget 
dynamic scoring, we are confident that the acceleration of these 
projects, and the equipment and services they require for delivery, 
would create net positive economic benefits in the form of private 
company payroll growth, investment in U.S. plant and equipment and an 
increase in both corporate and individual income taxes.

    For example, our Zero Waste Energy subsidiary provided the 
technology for the largest dry anaerobic digestion waste processing 
project in the world. This project generated nearly 300 direct skilled 
construction jobs including skilled pipe welders and electricians and 
approximately 50 advanced and high-paying manufacturing jobs for 
specialized equipment components and related engineering. We believe 
that the economic benefits related to this direct increase in jobs and 
payrolls would compare favorably with the ITC investment that Federal 
taxpayers made.

                                 ______
                                 
               Question Submitted by Hon. Mark R. Warner
    Question. Ms. Harbert's testimony notes that energy tax policy 
should be ``results-oriented and not proscriptive,'' that we as 
policymakers have not historically been good at predicting 
technological developments in the energy sector, and that there are 
often unintended consequences to well-intended energy policy. With that 
in mind, I am interested in the witnesses' answers to the following 
questions.

    How do we accomplish energy tax reform that successfully 
incentivizes companies to make meaningful investments toward energy 
efficiency while increasing our efficiency standards and also cutting 
down on abuse of energy tax credits?

    How do we incorporate phase-outs to ensure that a particular energy 
tax credit does not outlive its useful life?

    Answer. Bulk Handing Systems is not involved with energy efficiency 
but supports the development technologies and standards that 
economically reduce energy consumption over time.

    Concerning the phase-out of tax credits, biomass and anaerobic 
digestion are relatively new entrants to the U.S. renewable energy 
industry compared with solar and wind. Solar and wind technologies have 
benefited for years from Federal tax credits and received an additional 
5-year extension at the end of 2015, signaling that the useful life of 
these credits for these technologies has not been reached. Conversely, 
biomass and anaerobic digestion, which provide critical base-load 
renewable electricity, only received a 1-year extension, yet these 
technologies are not as mature or established as solar and wind, in 
part because of the uncertainty of tax credits for our technologies. 
The playing field is not level across technologies.

    As to the proscriptive nature of the credits, we agree that these 
should be removed. Our company recently built the first anaerobic 
digestion system to produce transportation fuels out of organic waste. 
The waste that was previously landfilled is now supplying 100% of the 
fuel needs of 15 trucks that collect waste each day. The tax code 
didn't contemplate our development of this new technology and so the 
project received none of the benefits that the ITC could have provided. 
The lack of the ITC credit limits the development of more projects and 
hampers our ability to more fully develop the technology. Had the code 
been written in a more general way which focused on the benefit alone, 
then we would be able to utilize it.

    Bulk Handling System respectfully requests that biomass and 
anaerobic digestion technologies receive the same 5-year extension as 
the more mature solar and wind industries received. All renewable and 
energy efficiency technologies should be reviewed near the sunset of 
the extension in relationship to the cost of tax credits to the 
benefits provided in the form of diversified energy production and 
increases in U.S. jobs and capital investment.

                                 ______
                                 
             Question Submitted by Hon. Benjamin L. Cardin
    Question. Mr. Miller, you lead a successful company that relies on 
a proven renewable energy technology well worth supporting.

    The issues you are facing seem very much akin to those faced by two 
particular energy industries I support: industries targeted at 
promoting energy efficiency, and the nascent and growing offshore wind 
industry in the United States, like the one we have in Maryland.

    A company in my home State will be building the first utility-scale 
offshore wind farm in the United States, producing 750 MW of clean, 
renewable energy by 2020. That company, and the developing offshore 
wind industry, need a stable and predictable tax code that recognizes 
the operational reality of the business.

    Take extending the ITC in section 48 for offshore wind as an 
example. Similar to the issues raised in your testimony, the extension 
we were able to agree upon at the end of last year--extending the ITC 
for 5 years with a phase-down in years 3, 4, and 5--doesn't work for 
offshore wind. It may work for land-based wind, but the operational 
reality of offshore wind--its scale and development time frame--is much 
longer.

    So we need to extend the ITC for offshore wind and do everything we 
can to bolster, support, and grow that industry just like we need to do 
the same for yours. Certainty is also key for encouraging investments 
in energy efficiency. Growing sectors of our economy, like energy 
efficient construction, offshore wind, and your renewable technologies 
and storage solutions, are very promising industries for economic 
development, job creation, and the use of clean energy.

    In your view, would a more stable and predictable tax code across 
these and other energy technologies help to grow your businesses and 
your industries and strengthen the American economy?

    Answer. Without question, a stable and predictable tax code that 
supports the development of important renewable energy and energy 
efficiency projects across a wide array of technology platforms would 
be most beneficial in terms of diversifying our carbon-neutral and 
carbon-negative energy supplies and creating high-paying jobs in 
construction, advanced manufacturing, and engineering.

    To add an additional important point, Bulk Handling Systems is not 
only advocating for extensions of the PTC and ITC, but an enhancement 
to the ITC program to also provide biogas projects which produce 
Renewable Natural Gas (RNG) for transportation fuel to receive the same 
benefits as biogas projects which generate renewable electricity. The 
United States is making a historic transition to a natural gas fueled 
economy, and biogas projects can provide an important source of fuel 
that is both economically and environmentally viable. Since the RNGs 
generated replace diesel fuel, they are regarded as carbon-negative and 
the single most carbon-reducing renewable fuel made. Application of the 
PTC and ITC for these projects will greatly accelerate their 
development.

                                 ______
                                 
            Prepared Statement of Hon. Charles E. Schumer, 
                      a U.S. Senator From New York
    Mr. Chairman, Ranking Member Wyden, thank you for holding this 
hearing today. Although we are talking about the long-term outlook for 
energy tax policy, I want to take a moment to focus our attention on an 
issue of immediate urgency.

    As you know, the tax package agreed to at the end of last year 
extended the section 48 energy investment tax credit for 5 years, 
beginning on January 1, 2017, phased down to 26 percent in 2020 and 22 
percent in 2021. However, through a drafting error, some technologies 
in section 48 were left out of that long-term extension. As a result, 
those technologies--including fuel cells, geothermal, hydropower, and 
biomass, among others--are set to expire at the end of this year.

    Picking winners and losers was not our intention. The Majority 
Leader agreed with that sentiment and made a commitment to address the 
discrepancy early this year. Unfortunately, we've yet to place it on a 
moving legislative vehicle. The lack of certainty for these 
technologies is creating market distortions that will drive capital out 
of these technologies and toward those with longer-term incentives.

    I think it's important that we support an all-of-the-above energy 
strategy, and ensuring new clean energy technologies have a seat at the 
table is a key component. Therefore, I would like to see us put the 
section 48 fix on the FAA extension that must move by mid-July, and I 
hope you will help me pursue that possibility, Mr. Chairman.

    This is a noncontroversial, already agreed-to modification, and it 
should be processed expeditiously. If you don't take my word for it, 
just listen to Representatives Tom Reed (R-NY) and Pat Meehan (R-PA.), 
both Republican Ways and Means members, who are making the same request 
of their leadership. As Representative Meehan said to Politico just 
yesterday: ``It's not as if there is new ground that needs to be 
broken. There was an agreement in the House and Senate on the 
principle, and we're simply looking for a vehicle to fix it.''

                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon
    In my view, there are two parts to the energy debate today. First 
is where our energy policy needs to go in the long term--a tech-neutral 
approach that throws the current mishmash of incentives in the trash 
can, cuts their cost in half, and promotes a clean-energy economy. More 
green for less green. The second part of the debate is about creating 
the running room in the short term that makes it possible to achieve 
that goal for the future. I want to talk about both today, beginning 
with the short term.

    At the end of last year, Democrats and Republicans came together 
and began to move away from the same old cycle of temporary tax 
extenders. Congress decided, on a bipartisan basis, that another weeks- 
or months-long renewal of the renewable energy incentives wasn't good 
enough. Incentives for wind and solar, which have grown to become major 
parts of the American energy portfolio, got 5 years of certainty, and 
other clean technologies got 2. And the result has been dramatic: new 
solar installations are projected to double this year and for the first 
time, new solar generation will exceed natural gas.

    Here in the short term, let's remember that there's leftover 
business that needs to be addressed. Certain renewable technologies 
were left out of last year's package: fuel cells, geothermal, and more. 
The clock is ticking down to another round of expirations at the end of 
this year. For example, bipartisan legislation on waste-heat-to-energy 
that passed this committee last year was left out. The sooner Democrats 
and Republicans come together, take care of these energy extenders and 
clear the decks, the sooner we can turn to finding a smarter, fresh 
approach to energy tax policy.

    That brings me to the long-term part of this debate. In my view, 
the key to a new approach on energy policy is going technology-neutral. 
The system on the books today distorts our energy markets, picks 
winners and losers, and holds innovators back. That ought to change, 
and that's why I've put forward a tech-neutral plan that will be 
radically simpler and more efficient. Gone will be today's web of 44 
energy tax breaks. In their place will be three incentives built around 
simple, clear goals: cleaner energy, cleaner transportation, and energy 
efficiency. And the price tag of today's system--$125 billion every 
decade--will be cut in half. It's a market-oriented system that will 
unleash innovators with big ideas.

    The Finance Committee is lucky to be joined here today by the heads 
of two companies that are doing exciting things in the world of 
renewable energy. With the technology made by Bulk Handling Systems, 
which is based right in Eugene, Oregon, the waste Americans produce 
every day can be recycled and turned into energy. Even the trash trucks 
run on renewable fuel.

    Advanced Microgrid Solutions is at the forefront of a technology 
that has long been overlooked by our tax policies, and that's energy 
storage. The fact is, the sun doesn't always shine and the wind doesn't 
always blow. So storage is a must-have.

    These are the kinds of 21st-century innovations in energy that are 
either disadvantaged by our outdated policies, or ignored altogether. 
But with a tech-neutral policy, the unfair market distortions will go 
away, the incentives will be predictable, and the goals will be clear. 
The cleaner your energy, the cleaner your transportation fuel, the more 
efficient your home or office building, the bigger the tax break. That 
goes for everybody--even the natural gas facility that invests in a 
highly efficient, next-gen turbine, or an oil company that sets out to 
make the clean transportation fuels of the future.

    The bottom line is that energy in this country is transforming. The 
threat posed by climate change is growing every day. New technologies 
are being developed. Innovators see enormous economic opportunity in 
renewable energy. Our energy tax policies have to keep up. Let's not 
cling to yesteryear like the naysayers who saw the first automobiles 
hit the road a century ago and said, ``No, the horse is here to stay.'' 
Let's put policies in place that support those who are at the 
forefront.

    I want to thank our witnesses for being here today. I'm looking 
forward to a bipartisan discussion of how this committee can lead when 
it comes to ending the cycle of extenders, and adopting a smart, fresh 
approach to energy tax policy. Thank you, Chairman Hatch.

                                 ______
                                 
   Prepared Statement of Benjamin Zycher,* John G. Searle Chair and 
            Resident Scholar, American Enterprise Institute
---------------------------------------------------------------------------
    * John G. Searle Scholar, American Enterprise Institute. I thank 
Marlo Lewis, Alan Viard, and William Yeatman for useful suggestions; 
but any remaining errors or omissions are my responsibility. I can be 
reached at [email protected]; or at 202-862-4883.
---------------------------------------------------------------------------
      four decades of subsidy rationales for uncompetitive energy
Summary
    The modern rationales for energy subsidies have varied in 
prominence over the decades, but none has been broadly discredited in 
the public discussion despite the reality that each suffers from 
fundamental analytic weaknesses. The rationales can be summarized as 
follows:

      Energy ``independence.''
      Support for infant industries.
      Leveling the subsidy playing field.
      Adverse external effects of conventional generation.
      Resource depletion or ``sustainability.''
      Employment expansion through the creation of ``green jobs.''
      The ``social cost of carbon.''

    Energy ``independence''--the degree of self-sufficiency in terms of 
energy production--is irrelevant analytically, particularly in the case 
of such energy sources as petroleum traded in international markets, an 
economic truth demonstrated by the historical evidence on the effects 
of demand and supply shifts from the 1970s through the present.

    Capital markets can sustain promising industries or technologies in 
their infancy--the early period during which technologies are proven 
and scale and learning efficiencies are achieved--so that the ``infant 
industry'' rationale for renewables subsidies is a non sequitur. 
Moreover, there is little evidence that there exist additional learning 
or scale cost reductions remaining to be exploited in wind and solar 
generation in any event.

    There is no analytic evidence that renewables suffer from a subsidy 
imbalance relative to competing conventional energy technologies--the 
data suggest the reverse strongly--and the conventional ``subsidies'' 
that are purported to create a disadvantage for renewables are not 
``subsidies'' defined properly as a matter of economic analysis.

    Wind and solar power create their own set of environmental 
problems, and even in terms of conventional effluents and greenhouse 
gases, it is far from clear that they have an advantage relative to 
conventional generation, particularly because of the up-and-down 
cycling of conventional backup units needed to preserve system 
reliability in the face of the intermittency (unreliability) of 
renewable power. And those backup costs--an economic externality caused 
bythe unreliability of renewable power--are substantially larger than 
the externality costs of conventional power even under extreme 
assumptions.

    The ``sustainability'' or resource depletion arguments for 
renewables subsidies make little sense analytically--the market rate of 
interest provides powerful incentives to conserve resources for 
consumption during future periods--and are inconsistent with the 
historical evidence in any event.

    Nor does the ``green jobs'' employment rationale for renewables 
subsidies make analytic sense, as a shift of resources into the 
production of politically favored power must reduce employment in other 
sectors--resources, after all, are limited always and everywhere--and 
the taxes needed to finance the subsidies cannot have salutary 
employment effects. Moreover, the historical evidence on the 
relationships among GDP, employment, and electricity consumption does 
not support the ``green jobs'' argument.

    The newest environmental rationale for renewables subsidies--the 
``social cost of carbon''--is an argument deeply flawed both 
conceptually and in terms of the quantitative estimates now underlying 
a large regulatory effort. In particular, the Obama administration 
estimate of the social cost of carbon suffers from three central 
benefit/cost analytic flaws: the application of (asserted) benefits 
global rather than national to the net benefit calculation; the failure 
to use an appropriate discount rate; and the addition of such ``co-
benefits'' as particulate reductions to the net benefit calculation. 
Moreover, the policies being proposed to reduce emissions of greenhouse 
gases would have temperature effects trivial or unmeasurable even at 
the international level, under assumptions highly favorable to the 
policy proposals. More generally, the terms ``carbon'' and ``carbon 
pollution'' are political propaganda, as carbon dioxide and ``carbon'' 
are very different physical entities, particularly given that some 
minimum atmospheric concentration of the former is necessary for life 
itself.

    It would be hugely productive for the U.S. economy writ large were 
policymakers to adopt a straightforward operating assumption: resource 
allocation in energy sectors driven by market prices is roughly 
efficient in the absence of two compelling conditions. First: it must 
be shown that some set of factors has distorted those allocational 
outcomes to a degree that is substantial. Second: it must be shown that 
government actions with high confidence will yield net improvements in 
aggregate economic outcomes. Given the weak history of analytic rigor 
and policy success in the context of energy subsidies, greatly 
increased modesty on the part of policymakers would prove highly 
advantageous.
I. Introduction: A Brief History of Modern U.S. Energy Subsidies
    Congress passed and the President signed late last year the 
Consolidated Appropriations Act, 2016.\1\ In the context of energy 
subsidies, the legislation renewed production tax credits for wind and 
other power technologies retroactively to January 1, 2015, with new 
expiration dates and phaseouts varying by technology.\2\ Investment tax 
credits were extended for solar, fuel cell, small wind, geothermal, 
microturbines, and co-generation (``combined heat and power'') 
projects, with gradual phaseouts of these tax subsidies between 2019 
and 2022.\3\ It borders on the implausible that this latest extension 
of such subsidies for uncompetitive electric power technologies will 
prove to be the last when the 2019-2022 Congressional sessions arrive, 
as a brief history of U.S. energy policy suggests strongly both in 
general and with respect to ``renewable'' and other unconventional 
energy sources in particular.\4\
---------------------------------------------------------------------------
    \1\ See the text of the legislation at https://www.gpo.gov/fdsys/
pkg/BILLS-114hr2029enr/pdf/BILLS-114hr2029enr.pdf.
    \2\ The expiration of the wind production tax credit was extended 
to December 31, 2019, with a phase-down imposed for wind projects 
beginning construction after the end of 2016. Tax credits for other 
eligible technologies (geothermal, biomass, and others) were extended 
for projects beginning construction before 2017. See the Department of 
Energy summary at http://energy.gov/savings/renewable-electricity-
production-tax-credit-ptc.
    \3\ See the Department of Energy summary at http://energy.gov/
savings/business-energy-investment-tax-credit-itc.
    \4\ With respect to the fundamental economic inefficiency of 
``renewable'' and other such unconventional energy sources, see 
Benjamin Zycher, Renewable Electricity Generation: Economic Analysis 
and Outlook, Washington: AEI Press, November 15, 2011, at http://
www.aei.org/publication/renewable-electricity-generation/. Such energy 
is ``unconventional'' precisely because it is uneconomic, and thus 
uncompetitive. See also Robert Bryce, ``Energy Policies and Electricity 
Prices: Cautionary Tales from the E.U.,'' monograph, Manhattan 
Institute, March 2016, at http://www.manhattan-institute.org/sites/
default/files/R-RB-0316.pdf; and Robert Bryce, ``What Happens to an 
Economy When Forced to Use Renewable Energy?'', Manhattan Institute 
Issue Brief, May 4, 2016, at http://www.manhattan-institute.org/sites/
default/files/IB-RB-0516.pdf.

    In terms of the modern history of U.S. energy policy, we usefully 
can begin in the mid-1970s with the energy ``crisis'' and the perceived 
need to achieve an expansion of the supply and ``independence'' of U.S. 
energy production.\5\ This original rationale has been expanded greatly 
over time, with environmental and ``sustainability'' arguments added to 
``energy independence''; but the early policy history begins with the 
dominant energy security concerns of that period. The 1978 National 
Energy Act (NEA) was focused for the most part on reducing dependence 
on foreign oil and on measures intended to increase conservation and 
efficiency in domestic energy consumption.\6\
---------------------------------------------------------------------------
    \5\ Useful discussions and information are provided by the Energy 
Information Administration (EIA), ``Policies to Promote Non-hydro 
Renewable Energy in the United States and Selected Countries,'' 
February 2005, at http://nrec.mn/data/uploads/Nom%20setguul%20xicheel/
PV/nonhydrorenewablespaper_ final.pdf; Fredric Beck and Eric Martinot, 
``Renewable Energy Policies and Barriers,'' Encyclopedia of Energy, 
Vol. 5 (2004), pp. 365-383; EIA, ``Renewable Energy 2000: Issues and 
Trends,'' February 2001, at http://pbadupws.nrc.gov/docs/ML0932/
ML093280377.pdf; Eric Martinot, Ryan Wiser, and Jan Hamrin, ``Renewable 
Energy Policies and Markets in the United States,'' at http://
www.martinot.info/Martinot_et_al_CRS.pdf; and North Carolina State 
University, North Carolina Clean Energy Technology Center, Database of 
State Incentives for Renewables and Efficiency, at http://
www.dsireusa.org/.
    \6\ This legislation comprised five statutes: The Energy Tax Act, 
The Natural Gas Policy Act, The National Energy Conservation Policy 
Act, The Power Plant and Industrial Fuel Use Act, and The Public 
Utility Regulatory Policies Act.

    As an aside, that overriding rationale was driven in substantial 
part by the perverse effects of the price and allocation controls 
imposed upon the energy sector during much of the 1970s.\7\ Market 
prices serve a number of economic functions, among them the imposition 
of discipline on consumption, and incentives for efficiency in the 
allocation of available supplies across competing uses. Such functions 
are crucial for achievement of the most productive use of supplies made 
more limited by supply disruptions, the central examples of which 
during the 1970s were the reduction in the output of crude oil by Arab 
OPEC during 1973-1975, and that caused by the Iranian revolution during 
1978-1980.\8\ Prices suppressed artificially by regulatory fiat can 
perform those central economic functions far less effectively, and in 
particular encourage consumption that is inefficient and total demands 
that exceed the supplies available, and a misallocation of those 
available supplies across competing uses.
---------------------------------------------------------------------------
    \7\ See Benjamin Zycher, ``Emergency Management,'' in S. Fred 
Singer, ed., Free Market Energy: The Way to Benefit Consumers, New 
York: Universe Books, 1984, pp. 74-98. See also Benjamin Zycher, ``In 
Defense of Price Gouging and Profiteering,'' The American, August 7, 
2014, at http://www.aei.org/publication/in-defense-of-price-gouging-
and-profiteering/.
    \8\ See Benjamin Zycher, ``OPEC,'' in David R. Henderson, ed., The 
Concise Encyclopedia of Economics, Indianapolis: Liberty Fund, 2008, at 
http://www.econlib.org/library/Enc/OPEC.html. See also the historical 
production data reported by BP in the Statistical Review of World 
Energy 2015, at http://www.bp.com/en/global/corporate/energy-economics/
statistical-review-of-world-energy.html.

    And so subsidies for conservation and efficiency during that period 
in part represented an attempt to achieve by government fiat the market 
discipline and allocational outcomes suppressed by price and allocation 
regulations. But government incentives to achieve the same outcomes 
engendered by market prices are weak, and in any event government 
cannot achieve market-driven patterns of resource use because 
decisionmaking processes centralized by government cannot replicate the 
information revealed by market competition and market prices.\9\ 
Instead, incentives for policymakers to use price and allocation 
regulation to bestow benefits upon favored constituencies are powerful. 
As an example, the allocation regulations imposed during the 1970s were 
based upon historical geographic consumption patterns; this meant that 
greater supplies than otherwise would have been the case went to rural 
areas, and lesser supplies to urban ones, an outcome that was 
predictable given the disproportionate political power enjoyed by less 
populated states in the U.S. Senate and in the electoral college, and 
because of the effects of gerrymandered congressional districts on the 
identity and policy preferences of the hypothetical median voter.\10\
---------------------------------------------------------------------------
    \9\ See Zycher, 2014, op. cit., fn. 7 supra.
    \10\ See Zycher, 1984, loc. cit., fn. 7 supra. See also Aaron 
Wildavsky, The Politics of the Budgetary Process, Boston: Little, 
Brown, and Co., 1964, esp. pp. 102-108; Nelson W. Polsby, et al., 
Presidential Elections: Strategies and Structures of American Politics, 
Lanham: Rowman and Littlefield, 2011, esp. ch. 2; Cary M. Atlas, et 
al., ``Slicing the Federal Government Net Spending Pie: Who Wins, Who 
Loses, and Why,'' American Economic Review, Vol. 85, No. 3 (June 1995), 
pp. 624-629; Frances E. Lee, ``Senate Representation and Coalition 
Building in Distributive Politics,'' American Political Science Review, 
Vol. 94, Issue 1 (March 2000), pp. 59-72; George Rabinowitz and Stuart 
Elaine Macdonald, ``The Power of the States in U.S. Presidential 
Elections,'' American Political Science Review, Vol. 80, Issue 1 (March 
1986), pp. 65-87; Benjamin Zycher, ``The Electoral College Does It 
Better,'' Los Angeles Times, October 27, 2004, at http://
articles.latimes.com/2004/oct/27/opinion/oe-zycher27; and Gary C. 
Jacobson and Jamie L. Carson, The Politics of Congressional Elections, 
Lanham: Rowman and Littlefield, 2016, esp. pp. 246-252.

    The 1978 NEA included the Public Utility Regulatory Policies Act, 
intended ostensibly to increase conservation and efficiency in the 
electric utility sector. PURPA required electric utilities to purchase 
electricity from ``qualifying facilities,'' which were defined as 
electric power producers smaller than 80 MW (megawatts) in capacity 
using cogeneration processes or renewable technologies.\11\ From an 
analytic standpoint, such purchase requirements are a tool with which 
to shift financing of renewables subsidies from the taxpayers writ 
large to the electricity market itself, as most State regulation of 
electricity prices bundles (or combines) lower- and 
higher-cost power into a single set of rates. This has the effect of 
subsidizing the producers of higher-cost power at the expense of 
consumers and the producers of lower-cost power. These implicit 
regulatory tax/expenditure transfers do not appear in government fiscal 
accounts. However, the very need for such implicit but sizeable 
subsidies, however financed, suggests, again, a fundamental 
competitiveness problem.
---------------------------------------------------------------------------
    \11\ Cogeneration facilities, now more commonly called ``combined 
heat and power'' (CHP) facilities, produce electricity and then capture 
the resulting heat for heating purposes. Under PURPA, utilities were 
required to purchase this power at ``avoided cost,'' the determination 
of which was left to the state regulatory authorities; but the upshot 
is that under this requirement higher-cost power is ``bundled'' with 
lower-cost power in the determination of cost-based electricity rates. 
This has the effect of increasing the demand for the higher-cost power. 
The Federal Energy Regulatory Commission took over the determination of 
avoided cost in 1995.

    The 1978 NEA included also the Energy Tax Act, which gave an 
investment tax credit of 30 percent to residential consumers for solar 
and wind energy equipment, and a 10-percent investment tax credit to 
businesses installing solar, wind, geothermal, and ocean energy 
technologies. These tax credits ended in 1985.\12\
---------------------------------------------------------------------------
    \12\ Wind technologies were practical for only very small numbers 
of residential and business consumers, and the same proved true for 
geothermal and ocean technologies.

    The 1992 Energy Policy Act created the production tax credit, set 
originally at 1.5 cents per kWh (kilowatt-hour) in 1993 dollars, 
adjusted for inflation, for some technologies, and 0.75 cents per kWh 
for others. The credit now is either 2.3 cents per kWh or 1.2 cents per 
kWh, respectively.\13\ This credit has had a somewhat erratic history, 
having expired and been extended several times; the most recent 
extensions were in February 2009, January 2013, December 2014, and 
December 2015.\14\
---------------------------------------------------------------------------
    \13\ See fn. 2 and fn. 3, supra. The production tax credit is 2.3 
cents per kWh for wind, closed-loop biomass, and geothermal generation; 
and 1.2 cents per kWh for open-loop biomass, landfill gas, municipal 
solid waste, qualified hydroelectric, and marine and hydrokinetic 
power.
    \14\ Respectively, the 2009 American Recovery and Reinvestment Act, 
the 2012 American Taxpayer Relief Act, the 2014 Tax Increase Prevention 
Act, and, as noted above, the Consolidated Appropriations Act, 2016. 
The 2009 legislation allowed facilities that qualify for the production 
tax credit to choose instead to take either the Federal business energy 
investment credit or an equivalent cash grant. The latter two subsidies 
generally are 30 percent of eligible costs. Note that the investment 
tax credit/cash grant is based upon the capital cost of the renewable 
generation capacity, and thus is independent of the amount of 
electricity actually produced. With a few exceptions, facilities are 
eligible for the production tax credit for 10 years. For an earlier 
discussion of ongoing problems with implementation of these programs, 
see Memorandum for the President, from Carol Browner, Ron Klain, and 
Larry Summers, ``Renewable Energy Loan Guarantees and Grants,'' October 
25, 2010, at http://www.politico.com/static/PPM182_101105_
renewable_energy_memo.html.

    A number of other Federal policies encourage the use of renewable 
energy in electricity generation. Qualified investments are eligible 
for accelerated depreciation and bonus depreciation under the 2008 
Energy Improvement and Extension Act (part of the Troubled Asset Relief 
Program),\15\ the 2009 legislation just noted, and the 2010 Tax Relief, 
Unemployment Insurance Reauthorization, and Job Creation Act. Certain 
rebates for renewable energy offered consumers by electric utilities 
are excluded from taxable income. Several other grant, subsidy, and 
loan programs are administered by various Federal agencies.\16\
---------------------------------------------------------------------------
    \15\ See http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.1424.enr:. 
[Note: Colon correct as part of the hyperlink.]
    \16\ Examples include renewable energy grants from the Treasury 
Department, various grant and loan guarantee programs from the 
Agriculture Department, and loan guarantee programs from the Energy 
Department. See North Carolina State University, op. cit., fn. 5 supra.

    Section II offers summary critiques of the shifting policy 
rationales commonly asserted in favor of energy subsidies. Section III 
discusses in greater detail the newest ``social cost of carbon'' 
externality rationale for renewables subsidies, as estimated by an 
interagency working group of the Obama administration;\17\ the 
attendant effects on temperatures in the year 2100 are discussed as a 
rough benefit/cost test. Finally, section IV offers some concluding 
observations.
---------------------------------------------------------------------------
    \17\ See ``Technical Support Document: Technical Update of the 
Social Cost of Carbon for Regulatory Impact Analysis Under Executive 
Order 12866,'' Interagency Working Group on Social Cost of Carbon, 
revised July 2015, at https://www.whitehouse.gov/sites/default/files/
omb/inforeg/scc-tsd-final-july-2015.pdf.

II. Observations on the Expanding Rationales for Energy Subsidies
    As noted above, the policy rationales for energy subsidies have 
expanded over time. What has not changed is their rather poor analytic 
quality; not one is convincing, and the most prominent modern 
rationale--subsidies for renewable electricity (``clean energy'') as an 
adjunct of climate policy--is deeply flawed. The central arguments for 
energy subsidies can be categorized as follows:

      Energy ``independence.''
      Support for infant industries.
      Leveling the subsidy playing field.
      Adverse external effects of conventional generation.
      Resource depletion or ``sustainability.''
      Employment expansion through ``green jobs.''
      The ``social cost of carbon.''

    Energy ``Independence.'' It still is asserted commonly that it was 
the 1973 Arab OPEC oil ``embargo'' that created the sharp price 
increases in 1973 and 1979, and the market dislocations experienced in 
the U.S. during that decade.\18\ In the wake of the 1970s experience, 
many have argued that explicit and implicit subsidies for domestic 
energy production would increase energy ``independence'' and thus 
insulate the U.S. economy from the effects of international supply 
disruptions.\19\
---------------------------------------------------------------------------
    \18\ See, e.g., Greg Myre, ``The 1973 Arab Oil Embargo: The Old 
Rules No Longer Apply,'' NPR Parallels, October 16, 2013, at http://
www.npr.org/sections/parallels/2013/10/15/234771573/the-1973-arab-oil-
embargo-the-old-rules-no-longer-apply.
    \19\ See, e.g., the discussion of ``Energy Security'' presented by 
the Renewable Fuels Association at http://www.ethanolrfa.org/issues/
energy-security/.

    Those arguments were and remain largely incorrect. Since there can 
be only one world market for crude oil, a refusal to sell to a given 
buyer (i.e., impose a higher price on that buyer only) cannot work, as 
market forces will reallocate oil so that prices are equal everywhere 
(adjusting for such minor complications as differential transport 
costs). The 1973 embargo aimed at the U.S., the Netherlands, and a few 
others had no effect at all: all the targeted nations obtained oil on 
the same terms as all other buyers, although the transport directions 
of the global oil trade changed because of the reallocation process. It 
was the production cutback by Arab OPEC that raised international 
prices; and it was the U.S. system of price and allocation controls 
that created the queues and other market distortions. Note that there 
was no embargo in 1979, but there was a production cutback in the wake 
of the Iranian revolution, and the U.S. again imposed price and 
allocation regulations. And, once again, there were queues and market 
distortions.\20\
---------------------------------------------------------------------------
    \20\ See Zycher, 1984, loc. cit., fn. 7 supra.

    Furthermore, however counterintuitive it may seem, the degree of 
``dependence'' on foreign sources of energy is irrelevant, except in 
the case in which a foreign supplier or foreign power can impose a 
physical supply restriction, perhaps through a naval blockade or a 
military threat to ocean transport through, say, a narrow strait. 
Russian pipeline delivery of natural gas to Europe is a related 
example. But in the general case, because the market for crude oil is 
international in nature, as noted above, nations that import all of 
their oil face the same prices as those that import none of their oil. 
The cases of Japan and the UK, respectively, illustrate this point 
nicely: changes in international prices, caused perhaps by supply 
disruptions, yield price changes in the two classes of economies that 
are equal, except for such minor factors as differences in exchange-
rate effects and the like. Accordingly, the degree of energy 
``dependence'' is irrelevant, the quest for energy ``independence'' is 
guaranteed to impose costs without offsetting benefits, and policy 
---------------------------------------------------------------------------
tools intended to increase such ``independence'' should be abandoned.

    As an aside, many observers and commentators on the international 
oil market often refer to pricing and production behavior by ``the OPEC 
cartel,'' but that characterization is not correct.\21\ OPEC has never 
behaved like a cartel in the classic sense of allocating production 
shares so as to equate marginal production cost across producers. It is 
Saudi production that historically has determined world market prices 
simply because Saudi production and reserves have been so large. It is 
more useful analytically to view OPEC as one big producer determining 
the market price, and a number of smaller ones who accept that price 
and then try to find ways to erode it so as to garner bigger market 
shares for themselves. An example of such price shaving is an extension 
of credit for buyers beyond the usual 30 days. Games can be played also 
with the qualities of oil delivered, and with a number of other 
parameters.\22\
---------------------------------------------------------------------------
    \21\ See, e.g., Daniel Yergin, The Prize: The Epic Quest for Oil, 
Money, and Power, New York: Free Press, 1992, esp. pp. 718-724.
    \22\ See Zycher, op. cit., fn. 8 supra; and the Saudi historical 
production data for crude oil at https://www.eia.gov/forecasts/steo/
tables/?tableNumber=7#startcode=1997.

    The Infant Industry Argument. Many argue that new technologies--
wind and solar power are good examples--often cannot compete with 
established ones because the available market at the beginning is too 
small for important scale economies to be exploited, and because the 
downward shifts in costs that might result from a learning process 
cannot be achieved without substantial expansion in capacity and 
production. Accordingly, policy support for expansion of the newcomers' 
share of the market is justified as a tool with which to allow the 
---------------------------------------------------------------------------
achievement of both scale and learning efficiencies.

    The central problem with this argument is that the market for 
electric power already has several competing technologies, each of 
which began with a small market share virtually by definition. More 
generally, many industries employing competing technologies are 
characterized by the presence of scale economies and/or learning 
efficiencies; but market forces operating through domestic and 
international capital markets provide investment capital in 
anticipation of future cost savings and higher economic returns. 
Accordingly, the infant industry argument is a non sequitur: the market 
can foresee the potential for scale and learning efficiencies, and 
invest accordingly. This argument provides no efficiency rationale for 
subsidies or other policy support.\23\
---------------------------------------------------------------------------
    \23\ For a discussion of the data on scale and learning 
efficiencies for renewable electricity, see Zycher, op. cit., fn. 4 
supra.

    Leveling the Subsidy Playing Field. Another central argument made 
in favor of policy support for renewables is essentially a level-
playing-field premise: because conventional generation ostensibly 
benefits from important tax preferences and other policy support, 
renewables cannot compete without similar treatment. A recent EIA 
analysis presents data from which Federal subsidies and support for a 
range of different energy types can be compared.\24\ These data are 
presented in Table 1.\25\
---------------------------------------------------------------------------
    \24\ See U.S. Energy Information Administration, ``Direct Federal 
Financial Interventions and Subsidies in Energy in Fiscal Year 2013,'' 
March 2015, at http://www.eia.gov/analysis/requests/subsidy/pdf/
subsidy.pdf.
    \25\ Other things held constant, subsidies that affect the marginal 
(or incremental) cost of generation or the per-unit prices received by 
particular technologies are likely to affect market prices, even under 
standard rate-of-return regulation, and so might create a competitive 
disadvantage for other technologies not receiving equivalent treatment. 
An example is the per-unit production tax credit for renewable power. 
Other credits might improve profitability without affecting marginal 
costs or prices directly; investment tax credits for renewables are a 
good example. The latter would attract additional investment into the 
industry over time, thus perhaps affecting market prices, but that 
price effect would be felt by all producers regardless of which 
actually received the subsidy. At the same time, even such subsidies as 
the latter would serve to reduce or eliminate whatever competitive 
disadvantages confront renewables as a result of policies that 
purportedly support conventional generation.


         Table 1  FY 2013 Electricity and Non-Electricity Subsidies: Direct Outlays and Tax Expenditures
                                               (year 2013 dollars)
----------------------------------------------------------------------------------------------------------------
                                                          Electricity per mWh           Non-Electricity per
                                                     ----------------------------         quadrillion btu
                   Fuel/Technology                                               -------------------------------
                                                         Outlays      Tax Exp.        Outlays        Tax Exp.
----------------------------------------------------------------------------------------------------------------
Natural Gas, Petroleum Liquids                               0.02          0.58            1.24          45.11
Coal (pulverized)                                            0.04          0.41            4.59          48.27
Hydroelectric                                                0.72          0.06          92.06             7.94
Biomass                                                      1.03          0.15        492.70            68.27
Nuclear                                                      0.05          1.41          n.a.            n.a.
Geothermal                                                 13.00           1.29      1516.03           150.63
Wind                                                       25.44           9.61          n.a.            n.a.
Solar                                                     128.84         90.11       2501.14         1748.86
----------------------------------------------------------------------------------------------------------------
Source: Energy Information Administration, op. cit., fn. 24 supra; and author computations. Computation of
  direct subsidies and tax expenditures for fuels used outside electric power sector assumes same proportions as
  for total subsidies.
n.a.: not applicable.


    With respect to energy sources used for electric generation, these 
data show that Federal subsidies and financial support, whether in the 
form of outlays or tax expenditures, are vastly higher for renewables 
than for conventional fuels used in power production, on a per-mWh 
basis. This reality holds a fortiori for wind and solar power, for 
which Federal financial support was higher than that for fossil fuels 
by approximate factors of 16 to 6,400. The same pattern holds for fuels 
used outside the power sector; on a per-btu basis, biomass, geothermal, 
and solar subsidies exceed those for conventional fuels by approximate 
factors ranging up to 2,000. Accordingly, it is clear that renewable 
power technologies are not at a competitive disadvantage because of 
average Federal subsidy outlays and tax expenditures received by 
conventional generation; quite the reverse is true.\26\
---------------------------------------------------------------------------
    \26\ This is only part of the ``subsidy'' issue: we should examine 
also the relative subsidies or tax expenditures net of royalty and 
other such payments made to the Federal Government as compensation for 
the use of Federal land. I have made that computation for the Ivanpah 
thermal solar power facility in California; per million btu of energy 
produced, Ivanpah pays $0.88 while oil and gas producers pay $1.23. See 
Benjamin Zycher, ``California's New Solar Plant: Burning Up Taxpayer 
Money, Land, and Wildlife,'' The American, May 21, 2014, at http://
www.aei.org/publication/californias-new-solar-plant-burning-up-
taxpayer-money-land-and-wildlife/.

    A somewhat older calculation of marginal subsidies and support 
through tax expenditures has been reported by Metcalf, yielding 
estimates of effective marginal tax rates on investments in alternative 
electric generation technologies. Computation of such effective 
marginal tax rates incorporates the many subsidies and preferences that 
affect choices among those alternatives, and so offers a direct test of 
the degree to which Federal tax expenditures favor given technologies 
over others.\27\ Table 2 summarizes his findings, which are for 2007.
---------------------------------------------------------------------------
    \27\ See Gilbert E. Metcalf, ``Investment in Energy Infrastructure 
and the Tax Code,'' in Jeffrey R. Brown, ed., Tax Policy and the 
Economy, Volume 24, Chicago: University of Chicago Press Journals, 
2010, pp. 1-33. See also Gilbert E. Metcalf, ``Federal Tax Policy 
Towards Energy,'' NBER Working Paper No. 12568, October 2006, at http:/
/www.nber.org/papers/w12568.pdf; and Gilbert E. Metcalf, ``Taxing 
Energy in the United States: Which Fuels Does the Tax Code Favor?'', 
Manhattan Institute Center for Energy Policy and the Environment, 
Report No. 4, January 2009, at http://www.manhattan-institute.org/html/
eper_04.htm.


          Table 2 PMetcalf Findings on Effective Marginal Tax Rates For Electric Generation Investment
                                                    (percent)
----------------------------------------------------------------------------------------------------------------
            Technology                     Current Law             No Tax Credits         Economic Depreciation
----------------------------------------------------------------------------------------------------------------
Coal (pulverized)                                      38.9                      38.9                      39.3
Gas                                                    34.4                      34.4                      39.3
Nuclear                                             -99.5                        32.4                   -49.4
Solar Thermal                                     -244.7                         12.8                   -26.5
Wind                                              -163.8                         12.8                   -13.7
----------------------------------------------------------------------------------------------------------------
Source: Metcalf (2010), op. cit., fn. 27, supra.
Note: Current law is as of 2007.

    The three columns present the Metcalf calculations of effective 
marginal tax rates under 2007 law, under a regime without production 
and investment tax credits, and with economic depreciation assumed in 
place of accelerated depreciation, respectively.\28\ Under 2007 law, 
solar thermal and wind generation investments received large net 
percentage marginal tax-expenditure subsidies (negative effective 
marginal tax rates) far larger than those enjoyed by nuclear 
investments; and coal and gas investments faced effective tax rates 
greater than zero. If the tax credits are assumed away, solar thermal 
and wind investments faced effective tax rates roughly one-third those 
of the other technologies. If economic depreciation replaces 
accelerated depreciation, nuclear investment enjoyed a negative 
effective marginal tax rate (tax subsidy) larger (in absolute value) 
than those for solar and wind investments; but coal and gas investments 
faced effective marginal tax rates of over 39 percent.
---------------------------------------------------------------------------
    \28\ Metcalf uses an exponential depreciation rate rather than 
straight-line depreciation as an approximation of economic depreciation 
over the lives of given investments.

    The Metcalf calculations of effective marginal tax rates under 2007 
law suggest strongly that the ``offsetting subsidy'' rationale for 
Federal financial support of solar and wind investments is weak: coal 
and gas investments face positive effective marginal tax rates, and new 
nuclear investment does not seem to be a serious competitive threat 
over the medium term.\29\ Moreover, the effective subsidies enjoyed by 
solar and wind generation are far greater than those needed to level 
the playing field with respect to nuclear generation except under 
Metcalf's ``economic depreciation'' assumption.\30\
---------------------------------------------------------------------------
    \29\ The last nuclear generation reactor to begin commercial 
operation is the Watts Bar-1 plant in Tennessee, on May 27, 1996. See 
EIA at https://www.eia.gov/tools/faqs/faq.cfm?id=228&t
=21. The Tennessee Valley Authority has announced plans to bring Watts 
Bar-2 to commercial operation during the summer of 2016. See https://
www.tva.gov/Newsroom/Watts-Bar-2-Project.
    \30\ The playing field is biased in favor of renewables for two 
additional reasons, the first of which is the implicit subsidy for 
backup generation capacity and transmission costs. Such costs are a 
direct effect of investment in renewable capacity, but are spread 
across electricity consumption from all sources. The Federal Energy 
Regulatory Commission, in a recent case involving the Midwest 
Independent Transmission Operator, ruled that the transmission costs 
attributable to wind generation may be allocated to consumers 
regardless of the amount of wind power actually consumed by any given 
ratepayer. This ruling essentially spreads such costs across the entire 
grid; accordingly, the transmission costs attendant specifically upon 
wind generation are not reduced but instead are hidden somewhat from 
calculations of the marginal cost of wind power. See the FERC 
Conditional Order, Docket No. ER10-1791-000, December 16, 2010, at 
http://www.ferc.gov/whats-new/comm-meet/2010/121610/E-1.pdf. Second, 
public subsidies for renewable power, whether in the form of direct 
outlays or indirect tax preferences, impose costs upon the private 
sector larger than the subsidies themselves, because of the excess 
burden (or ``deadweight losses'') imposed by the tax system. 
Essentially, the private sector becomes smaller by more than a dollar 
when it is forced to send a dollar to the Federal Government. For a 
nontechnical discussion, see Martin A. Feldstein, ``The Effect of Taxes 
on Efficiency and Growth,'' Tax Notes, May 8, 2006, pp. 679-684.

    Even given the substantially larger per-unit subsidies given 
unconventional energy, it is interesting to address briefly whether the 
central tax and other preferences given conventional energy are 
``subsidies'' under a proper analytic definition.\31\ The percentage 
depletion allowance essentially is a form of depreciation for the 
capital assets represented by extractive resource geologic formations; 
this tax treatment is available to all extractive industries.\32\ It 
may or may not be the case that a particular legal depletion percentage 
is correct analytically--the allowance can result in a deduction in 
excess of the incurred capital costs--but the percentage depletion 
allowance as a method for the depreciation of an extractive capital 
asset conceptually is not a ``subsidy.''
---------------------------------------------------------------------------
    \31\ See a list of such tax provisions prepared by the Joint 
Committee on Taxation at https://www.jct.gov/
publications.html?func=startdown&id=4415.
    \32\ Note that integrated oil companies--those that both produce 
and refine petroleum--are not allowed this tax benefit.

    The accelerated tax deduction for intangible drilling expenses 
allows expensing of labor and other drilling costs associated with 
exploration activities.\33\ Since those costs are incurred in the 
creation of a capital asset, the basic analytics of income taxation 
require that such costs be capitalized and depreciated over time. This 
problem, however, does not represent a ``subsidy'' for conventional 
energy production, as this tax provision is very similar to the tax 
treatment of research and development costs in other industries. The 
allowed expensing of materials injected into declining wells so as to 
enhance extraction is appropriate, because the materials are consumed 
in the extraction process; they do not, therefore, help to create 
capital assets. Accordingly, this tax treatment is not a ``subsidy.''
---------------------------------------------------------------------------
    \33\ This deduction is reduced for integrated oil companies, which 
are allowed to expense 70 percent of such costs, with the remainder 
deducted over the ensuing 5 years.

    The ``section 199'' deduction of 9 percent of income is a tax 
preference given almost all U.S. producers of goods (but not services). 
This deduction for producers of goods may or may not be sound tax 
policy, but it is not specific to conventional energy producers--which 
receive only a 6 percent deduction--and so it is not a ``subsidy'' for 
such producers relative to other producers of goods. To the extent that 
goods producers with significant physical stocks of capital face some 
prospect of price controls during future wars or other emergencies, 
this deduction may be efficient in terms of inducing an optimal level 
of investment in such industries during peacetime.\34\
---------------------------------------------------------------------------
    \34\ The expectation (with some probability greater than zero) of 
future price controls would suppress investment below efficient levels 
because the presence of significant physical capital stocks specialized 
to specific production activities creates ``quasi-rents'' available for 
government to extract with price controls, without suppressing 
production in the short run. See Earl A. Thompson, ``Taxation and 
National Defense,'' Journal of Political Economy, Vol. 82, No. 4 (July-
August 1974), pp. 755-782; and Earl A. Thompson, ``An Economic Basis 
for the `National Defense Argument' for Aiding Certain Industries,'' 
Journal of Political Economy, Vol. 87, No. 1 (February 1979), pp. 1-30.

    Finally, the foreign tax credit is a tax provision designed to 
avoid double taxation of U.S. firms operating both domestically and 
overseas. Whatever the issues inherent in the allocation of costs and 
revenues across operations in different geographic locales, or the 
possible classification of royalty payments as ``income taxes,'' the 
tax credit is not a ``subsidy'' in principle, although it is the case 
that the foreign tax credit treats foreign income taxes more generously 
---------------------------------------------------------------------------
than other foreign taxes and business costs.

    Adverse External Effects of Conventional Generation. A negative 
``externality'' is an adverse effect of economic activity the full 
costs of which are not borne by the parties engaging directly in the 
activity yielding the adverse effect. A simple example is the emission 
of effluents into the air as a byproduct of such industrial processes 
as power generation. There is no dispute that power generation with 
fossil fuels imposes adverse environmental effects due to the emission 
of carbon monoxide, sulfur oxides, nitrogen oxides, mercury, 
particulates, lead, and other effluents. Accordingly, the EPA and the 
States have established detailed programs for defining emission 
standards and for implementing attendant investment and enforcement 
programs.

    If the negative externalities yielded by conventional generation 
are not internalized fully by current environmental policies--that is, 
if buyers and producers are not confronted with the full costs of the 
adverse environmental effects that they impose on others--then the 
costs of conventional generation as perceived by the market would be 
(artificially) lower than the true social costs. At the same time, the 
unreliable nature of wind and solar generation imposes a requirement 
for costly backup capacity. And so the question to be addressed is as 
follows: given the magnitude of those backup cost requirements--which 
are economic externalities imposed by renewables--as estimated in the 
technical literature, are the additional (or marginal) costs of backup 
capacity imposed by renewable generation sufficient to offset any 
artificial ``externality'' cost advantage enjoyed by conventional 
generation? \35\
---------------------------------------------------------------------------
    \35\ Note that because renewable generation--wind and solar power--
are unreliable, the conventional backup generation must be cycled up 
and down in coordination with the availability of the renewable 
generation. In particular for coal-fired generation, but also for gas 
combined-cycle backup generation, this means that the conventional 
assets cannot be operated as efficiently as would be the case were they 
not cycled up and down in response to wind or solar generation 
conditions. Inefficient operation--a higher heat rate, that is, more 
btu of energy input per mWh generated--is the necessary result of such 
cycling. A recent study of the attendant emissions effects for Colorado 
and Texas found that requirements for the use of wind power impose 
significant operating and capital costs because of cycling needs for 
backup generation--particularly coal plants--and actually exacerbate 
air pollution problems. See Bentek Energy LLC, How Less Became More: 
Wind, Power and Unintended Consequences in the Colorado Energy Market, 
April 16, 2010, at http://docs.wind-watch.org/BENTEK-How-Less-Became-
More.
pdf.

    A number of analyses of the environmental externality costs of U.S. 
electricity generation were conducted during the 1980s and 1990s.\36\ 
These studies differ somewhat in terms of methodology and focus, but 
offer a range of estimates useful in terms of the question addressed 
here. In summary: the estimated externality costs for coal range from 
0.1 cents to 26.5 cents per kWh. For gas generation, the range is 0.1-
10.2 cents per kWh. For oil, nuclear, and hydro generation, the 
respective ranges are 0.4-16.5 cents per kWh, 0-4.9 cents per kWh, and 
0-2.1 cents per kWh.
---------------------------------------------------------------------------
    \36\ For a detailed discussion of that literature, see Zycher, op. 
cit., fn. 4 supra., at 41-46. Note that renewable power generation 
imposes its own set of problems, including noise, light flicker 
effects, deaths among possibly-large numbers of birds, pollution with 
heavy metals, consumption of large amounts of land with unsightly 
turbine farms or solar collection panels, and others. See Zycher, op. 
cit., fn. 26 supra. Interestingly, new research finds that large-scale 
adoption of wind generation might cause an increase in surface 
temperatures. See C. Wang and R.G. Prinn, ``Potential Climatic Impacts 
and Reliability of Very Large-Scale Wind Farms,'' Atmospheric Chemistry 
and Physics, Vol. 10, No. 4 (2010), pp. 2052-2061, athttp://www.atmos-
chem-phys.net/10/2053/2010/acp-10-2053-2010.pdf.

    The highest estimated figure for coal generation is 26.5 cents per 
kWh, or $265 per mWh. A conservative estimate of the cost of backup 
capacity for existing wind and solar generation is about $368 per mWh, 
or roughly 37 cents per kWh.\37\ Accordingly, if all conventional 
generation were coal-fired, existing wind and solar capacity imposes a 
backup cost ``externality'' about 39 percent higher than the 
environmental externality costs of conventional generation under the 
implausible assumption that none of the conventional externalities have 
been internalized under current environmental policies.
---------------------------------------------------------------------------
    \37\ See Zycher, op. cit., fn. 4 supra., at 26-31.

    But in fact coal generation is about 33 percent of total U.S. 
generation; gas generation is about 33 percent, nuclear generation is 
about 20 percent, hydroelectric generation is about 6 percent, and 
renewables and other miscellaneous technologies make up the rest.\38\ 
If we use those figures and the highest estimates by fuel type noted 
above to compute a weighted-average externality cost for nonrenewable 
generation, the externality cost per conventional kWh is about 13.2 
cents, or $132 per mWh. Relative to the backup cost ``externality'' 
($368 per mWh) imposed by wind and solar investments alone, those 
figures are sufficiently low to cast substantial doubt upon the 
externality argument for tax expenditures on renewables: current 
environmental regulation must internalize some substantial part of 
conventional externalities, and Federal and State subsidies, both 
explicit and implicit, and requirements for minimum market shares for 
renewables also have the effect of offsetting any artificial cost 
advantage enjoyed by conventional generation as a result of 
uninternalized externalities.
---------------------------------------------------------------------------
    \38\ See the EIA data at https://www.eia.gov/electricity/monthly/
epm_table_grapher.cfm?t=
epmt_1_1 and at https://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3.

    The environmental problems caused by renewable power are 
substantial--noise, flicker effects, wildlife destruction, heavy-metals 
pollution, etc.--but represent a topic outside the scope of the 
discussion here.\39\ In any event, note that in terms of economic 
efficiency, subsidies in the form of direct outlays or tax expenditures 
for renewables intended to offset the (assumed) uninternalized external 
costs of conventional generation are a ``second-best'' policy at best. 
Such subsidies would reduce the (inefficient) competitive advantage of 
conventional generation yielded by the presence of some social costs 
not reflected in prices; but they would not improve the efficiency of 
costs or prices for conventional generation. And by biasing the 
perceived costs and prices of renewable generation downward, the 
subsidies would result in a total electricity market that would be too 
large. In short: the externality argument in favor of tax expenditures 
or policy support for renewable electricity generation is exceedingly 
weak, far more so than commonly assumed.
---------------------------------------------------------------------------
    \39\ See fn. 36 supra.

    The Resource Depletion or ``Sustainability'' Argument. 
``Renewable'' energy has no uniform definition; but the (assumed) 
finite physical quantity of such conventional energy sources as 
petroleum is the essential characteristic differentiating the two in 
most discussions.\40\ In a word, conventional energy sources physically 
are (assumed to be) depletable; but that would not yield a depletion 
problem as an economic reality under market processes, as discussed 
below. In contrast, each sunrise and geographic temperature 
differential yields new supplies of sunlight and wind flows, a central 
component of ``sustainability,'' which perhaps is a concept broader 
than the depletion condition. Nonetheless, the definition of 
``sustainability'' is highly elusive, as the Environmental Protection 
Agency discussion illustrates:
---------------------------------------------------------------------------
    \40\ There is considerable discussion in the technical literature 
of non-biological sources of methane and petroleum. See James A. Kent, 
Kent and Riegel's Handbook of Industrial Chemistry and Biotechnology, 
11th ed., New York: Springer, 2007, Ch. 20; and M. Ragheb, ``Biogenic 
and Abiogenic Petroleum,'' at http://mragheb.com/
NPRE%20402%20ME%20405%20Nuclear%20
Power%20Engineering/Biogenic%20and%20Abiogenic%20Petroleum.pdf. To the 
extent that conventional energy resources are produced non-
biologically, the ``depletion'' assumption underlying the 
sustainability argument may be incorrect even descriptively.

        Sustainability is based on a simple principle: everything that 
        we need for our survival and well-being depends, either 
        directly or indirectly, on our natural environment. To pursue 
        sustainability is to create and maintain the conditions under 
        which humans and nature can exist in productive harmony to 
        support present and future generations.\41\
---------------------------------------------------------------------------
    \41\ See the EPA discussion at https://www.epa.gov/sustainability/
learn-about-sustainability
#what.

    This obviously is infantile blather, definitive proof that the EPA 
has no idea what ``sustainability'' means as an analytic concept. An 
international definition often cited is that from the Report of the 
---------------------------------------------------------------------------
World Commission on Environment and Development: Our Common Future:

        Humanity has the ability to make development sustainable to 
        ensure that it meets the needs of the present without 
        compromising the ability of future generations to meet their 
        own needs.\42\
---------------------------------------------------------------------------
    \42\  See http://www.un-documents.net/our-common-future.pdf.

    This definition also is useless, as ``needs'' whether present or 
future are undefined, the evaluation of the inexorable tradeoffs among 
such needs is ignored, again whether in the present or the future or 
across time periods and generations, the effects of unknown but certain 
---------------------------------------------------------------------------
technological advances are not considered, ad infinitum.

    In any event, the energy content of sunlight and wind is finite, 
regardless of whether new supplies of sunlight or wind flows emerge 
continually. They contain only so much convertible energy, which is not 
always available. Moreover, the same is true for the other resources--
materials, land, etc.--upon which the conversion of such renewable 
energy into electricity depends. More fundamentally, the basic 
``sustainability'' concept seems to be that without policy 
intervention, market forces will result in the depletion (or 
exhaustion) of a finite resource. Accordingly, subsidies and other 
support for renewable power generation are justified as tools with 
which to slow such depletion and to hasten the development of 
technologies that would provide alternatives for future generations.

    That argument is deeply problematic. Putting aside the issue of 
whether government as an institution has incentives to adopt a time 
horizon longer than that relevant for the private sector, the profit 
motive provides incentives for the market to consider the long-run 
effects of current decisions. The market rate of interest is a price 
that links the interests of generations present and future. If a 
resource is being depleted, then its expected future price will rise, 
other things held constant. If that rate of price increase is greater 
than the market interest rate, then owners of the resource have 
incentives to reduce production today--by doing so they can sell the 
resource in the future and in effect earn a rate of return higher than 
the market rate of interest--thus raising prices today and reducing 
expected future prices. In equilibrium--again, other factors held 
constant--expected prices should rise at the market rate of 
interest.\43\ Under market institutions, it is the market rate of 
interest, again, that ties the interests of the current and future 
generations by making it profitable currently to conserve some 
considerable volume of exhaustible resources for future 
consumption.\44\ Because of the market rate of interest, market forces 
will never allow the depletion of a given resource.
---------------------------------------------------------------------------
    \43\ In reality, the long-run prices of most exhaustible natural 
resources have declined (after adjusting for inflation), in large part 
because of (unexpected) technological advances in discovery, 
production, and use.
    \44\ Strictly speaking, it is not the price of the resource that 
should rise at the market rate of interest; instead, the total economic 
return to holding the resource for future use should equal the market 
rate of interest. That total economic return includes expected price 
changes and capital gains, expected cost savings, and the like. Current 
and expected prices are a reasonable first approximation of that total 
economic return.

    Accordingly, the market has powerful incentives to conserve, that 
is, to shift the consumption of large volumes of finite (or depletable) 
resources into future periods. That is why, for example, not all crude 
oil was used up decades ago even though the market price of crude oil 
always was greater than zero, which is to say that using it would have 
yielded value. In short, the ``sustainability'' argument for policy 
support for renewable electricity depends crucially upon an assumption 
that the market conserves too little and that government has incentives 
to improve the allocation of exhaustible resources over time. That is a 
dual premise for which the underlying rationale is weak and with 
respect to which little persuasive evidence has been presented.\45\
---------------------------------------------------------------------------
    \45\ For a more detailed conceptual and empirical discussion of the 
market allocation of a depletable resource over time, see Benjamin 
Zycher, ``World Oil Prices: Market Expectations, the House of Saud, and 
the Transient Effects of Supply Disruptions,'' monograph, aei.org, June 
2016, at http://www.aei.org/wp-content/uploads/2016/06/World-Oil-
Prices.pdf.

    ``Green Jobs'': Renewable Power as a Source of Expanded Employment. 
A common argument in support of expanded renewable power posits that 
policies (subsidies) in support of that goal will yield important 
benefits in the form of complementary employment growth in renewables 
sectors, and stronger demand in the labor market in the aggregate. Both 
---------------------------------------------------------------------------
of those premises are almost certainly incorrect.

    The employment in renewables sectors created by renewables policies 
actually would be an economic cost rather than a benefit for the 
economy as a whole. Suppose that policy support for renewables (or for 
any other sector) were to have the effect of increasing the demand for, 
say, high-quality steel. That clearly would be a benefit for steel 
producers, or more broadly, for owners of inputs in steel production, 
including steel workers. But for the economy as a whole, the need for 
additional high-quality steel in an expanding renewable power sector 
would be an economic cost, as that steel (or the resources used to 
produce it) would not be available for use in other sectors. Similarly, 
the creation of ``green jobs'' as a side effect of renewables policies 
is a benefit for the workers hired (or for those whose wages rise with 
increased market competition for their services). But for the economy 
as a whole, that use of scarce labor is a cost because those workers no 
longer would be available for productive activity elsewhere.\46\
---------------------------------------------------------------------------
    \46\ Considerable employment would be created if policies 
encouraged ditch-digging with shovels (or, in Milton Friedman's famous 
example, spoons) rather than heavy equipment. Such employment obviously 
would be laughable, that is, an obvious economic burden. There is no 
analytic difference between this example and the ``green jobs'' 
rationale for renewables subsidies.

    More to the point, an expansion of the renewable electricity sector 
must mean a decline in some other sector(s), with an attendant 
reduction in resource use there; after all, resources in the aggregate 
are finite. If there exists substantial unemployment, and if labor 
demand in renewables is not highly specialized, a short-run increase in 
total employment might result. But in the long run--not necessarily a 
long period of time--such industrial policies cannot ``create'' 
employment; they can only shift it among economic sectors. In short, an 
expanding renewables sector must be accompanied by a decline in other 
sectors, whether relative or absolute, and creation of ``green jobs'' 
must be accompanied by a destruction of jobs elsewhere. Even if an 
expanding renewables sector is more labor-intensive (per unit of 
output) than the sectors that would decline as a result, it remains the 
case that the employment expansion would be a cost for the economy as a 
whole, and the aggregate result would be an economy smaller than 
otherwise would be the case.\47\ There is no particular reason to 
believe that the employment gained as a result of the (hypothetically) 
greater labor intensiveness of renewables systematically would be 
greater than the employment lost because of the decline of other 
sectors, combined with the adverse employment effect of the smaller 
economy in the aggregate. There is in addition the adverse employment 
effect of the explicit or implicit taxes that must be imposed to 
finance the expansion of renewable power.
---------------------------------------------------------------------------
    \47\ Many advocates of renewables subsidies assert that solar and 
wind power are more labor-intensive than conventional generation. The 
assumption of greater labor intensity for renewable power production is 
dubious: the operation of solar or wind facilities does not employ 
large amounts of labor, and it is far from clear that construction of 
solar or wind facilities is more labor-intensive than construction of 
conventional generation facilities.

    Because renewable electricity generation is more costly than 
conventional generation, policies driving a shift toward heavier 
reliance upon the former would increase aggregate electricity costs, 
and thus reduce electricity use below levels that would prevail 
otherwise.\48\ The 2007 EIA projection of total U.S. electricity 
consumption in 2030 was about 5.17 million gigawatt-hours (gWh).\49\ 
The latest EIA projection for 2030 is about 4.44 million gWh, a decline 
of about 14 percent.\50\ The change presumably reflects some 
combination of assumptions about structural economic shifts, increased 
conservation, substitution of renewables for some conventional 
generation, and a projected price increase (in 2015 dollars) from about 
9.3 cents per kWh to 11.6 cents, or almost 25 percent.\51\ Because, in 
the EIA projections, consumption of electric power in 2030 falls by 
that 14 percent between the 2007 and 2015 analyses, the projected price 
increase is likely to be due to increases in costs rather than 
strengthened demand conditions.
---------------------------------------------------------------------------
    \48\ See Zycher, op. cit., fn. 4 supra.
    \49\ See EIA at http://www.eia.doe.gov/oiaf/archive/aeo07/
aeoref_tab.html, at Table 2.
    \50\ See EIA at http://www.eia.gov/forecasts/aeo/pdf/tbla8.pdf.
    \51\ The EIA 2007 price projection for electricity in 2030 was 
$23.60 per million btu in year 2005 dollars, or about 8.1 cents per kWh 
at a conversion rate of 293 kWh per million btu (3413 btu per kWh); 
that is about 9.3 cents in year 2015 dollars. See EIA at http://
www.eia.gov/oiaf/archive/aeo07/pdf/aeotab_3.pdf. The EIA projection in 
2015 for 2030 was $33.97 per million btu, or 11.6 cents per kWh, in 
year 2015 dollars. See EIA at http://www.eia.gov/forecasts/aeo/
data.cfm#summary (Table 3). The deflators are derived from the Council 
of Economic Advisers, Annual Report of the Council of Economic 
Advisers, February 2016, Table B-3, at https://www.whitehouse.gov/
administration/eop/cea/economic-report-of-the-President/2016.

    Accordingly, it would be surprising if that reduction in total U.S. 
electricity consumption failed to have some nontrivial employment 
effect. Figure 1 displays data on electricity consumption, and non-
agricultural employment for the period 1973 through 2015.\52\
---------------------------------------------------------------------------
    \52\ For civilian employment, see the Bureau of Labor Statistics at 
http://www.bls.gov/cps/tables.htm. For electricity consumption, see EIA 
at http://www.eia.gov/totalenergy/data/annual/index.cfm#electricity 
(Table 8.9).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    It is obvious from the aggregate trends that electricity use and 
labor employment are complements rather than substitutes; the simple 
correlation between the two series is 0.988, meaning, crudely, that a 
one-unit change in one tends to be observed with a 0.988 unit change in 
---------------------------------------------------------------------------
the other, in the same direction.

    Correlation is not causation; but it is not plausible that an 
increase in electricity costs (or energy costs more broadly) would fail 
to have adverse effects on employment, if only by increasing the cost 
of using equipment and other such capital complementary with labor 
employment.\53\ The determination (or refutation) of such economic 
relationships would require application (and statistical testing) of a 
conceptual model, a task outside the scope of the issues addressed 
here. But the data displayed in Figure 1 provide strong grounds to 
infer that the higher costs and reduced electricity consumption 
attendant upon expansion of renewable generation would reduce 
employment; at a minimum they provide strong grounds to question the 
common assertion that policies in support of expanded renewable 
electricity generation would yield increases in aggregate employment as 
a side effect, putting aside whether such increases would be a net 
economic benefit for the economy as a whole.
---------------------------------------------------------------------------
    \53\ It is important to keep clear the conceptual experiment under 
consideration. In the context here, we assume that government policies 
increase the substitution of renewable power in place of conventional 
electricity, and ask whether the aggregate data are consistent with the 
assertion that such ``green'' policies--explicitly an increase in 
energy costs (see Zycher, op. cit., fn. 4 supra) --can be predicted to 
yield an increase in aggregate employment. This is very different from, 
say, the effects of an aggregate recession, which can be predicted to 
reduce both energy costs (prices) and employment more or less 
simultaneously. Similarly, an economic boom would increase both energy 
prices and employment, while an increase in energy supplies would 
reduce energy prices and increase employment. Note that aggregate 
employment in any of these scenarios might fall in the short run as 
market forces reallocate labor (and other resources) in response to 
changes in relative prices.

    It certainly is possible that the historical relationship between 
employment and electricity consumption will change. Technological 
advances are certain to occur; but the prospective nature and effects 
of those shifts are difficult to predict.\54\ The U.S. economy may 
evolve over time in ways yielding important changes in the relative 
sizes of industries and sectors, as it has continually over time; but, 
again, the direction of the attendant shifts in employment and 
electricity use is ambiguous.
---------------------------------------------------------------------------
    \54\ Note that greater energy ``efficiency'' in any given activity 
can yield an increase in actual energy consumption, if the elasticity 
of energy demand with respect to the marginal cost of energy use is 
greater than one. If, for example, air conditioning were to become 
sufficiently ``efficient'' in terms of energy consumption per degree of 
cooling, it is possible that air conditioners would be run so much--or 
that so many additional air conditioners would be installed--that total 
energy consumption in space cooling would increase. A tax, on the other 
hand, whether explicit or implicit, increases the price of energy use, 
and so unambiguously reduces energy consumption.

    But there exists no evidence with which to predict that a reduction 
in electricity consumption would yield an increase in employment. Like 
all geographic entities, the U.S. has certain long-term 
characteristics--climate, available resources, geographic location, 
trading partners, legal institutions, ad infinitum--that determine in 
substantial part the long-run comparative advantages of the economy in 
terms of economic activities and specialization. Figure 2 presents the 
historical paths of the electricity intensity of U.S. GDP (electricity 
consumption per dollar of output) and of the labor intensity of U.S. 
electricity consumption (employment per million gWh of power 
consumption).\55\
---------------------------------------------------------------------------
    \55\ Sources: See BLS and EIA, op. cit., fn. 52 supra.; and for 
GDP, Bureau of Economic Analysis at http://www.bea.gov/national/
index.htm#gdp, Federal Reserve Bank of St. Louis at https://
research.stlouisfed.org/fred2/series/GDPDEF, and author computations.

    During 1973-2015, the electricity intensity of GDP has increased 
and declined over various years, but for the whole period has declined 
slightly at a compound annual rate of about 0.9 percent. The labor 
intensity of U.S. electricity consumption--in a sense, the employment 
``supported'' by each increment of electricity consumption--has 
declined over the entire period at an annual compound rate of about 0.3 
percent. This may be the result largely of changes in the composition 
of U.S. GDP (toward services), and perhaps the substantial increase in 
---------------------------------------------------------------------------
U.S. labor productivity in manufacturing.

    But these data are not consistent with the premise that a reduction 
in electricity consumption driven by an increase in energy costs would 
yield an increase in aggregate employment; instead, they suggest the 
reverse strongly. In short, while the electricity/output and 
employment/electricity relationships may have declined over time, there 
is no evidence that they are unimportant in an absolute sense, and they 
are far from negative. An increase in the cost of electric power will 
reduce electricity consumption and employment, notwithstanding 
ubiquitous assertions about the ``green jobs'' attendant upon an 
expansion of wind and solar power.

 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Finally, Figure 3 presents the crude relationship between 
electricity consumption and real GDP; the simple correlation between 
these two parameters is 0.977 for 1973-2015. This relationship makes it 
difficult to believe that an artificial increase in electricity costs 
would fail to erode GDP growth and thus employment.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


III. The ``Social Cost of Carbon'' Rationale for Renewables Subsidies
    The newest application of the externality rationale is the ``social 
cost of carbon'' (SCC) analysis conducted by an interagency working 
group of the Obama administration.\56\ The overall purpose of this 
estimate of the SCC is the application of benefit/cost analysis to 
policies proposed to mitigate the asserted effects of increasing 
atmospheric concentrations of greenhouse gases (GHG), that is, 
``climate'' policies. The SCC analysis is deeply flawed, for three 
central reasons: the use of ``global'' benefits in the benefit/cost 
calculation, the failure to apply a 7 percent discount rate to the 
stream of (asserted) future benefits and costs, and the use of ozone 
and particulate reductions as ``co-benefits'' of climate policies.\57\
---------------------------------------------------------------------------
    \56\ See op. cit., fn. 17, supra.
    \57\ Note that these three problems are independent of the 
climatology assumptions underlying the analysis of the costs of 
increasing atmospheric concentrations of GHG. Notwithstanding 
ubiquitous assertions that ``the science is settled,'' in reality it is 
not: the issue of the climate sensitivity of the atmosphere is hotly 
(!) debated, as noted below, and the existing body of evidence on 
temperature and other climate phenomena are not consistent with the 
argument that climate impacts both visible and serious already are 
visible. See Benjamin Zycher, ``Paris in the Fall: COP-21 vs Climate 
Evidence,'' aei.org, November 30, 2015, at http://www.aei.org/
publication/paris-in-the-fall-cop-21-vs-climate-evidence/. How rising 
temperatures might affect such phenomena as weather patterns, ice sheet 
dynamics, sea levels, agriculture, ad infinitum simply is not known. 
Moreover, scientific ``truth'' is not majoritarian; it never can be 
``settled'' because new evidence emerges constantly. These observations 
are not relevant to the benefit/cost critique presented here; but it is 
important to note that the policy issues raised by the GHG/climate 
question would remain difficult even if there existed both unanimity 
and certainty on the underlying scientific issues.

    Before turning to those analytic issues, it is important to note as 
an aside that carbon dioxide--the most important anthropogenic GHG--is 
not ``carbon.'' ``Carbon'' is soot, or in the language of environmental 
policy, particulates; carbon dioxide is a colorless, odorless GHG, a 
certain minimum atmospheric concentration of which is necessary for 
life itself. It is, therefore, not a ``pollutant.'' By far the most 
important GHG in terms of the radiative properties of the troposphere 
is water vapor; do the proponents of renewables subsidies believe that 
water vapor is a ``pollutant?'' \58\ The ``social cost of GHG'' would 
be a wise replacement for ``the social cost of carbon,'' as the former 
has the virtue of scientific accuracy without assuming the answer to 
the underlying policy question. More generally, the terms ``carbon'' 
and ``carbon pollution'' are political propaganda, designed to end 
debate before it begins by shunting aside the central policy questions.
---------------------------------------------------------------------------
    \58\ That the dominant source of tropospheric water vapor by far is 
ocean evaporation, a natural process, is irrelevant. Volcanic eruptions 
also are natural, but no one would deny that the massive amounts of 
particulates, mercury, and other effluents emitted by volcanoes are 
pollutants.

    With respect to the first of the three flaws in the SCC analysis by 
the Obama administration, Office of Management and Budget Circular A-4 
is explicit: only the benefits and costs of regulations enjoyed or 
borne domestically are to be used in benefit/cost analysis.\59\ 
International effects are to be reported separately. The reason for 
this is obvious: if domestic costs and global benefits are used in 
benefit/cost analysis, then the U.S. would be driven to bear all of the 
regulatory burdens for the entire world.\60\ Not only would other 
economies have incentives to allow the United States to bear all of the 
attendant costs (that is, to engage in ``free riding'' on U.S. 
policies), it would be economically efficient for them to do so; if 
they were to reduce emissions further, global emissions would be lower 
than optimal, because the global marginal cost of emissions reductions 
would exceed the global marginal benefits.\61\ This also is 
inconsistent with the standard theory of efficient emissions 
reductions, under which the marginal cost of those reductions is 
equated across emitters. Accordingly, the global benefits orientation 
is inconsistent with the current objective, implicit but clear, under 
the Clean Power Plan of regionalizing emissions reductions, ostensibly 
to equate the marginal costs of reducing GHG emissions across States, 
but actually to force most States into regional cap-and-trade wealth 
transfer systems, the dominant feature of which would be payments from 
red States to blue ones.\62\
---------------------------------------------------------------------------
    \59\ See Office of Management and Budget at https://
www.whitehouse.gov/sites/default/files/omb/assets/
regulatory_matters_pdf/a-4.pdf (p. 15): ``. . . analysis should focus 
on benefits and costs that accrue to citizens and residents of the 
United States. Where you choose to evaluate a regulation that is likely 
to have effects beyond the borders of the United States, these effects 
should be reported separately.'' See also https://www.whitehouse.gov/
sites/default/files/omb/inforeg/regpol/circular-a-4_regulatory-impact-
analysis-a-primer.pdf.
    \60\ In this case, U.S. policies would equate marginal domestic 
costs with marginal global benefits. In other words, the United States 
would reduce emissions of a given effluent to the point that such 
emissions would be optimal for the entire world, with only the United 
States bearing the costs. If U.S. benefit/cost analysis were to 
incorporate both global benefits and global costs, the enormous cost 
calculation would reduce the domestic political viability of any such 
U.S. policy, and the United States cannot enforce regulatory 
requirements on other nations in an effort to spread the costs. At the 
same time, if all nations were to adopt a global benefit approach, the 
efficient level of effluents would be achieved, but this ignores the 
individual incentives to obtain a free ride on the efforts of others, 
and so is not a reasonable underlying analytic assumption.
    \61\ This problem is separate from the industry relocation 
incentives yielded by the adoption of such policies only by the United 
States. Note that in the 2010 Interagency Working Group analysis, the 
domestic SCC is about 7-23 percent of the global value, or about $2-$7 
per ton of GHG emissions if we apply the 2015 IWG estimate of the SCC 
of $31 for 2010. See the IWG 2010 analysis at https://
www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-
Cost-of-Carbon-for-RIA.pdf and the 2015 revision at op. cit., fn. 17 
supra.
    \62\ See `` `Summary of Key Points' in Testimony of Anne E. Smith, 
Ph.D. at a Hearing on EPA's Final Clean Power Plan Rule by the 
Committee on Science, Space, and Technology,'' United States House of 
Representatives, Washington, DC November 18, 2015, at http://
docs.house.gov/meetings/SY/SY00/20151118/104182/HHRG-114-SY00-Wstate-
SmithA-20151118.pdf.

    OMB Circular A-4 requires also that Federal agencies apply both 3 
percent and 7 percent discount rates to the streams of benefits and 
costs of proposed regulations in order to allow a comparison of the 
respective present values.\63\ The Obama administration used 2.5 
percent, 3 percent, and 5 percent discount rates, but not 7 percent. 
The reason for this is obvious: at 7 percent, the social cost of carbon 
becomes small or negative. In the DICE integrated assessment model, the 
social cost of carbon declines by 80 percent relative to the case of a 
3 percent discount rate, from $61.72 per ton to $12.25. In the FUND 
model, the social cost of carbon for 2010-2050 at a 7 percent discount 
rate declines to approximately zero or becomes negative. In the 2015 
IWG revision, the 2050 social cost of carbon is $26 per ton at a 5 
percent discount rate, $69 at 3 percent, and $95 at 2.5 percent. It is 
clear that the effect of changes in the assumed discount rate is very 
substantial, and the failure of the Obama administration to adhere to 
the requirements of OMB Circular A-4 is driven by imperatives heavily 
political rather than analytic.\64\
---------------------------------------------------------------------------
    \63\ A-4 allows a 3 percent discount rate in addition to the 7 
percent rate if a consumption displacement model is deemed appropriate. 
That obviously is not solely the case for climate policies, which would 
affect investment flows substantially; but A-4 (p. 34) requires the use 
of both 3 percent and 7 percent discount rates so as to account for 
both the consumption and investment effects of proposed regulations, 
and to allow for sensitivity analysis.
    \64\ For the DICE and FUND models, see, respectively, http://
www.econ.yale.edu/nordhaus/homepage/documents/DICE_Manual_103113r2.pdf 
and http://www.fund-model.org/. See Kevin D. Dayaratna and David 
Kreutzer, ``Environment: Social Cost of Carbon Statistical Modeling Is 
Smoke and Mirrors,'' Natural Gas and Electricity, Vol. 30, Issue 12 
(July 2014), pp. 7-11; Kevin D. Dayaratna and David Kreutzer, ``Loaded 
DICE: An EPA Model Not Ready for the Big Game,'' Heritage Foundation 
Backgrounder #2860, November 21, 2013, at http://www.heritage.org/
research/reports/2013/11/loaded-dice-an-epa-model-not-ready-for-the-
big-game; and Kevin D. Dayaratna and David Kreutzer, ``Unfounded FUND: 
Yet Another EPA Model Not Ready for the Big Game,'' Heritage Foundation 
Backgrounder #2897, at http://www.heritage.org/research/reports/2014/
04/unfounded-fund-yet-another-epa-model-not-ready-for-the-big-game. 
Another problem is presented by the reality that the economic costs of 
climate policies--increased energy costs and attendant effects--are 
substantially more certain than the benefits, that is, the future 
impacts of those policies in terms of temperatures and other such 
phenomena as storms and sea levels. This means that the assumed benefit 
stream of such policies over time should be subjected to a state-
options analysis, or at a minimum to a crude application of a discount 
rate higher than that applied to the cost stream. See, e.g., Daniel A. 
Graham, ``Cost-Benefit Analysis Under Uncertainty,'' American Economic 
Review, Vol. 71, No. 4 (September 1981), pp. 715-725.

    Note that it is not appropriate to use a low discount rate as a 
means of increasing the weight given the interests of future 
generations. This is because future generations are interested not in 
receiving a bequest of, say, maximum environmental quality, but instead 
in an inheritance of the most valuable possible capital stock in all of 
its myriad dimensions, among all of which there are tradeoffs that 
cannot be avoided. Consider a homo sapiens baby borne in a cave some 
tens of thousands of years ago, in a world with a resource base 
virtually undiminished and environmental quality effectively untouched 
by mankind. That child at birth would have had a life expectancy on the 
order of 10 years; had it been able to choose, it is obvious that it 
willingly would have given up some resources and environmental quality 
in exchange for better housing, food, water, medical care, safety, ad 
infinitum.\65\ That is, it is obvious that people willingly would 
choose to give up some environmental quality in exchange for a life 
both longer and wealthier.
---------------------------------------------------------------------------
    \65\ The source for this life expectancy estimate is a telephone 
discussion February 16, 2011 with Professor Gail Kennedy, Department of 
Anthropology, University of California-Los Angeles. Note here the 
implicit normative assumption that the ``interests'' of any individual 
or group are those that they would define for themselves or, more 
important, reveal through choice behavior.

    Accordingly, the central interest of future generations is a 
bequest from previous generations of the most valuable possible capital 
stock, of which the resource base and environmental quality are two 
important dimensions among many, and among which there always are 
tradeoffs. That requires efficient resource allocation by the current 
generation. If regulatory and other policies implemented by the current 
generation yield less wealth currently and a smaller total capital 
stock for future generations, then, perhaps counterintuitively, some 
additional emissions of effluents would be preferred (efficient) from 
the viewpoint of those future generations.\66\
---------------------------------------------------------------------------
    \66\ The capital stock includes both tangible capital and such 
intangibles as the rule of law, the stock of knowledge, culture, and 
the like. Greater wealth for the current generation yielded by resource 
consumption yields conditions allowing the expansion of other 
dimensions of the capital stock defined broadly.

    The IWG benefit/cost analysis of the Clean Power Plan (CPP)--the 
central ``climate'' policy proposal from the Obama administration--
includes ``co-benefits'' in the form of reductions in ozone and 
emissions of fine particulates. Indeed: these co-
benefits in 2030 are half or more of the benefits (evaluated at a 3 
percent discount rate) asserted for the CPP.\67\ This ``co-benefit'' 
approach is deeply problematic because the Clean Air Act explicitly 
requires the EPA, upon making an ``endangerment'' finding for a given 
effluent, to promulgate a National Ambient Air Quality Standard that 
``protects the public health'' with ``an adequate margin of safety.'' 
\68\ Accordingly, it must be the case that the existing ozone and 
particulate standards fail to satisfy the requirements of the law, or 
the EPA is double- (or more) counting the benefits of reductions in 
ozone and fine particulates in its analysis of the CPP, or the CPP will 
reduce ozone and fine particulate emissions to levels that are 
inefficiently low, that is, to levels at which marginal costs exceed 
marginal benefits. At least one of those three conditions must be true. 
Note that the EPA uses the same assumed particulate reductions to 
justify the CPP, the new ozone rule,\69\ the new particulate rule,\70\ 
and the Utility Mercury and Air Toxics Standards.\71\ Note also that 
the IWG uses the assumed global benefits of reductions in GHG emissions 
as the basis for the SCC analysis, while the CPP net benefits in 
substantial part are created by assumed reductions in ozone and fine 
particulates, which are domestic pollutants, as just discussed. This is 
an inconsistency that has gone largely unnoticed in the Washington 
policy community.
---------------------------------------------------------------------------
    \67\ This is true for both the ``rate-based'' and ``mass-based'' 
regulatory approaches of the CPP. In the regulatory impact analysis for 
the CPP, the ``climate'' and ``air quality'' benefits of the CPP can be 
compared only with the 3 percent discount rate, because EPA does not 
provide that direct comparison for other discount rates, interestingly 
enough. See Tables ES-9 and ES-10 in Environmental Protection Agency, 
Regulatory Impact Analysis for the Clean Power Plan Final Rule, October 
23, 2015, at https://www.epa.gov/sites/production/files/2015-08/
documents/cpp-final-rule-ria.pdf.
    \68\ See the relevant language at https://www.law.cornell.edu/
uscode/text/42/7409.
    \69\ See EPA at https://www.gpo.gov/fdsys/pkg/FR-2015-10-26/pdf/
2015-26594.pdf.
    \70\ See EPA at https://www.gpo.gov/fdsys/pkg/FR-2015-03-23/pdf/
2015-06138.pdf.
    \71\ See EPA at https://www3.epa.gov/mats/pdfs/20160317fr.pdf.

    It is important to note that even in the context of the climate 
model used by the EPA,\72\ the future temperature effects of U.S. and 
international climate policies are small at most and trivial for the 
most part. The Obama administration Climate Action Plan calls for a 17-
percent reduction below 2005 levels in U.S. GHG emissions by 2020.\73\ 
In addition, the U.S.-China Joint Announcement on Climate Change calls 
for an additional 10-percent reduction by the U.S. by 2025.\74\ The 17-
percent reduction would reduce temperatures by the year 2100 by \15/
1000\ of a degree. The additional 10-percent reduction yields another 
\1/100\ of a degree. Given that the standard deviation of the 
temperature record is about 0.1 degrees, these effects would be too 
small even to be measured, let alone to affect sea levels and cyclones 
and all the rest.\75\ If we assume an additional 20 percent emissions 
cut by China by 2030, that adds 0.2 degrees; and another 0.2 degrees if 
we assume a 30 percent emissions cut by the rest of the industrialized 
world, by 2030. If we assume also a 20 percent reduction by the less-
developed world by 2030, temperatures would be reduced by another \1/
10\ of a degree. The total: a bit more than 0.5 degrees.
---------------------------------------------------------------------------
    \72\ This model was developed at the National Center for 
Atmospheric Research, with funding provided by the EPA. See http://
www.cgd.ucar.edu/cas/wigley/magicc/.
    \73\ See https://www.whitehouse.gov/sites/default/files/docs/
cap_progress_report_final_w_
cover.pdf.
    \74\ See https://www.whitehouse.gov/the-press-office/2014/11/11/us-
china-joint-announcement-climate-change. See also Benjamin Zycher, 
``Observations on the U.S.-China Climate Announcement,'' The Hill, 
November 14, 2014, at http://thehill.com/blogs/pundits-blog/energy-
environment/224076-observations-on-the-us-china-climate-announcement; 
and Benjamin Zycher, ``The U.S.-China Climate Agreement Hangover,'' The 
Hill, December 8, 2014, at http://thehill.com/blogs/pundits-blog/
energy-environment/226272-the-us-china-climate-agreement-hangover.
    \75\ See Judith Curry's analysis at https://judithcurry.com/2015/
11/06/hiatus-controversy-show-me-the-data/.

    Note that these model predictions use underlying parameters highly 
favorable to the policies under examination, that is, assumptions that 
increase the predicted effects of the policies. The most important is a 
``climate sensitivity'' (the temperature effect in 2100 of a doubling 
of GHG concentrations) assumption of 4.5 degrees, a number 50 percent 
greater than the median adopted by the Intergovernmental Panel on 
Climate Change in its latest assessment report.\76\ And even the latter 
is about 40 percent higher than the median of the estimates published 
in the recent peer-reviewed literature.\77\
---------------------------------------------------------------------------
    \76\ See the summary of the recent peer-reviewed evidence presented 
by Patrick J. Michaels and Paul C. Knappenberger at http://
www.cato.org/blog/collection-evidence-low-climate-sensitivity-
continues-grow. See the IPCC 5th Assessment Report at https://
www.ipcc.ch/report/ar5/.
    \77\ On the recent estimates in the peer-reviewed literature, see 
https://judithcurry.com/2015/11/30/how-sensitive-is-global-temperature-
to-cumulative-co2-emissions/#more-20572, https://judithcurry.com/2015/
03/23/climate-sensitivity-lopping-off-the-fat-tail/, and Michaels and 
Knappenberger, op. cit., fn. 76 supra.

    For obvious reasons, these trivial temperature benefits of 
``climate'' policies have not been publicized extensively. EPA has 
published such an estimate in its regulatory rule for GHG emissions and 
fuel efficiency standards for medium- and heavy-duty engines and 
vehicles, and it is revealing: \78\
---------------------------------------------------------------------------
    \78\ See https://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-
2014-0827-0002.

        The results of the analysis, summarized in Table VII-37, 
        demonstrate that relative to the reference case, by 2100 . . . 
        global mean temperature is estimated to be reduced by 0.0026 to 
        0.0065 +C, and sea-level rise is projected to be reduced by 
---------------------------------------------------------------------------
        approximately 0.023 to 0.057 cm. . . .

    EPA then states that ``the projected reductions in atmospheric 
CO2, global mean temperature, sea level rise, and ocean pH 
are meaningful in the context of this action.'' And so we arrive at the 
benefit/cost conclusion:

        [We] estimate that the proposed standards would result in net 
        economic benefits exceeding $100 billion, making this a highly 
        beneficial rule.

    Can anyone believe that a temperature effect by 2100 measured in 
\10/1000\ of a degree, or sea-level effects measured in thousandths of 
a centimeter could yield over $100 billion in net economic benefits? 
\79\ This conclusion is possible only because of the assumptions and 
approach underlying the SCC analysis; as discussed above, they are 
deeply problematic.
---------------------------------------------------------------------------
    \79\ Marlo Lewis, et al. provide a detailed analysis of the fuel 
efficiency standards for medium- and heavy-duty engines and vehicles at 
http://www.globalwarming.org/wp-content/uploads/2015/10/Marlo-Lewis-
Competitive-Enterprise-Institute-and-Free-Market-Allies-Comment-Letter-
on-Phase-2-EPA-NHTSA-greenhouse-gas-fuel-economy-HDV-rule-Oct-1-2015-
Final.docx.pdf.

    In short: the climate change/GHG emissions/``social cost of 
carbon'' rationale for renewables subsidies is fatally flawed 
analytically, and should be reformed in a serious fashion by 
policymakers.
IV. Concluding Observations
    From ``energy independence'' through the ``social cost of carbon,'' 
the modern rationales for energy subsidies have varied in prominence 
over the decades, but none has been broadly discredited in the public 
discussion despite the reality that each suffers from fundamental 
analytic weaknesses.

    Energy ``independence''--the degree of self-sufficiency in terms of 
energy production--is irrelevant analytically, particularly in the case 
of such energy sources as petroleum traded in international markets, an 
economic truth demonstrated by the historical evidence on the effects 
of demand and supply shifts from the 1970s through the present.

    Capital markets can sustain promising industries or technologies in 
their infancy--the early period during which technologies are proven 
and scale and learning efficiencies are achieved--so that the ``infant 
industry'' rationale for renewables subsidies is a non sequitur. 
Moreover, there is little evidence that there exist additional learning 
or scale cost reductions remaining to be exploited in wind and solar 
generation in any event.

    There is no analytic evidence that renewables suffer from a subsidy 
imbalance relative to competing conventional energy technologies--the 
data suggest the reverse strongly--and the conventional ``subsidies'' 
that are purported to create a disadvantage for renewables are not 
``subsidies'' defined properly as a matter of economic analysis.

    Wind and solar power create their own set of environmental 
problems, and even in terms of conventional effluents and GHG it is far 
from clear that they have an advantage relative to conventional 
generation, particularly because of the up-and-down cycling of 
conventional backup units needed to preserve system reliability in the 
face of the intermittency (unreliability) of renewable power. And those 
backup costs--an economic externality caused by the unreliability of 
renewable power--are substantially larger than the externality costs of 
conventional power even under extreme assumptions.

    The ``sustainability'' or resource depletion arguments for 
renewables subsidies make little sense analytically--the market rate of 
interest provides powerful incentives to conserve resources for 
consumption during future periods--and are inconsistent with the 
historical evidence in any event.

    Nor does the ``green jobs'' employment rationale for renewables 
subsidies make analytic sense, as a resource shift into the production 
of politically favored power must reduce employment in other sectors--
resources, after all, are limited always and everywhere--and the taxes 
needed to finance the subsidies cannot have salutary employment 
effects. Moreover, the historical evidence on the relationships among 
GDP, employment, and electricity consumption does not support the 
``green jobs'' argument.

    The newest environmental rationale for renewables subsidies--the 
SCC--is an argument deeply flawed both conceptually and in terms of the 
quantitative estimates now underlying a large regulatory effort. 
Moreover, the policies being proposed to reduce emissions of greenhouse 
gases would have temperature effects trivial or unmeasurable even at 
the international level, under assumptions highly favorable to the 
policy proposals. More generally, the terms ``carbon'' and ``carbon 
pollution'' are political propaganda, as carbon dioxide and ``carbon'' 
are very different physical entities, particularly given that some 
minimum atmospheric concentration of the former is necessary for life 
itself.

    It would be hugely productive for the U.S. economy writ large were 
policymakers to adopt a straightforward operating assumption: resource 
allocation in energy sectors driven by market prices is roughly 
efficient in the absence of two compelling conditions. First: it must 
be shown that some set of factors has distorted those allocational 
outcomes to a degree that is substantial. Second: it must be shown that 
government actions with high confidence will yield net improvements in 
aggregate economic outcomes. Given the weak history of analytic rigor 
and policy success in the context of energy subsidies, greatly 
increased modesty on the part of policymakers would prove highly 
advantageous.

                                 ______
                                 
         Questions Submitted for the Record to Benjamin Zycher
                Questions Submitted by Hon. Dean Heller
    Question. Though geothermal and solar production is steadily 
increasing in the Silver State, natural gas is the primary fuel for 
power generation in my home State. In 2014, Nevada generated 63% of its 
electricity from natural gas. That cheap base-load energy allows the 
State to also utilize renewable without decreasing reliability and 
increasing consumer costs.

    Answer. This last sentence is incorrect. If the conventional base-
load capacity allows for increased renewable generation without a 
reduction in reliability, then the conventional units must be cycled up 
and down depending on whether renewable power is available. That 
cycling increases the cost (and polluting characteristics) of the base-
load generation. Moreover, the renewables themselves are high-cost, a 
reality not changed by the availability of inexpensive base-load power. 
The fact that the high cost of the renewable electricity can be hidden 
by averaging it with the low costs of the base-load generation does not 
``reduce costs''; it merely masks them. The assertion that 
``renewable'' can be ``utilize[d] . . . without . . . increasing 
consumer costs'' is false unless we exclude the subsidies from the 
definition of ``consumer costs,'' an approach that is incorrect 
analytically.

    Question. What tax incentives are essential to ensuring our Nation 
continues to lead the world in natural resources development?

    Answer. Tax policy should not have as a goal ``ensuring our Nation 
continues to lead the world in natural resources development.'' Such 
outcomes in resource allocation should be driven by market prices, at 
least as the processes and implications of market competition 
traditionally are envisioned at a normative level. Given that most 
natural resources traded in international markets cannot be 
``embargoed'' with respect to a given nation, it is unlikely that a 
sound national security rationale can be specified for such tax 
incentives.

                                 ______
                                 
               Questions Submitted by Hon. Mark R. Warner
    Question. Ms. Harbert's testimony notes that energy tax policy 
should be ``results-oriented and not proscriptive,'' that we as 
policymakers have not historically been good at predicting 
technological developments in the energy sector, and that there are 
often unintended consequences to well-intended energy policy. With that 
in mind, I am interested in your answers to the following questions.

    How do we accomplish energy tax reform that successfully 
incentivizes companies to make meaningful investments toward energy 
efficiency while increasing our efficiency standards and also cutting 
down on abuse of energy tax credits?

    Answer. I know of no sound argument to the effect that market 
prices yield too little investment in energy ``efficiency,'' a term 
that is misleading in any event in that such artificial ``energy 
efficiency'' driven by government policy is inconsistent with broader 
economic efficiency.

    Question. How do we incorporate phase-outs to ensure that a 
particular energy tax credit does not outlive its useful life?

    Answer. I know of no way to do this given that a current Congress 
cannot bind a future Congress. In any event, such energy tax credits do 
not have ``useful'' lives as a general condition because they are 
inefficient, and thus waste resources. The only ``phase-outs'' that 
work are those not implemented in the first place.

                                 ______
                                 

                             Communications

                              ----------                              


               Advanced Biofuels Business Council et al.
Chairman Hatch, Ranking Member Wyden, members of the committee, thank 
you for holding the Senate Finance Committee hearing on ``Energy Tax 
Policy in 2016 and Beyond.'' This hearing comes at a critical time for 
the advanced and cellulosic biofuels industry.

Because of your leadership, a suite of critical advanced biofuels tax 
incentives were extended last December in the ``Protecting Americans 
From Tax Hikes Act of 2015.'' Unfortunately, these provisions are 
already set to expire at the end of 2016, jeopardizing the long-term 
investment necessary for advanced biofuels. As the committee examines 
tax provisions related to energy in the United States, we hope members 
recognize the value of the advanced biofuels industry to our Nation's 
energy security, economy, and environment.

Since 2009, the advanced and cellulosic biofuels industry has invested 
billions of dollars to build first-of-a-kind demonstration and 
commercial-scale biorefineries across the country. As a result, five 
commercial scale cellulosic biorefineries with a combined capacity of 
more than 50 million gallons within the United States are now online. 
Additionally, in part as a result of the biodiesel, renewable diesel, 
and renewable aviation fuel tax incentive, advanced biofuel use in 
America has grown from roughly 112 million gallons in 2005 when the tax 
incentive was first implemented to nearly 2.1 billion gallons last 
year. In fact, many truck stops and retail stations across the country 
today sell diesel blends containing 10 percent to 20 percent biodiesel. 
This is not just helping to create a new American energy industry, it 
is significantly reducing pollution while strengthening our energy 
security by diversifying our fuel sources.

Tax incentives for cellulosic and advanced biofuels, have helped move 
projects to commercial production by attracting investment and reducing 
the cost of production, and have played a significant role in the 
growth of the industry. Unfortunately, the economic recession at the 
beginning of the decade, the challenges of scaling up new cellulosic 
technologies, and policy instability (such as the uncertainty regarding 
the long term availability of the tax incentives) have hampered the 
development of commercial scale advanced cellulosic biorefineries in 
the United States. As a result advanced and cellulosic biofuels today 
account for only a small fraction of the U.S. transportation fuel 
market. While companies and investors are increasingly looking for 
locations overseas or have simply put projects on hold indefinitely.

Tax incentives for cellulosic and advanced biofuels like biodiesel have 
been successful; however, the incentives has expired repeatedly in 
recent years and is slated to lapse yet again at the end of 2016. This 
cycle of uncertainty surrounding these incentives has severely 
disrupted the growth and development of all of the U.S. advanced and 
cellulosic biofuel industry. Manufacturing of advanced biofuels is a 
difficult and capital-intensive enterprise, and advanced biofuel 
remains a young, developing industry. As a group, this sector needs 
predictable federal tax policy to continue to attract investment, build 
infrastructure and continue growing so that it can compete with 
incumbent industries that have long received favorable tax preferences. 
When compared to other major fuels such as gasoline, diesel and 
conventional biofuels, advanced biofuels are at a fundamentally 
different stage of development.

Allowing advanced biofuels tax incentives to expire this year would 
significantly limit the growth in the domestic advanced and cellulosic 
biofuels industry and undermine all the positive contributions the 
industry has made to national security, the economy, and the 
environment to date. Development of biofuels reduces our dependence on 
foreign oil, lessens costs at the pumps for consumers, and lowers 
greenhouse gas emissions. About one-fourth of the petroleum we consume 
is still imported from other countries, and about 45 percent of the 
crude oil processed by U.S. refineries in 2015 was imported from 
foreign countries. Over the past 10 years the biofuels industry has 
displaced nearly 1.9 billion barrels of foreign oil by replacing fossil 
fuels with homegrown biofuels. This has saved consumers an average of 
one dollar a gallon at the pump. The use of biofuels has also led to a 
reduction in U.S. transportation-related carbon emissions of 590 
million metric tons over the past decade--an equivalent of removing 
more than 124 million cars from the road.

Ensuring further growth in the advanced biofuels industry will require 
additional support and greater policy certainty going forward. As such, 
we encourage the Committee to advance a multi-year extension of 
advanced biofuel tax provisions--the Second Generation Biofuel Producer 
Tax Credit, the Special Depreciation Allowance for Second Generation 
Biofuel Plant Property, the Biodiesel and Renewable Diesel Fuels 
Credit, and the Alternative Fuel Vehicle Refueling Property--as a part 
of any energy tax package.

Motor fuel markets are not free markets. The oil industry receives 
permanent federal subsidies and tax breaks that give incumbents a 
market advantage over renewable fuels if not remedied by the counter 
balancing incentives described above. Temporary extensions are not 
enough to create parity, but they help bridge the gap to comprehensive 
energy tax reform. Therefore, we urge the committee to reject any 
effort to phase out advanced biofuel tax incentives. The Second 
Generation Biofuel Producer Credit and associated depreciation 
provisions have never been enacted for a sufficient length of time to 
allow investors to depend upon their existence once the facilities are 
eventually placed in service. Ending these tax credits on an arbitrary 
date in the near term would be premature, and will hamper the 
utilization of these incentives for an industry where financing and 
constructing new facilities takes on average 5 to 6 years.

As leaders in a critical innovation sector in the United States, we are 
well aware of the financial constraints facing this country. However, 
the United States' global competitors are offering tax incentives for 
advanced biofuels and are attracting construction of new facilities. 
Extending these tax incentives for advanced biofuels ahead of the 
expiration date will avoid creating uncertainty for investors and 
companies trying to raise capital. We look forward to working with you 
on this important matter.


 
 
 
Advanced Biofuels        Algae Biomass            Biotechnology
 Business Council         Organization             Innovation
                                                   Organization
 
Growth Energy            National Biodiesel       Renewable Fuels
                          Board                    Association
 


                                 ______
                                 
                   Alliance for Industrial Efficiency

                    2101 Wilson Boulevard, Suite 550

                          Arlington, VA 22201

June 24, 2016

The Honorable Orrin Hatch (R-UT)    The Honorable Ron Wyden (D-OR)
Chairman                            Ranking Member
Senate Finance Committee            Senate Finance Committee
104 Hart Office Building            221 Dirksen Senate Office Building
Washington, DC 20510                Washington, DC 2051

Dear Chairman Hatch and Ranking Member Wyden:

The Alliance for Industrial Efficiency (hereinafter, ``The Alliance'') 
appreciates the opportunity to comment on the Senate Finance Committee 
Hearing on Energy Tax Policy. The Alliance is a diverse coalition that 
includes representatives from the business, environmental, labor and 
contractor communities, and has members in every state. We are 
committed to enhancing manufacturing competitiveness and reducing 
emissions through industrial energy efficiency, particularly through 
the use of clean and efficient power generating systems, such as 
combined heat and power (CHP) and waste heat to power (WHP). We write 
now to urge the Senate Finance Committee to support policies that would 
help advance the deployment of these important clean-energy 
technologies.

We commend the Committee for holding a hearing on energy tax policy on 
June 14, 2016. We recognize the importance of providing opportunities 
for both sides of the aisle to present their ideas to improve the tax 
code as it relates to energy issues. Our comments recommend that the 
Committee extend and strengthen the Section 48 clean-energy tax credits 
as soon as possible, which would promote deployment of CHP and WHP 
technologies. The existing Section 48 tax credit must also be expanded 
to include waste heat to power, as reflected in S. 913, which the 
Finance Committee approved unanimously this winter. We also support 
Ranking Member Wyden's technology-neutral clean energy tax incentive 
proposal (S. 2089), and look forward to working with Senator Wyden to 
help advance this proposal when comprehensive tax reform moves forward.

    I.  CHP and WHP offer economic, reliability, and environmental 
benefits

CHP and WHP are proven and effective energy resources that can help 
address current and future global energy needs and enhance 
manufacturing competitiveness while reducing environmental impacts. By 
generating both heat and electricity from a single fuel source, CHP 
dramatically lowers emissions and increases overall fuel efficiency--
allowing utilities and companies to effectively ``get more with less.'' 
CHP can operate using more than 70 percent of fuel inputs. As a 
consequence, CHP can produce electricity with roughly one-quarter the 
emissions of an existing coal power plant. WHP can generate electricity 
with no additional fuel and no incremental emissions. Due to its scale, 
a single CHP or WHP investment can achieve significant emission 
reductions.

Investment in CHP and WHP systems stimulate the local economy both 
directly and indirectly. By dramatically reducing electric power demand 
(and related energy costs) for industrial sources, CHP can directly 
make U.S. manufacturing more competitive. For instance, the 
ArcelorMittal steel facility in East Chicago, Indiana, reports $20 
million in annual energy savings from its CHP facility. The company 
found that these cost savings made the plant's steel more competitive 
by effectively lowering the production cost by approximately $5 per 
ton.\1\ Further, industrial companies with CHP, such as ArcelorMittal, 
can use the money they save on energy to expand production and 
employment. Such savings are already being realized at thousands of 
locations nationwide (though, as noted below, the opportunity is far 
greater).
---------------------------------------------------------------------------
    \1\ Center for Clean Air Policy, July 2013, ``White Paper: Combined 
Heat and Power for Industrial Revitalization: Policy Solutions to 
Overcome Barriers and Foster Greater Deployment,'' at 10 (http://
ccap.org/assets/White-Paper_Combined-Heat-and-Power-for-Industrial-
Revitalization
_CCAP_July-20131.pdf).

CHP and WHP projects create direct jobs in manufacturing, engineering, 
installation, operations, and maintenance, which in turn, increase the 
economic competitiveness of companies that install the systems and 
receive the energy savings benefits. Individuals employed as a result 
of CHP and WHP installations are able to spend their income on goods 
and services within their local communities, while businesses and 
consumers can reinvest the money these systems save them on their 
energy bills into other goods and services as well. For example, 
businesses may reinvest savings to support facility expansion or other 
capital projects or to hire and/or retain workers. This activity 
creates and retains jobs and induces economic growth in local 
communities.\2\
---------------------------------------------------------------------------
    \2\ Natural Resources Defense Council, April 2013, ``Combined Heat 
and Power Systems: Improving the Energy Efficiency of Our Manufacturing 
Plants, Buildings, and Other Facilities,'' at 6 (http://www.nrdc.org/
energy/files/combined-heat-power-ip.pdf).

A 2013 Natural Resources Defense Council issue paper states that each 
gigawatt of installed CHP capacity may be reasonably expected to create 
and maintain between 2,000 and 3,000 full-time equivalent jobs 
throughout the lifetime of the system. These jobs would be in 
manufacturing, construction, operations and maintenance, as well as 
indirect jobs from redirection of industrial energy expenditures and 
the spending of commercial and residential energy bill savings on other 
goods and services.\3\
---------------------------------------------------------------------------
    \3\ Id.

What's more, because CHP projects can operate independently of the 
grid, these projects can increase the reliability of our power sector, 
by ensuring that manufacturers, universities and hospitals ``keep the 
lights on'' during extreme weather events that can compromise the 
electric grid.\4\ As a testament to the power resiliency of CHP 
systems, during both Hurricane Katrina in 2005 and Hurricane Sandy in 
2012, facilities with CHP continued to have access to power and thermal 
amenities, including several hospitals that were able to continue 
serving patients.\5\ As Senator Menendez (D-NJ) alluded to during his 
questions at the June 16 hearing,\6\ while more than 8-million 
residents in the Mid-Atlantic lost power during Hurricane Sandy in 
October 2012, CHP systems helped several large energy users--New York 
University, Long Island's South Oaks Hospital, Co-op City in the Bronx 
and New Jersey's Bergen County Utilities Authority--stay warm and 
bright.\7\ These islands of power acted as places of refuge for 
emergency workers, displaced people, and evacuated patients from 
medical facilities without power.\8\
---------------------------------------------------------------------------
    \4\ U.S Department of Energy, U.S. Department of Housing and Urban 
Development, U.S. Environmental Protection Agency, September 2013, 
``Guide to Using Combined Heat and Power for Enhancing Reliability and 
Resiliency in Buildings,'' (https://portal.hud.gov/hudportal
/documents/huddoc?id=energy_chp_for_rc.pdf).
    \5\ NRDC, supra note 2.
    \6\ United States Senate Committee on Finance, June 14, 2016, 
``Hearing on Energy Tax Policy in 2016 and Beyond.'' (``We saw in New 
Jersey after Sandy that Princeton University was able to keep the 
lights on through its resiliency program, but large parts of the state 
did not, including our mass transit system.'')
    \7\ Pentland, William, October 31, 2012, ``Lessons From Where the 
Lights Stayed on During Sandy,'' Forbes (http://www.forbes.com/sites/
williampentland/2012/10/31/where-the-lights-stayed-on-durinq-hurricane-
sandy/#efe1e20731b3).
    \8\ See, e.g., U.S. EPA, June 18, 2014, 79 Fed. Reg, 34830, 34899, 
``Carbon Pollution Emission Guidelines for Existing Stationary Sources: 
Electric Utility Generating Units'' (noting that CHP ``reduce[s] demand 
for centrally generated power and thus relieve[s] pressure on the 
grid.'')

Across the country, nearly 83 gigawatts of CHP capacity exist at more 
than 4,400 industrial and commercial facilities, representing over 12 
percent of annual U.S. power generation.\9\ However, significant 
potential remains. In fact, this spring (March 2016), the Department of 
Energy (DOE) published a new report finding that there is an estimated 
149 gigawatts of remaining on-site technical potential for CHP and WHP 
\10\ within the United States.\11\ Realizing this potential would 
create jobs in the design, construction, installation and maintenance 
of equipment; reduce fuel use and energy costs; and lower greenhouse 
gas emissions.
---------------------------------------------------------------------------
    \9\ U.S. Department of Energy, March 2016, ``Combined Heat and 
Power (CHP) Technical Potential in the United States,'' at 5 (http://
energy.gov/sites/prod/files/2016/04/f30/CHP%20
Technical%20Potential%20Study%203-31-2016%20Final.pdf).
    \10\ Includes traditional topping cycle CHP, WHP (sometimes 
referred to as bottoming cycle CHP), and district energy.
    \11\ U.S. DOE, supra note 9.

Unfortunately, CHP and WHP deployment to date fall far short of this 
technical potential. Despite the substantial long-term economic 
benefits, projects require a significant up-front investment with a 
multi-year payback period. CHP capital costs, range from $1,200 to 
$4,000 per kilowatt depending on technology, size and site 
conditions.\12\ CHP system owners report payback periods ranging from 
1.5 years to 12 years, with a large number of opportunities 
anticipating payback between 5 to 10 years.\13\
---------------------------------------------------------------------------
    \12\ U.S. EPA, September 2014, ``Catalog of CHP Technologies,'' at 
Table 2-4 (reporting capital costs ranging from $1,200 to $4,300/kW--
small microturbine on the small side, large gas turbine on the high 
side of range--dependent on prime mover and size) (http://www.epa.gov/
chp/documents/catalog_chptech_full.pdf).
    \13\ AGA, May 2013, ``The Opportunity for CHP in the United 
States,'' at Table ES-1 (reporting approximately 35 GW of projects with 
a payback between 5 to 10 years compared to 6.4 GW with a payback of 
less than 5 years given current technology costs and electricity 
prices), (https://www.aga.org/sites/default/files/sites/default/files/
media/the_opportunity_for_chp_in
_the_united_states_-_final_report_0._pdf).

Financial incentives for CHP and WHP can help reduce the initial cost 
for these projects, shrinking the payback period. It is imperative that 
appropriate incentives exist for CHP and WHP to support widespread 
deployment and realize the full suite of CHP and WHP's economic, 
reliability, and environmental benefits. Fortunately, policy solutions 
---------------------------------------------------------------------------
with strong bipartisan support allow this.

    II.  The Alliance urges the Senate Finance Committee to extend 
Section 48 tax credits

As you know, in December 2015, Congress extended the ITC for solar 
technologies through 2021 (providing a 5-year extension with ``start of 
construction'' language). The credit for the non-solar Section 48 
technologies, including CHP, was not similarly extended and will expire 
at the end of this year. At the June 16 Senate 
Finance Committee Energy Tax Policy hearing, Ranking Member Wyden noted 
the urgent need to extend the clean-energy tax incentives that expire 
at the end of this year, as well as to enact the bill the Finance 
Committee approved that includes WHP in the investment tax credit 
(ITC). At the hearing, Senator Menendez also expressed support for 
extending the expiring investment tax credits. We are very grateful for 
Senator Wyden's and Menendez's leadership on this issue.

The Alliance strongly supports an extension of the existing Section 48 
tax credit, which is needed to encourage continued growth of the clean-
energy economy. By extending the ITC for all Section 48 technologies, 
Congress would help improve the energy efficiency and competitiveness 
of America's manufacturing sector, and enhance the country's energy 
independence and security.

The Alliance further encourages Congress to clarify that the existing 
Section 48 ITC for CHP includes WHP. In February 2016, the Senate 
Finance Committee approved bipartisan legislation making a technical 
correction to Section 48 and clarified that WHP is a qualifying 
technology (S. 913). We applaud this action by the Committee. S. 913 
addresses the unique attributes of WHP that distinguish it from CHP, 
and provides critical parity with other power sources eligible for the 
ITC.

By expanding the Section 48 tax credit to WHP (as reflected in S. 913), 
Congress would reduce the cost of WHP technologies, diversify our 
nation's energy mix, create on-site power while lowering fuel use and 
emissions, and promote enhanced competition among all of our nation's 
energy sources. We therefore urge Congress to include this simple 
clarification in any energy tax legislation this year.

  III.  The Alliance urges the Senate Finance Committee to adopt 
Ranking Member Wyden's technology-neutral clean energy tax incentive 
proposal

Ranking Member Wyden's technology-neutral clean energy tax incentive 
proposal (the ``American Energy Innovation Act,'' S. 2089, Title V) 
would eliminate the current 44 separate energy tax breaks and would 
instead establish three long-term incentives built around energy-
efficiency, clean energy, and clean transportation goals. This proposal 
would simplify energy tax policy and would provide parity and 
flexibility among clean-energy technologies, including CHP and WHP. We 
support this approach and look forward to working with Senator Wyden to 
help advance it when the Senate addresses comprehensive tax reform.

In conclusion, the Alliance encourages the Congress to swiftly enact 
the extension of the Section 48 investment tax credit and clarify that 
WHP is also eligible for the investment tax credit. We also ask that 
the Committee include Ranking Member Wyden's technology-neutral clean-
energy tax incentive proposal as part of its future tax reform agenda. 
We are extremely grateful for Senator Wyden's continued leadership on 
these issues.

CHP and WHP provide scalable, cost-effective approaches to increasing 
manufacturing competitiveness, enhancing electric reliability, and 
reducing emissions. Unfortunately, limitations in existing tax policy 
has prevented manufacturers from realizing these benefits. We look 
forward to working with the Senate Finance Committee to explore policy 
options to help realize the full potential of CHP and WHP.

Thank you for the opportunity to comment.

Sincerely,

Jennifer Kefer
Executive Director
Alliance for Industrial Efficiency

                                 ______
                                 
                American Public Power Association (APPA)

                     2451 Crystal Drive, Suite 1000

                        Arlington, VA 22202-4804

                            Ph: 202-467-2900

                           Fax: 202-467-2910

                          www.PublicPower.org

The American Public Power Association (APPA) appreciates the 
opportunity to submit this statement for the record in relation to the 
Senate Committee on Finance June 14, 2016, hearing on ``Energy Tax 
Policy in 2016 and Beyond.''

As the Committee knows, energy-related provisions in the tax code 
generally come in the form of tax credits and accelerated cost-recovery 
and depletion provisions.\1\ Public power utilities are generally only 
indirectly affected by these provisions, though public power utilities 
can issue New Clean Renewable Energy Bonds (New CREBs). These 
provisions generally are intended to encourage investments. However, 
the tax code also imposes more stringent private use rules for electric 
energy-related investments financed with municipal bonds, serving to 
discourage certain types of energy-related investments by public power 
utilities. That said, for public power utilities, the single most 
important provision of the code is the tax exemption for municipal bond 
interest.
---------------------------------------------------------------------------
    \1\ There is also an exception from corporate taxation for certain 
publicly traded partnerships, the tax expenditure value of which is 
comparable to other significant energy-tax provisions.

---------------------------------------------------------------------------
Background

APPA is the national service organization representing the interests of 
over 2,000 municipal and other state and locally owned, not-for-profit 
electric utilities throughout the United States (all but Hawaii) 
referred to collectively as ``public power utilities.'' These utilities 
deliver electricity to one of every seven electricity consumers 
(approximately 48 million people). Public power utilities serve some of 
the nation's largest cities, but the vast majority of APPA's members 
serve communities with populations of 10,000 people or less.

Public power utilities are diverse in structure. Some are vertically 
integrated, i.e., they own electric power generation, high-voltage 
transmission, and lower-voltage distributions facilities. Others own 
distribution resources, but rely on third-party providers to generate 
and/or transmit the electric power they use. Finally, some public power 
utilities have been formed to serve as wholesale providers of power to 
other public power utilities.

For a variety of reasons--including private-use restrictions on tax-
exempt municipal bond financing--public power utilities, on average, 
sell more electric power than they generate. While public power 
utilities serve about 14.5 percent of the nation's homes and business 
(roughly 22 million electric meters total), these utilities generate 
about 9.9 percent of the nation's power (more than 400 million megawatt 
hours every year).

Municipal Bonds

Since their establishment in the late 19th century, public power 
utilities have largely relied on municipal bonds to cost effectively 
raise capital needed to build generation, transmission, and 
distribution facilities that serve their communities. These projects 
require substantial up-front commitments of capital, but also tend to 
have long useful lives. Bonds are a responsible way to finance these 
costs and repay them over time. This allows the investments to be made 
and ensures that those customers who are benefiting from the investment 
are paying for it through their rates. In the last decade, nearly 1,400 
power-related municipal bonds providing roughly $110 billion in new 
money financing were issued.

This is especially important since state and local governmental 
entities--including public power utilities--have limited means to raise 
funds for their communities' capital needs. They cannot issue stock and 
a local bank loan is rarely an option given the size of the investments 
required. Moreover, they generally do not use, or even accrue, 
accumulated cash surpluses in part because doing so would require rate 
payers to pay the cost of investments from which they may never 
benefit. Conversely, municipal bonds allow issuers to build long-term 
projects financed up-front by investors and the debt for which is 
repaid by residents over the useful life of that investment.

Interest on municipal bonds is exempt from federal taxation,\2\ and has 
been since the creation of the federal income tax in 1913.\3\ In 
contrast to other ``tax expenditures,'' however, the federal tax 
exemption of municipal bond interest is part of a trade-off--state and 
local governments are likewise prohibited from taxing interest on 
federal debt.\4\ While congressional agencies largely ignore this 
reciprocal arrangement when discussing taxation of municipal bonds, the 
state and local tax exemption has been well-guarded and maintained by 
Congress.\5\
---------------------------------------------------------------------------
    \2\ I.R.C. Sec. 103(a).
    \3\ Revenue Act of 1913, 38 Stat. 114 (October 3, 1913).
    \4\ 31 U.S.C. Sec. 3124(a).
    \5\ See, e.g., Pub. L. No. 97-258 Sec. 3124, 96 Stat. 945 
(September 13, 1982); Pub. L. No. 86-346 Sec. 105, 73 Stat. 622 
(September 22, 1959); Public Debt Acts of 1941, Pub. L. No. 77-7 
Sec. 3, 55 Stat. 8 (February 19, 1941).

Likewise, Congress has honed the original exemption from federal tax 
for municipal bonds, limiting the entities that can issue tax-exempt 
bonds, the purposes for which the bonds may be issued, and the 
investment of bond proceeds. Specifically, these laws seek to prevent 
state and local governments from issuing bonds which finance a facility 
serving a private activity--rather than financing a facility serving a 
general public purpose. Generally, if more than 10 percent of a bond 
finances a private activity and more than 10 percent of the repayment 
of the bond is tied to revenues from that private activity, then the 
bond does not qualify as a government purpose bond, but is a ``private 
activity bond,'' which is subject to federal income tax.\6\
---------------------------------------------------------------------------
    \6\ I.R.C. Sec. 141(b)(2).

However, private use rules for power-related bonds are stricter, in 
effect a ``negative tax expenditure'' relative to the commonly applied 
private-use rules. This additional private use limit is just 5 percent 
for any power output facility for which the private use will exceed $15 
million. In addition, only up to $15 million in private use is 
permitted for all issuances for any one project.\7\
---------------------------------------------------------------------------
    \7\ I.R.C. Sec. 141(b)(4).

Furthermore, Internal Revenue Service (IRS) implementation of these 
private-use rules prevent issuers from using tax-exempt bonds to build 
facilities large enough to meet not just current needs, but future 
needs. These rules treat near-term excess generation sold outside a 
public-power utility's customer base as ``private use'' even if that 
excess generation capacity will be needed to meet increased customer 
demand in the future. Additionally, private use rules severely limit 
the ability of municipal utilities to acquire existing privately-owned, 
power-related assets with tax-exempt municipal bonds.\8\
---------------------------------------------------------------------------
    \8\ I.R.C. Sec. 141(d).
---------------------------------------------------------------------------

Private Activity Bonds

As discussed above, a municipal bond that exceeds private use limits is 
considered a private activity bond and, generally, is subject to 
federal tax. However, a private activity bond can be exempt (in whole 
or in part) from federal tax if it is used to finance certain specific 
types of qualified facilities or activities. A qualified facility can 
include an airport, dock, wharf, mass-transit facility, multi-family 
housing, or solid waste disposal facility. A qualified facility (or 
activity) can also be a facility furnishing local electric energy \9\ 
or an environmental enhancement of a hydro-electric facility.\10\ The 
definition of ``local electric energy'' is very narrow--applying only 
to facilities furnishing electric energy to either: (a) a city and one 
contiguous county or (b) two contiguous counties.\11\ Likewise, 
environmental enhancements to hydroelectric facilities are a small 
portion of the investments made by public power utilities nationally. 
Given these narrow constraints, power-related qualified facility 
private activity bonds are relatively rare. For example, in 2015, of 
183 power-related municipal bonds totaling $17.5 billion just two 
totaling $49 million were private activity bonds.\12\
---------------------------------------------------------------------------
    \9\ I.R.C. Sec. 142(a)(8).
    \10\ I.R.C. Sec. 142(a)(12).
    \11\ I.R.C. Sec. 142(f).
    \12\ Bond Buyer, ``The Bond Buyer/Thomson Reuters 2016 Yearbook'' 
(2016).
---------------------------------------------------------------------------

Energy-Related Tax Provisions

By Joint Committee on Taxation (JCT) estimate, the bulk of the tax 
value of energy tax expenditures come in the form of tax credits for 
renewable power investments and production (worth $4.5 billion 
annually), accelerated cost recovery for oil and gas operations (worth 
$3.1 billion annually), and an exemption from corporate taxation for 
publicly traded partnerships owning certain energy facilities, 
generally oil and gas pipelines (worth $1.2 billion annually).\13\
---------------------------------------------------------------------------
    \13\ Joint Committee on Taxation, ``Estimates of Federal Tax 
Expenditures for Fiscal Years 2015-2019,'' JCX-141R-15 (December 7, 
2015).

As not-for-profit entities, public power utilities cannot directly 
benefit from these provisions. To begin to provide comparable 
incentives to invest in renewable power, in 1992 Congress authorized 
Renewable Energy Production Incentives (REPI) for public power and 
cooperative utilities. Congress, however, provided little funding for 
the program--just $54 million to pay $329 million in REPI credits 
earned by public power and cooperative utilities--and stopped funding 
---------------------------------------------------------------------------
REPI entirely after 2009.

Congress took a different tack in the Energy Policy Act of 2005 
(EPAct05) \14\ with the creation of Clean Renewable Energy Bonds 
(CREBS), which have since been replaced by New CREBs. Under current 
rules, qualified issuers of New CREBs included public power utilities, 
states and towns, and cooperative electric utilities. Interest paid on 
a New CREB is taxable, but the bondholder receives a tax credit. The 
tax credit is calculated by Treasury at the date of bond issuance and 
set at 70 percent of the level necessary to allow the bond to be issued 
at the same interest rate as if the bond had been issued as a tax-
exempt bond.
---------------------------------------------------------------------------
    \14\ Energy Policy Act of 2005, Pub. L. No. 109-58 Sec. 1303, 119 
Stat. 991 (codified as I.R.C. Sec. 54) (August 8, 2005).

Alternatively, the issuer may elect to receive the tax credit as a 
direct payment from the federal government (with the credit calculated 
the same as if the bond were issued as a tax credit bond). A total of 
$2.4 billion in New CREBs may be issued, split evenly between public 
power utilities, rural electric cooperatives, and state and local 
---------------------------------------------------------------------------
governmental entities that are not public power utilities.

As of March 2015, public power utilities have issued a total of roughly 
$283 million in New CREBs. By way of comparison, public power utilities 
typically finance $9 billion in new projects every year with 
traditional municipal bonds.\15\ And according to JCT tax expenditure 
estimates, CREB and New CREB tax credits and direct payments are worth 
roughly $100 million annually.\16\
---------------------------------------------------------------------------
    \15\ Bond Buyer, ``The Bond Buyer/Thomson Reuters 2016 Yearbook'' 
(2016); Bond Buyer, ``The Bond Buyer/Thomson Reuters 2011 Yearbook'' 
(2011).
    \16\ Joint Committee on Taxation, supra note 13.

As discussed above, CREBs and New CREBs were an attempt to provide 
direct benefits to not-for-profit utilities making targeted energy 
investments. However, as a tax credit bonds, CREBs were exceedingly 
unpopular and New CREBs have been hamstrung by: a burdensome 
application process; a low cap on bond volume; and a process that 
provided bond volume allocations of a fraction of the amounts being 
sought. Additionally, public power utilities that issued New CREBs as 
direct payment bonds continue to face penalties, with federal budget 
sequestration cutting otherwise authorized payments since 2013--
---------------------------------------------------------------------------
sequestration cuts that are now scheduled to continue through 2025.

The IRS announced in February 2015 new procedures for receiving an 
allocation of New CREB bond volume--i.e., to secure the right to issue 
a New CREB--including $527 million in New CREB bond volume available to 
public power utilities.\17\ Data is not publicly available, but many of 
the same issues hamstringing New CREBs in the past will continue to 
hamstring them in the future.
---------------------------------------------------------------------------
    \17\ I.R.S. Notice 20 15-12 (February 3, 2015).

APPA has long said that if Congress wants to incentivize energy 
investments, it provide comparable incentives to all utility sectors--
including not-for-profit entities, which collectively provide power to 
roughly 27 percent of the nation's electric power customers. For 
example, EPAct05 created the IRC Sec. 45J advanced nuclear production 
tax credit to offset the first-of-a-kind risk of the first 6,000 
megawatts of new nuclear generating capacity built after 2005, but 
placed in service prior to 2021. Since then, construction has begun on 
four nuclear reactors in Georgia and South Carolina--the first new 
reactors built in the United States since the 1970s. Additional 
projects, including the first of a new generation of small modular 
reactors, are moving through the licensing process at the Nuclear 
Regulatory Commission, and will be ready for commercial deployment in 
---------------------------------------------------------------------------
the first half of the next decade.

Nonetheless, the pace of new nuclear plant construction has not been as 
rapid as Congress had hoped in 2005, meaning credits for 1,600 
megawatts of new nuclear power will be stranded by the 2020 placed-in-
service deadline. Additionally, those plants which are under 
construction have required involvement of investor-owned utilities, 
electric cooperatives, and public power utilities. These new nuclear 
plants now being developed will provide needed baseload electricity; 
create tens of thousands of new jobs during construction and operation 
of the plants and through the entire nuclear supply chain; and reduce 
the electric power industry's carbon dioxide emissions. However, public 
power utilities investing in these new plants will not receive the 
production tax credit. Allowing the credit to be transferred from 
public-power utilities and extending the placed-in-service date beyond 
2020 would directly benefit utilities that are making the investments 
Congress sought to encourage in EPAct05 and encourage further such 
investments.

Defense of, and Improvements to, Municipal Bonds

Modifying the advanced nuclear PTC is a small step Congress could take 
to accomplish the goals set in EPAct05, and allowing public power 
issuance of New CREBs is of benefit to the utilities that can receive 
an allocation. However, for public power utilities, the single most 
important step Congress could take to encourage energy-related 
investments would be to stop talking about taxing municipal bonds and 
start talking about ways to improve the rules surrounding municipal 
bonds. Every municipal bond issued includes an official statement 
warning that the tax treatment of municipal bonds could be changed by 
Congress at any time. The premium that investors demand as a result of 
this risk is not insignificant. Conversely, this risk premium could be 
reduced to nearly nothing if policymakers would clearly state their 
intention not to tax municipal bonds. Savings on new projects would be 
immediate, reducing electric power rates for customers, or allowing 
larger investments in needed new infrastructure.

Additionally, Congress could undertake to improve the current-law tax 
treatment of municipal bonds. APPA supports a recent proposal to repeal 
the 5 percent unrelated or disproportionate private business use test 
(Section 141(b)(3) of the Code) to simplify the private business use 
test applicable to governmental bonds. This test involves vague factual 
determinations which can lead to a reduction in the otherwise permitted 
10 percent private business use participation to 5 percent. We agree 
with the Treasury Department that the 5-percent test creates undue 
complexity and should be repealed.\18\ We also agree that the ``10 
percent private business limit generally represents a sufficient and 
workable threshold for governmental bond status'' \19\ and would, as a 
result, recommend that other unnecessary addenda to the 10 percent 
limit also be reconsidered.
---------------------------------------------------------------------------
    \18\ U.S. Department of the Treasury, ``General Explanations of the 
Administration's Fiscal Year 2016 Revenue Proposals'' at 273 (February 
2, 2015).
    \19\ Id.

Likewise, Code Section 141(b)(4) provides for a $15 million private 
business use/payments limitation on certain output facilities which are 
part of the same project. The per-project limitation is a punitive rule 
that singles out governmentally owned electric output facilities from 
other bond financed governmental owned assets and systems. Accordingly, 
we support the repeal of this provision. At a time in which additional 
electric output and smart-grid transmission and distribution facilities 
are needed to meet a rising energy needs, the repeal of this per-
---------------------------------------------------------------------------
project limitation would provide needed operational flexibility.

Similarly, Code Section 141(b)(5) provides for a maximum $15 million 
private business use/payments limitation on all tax-exempt governmental 
bonds unless volume cap is allocated to such excess under Section 146 
of the Code. This $15 million limitation, like the $15 million per-
project limitation of Section 141(b)(4), creates undue complexity for 
municipal issuers and interferes with a policy goal of creating a 
bright line 10 percent private business use test. We support its 
repeal.

APPA would also support a revision in the tax treatment of capital 
contributions by public power utilities to investor-owned utilities 
(IOUs) to build facilities (e.g., interconnections and associated 
facilities, transformers, circuits, etc.) to serve the public power 
utility's retail demand (``load''). Under current law, these payments 
are treated as taxable ``contributions-in-aid of construction'' to the 
IOU.\20\ Because the JOU traditionally requires the municipal utility 
to ``gross up'' its contribution, the cost of the investment is 
effectively increased by as much as 35 percent.
---------------------------------------------------------------------------
    \20\ I.R.C. Sec. 118(b).

Finally, we support the recent proposal to simplify the arbitrage 
investment restrictions applicable to tax exempt bonds under Code 
Section 148. We fully agree with Treasury \21\ that the investment 
yield and arbitrage rebate restrictions are duplicative and that these 
dual restrictions create an unnecessary compliance burden for state and 
local governments.
---------------------------------------------------------------------------
    \21\ U.S. Department of the Treasury, supra note 17, at 270.
---------------------------------------------------------------------------

Conclusion

The federal income tax includes a variety of provisions intended to 
encourage 
energy-related investments. Almost none are of direct benefit to public 
power utilities, although public power utilities have made limited use 
of New Clean Renewable Energy Bonds. Conversely, there remain 
substantial impediments to energy-related investments in rules 
governing tax-exempt municipal bonds. If Congress is seeking to 
encourage needed investment in energy infrastructure--of all sorts--it 
should update the treatment of such investments when financed by 
municipal bonds and, at the very least, remove the threat of a tax on 
municipal bonds.

We thank you for your time.

For more information, please contact John Godfrey, Senior Government 
Relations Director, American Public Power Association, 202-467-2929, 
jgodfrey@public
power.org.
                                 ______
                                 
                 Biomass Thermal Energy Council (BTEC)

                 1211 Connecticut Avenue, NW, Suite 650

                       Washington, DC 20036-2701

                            202-596-3974 tel

                            202-223-5537 fax

                         www.biomassthermal.org

June 28, 2016

The Honorable Orrin G. Hatch        The Honorable Ron Wyden
Chairman                            Ranking Member
Senate Finance Committee            Senate Finance Committee
219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
Washington, DC 20510                Washington, DC 20510

RE: Statement for the Hearing Record: ``Energy Tax Policy in 2016 and 
Beyond''--June 14, 2016

The Biomass Thermal Energy Council (BTEC) appreciates the opportunity 
to share our perspective on federal energy tax policy in the context of 
comprehensive tax reform. BTEC is an association of biomass fuel 
producers, forest landowners, appliance manufacturers, combined heat 
and power project developers, thermal energy utilities, district energy 
system operators, supply chain companies, universities, agencies and 
non-profit organizations. Collectively, our diverse membership of 
businesses and organizations views biomass thermal energy as a proven, 
renewable, responsible, clean and energy-efficient pathway to meeting 
America's energy needs.

Biomass thermal energy investments provide immediate value for 
industries, businesses and communities. Examples of biomass thermal 
projects and technologies include heating of homes, businesses, 
schools, hospitals, commercial and industrial buildings; district 
heating of campuses, densely developed commercial and industrial parks; 
neighborhoods and city centers; domestic hot water for large consumers 
such as laundries; and industrial process heat for companies in food 
processing, metallurgy, and pharmaceuticals, and combined heat and 
power projects that produce both heat and electricity for consumers. 
However, our nation's tax code, which has long played a key role in 
shaping and influencing national energy policy, misses a clear 
opportunity to capture this technology's full benefits. In the 
renewable energy arena, the code features numerous incentives for most 
renewable energy technologies in residential, commercial and industrial 
installations. In fact, analysis provided by the Joint Committee on 
Taxation lists 80 separate energy-related tax provisions in existing 
law. Unfortunately, none of these incentives extends to high efficiency 
biomass thermal energy, despite the fact that biomass thermal energy 
fulfills the same public policy objectives as other renewable energy 
sources. Our tax code recognizes solar thermal and geothermal 
technologies (e.g., section 250 and section 48), but not technology 
that produces heat from renewable biomass. This is an example of the 
policy ``picking winners and losers'' within narrow classes of 
technology. Accordingly, the Committee has a clear opportunity to cover 
this gap, and thereby unlock biomass thermal's benefits, through fair 
tax code treatment.

We believe that comprehensive tax reform should embrace energy pathway 
neutrality without picking winners and losers in the manner in which 
renewable energy is delivered. BTEC welcomes the Committee's renewed 
effort to streamline portions of the tax code dedicated to energy 
production and eliminate those provisions that no longer have merit. 
Moreover, we strongly endorse tax reform efforts that provide a level 
playing field for competing energy technologies and support the concept 
of technology neutrality.

Thermal energy is also derived from solar and geothermal sources. As 
noted above, thermal energy comprises roughly one-third of our nation's 
energy consumption. Despite this fact, energy policy to promote 
renewable energy has focused entirely on transportation fuels such as 
ethanol and biodiesel, and electricity from hydro, wind, solar, 
geothermal, and biomass. These fuels and technologies have received 
support from the federal government for many years in the form of 
production and investment tax credits, accelerated depreciation, 
research and development funding, direct project grants, and renewable 
energy credits. The 2005 Energy Policy Act, the 2007 Energy 
Independence and Security Act, and the 2009 American Recovery and 
Reinvestment Act boosted support for these technologies in many areas. 
BTEC believes that efforts to comprehensively reform the tax code 
provide the ideal opportunity to rectify this oversight and provide 
incentives for which all renewable thermal energy providers can compete 
on an equal basis.

Tax incentives will help deliver across a broad spectrum of public 
policy goals inclusive of jobs growth, energy security and healthy 
communities. In particular, the proper incentives in this area catalyze 
markets for high efficiency systems that can create jobs and local 
economic development from a widely available renewable domestic energy 
resource, reduce American dependence on energy imports and lower fossil 
fuel-based greenhouse gas emissions. Tax policy that supports biomass 
thermal energy will provide the highest possible return for the country 
in terms of reductions in fossil fuel imports and jobs created. It is 
estimated that 1,580 jobs will be created for every 5,500 homes that 
are converted from heating oil to biomass.i Biomass has also 
accounted for 40 percent of the renewable energy jobs in Germany, more 
than wind, solar or liquid fuels.ii State-side, both Maine, 
through Efficiency Maine's Home Energy Savings Program, and 
Massachusetts through the Commonwealth Woodstove Change-Out have 
launched rebate programs iii to reduce high home fuel costs 
through biomass heating systems.
---------------------------------------------------------------------------
    i http://biomassthermal.org/pdf/Strauss_ BTU_ Act.pdf
    ii http://www.renewableenergyworld.com/rea/news/article/
2008/04/renewable-energy-jobs-soar-in-germany-52089
    iii http://www.efficiencymaine.com/at-home/home-energy-
savings-program/hesp-incentives/ and http://www.masscec.com/programs/
commonwealth-woodstove-change-out

Despite some progress at the state level in promoting biomass thermal 
systems, obstacles to wider adoption remain; tax code adjustments could 
help surmount these barriers and right-size markets. Because of the 
relatively small market penetration of new advanced biomass thermal 
systems, today's systems are often more expensive compared to fossil-
fueled units. In fact, installed systems can cost two to three times as 
much as a similarly sized oil or gas system. Fuel transport logistics 
have yet to reach critical mass with few customers spread over large 
geographic areas, thus increasing the unit cost of fuel distribution. 
Incentives are necessary to enable biomass thermal technology to be 
more competitive in the market near term. In time, with increasing 
market penetration, these incentives can be scaled down or eliminated. 
As an example, in Europe, there is a thriving biomass heating business 
employing tens of thousands of people--the supply of these fuels 
continues to be cost competitive, without government subsidies. Crafted 
correctly, incentives can support innovation while attracting private 
---------------------------------------------------------------------------
capital that will drive long term economic growth.

BTEC is a strong supporter of the Biomass Thermal Utilization Act of 
2015 (S. 727). The bill, known as the BTU Act, would qualify highly 
efficiency thermal energy from biomass for investment tax credits under 
section 48 and section 250. The spirit of this proposal is to simply 
level the playing field so that thermal renewable energy providers are 
treated equally with those producing liquid fuels, electricity and 
thermal energy from solar and geothermal. Our request to the Committee 
is to keep this principle--technology and pathway neutrality--as a 
guide post as you continue to craft energy tax reform legislation.

Conclusion

Biomass thermal energy fulfills the same public policy objectives that 
are the basis and justification for renewable energy tax incentives. 
These include:

      Strengthen local economic development and job creation through 
domestic production of fuels, system installation and service, and fuel 
distribution for many parts of the country that have neither natural 
gas nor oil;
      Strengthen energy security by reducing consumption of foreign 
fossil fuel-based energy, thereby increasing America's energy 
independence;
      Increase efficiency of utilization for equivalent energy output, 
as compared to biomass electric generation and cellulosic biofuels;
      Improve the nation's health through reducing emissions of 
certain air pollutants such as sulfur dioxides, PM 2.5, and mercury, as 
compared to fossil fuels; and
      Reduce emissions of greenhouse gases due to the low carbon 
intensity or near carbon neutrality of biomass.

The current fiscal environment necessitates that taxpayer dollars be 
deployed in a manner that maximizes return on investment. BTEC believes 
that investment in biomass thermal technologies achieve not only 
optimal efficiency and job creation throughout the country, but also 
deliver across a portfolio of public policy priorities and national 
needs. For these reasons, this investment should be a critical 
component of your energy tax reform efforts. We look forward to working 
with the Committee as it continues to engage this critical issue.

Respectfully submitted,

Jeff Serfass
Executive Director, Biomass Thermal Energy Council

                                 ______
                                 
              Biotechnology Innovation Organization (BIO)

Introduction

The Biotechnology Innovation Organization (BIO) is pleased to submit 
testimony to the U.S. Senate Finance Committee hearing on ``Energy Tax 
Policy in 2016 and Beyond.''

BIO is the world's largest trade association representing biotechnology 
companies, academic institutions, state biotechnology centers and 
related organizations across the United States and in more than 30 
other nations. BIO members are involved in the research and development 
of innovative healthcare, agricultural, industrial and environmental 
biotechnology products.

BIO's Industrial and Environmental Section represents over 75 companies 
leading the development of new technologies for producing conventional 
and advanced biofuels, renewable chemicals, and biobased products. 
Through the application of industrial biotechnology, BIO members are 
improving conventional biofuel processes, enabling advanced and 
cellulosic biofuel production technologies, a new generation of 
innovative renewable chemicals and biobased products produced from 
biomass, and speeding the development of new purpose grown energy and 
renewable chemical crops.

BIO applauds the Committee for holding this hearing delving into the 
important issue of tax provisions related to energy in the United 
States. By developing and implementing the right policies, tax 
incentives can be powerful policy mechanisms, particularly in growing 
the U.S. biobased economy through the production of advanced biofuels, 
renewable chemicals, and biobased products. Helping achieve our 
nation's energy security, economy, and environmental goals.

Sustained supportive tax policy is very important to emerging 
technologies that have not yet achieved commercial scale, and should be 
targeted at those technologies with the greatest potential to create 
the jobs, economic growth, energy security and environmental benefits 
we seek as a nation. Emerging technologies in advanced biofuels, 
renewable chemicals, and biobased products have tremendous potential to 
address the nation's challenges and are ready for commercial 
deployment, but face a very challenging capital environment for first-
of-a-kind biorefinery construction. We urge you to extend and enhance 
provisions that support the scale-up of these important technologies.

Biofuels

Since 2009, the advanced biofuels industry has invested billions of 
dollars to build first-of-a-kind demonstration and commercial-scale 
biorefineries across the country. Despite the challenges associated 
with developing new technologies, as of 2015 there were five commercial 
scale cellulosic biorefineries with a combined capacity of more than 50 
million gallons within the United States. Unfortunately, policy 
instability undermines certainty and predictability for investors and 
other market participants. The year-to-year nature of tax incentives 
for advanced and cellulosic biofuels make it difficult for the industry 
to take advantage of these tax incentives, which have help move these 
projects to commercial production by attracting investment and reducing 
the cost of production.

The development of advanced and cellulosic biofuels is a difficult and 
capital-intensive enterprise. Despite the recent successes of bringing 
commercial-scale facilities, this is a new and developing industry. 
However, there are great benefits to developing these technologies. 
Over the past 10-years the biofuels industry has displaced nearly 1.9 
billion barrels of foreign oil by replacing fossil fuels with homegrown 
biofuels. This has saved consumers an average of $1 a gallon at the 
pump. The use of biofuels has also led to a reduction in U.S. 
transportation-related carbon emissions of 590 million metric tons over 
the past decade--an equivalent of removing more than 124 million cars 
from the road. Even with these benefits, in order to grow and compete 
with incumbent industries that have long received favorable tax 
preferences this sector needs predictable federal tax policy to 
continue to attract investment.

BIO encourages the Committee to advance a multi-year extension of 
advanced biofuel tax provisions--the Second Generation Biofuel Producer 
Tax Credit, the Special Depreciation Allowance for Second Generation 
Biofuel Plant Property, the Biodiesel and Renewable Diesel Fuels 
Credit, and the Alternative Fuel Vehicle Refueling Property--as a part 
of any energy tax package. BIO also requests the Committee reject the 
creation of a phase-out for the renewable energy incentives. The PTC 
and associated depreciation provisions have never been enacted for a 
sufficient length of time to allow investors to depend upon their 
existence once the facilities are eventually placed in service. Ending 
the tax credits on an arbitrary date in the near term will hamper the 
utilization of these incentives for an industry where financing and 
constructing new facilities takes on average 5 to 6 years.

New tax incentives can grow robust biobased innovation economy which 
will create high value careers and new income streams for American 
farmers and rural communities, revitalize domestic manufacturing jobs, 
lessen our dependence on fossil fuels, and reduce greenhouse gas 
emissions.

Renewable Chemical and Biobased Products

Renewable chemicals and biobased products offer similar opportunities. 
A recent report estimates that the global sustainable chemical industry 
will grow to $1 trillion, which provides an important opportunity for 
U.S. job and export growth. Currently, the industry is estimated to be 
only 7 percent of its future projected size. U.S. companies 
traditionally make-up about 19 percent of the traditional global 
chemical industry. If U.S. companies capture the same percentage of the 
sustainable chemical industry as it grows to $1 trillion, BIO 
anticipates 237,000 direct U.S. jobs and a trade surplus within the 
chemical sector.\1\
---------------------------------------------------------------------------
    \1\ Biobased Chemicals and Products: A New Driver of U.S. Economic 
Development and Green Jobs, BIO, available at: http://www.bio.org/
sites/default/files/20100310_biobased_chemicals.
pdf.

Renewable chemicals and biobased products derived from renewable 
biomass represent a historic opportunity for revitalization of U.S. 
chemical manufacturing. The U.S. has the potential to become the world 
leader in renewable chemicals and biobased product manufacturing, as we 
are currently home to most of the world's advanced renewable chemicals 
technology and intellectual property and have access to a wide range of 
sustainably produced renewable biomass. An investment in renewable 
chemicals will pay strong dividends in the future of U.S. chemical 
manufacturing while advancing the goals of quality domestic job 
creation and domestic advanced manufacturing, improved trade balance, 
and maintaining U.S. leadership in clean energy and manufacturing 
---------------------------------------------------------------------------
technologies.

The shift to renewable biomass feedstocks from traditional fossil 
feedstocks increases energy efficiency, reduces costs and reduces 
reliance for foreign oil. Volatile crude oil prices create an unstable 
price structure for traditional fossil-based chemicals and resulting 
products. Renewable chemicals can be cost competitive and maintain 
stable pricing, allowing businesses to plan for the long-term and pass 
savings to consumers. Renewable chemical processes can also prevent 
pollution before it ever occurs and remediate existing pollution, 
improving pollution in the environment. For example, many renewable 
chemicals are carbon negative on a lifecycle basis, sequestering 
atmospheric carbon within the chemical/product itself. The World 
Wildlife Fund (WWF) recently concluded that these industrial 
biotechnologies have the potential to save up to 2.5 billion tons of 
carbon dioxide equivalent emissions per year by 2030.

To realize the full potential of the domestic renewable chemicals 
industry, existing renewable energy, manufacturing, or environmental 
tax incentive regimes should be opened to renewable chemicals. 
Renewable chemicals and biobased plastics represent an important 
technology platform for reducing reliance on petroleum, creating U.S. 
jobs, increasing energy security, and reducing greenhouse gas 
emissions. By providing a federal income tax credit for domestically 
produced renewable chemicals, Congress can create domestic jobs and 
other economic activity, and can help secure America's leadership in 
the important arena of green chemistry. Like current law for renewable 
electricity production credits, the credits would be general business 
credits available for a limited period per facility. Industrial 
biotechnology enables the production of renewable chemicals and 
biobased products from biomass, and the total displacement of fossil 
fuel products can be accelerated with an investment or production tax 
credit. The Renewable Chemicals Act of 2015, S. 2271, and House 
companion H.R. 3390, offers a strong model for implementation of this 
proposal.

Conclusion

BIO supports the efforts underway to update, level-set and innovate the 
U.S. tax code, particularly as it applies to innovation sectors such as 
advanced biofuels, renewable chemicals and biobased products. To truly 
achieve energy security, the U.S. must develop biorefineries that 
produce alternatives to all of the products made from each barrel of 
oil. The provisions above are essential ingredients in any effort to 
accelerate the commercialization of advanced biofuels, renewable 
chemicals and biobased products. We ask that you include these 
provisions in any energy, advanced manufacturing, or environmental tax 
package.

Thank you.

                                 ______
                                 
                                 Boland

                       30 West Watkins Mill Road

                      Gaithersburg, Maryland 20878

                             (240) 306-3000

                             1-800-552-6526

                          FAX: (240) 306-3400

                             www.boland.com

June 15, 2016

The Honorable Orrin Hatch           The Honorable Ron Wyden
Chairman                            Ranking Member
Committee on Finance                Committee on Finance
U.S. Senate                         U.S. Senate
219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
Washington, DC 20510                Washington, DC 20510

RE: Section 179D Tax Deduction for Energy Efficient Buildings

Dear Chairman Hatch and Ranking Member Wyden:

As the Committee considers the future of energy tax policy, I write you 
on behalf of Boland Trane Services, Inc. to urge a multiyear extension 
of the Section 179D tax deduction for energy efficient commercial and 
multifamily buildings, with the bipartisan refinements to the provision 
included in S. 1946, the Tax Relief Extension Act of 2015. Section 179D 
is scheduled to expire on December 31, 2016, and certainty about this 
important tax policy's future is critical. On behalf of Boland Trane 
Services, Inc. I respectfully request that Section 179D be addressed as 
part of the first moving vehicle.

Boland Trane supports the Committee's efforts to reform the tax code, 
and believes any reform must reflect the important relationship between 
the reduction of energy consumption and tax policy. Of particular 
importance to Boland Trane is the continuation of the Section 179D 
deduction for commercial energy efficient property, which delivers 
demonstrated and widespread benefits to the U.S. economy.

Section 179D provides a tax deduction to help offset some of the high 
costs of energy efficient components and systems for commercial and 
larger multifamily buildings. The 179D deduction has leveraged billions 
of dollars in private capital, resulted in the energy-efficient 
construction of thousands of buildings, and created and preserved 
hundreds of thousands of jobs. It has lowered demands on the power 
grid, moved our country closer to energy independence, and reduced 
carbon emissions.

Reducing energy consumption through public policy initiatives, like the 
1790 tax deduction for efficient lighting, HVAC, and building envelope 
improvements, is and should remain a critical element of our nation's 
energy strategy. Tax incentives promoting energy efficiency, such as 
Section 179D, generate the greatest impact in terms of value to the 
taxpayer and are a critical tool in advancing the country's energy 
conservation and security goals.

The Section 179D deduction enables accelerated cost recovery 
(depreciation) of energy efficiency investments made by commercial 
building owners, and assists designers of efficiency systems to develop 
advanced technologies that reduce energy waste. It does not reward the 
taxpayer simply for making an investment; rather, the deduction 
requires the achievement of verifiable reductions in energy usage. In 
its rules implementing this section of the code, the Internal Revenue 
Service requires inspection and testing of the energy efficiency (EE) 
project by qualified individuals to ensure the project qualifies for 
the deduction.

Section 179D advances our nation's energy policy priorities in a 
prudent and cost-effective manner:

      Economic Value: Utilizing the Sec. 179D deduction creates 
additional economic value for building owners and has contributed to 
the increased use of energy efficient building design strategies 
resulting in the retrofit of energy inefficient aging buildings, many 
with significant deferred maintenance problems. In addition, the 
dollars saved on energy costs by businesses through efficiency 
improvements can be reinvested in areas that produce greater economic 
activity.

      Job Creation: Section 1790 serves as an engine of economic 
growth that generates job creation in a variety of industry sectors. 
The incremental energy efficiency projects enabled by the availability 
of this tax deduction create and sustain more jobs in the construction, 
engineering, manufacturing, and design sectors and reduce the need for 
investment in new energy supplies and production.

      Encourages Efficiency Improvements to Building Stock: The 
Sec. 179D deduction encourages energy efficiency improvements to aging 
building stock, which otherwise may be neglected, by allowing for 
accelerated cost recovery of energy efficiency investments. Without 
Sec. 179D, energy efficiency retrofits are depreciated over a longer 
period of time as capital expenses. The acceleration of energy 
efficient building design and retrofits of inefficient aging buildings 
generates deep savings in building energy costs, significantly reduces 
energy demand, and lowers the emissions of greenhouse gases--all of 
which benefit the nation's energy security and clean energy priorities. 
In terms of value, efficiency is a far more cost effective means of 
meeting energy demand than is the generation of a new unit of energy.

      Technology Driver: The Sec. 179D deduction rewards achievement 
of significant energy savings regardless of the technology used to 
achieve those savings and places a premium on implementation of more 
sophisticated technologies. The incentive supports the modernization of 
aging U.S. building stock and enhances the overall performance of our 
nation's building infrastructure.

Repealing the tax incentive for energy efficient commercial property 
undermines the significant advancements made to date in modernizing our 
nation's building stock. In fact, the expiration of the deduction in 
December 2014, despite its retroactive reinstatement in December 2015, 
resulted in tremendous uncertainty on the part of commercial building 
owners, as well as the energy services companies and other industry 
providers whose businesses are directly tied to developing and 
implementing efficiency retrofits. Additionally, removing the only 
incentive that provides accelerated treatment for commercial efficiency 
property could result in a strong disincentive to invest in efficiency 
improvements. The tax code allows commercial businesses the ability to 
immediately deduct money spent on energy consumption (utility bills) as 
an ordinary and necessary business expense, while without Section 179D 
the cost of efficiency improvements would be depreciated over many 
years. This asymmetry in the tax code is successfully addressed through 
the 179D deduction. Eliminating the 179D provision brings back the 
economic bias in favor of higher energy costs created by, in many 
cases, the wasteful use of energy that could have been avoided through 
the use of energy efficient technologies.

In short, Boland Trane Services, Inc. strongly believes Section 179D 
should remain a permanent component of a reformed tax code. 
Importantly, Section 179D compliments the goals of tax reform by 
delivering economic growth, job creation, and enhanced economic 
competitiveness. If near-term enactment of comprehensive tax reform is 
not expected to be forthcoming, we strongly support an immediate, 
multi-year extension of Section 179D. An extension of Section 179D will 
provide needed certainty to the commercial and government building 
markets as well as the energy services company industry, and retain in 
the tax code the provision directed specifically at stimulating energy 
savings through investments in efficiency retrofits in the commercial 
building sector. Any discussion of energy tax policy is incomplete 
without a robust consideration of energy efficiency, and prudent and 
effective efficiency incentives--such as Section 1790--belong 
permanently in a reformed tax code.

Sincerely,

Sean Boland
Vice President

                                 ______
                                 
             Business Council for Sustainable Energy (BCSE)

                     805 15th Street, NW, Suite 708

                          Washington, DC 20005

                            p: 202-785-0507

                            f: 202-785-0514

                          http://www.bcse.org

The Business Council for Sustainable Energy urges Congress to quickly 
move forward to enact legislation to provide durable tax policy 
promoting clean energy. Current law provides a mix of tax incentives 
for production of clean energy and investment in plant property to a 
variety of technologies. The inconsistent level of the current 
incentives, the duration of the provisions, and the definitions of the 
technologies, however, do not reflect a comprehensive energy policy. 
While the Congress made significant inroads on tax policy at the end of 
2015, much remains to be done in this important sector.

BCSE is a coalition of companies and trade associations from the energy 
efficiency, natural gas and renewable energy sectors, and also includes 
independent electric power producers, investor-owned utilities, public 
power, and commercial end users. Founded in 1992, the Council advocates 
for policies that expand the use of commercially available clean energy 
technologies, products and services. The coalition's diverse business 
membership is united around the continued revitalization of the economy 
and the creation of a secure and reliable energy future in America.

The 2016 spending bill enacted at the end of 2015 included a 5-year 
extension of the Production Tax Credit (PTC) for wind power and a 5 
year extension of the Investment Tax Credit (ITC) for solar, with 
gradual ramp-down of these credits. BCSE is pleased that the solar and 
wind sectors received a long-term extension of these credits, as well 
as language that will enable them to be used when construction on a 
project starts. Having stable tax policy for these industries is 
providing predictable market conditions, which enables them to grow, 
reduce costs and attract investment.

Additionally, the Protecting American Taxpayers and Homeowners (PATH) 
Act, enacted at the end of 2015, extended incentives for energy 
efficiency to December 31, 2016. However, incentives for the non-wind 
and non-solar technologies that currently access the PTC and ITC will 
expire on December 31, 2016, if Congress does not take action. These 
technologies include: combined heat and power, microturbines, fuel 
cells, small wind, biomass, geothermal. landfill gas, waste to energy, 
hydropower, marine and hydrokinetic.

In order to maintain a diverse portfolio of beneficial clean energy 
technologies it is critical that Congress formulate and enact the 
stable, long-term tax policy framework that will support the deployment 
and use of clean energy technologies in a meaningful way. Energy tax 
incentives should be established in such a way that the tax benefits 
are provided to all qualifying technologies in accordance with the 
energy, environmental and other public benefits they generate. 
Additionally, it is important that any such changes establish a 
sufficient duration to provide investors with the confidence they need 
to proceed with major investments.

BCSE looks forward to working with Congress to achieve this objective.

For further information or questions, please contact Lisa Jacobson, 
President, Business Council for Sustainable Energy at 
[email protected].

                                 ______
                                 
                       Capital Review Group (CRG)

                    2415 E. Camelback Rd., Suite 700

                           Phoenix, AZ 85016

                              877-666-5539

                     http://CapitalReviewGroup.com

Dear Chairman Hatch and Ranking Member Wyden:

We are writing to you today in regards to the Committee on Finance 
Hearing titled ``Energy Tax Policy in 2016 and Beyond.'' As you seek 
ways to grow our economy and create jobs, we strongly urge a multi-year 
extension of the Sec. 179D tax deduction for energy-efficient 
commercial and multifamily buildings at the earliest opportunity before 
it expires on December 31, 2016.

Our company, Capital Review Group, is a specialized tax consulting firm 
with 10 employees. Through our unique combination of expertise in 
facility engineering and tax accounting, we help clients such as 
architects, engineers, and commercial building owners reduce their tax 
burdens. The Sec. 179D deduction is one of the most beneficial 
incentives for our clients and the communities in which they are 
located. In our years of helping clients claim this deduction, we have 
consistently seen it serve as a powerful motivator for businesses to 
implement sustainable design. Given the typically expansive size of 
commercial buildings, energy-efficient upgrades like those incentivized 
by the Sec. 179D deduction can lead to a drastic reduction in energy 
consumption. While benefitting the environment and advancing our 
nation's energy security, the Sec. 179D deduction also generates 
substantial savings that taxpayers may reinvest in their businesses, 
thus bolstering their local economies.

As you know, 179D directly supports two national priorities: Job 
Creation and Energy Independence. Section 179D was introduced into the 
tax code with the Energy Policy Act of 2005. It has been extended four 
times and will expire on December 31, 2016. Since the inception of 
179D, it has assisted thousands of building owners and tenants in 
retaining jobs and increasing profitability; it has also increased job 
creation in the trades, where energy efficiency retrofits create large 
numbers of high paying jobs for a labor pool that was particularly 
impacted by the economic downturn. At the same time, 179D helps reduce 
our nation's dependence on foreign oil, thereby increasing America's 
energy security.

Jobs

Energy efficiency projects require enormous skilled and semi-skilled 
work forces. By cost-justifying projects, EPAct therefore plays a 
direct role in supporting a major source of employment in our state.

Lighting retrofits require lighting designers, laborers to remove and 
dispose existing fixtures, distribution centers to store the new 
lighting material, laborers to stage the new material near the job site 
and electricians to install the new fixtures.

HVAC retrofits require engineers for project system design, substantial 
U.S. manufacturing activity (most HVAC equipment is heavy and made in 
the U.S.), U.S. steel procurement and HVAC mechanics to install.

The building envelope involves a wide variety of manufactured and 
workshop materials including roofs, walls, windows, doors, foundations 
and insulation. In addition to the labor required to create these 
products, large numbers of roofers, carpenters, installers and laborers 
are needed to handle the material and incorporate it into a building.

In addition, reduced building expenses allow for the retention of jobs 
on the building owners' end.

Energy Security

Our nation's goal of becoming energy independent cannot be achieved 
through domestic oil and natural gas production alone. Energy 
Efficiency is an untapped natural resource. Commercial Buildings 
represent 20% of our nation's energy use. ``Drilling'' for building 
energy efficiency is the least costly natural resource we have. For 
building owners, the up-front cost of retrofitting is expensive, but 
with utility and government assistance working together with building 
owners, energy use reductions between 20% and 50% can be obtained.

Commercial building energy efficiency is a critical way by which 
utilities can meet newly established national guidelines for carbon 
emission reductions. By improving the cost benefit equation of an 
energy efficiency retrofit, Section 1790 thereby plays an important 
role in helping utilities comply with national policy while 
simultaneously reducing the need for the construction of costly new 
power plants.

Looking Ahead

Today, taxpayers and industry understand how to prospectively use 1790 
to achieve the greatest possible energy reduction far better than they 
did 8 years ago. This extension will empower our country to realize 
major energy efficiency gains and will not represent a material cost to 
Treasury. With the use of dynamic scoring the efficiency gains will 
increase taxable income over time for commercial building owners, and 
thereby reducing Treasury's losses from accelerating the depreciation. 
The tax collected from added profits obtained through energy savings 
quickly outweigh the foregone tax revenue created by 1790.

Conclusion

Section 1790 supports a key investment in the American economy: energy 
efficiency. Energy efficiency is a force-multiplying investment that 
saves energy, saves money, and sustains and creates American jobs. 
Comprehensive energy efficiency upgrades drastically improve the 
reliability and performance of the nation's building stock, while 
reducing demand on our energy supply. We urge you to include multi-year 
extension of EPAct 1790 in upcoming legislation.

Sincerely,

Capital Review Group

                                 ______
                                 
                      The Center for Fiscal Equity

                          14448 Parkvale Road

                       Rockville, Maryland 20853

               Comments for the Record by Michael Bindner

Chairman Hatch and Ranking Member Wyden, thank you for the opportunity 
to submit our comments on this topic. Our comments are largely a 
restatement of those provided in December of 2012 on the same topic, 
with updating as appropriate. As usual, our comments are based on our 
four-part tax reform plan, which is as follows:

      A Value Added Tax (VAT) to fund domestic military spending and 
domestic discretionary spending with a rate between 10% and 13%, which 
makes sure very American pays something.
      Personal income surtaxes on joint and widowed filers with net 
annual incomes of $100,000 and single filers earning $50,000 per year 
to fund net interest payments, debt retirement and overseas and 
strategic military spending and other international spending, with 
graduated rates between 5% and 25% in either 5% or 10% increments. 
Heirs would also pay taxes on distributions from estates, but not the 
assets themselves, with distributions from sales to a qualified ESOP 
continuing to be exempt.
      Employee contributions to Old-Age and Survivors Insurance (OASI) 
with a lower income cap, which allows for lower payment levels to 
wealthier retirees without making bend points more progressive.
      A VAT-like Net Business Receipts Tax (NBRT), essentially a 
subtraction VAT with additional tax expenditures for family support, 
health care and the private delivery of governmental services, to fund 
entitlement spending and replace income tax filing for most people 
(including people who file without paying), the corporate income tax, 
business tax filing through individual income taxes and the employer 
contribution to OASI, all payroll taxes for hospital insurance, 
disability insurance, unemployment insurance and survivors under age 
60.

There are three aspects to consider regarding whether energy policy 
should be conducted through the tax code: energy taxes as 
transportation user fees; energy taxes as environmental sin taxes and 
energy tax policies as a subsidy for business. How to design provisions 
for a sustainable energy policy and tax reform will be discussed for 
each of these areas and we will address certain oversight questions on 
whether current tax provisions have been implemented efficiently and 
effectively.

Energy Taxes as Transportation User Fees

The most familiar energy tax is the excise tax on gasoline. It 
essentially functions as an automatic toll, but without the requirement 
for toll booths. As such, it has the advantage of charging greater 
tolls on less fuel efficient cars and lower tolls on more efficient 
cars, all without requiring purchase of a EZ Pass or counting axles.

It is a highly efficient tax in this regard, although its effectiveness 
is limited because it has not kept pace with inflation. This could be 
corrected by shifting it from a uniform excise to a uniform percentage 
tax--however because the price of fuel varies by location, there may be 
constitutional problems with doing so. The only other option to 
increase this tax in order to overcome the nation's infrastructure 
deficit--which is appropriately funded with this tax--is to have the 
courage to increase it.

In this time of high unemployment, such an increase would be a balm to 
economic growth, as it would put people back to work. Given the 
competitive nature of gas prices, there is some question as to whether 
such an increase would produce a penny for penny increase in gasoline 
prices. If the tax elasticity is more inelastic than elastic, the tax 
will be absorbed in the purchase price and be a levy on producers. If 
it is more elastic, it will be a levy on users and will impact 
congestion (and thus decrease air pollution and overall conservation). 
For many citizens, either prospect is a win-win, given concerns over 
both climate change and energy industry profits. The only real question 
is one of the political courage to do what is necessary for American 
jobs and infrastructure--and that seems to be a very open question.

Energy taxes are currently levied through the private sector, rather 
than through toll booth employees, which from the taxpayer point of 
view is a savings as it externalizes the pension and benefit 
requirements associated with hiring such workers.

In the event that gasoline cars were replaced with electric cars, given 
either improvements in battery charging technology or in providing 
continuous supply through overhead wires, much in the same way that 
electric trains and busses receive power, any excise per kilowatt for 
the maintenance of roads could be collected in the same way--or the 
road system could be made part of a consortium with energy providers, 
car makers and road construction and maintenance contractors--
effectively taking the government out of the loop except when eminent 
domain issues arise (assuming you believe such a tool should be used 
for private development, we at the Center believe that it should not 
be).

The electric option provides an alternative means to using natural gas, 
besides creating a gas fueling infrastructure, with natural gas power 
plants providing a more efficient conduit than millions of internal 
combustion engines. The electric option allows for the quick 
implementation of more futuristic fuels, like hydrogen, wind and even 
Helium3 fusion. Indeed, if private road companies become dominant under 
such a model, a very real demand for accelerated fusion research could 
arise, bypassing the current dependence on governmental funding.

In the event of comprehensive tax reform, the excise for fuel would be 
either a component of or an addition to any broad based Value Added or 
VAT-like Net Business Receipts Tax. The excise should not disappear 
into such a general tax, as doing so would have the effect of forcing 
all businesses to fund transportation on an equal percentage, 
regardless of their use of such infrastructure. Of course, like a VAT, 
any gasoline excise would be accounted for using the credit receipt 
method, so that cascading taxes would not occur, as they do now with 
this excise functioning as hidden levy.

Energy Taxes as Environmental Sin Taxes

Carbon Taxes, Cap and Trade and even the Gasoline Excise are 
effectively taxes on pollution or perceived pollution and as such, 
carry the flavor of sin taxes. As such, they put the government in the 
position of discouraging vice while at the same time trying to benefit 
from it. Our comments above as to whether the tax elasticity of the 
gasoline excise has an impact on congestion and pollution is applicable 
to this issue, although tax inelasticity will mute the effect of 
discouraging ``sinful'' behavior and instead force producers to 
internalize what would otherwise be considered externalities--provided 
of course that the proceeds from these taxes are used to ameliorate 
problems of both pollution (chest congestion) by paying for health care 
and traffic congestion in building more roads and making more public 
transit available--while funding energy research to ease the carbon 
footprint of modern civilization.

Oddly enough, this approach was once considered the conservative 
alternative to other more intrusive measures proposed by liberals, like 
imposing pollution controls on cars and factories or simply closing 
down source polluters. When those options are taken off the table, 
however, or are considered impractical, then the concept of 
environmental sin taxes becomes liberal and no action at all becomes 
the conservative position. These use of environmental sin taxes is by 
nature much more efficient economically than pollution controls and 
probably also more efficient than allowing producers and consumers to 
benefit from externalities like pollution, congestion and asthma. As 
with transportation funding, such taxes are only effective if they 
actually provide adequate funding for amelioration or otherwise change 
consumer behavior. If the politics of the day prevent taxes from 
actually accomplishing these objectives, then their effectiveness is 
diminished.

The short-term political win of keeping taxes too low can only work for 
so long. Reality has a way of intruding, either because infrastructure 
crumbles, congestion becomes too high, children become ill with asthma 
(for full disclosure purposes, I suffered from this after moving down-
wind as a child from an Ohio Edison coal plant) and sea levels rise--
destroying vacation homes and the homes of those who support them--and 
if Edgar Cayce is to be believed--the states that are the heart of the 
Republican base.

The role of energy taxes as sin taxes are preserved in comprehensive 
tax reform only if they are preserved in addition to value added and 
net business receipts taxes. If there is no separate tax or higher rate 
for these activities, there is no sin tax effect and the ``sin'' is 
effectively forgiven with any amelioration programs funded by the whole 
of society rather than energy users.

Oddly enough, because the Center does not mention carbon taxes or cap 
and trade in our standard proposal, liberal commentators on Daily Kos 
criticize its lack and assume we don't believe in them at all. This is 
far from the case, as our proposals say nothing about replacing such 
taxes with our proposed VAT and NBRT. Our proposal is to replace low 
and mid-rate income taxes, corporate income taxes and non-OASI payroll 
taxes with these revenues. We simply don't touch the question of any 
other excise. This shows how much the fortunes of energy taxes have 
changed since Vice President Gore suggested their inclusion in 
President Clinton's tax proposals.

Energy Tax Policies as a Subsidy for Business

There are quite a few ways in which energy tax policy subsidizes 
business. The most basic way is the assessment of adequate energy 
taxes, or taxes generally, to pay for government procurement of 
infrastructure and research. If tax reform does not include adequate 
revenue, the businesses which fulfill these contracts will be forced to 
either reduce staff or go out of business. Government spending 
stimulates the economy when more money is spent because taxes are 
raised and dedicated (or even earmarked) for these uses. Eliminating 
specific energy taxes in tax reform forces this work into competition 
with other government needs.

Let me be clear that the Center does not propose such a move. Our 
approach actually favors more, not less, identification of revenues 
with expenditures, reducing their fungibility, with the expectation 
that taxes increase when needs are greater and decrease when they are 
met, either through building in advance of need or finding an 
alternative private means of providing government services.

The more relevant case to Committee's question is the existence of 
research and exploration subsidies as they exist inside of more general 
levies, such as the Corporate Income Tax. To the extent to which tax 
reform eliminates this tax and replaces it with reforms such as the Net 
Business Receipts Tax (which taxes both labor and profit), such 
subsidies are problematic, but not impossible to preserve.

This is one of the virtues of a separate Net Business Receipts Tax, 
rather than replacing the Corporate Income Tax with a VAT or a Fair 
Tax--which by their nature have no offsetting tax expenditures. The 
challenge arises, however, when the existence of such subsidies carry 
with them the very justified impression that less well connected 
industries must pay higher taxes in order to preserve these tax 
subsidies. Worse is the perception, which would arise with their use in 
a business receipts tax, that such subsidies effectively result in 
lower wages across the economy. Such a perception, which has some basis 
in reality, would be certain death for any subsidy.

One must look deeper into the nature of these activities to determine 
whether a subsidy is justified, or even possible. If subsidized 
activities are purchased from another firm, the nature of both a VAT 
and an NBRT alleviate the need for any subsidy at all, because the VAT 
paid implicit in the fees for research and exploration would simply be 
passed through to the next level on the supply chain and would be 
considered outside expenditures for NBRT calculation and therefore not 
taxable. If research and exploration is conducted in house, then the 
labor component of these activities would be taxed under both the VAT 
and the NBRT, as they are currently taxed under personal income and 
payroll taxes now.

The only real issue is whether the profits or losses from these 
activities receive special tax treatment. Because profit and loss are 
not separately calculated under such taxes, which are essentially 
consumption taxes, the answer must be no. The ability to socialize 
losses and privatize profits through the NBRT would cease to exist with 
the tax it is replacing.

If society continues to value such subsidies, they would have to come 
as an offset to a carbon tax or cap and trade regime, if at all, as the 
excise tax for energy is essentially a retail sales tax and the 
industrial model under which the energy industry operates insulates the 
gasoline excise from the application of any research and exploration 
credits. If the energy companies were to change their model to end 
independent sales and distribution networks and treat all such 
franchisees as employees (with the attendant risk of unionization), 
then the subject subsidies could be preserved--provided that the 
related energy tax is increased so that the subsidy could actually 
operate--favoring those who participate in research and development and 
penalizing those who do not.

In other words, if big oil wants to keep this subsidy when there is no 
corporate income tax, it must buy up all its franchisees and allow the 
government to double the gasoline tax with a deduction at payment for 
research and exploration.

Without taxes, there can be no subsidy.

The last subsidy issue involves the use of a Value Added Tax as an oil 
import fee. If the VAT replaces some percentage of current employee and 
investor income taxes, domestically produced energy products become 
more competitive on the world market, provided that the VAT is border 
adjustable, which it would be. For example, if Alaska crude is shipped 
to Japan for refining and use or western low-sulfur coal is shipped to 
China, it would be cheaper than the same product shipped under today's 
tax system.

The NBRT would not be border adjustable because it is designed to pay 
for entitlement costs which benefit employees and their families 
directly, so that it is appropriate for the foreign beneficiaries of 
their labor to fund these costs. Additionally, the ultimate goal of 
enacting the NBRT is to include tax expenditures to encourage employers 
to fund activities now provided by the government--from subsidies for 
children to retiree health care to education to support for adult 
literacy. Allowing this tax to be zero-rated at the border removes the 
incentive to use these subsidies, keeping government services in 
business and requiring higher taxation to support the governmental 
infrastructure to arrange these services--like the Committee on 
Finance.

Thank you for this opportunity to share these ideas with the Committee. 
As always, we are available to meet with members and staff or to 
provide direct testimony on any topic you wish.

                                 ______
                                 
        Coalition to Extend and Improve the 179D Tax Deduction 
                     for Energy Efficient Buildings
June 13, 2016

The Honorable Orrin Hatch           The Honorable Ron Wyden
Chairman                            Ranking Member
Committee on Finance                Committee on Finance
 U.S. Senate                        U.S. Senate
219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
Washington, DC 20510                Washington, DC 20510

Dear Chairman Hatch and Ranking Member Wyden:

    As the Committee considers the future of energy tax policy, we 
write to urge a multi-year extension of the Section 1790 tax deduction 
for energy efficient commercial and multifamily buildings, with the 
bipartisan refinements to the provision included in S. 1946, the Tax 
Relief Extension Act of 2015. Section 1790 is scheduled to expire on 
December 31, 2016 and certainty about this important tax policy's 
future is critical. We respectfully request that Section 179D be 
addressed as part of the first moving vehicle.

    Our organizations and companies represent a broad spectrum of the 
U.S. economy. They include real estate, manufacturing, architecture, 
contracting, engineering, building services, financing, labor, 
education, environmental and energy efficiency advocates. We represent 
many small businesses that drive and sustain American job growth.

    Section 179D provides a tax deduction to help offset some of the 
high costs of energy efficient components and systems for commercial 
and larger multifamily buildings. The 179D deduction has leveraged 
billions of dollars in private capital, resulted in the energy-
efficient construction of thousands of buildings, and created and 
preserved hundreds of thousands of jobs. It has lowered demands on the 
power grid, moved our country closer to energy independence, and 
reduced carbon emissions.

    The bipartisan, broadly-supported amendments proposed to Section 
179D as part of S. 1946 would strengthen it by allowing tribal 
governments and non-profits to allocate the deduction to designers. 
Having been approved by the Senate Finance Committee twice, these 
common-sense modifications have been carefully analyzed, thoroughly 
vetted, and should be enacted.

    We also favor improvements to the 179D deduction to better enable 
retrofits for buildings owned and managed by private sector owners, and 
encourage that any extenders package incorporate the common sense, 
technology neutral, and performance based provisions, such as those 
offered by Senators Cardin, Feinstein, and Schatz in title I of S. 2189 
filed last Congress.

    These provisions provide a sound policy bridge to comprehensive tax 
reform efforts, as Section 179D is fully consistent with reform 
priorities. In particular, by allowing businesses to accelerate cost 
recovery, Section 179D stimulates greater capital investment. This 
dynamic is an engine of economic growth for communities across the 
country.

    We strongly urge Congress to ensure that Section 179D continues to 
drive growth and innovation by extending this important provision at 
the earliest possible opportunity before its expiration on December 31, 
2016 and by making the refinements proposed in S. 1946. Thank you for 
your consideration and leadership on this important issue.

Sincerely,


 
 
 
ABM Industries           Acuity Brands            Advanced Energy
                                                   Economy
Air Barrier Association  Air Conditioning         Air-Conditioning,
 of America               Contractors of America   Heating, and
                                                   Refrigeration
                                                   Institute
Alliance for Industrial  Alliance to Save Energy  Alliantgroup, LLC
 Efficiency
Ameresco                 American Council for an  American Council of
                          Energy-Efficient         Engineering Companies
                          Economy
American Gaming          American Gas             American Institute of
 Association              Association              Architects
American Public Gas      American Resort          American Society of
 Association              Development              Interior  Designers
                          Association              (ASID)
APPA--Leadership in      Appraisal Institute      ASHRAE
 Educational Facilities
Associated General       Big Ass Solutions        BLUE Energy Group
 Contractors of America
Brady Services Inc.      Building Owners and      CCIM Institute
                          Managers Association
                          (BOMA)  International
Chestnut Hill South,     Concord Energy           Consolidated Edison
 LLC                      Strategies               Solutions
Consolidated Energy      D Squared Tax            Eaton
 Solutions                Strategies
Energy Future Coalition  Energy Systems Group     Energy Tax Savers,
                                                   Inc.
Environmental Defense    Franklin Construction,   Green Business
 Fund                     LLC                      Certification Inc.
Green Light National     Howard J. Moore Company  Independent Electrical
                          Inc.                     Contractors
Ingersoll Rand           Insulation Contractors   Institute for Market
                          Association of America   Transformation (IMT)
Institute of Real        International Council    International Union of
 Estate  Management       of Shopping Centers      Painters and Allied
                                                   Trades
Johnson Controls, Inc.   KeyStone Energy          Legrand
Lexicon Lighting         LightPro Software, LLC   LuNex Lighting
 Technologies
McKinstry Essention,     Mechanical Contractors   Metrus Energy, Inc.
 LLC                      Association of America
                          (MCAA)
Micromega Systems, Inc.  Mix Avenue, LLC          NAIOP, the Commercial
                                                   Real  Estate
                                                   Development
                                                   Association
North American           National Apartment       National Association
 Insulation               Association              of College and
 Manufacturers                                     University Business
 Association                                       Officers
National Association of  National Association of  National Association
 Electrical               Energy Service           of Home Builders
 Distributors             Companies (NAESCO)
National Association of  National Association of  National Association
 Real  Estate              REALTORS               of State  Energy
 Investment Trusts                                 Officials (NASEO)
National Electrical      National Electrical      National Leased
 Contractors              Manufacturers            Housing  Association
 Association (NECA)       Association (NEMA)       (NLHA)
National Multifamily     National Roofing         Natural Resources
 Housing Council          Contractors              Defense  Council
                          Association
North Haven Health and   OpTerra Energy Services  Osram Sylvania
 Racquet, LLC
Owens Corning            Pathfinder Engineers     Plumbing-Heating-
                          and  Architects          Cooling  Contractors--
                                                   National  Association
PMH Associates, Inc.     Polyisocyanurate         PowerDown Holdings,
                          Insulation               Inc.
                          Manufacturers
                          Association
PowerDown Lighting       Rampart Partners LLC     RB+B Architects, Inc.
 Systems, Inc.
Real Estate Board of     Sheet Metal and Air      Sheet Metal Workers'
 New York                 Conditioning             International
                          Contractors' National    Association, a
                          Association              division of
                                                   S.M.A.R.T.
                                                   (International
                                                   Association of Sheet
                                                   Metal, Air, Rail and
                                                   Transportation
                                                   Workers)
Saybrook Point Inn, LLC  Saybrook Point Marina,   Sierra Club
                          LLC
Society of Industrial    Sustainable Performance  TecnerG, LLC
 and Office REALTORS     Solutions
TerraLUX                 The Real Estate          Trio Electric
                          Roundtable
Tri-State Light &        U.S. Green Building      Window and Door
 Energy, Inc.             Council                  Manufacturers
                                                   Association
 


                                 ______
                                 
                    Concord Engineering Group, Inc.

                       520 South Burnt Mill Road

                           Voorhees, NJ 08043

                           P: (856) 427-0200

                           F: (856) 427-6529

June 13, 2016

Senate Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

RE:  Section 179D Energy Efficient Commercial Buildings Deduction 
Should Be Extended

Dear Chairman Hatch and Ranking Member Wyden:

We are writing to you today in regards to the Committee on Finance 
Hearing titled ``Energy Tax Policy in 2016 and Beyond.'' As you seek 
ways to grow our economy and create jobs, we strongly urge a multi-year 
extension of the Section 179D tax deduction for energy efficient 
commercial and multifamily buildings at the earliest opportunity before 
it expires on December 31, 2016.

Our company, Concord Engineering Group, Inc., is a full service 
engineering and energy consulting firm specializing in energy 
efficiency, LEED certified sustainable building design, power plant 
design and transmission and distribution electrical design. Our firm is 
heavily involved in distributed generation and combined heat and power, 
as well as energy efficient system design using heating and air 
conditioning (HVAC), lighting, plumbing and fire protection systems. We 
service the public and not-for-profit sector primarily. As a small 
business with 80 employees we have been able to monetize many projects 
using Section 179D. This has been a catalyst for public sector interest 
in energy efficiency since it allows the engineering and consulting 
fees to be supplemented by the tax deductions.

Extending the deduction to not-for-profits is critical to enticing 
hospitals and other healthcare institutions to embrace energy 
efficiency. By including not-for-profit institutions, engineering 
companies like ours who specialize in this type of work can better 
justify the expense of working in a volatile and sometimes unfriendly 
work place where lowest cost often justifies the design and the lowest 
fee gets the job. Too often the lowest fee is not the most efficient 
design.

As you know, 179D directly supports two national priorities: Job 
Creation and Energy Independence. 179D was introduced into the tax code 
with the Energy Policy Act of 2005. It has been extended four times and 
will expire on December 31, 2016. Since the inception of 179D, it has 
assisted thousands of building owners and tenants in retaining jobs and 
increasing profitability; it has also increased job creation in the 
trades, where energy efficiency retrofits create large numbers of high 
paying jobs for a labor pool that was particularly impacted by the 
economic downturn. At the same time, 179D helps reduce our nation's 
dependence on foreign oil, thereby increasing America's energy 
security.

Jobs

Energy efficiency projects require enormous skilled and semi-skilled 
work forces. By cost justifying projects, EPAct therefore plays a 
direct role in supporting a major source of employment in our state.

Lighting retrofits require lighting designers, laborers to remove and 
dispose existing fixtures, distribution centers to store the new 
lighting material, laborers to stage the new material near the job site 
and electricians to install the new fixtures.

HVAC retrofits require engineers for project system design, substantial 
U.S. manufacturing activity (most HVAC equipment is heavy and made in 
the U.S.), U.S. steel procurement and HVAC mechanics to install.

The building envelope involves a wide variety of manufactured and 
workshop materials including roofs, walls, windows, doors, foundations 
and insulation. In addition to the labor required to create these 
products, large numbers of roofers, carpenters, installers and laborers 
are needed to handle the material and incorporate it into a building.

In addition, reduced building expenses allow for the retention of jobs 
on the building owners' end.

Energy Security

Our nation's goal of becoming energy independent cannot be achieved 
through domestic oil and natural gas production alone. Energy 
Efficiency is an untapped natural resource. Commercial Buildings 
represent 20% of our nation's energy use. ``Drilling'' for building 
energy efficiency is the least costly natural resource we have. For 
building owners, the up-front cost of retrofitting is expensive, but 
with utility and government assistance working together with building 
owners, energy use reductions between 20% and 50% can be obtained.

Commercial building energy efficiency is a critical way by which 
utilities can meet newly established national guidelines for carbon 
emission reductions. By improving the cost benefit equation of an 
energy efficiency retrofit, Section 179D thereby plays an important 
role in helping utilities comply with national policy while 
simultaneously reducing the need for the construction of costly new 
power plants.

Looking Ahead

Today, taxpayers and industry understand how to prospectively use 179D 
to achieve the greatest possible energy reduction far better than they 
did 8 years ago. This extension will empower our country to realize 
major energy efficiency gains and will not represent a material cost to 
Treasury. With the use of dynamic scoring the efficiency gains will 
increase taxable income over time for commercial building owners, and 
thereby reducing Treasury's losses from accelerating the depreciation. 
The tax collected from added profits obtained through energy savings 
quickly outweigh the foregone tax revenue created by 1790.

Conclusion

Section 179D supports a key investment in the American economy: energy 
efficiency. Energy efficiency is a force-multi plying investment that 
saves energy, saves money, and sustains and creates American jobs. 
Comprehensive energy efficiency upgrades drastically improve the 
reliability and performance of the nation's building stock, while 
reducing demand on our energy supply. We urge you to include multi-year 
extension of EPAct 179D in upcoming legislation.

Sincerely,
Concord Engineering

Michael Fischette, CEO

                                 ______
                                 
                          Controlled Air, Inc.

                            21 Thompson Road

                      Branford, Connecticut 06405

                          Phone (203) 481-3531

                           Fax (203) 481-3533

                         www.controlledair.com

June 14, 2016

Senate Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

RE: Section 179D Energy Efficient Commercial Buildings Deduction Should 
Be Extended

Dear Chairman Hatch and Ranking Member Wyden:

We are writing to you today in regards to the Committee on Finance 
Hearing titled ``Energy Tax Policy in 2016 and Beyond.'' As you seek 
ways to grow our economy and create jobs, we strongly urge a multi-year 
extension of the Section 179D tax deduction for energy efficient 
commercial and multifamily buildings at the earliest opportunity before 
it expires on December 31, 2016.

Our company, Controlled Air, Inc. founded in 1980, is a family-owned 
and operated heating, ventilation, air conditioning and temperature 
controls company. We have approximately 80 employees. We have always 
been on the forefront of technology, bringing sophisticated and energy 
efficient solutions to the challenges of today's complex application. 
We receive a substantial number of high efficiency generated projects 
i.e., Cogeneration, etc. due in part of Sec 179D. Controlled Air and 
our customers would be deeply affected if EPAct 179D is not extended.

As you know, 179D directly supports two national priorities: Job 
Creation and Energy Independence. Section 179D was introduced into the 
tax code with the Energy Policy Act of 2005. It has been extended four 
times and will expire on December 31, 2016. Since the inception of 
179D, it has assisted thousands of building owners and tenants in 
retaining jobs and increasing profitability; it has also increased job 
creation in the trades, where energy efficiency retrofits create large 
numbers of high paying jobs for a labor pool that was particularly 
impacted by the economic downturn. At the same time, 179D helps reduce 
our nation's dependence on foreign oil, thereby increasing America's 
energy security.

Jobs

Energy efficiency projects require enormous skilled and semi-skilled 
work forces. By cost-justifying projects, EPAct therefore plays a 
direct role in supporting a major source of employment in our state.

Lighting retrofits require lighting designers, laborers to remove and 
dispose existing fixtures, distribution centers to store the new 
lighting material, laborers to stage the new material near the job site 
and electricians to install the new fixtures.

HVAC retrofits require engineers for project system design, substantial 
U.S. manufacturing activity (most HVAC equipment is heavy and made in 
the U.S.), U.S. steel procurement and HVAC mechanics to install.

The building envelope involves a wide variety of manufactured and 
workshop materials including roofs, walls, windows, doors, foundations 
and insulation. In addition to the labor required to create these 
products, large numbers of roofers, carpenters, installers and laborers 
are needed to handle the material and incorporate it into a building.

In addition, reduced building expenses allow for the retention of jobs 
on the building owners' end.

Energy Security

Our nation's goal of becoming energy independent cannot be achieved 
through domestic oil and natural gas production alone. Energy 
Efficiency is an untapped natural resource. Commercial Buildings 
represent 20% of our nation's energy use. ``Drilling'' for building 
energy efficiency is the least costly natural resource we have. For 
building owners, the up-front cost of retrofitting is expensive, but 
with utility and government assistance working together with building 
owners, energy use reductions between 20% and 50% can be obtained.

Commercial building energy efficiency is a critical way by which 
utilities can meet newly established national guidelines for carbon 
emission reductions. By improving the cost benefit equation of an 
energy efficiency retrofit, Section 179D thereby plays an important 
role in helping utilities comply with national policy while 
simultaneously reducing the need for the construction of costly new 
power plants.

Looking Ahead

Today, taxpayers and industry understand how to prospectively use 179D 
to achieve the greatest possible energy reduction far better than they 
did 8 years ago.

This extension will empower our country to realize major energy 
efficiency gains and will not represent a material cost to Treasury. 
With the use of dynamic scoring the efficiency gains will increase 
taxable income over time for commercial building owners, and thereby 
reducing Treasury's losses from accelerating the depreciation. The tax 
collected from added profits obtained through energy savings quickly 
outweigh the foregone tax revenue created by 179D.

Conclusion

Section 179D supports a key investment in the American economy: energy 
efficiency. Energy efficiency is a force-multiplying investment that 
saves energy, saves money, and sustains and creates American jobs. 
Comprehensive energy efficiency upgrades drastically improve the 
reliability and performance of the nation's building stock, while 
reducing demand on our energy supply. We urge you to include multi-year 
extension of EPAct 179D in upcoming legislation.

Sincerely,

Vincent Chiocchio, President
                                 ______
                                 
            Electric Drive Transportation Association (EDTA)

                STATEMENT OF GENEVIEVE CULLEN, PRESIDENT

The Electric Drive Transportation Association (EDTA) is the cross-
industry trade association promoting the advancement of electric drive 
technology and electrified transportation. Our members represent the 
entire value chain of electric drive, including vehicle manufacturers, 
battery and component manufacturers, utilities and energy companies, 
and smart grid and charging infrastructure developers. Collectively, we 
are committed to realizing the economic, national security, and 
environmental benefits of replacing oil with hybrid, plug-in hybrid, 
battery, and fuel cell electric vehicles.

Oil provides 93% of the energy used for transportation in the United 
States. Around one-third of the oil we use is imported, costing our 
economy roughly $192 billion annually. Even with reduced imports, our 
energy and economic security continue to be threatened by oil 
dependence. Our transportation sector is fueled almost wholly by a 
single commodity whose price is set by the global market and whose 
availability is subject to significant geopolitical uncertainty. As the 
Department of Energy (DOE) documents, the majority of the world's oil 
reserves are concentrated in the Middle East; approximately 73% of 
those reserves are controlled by the Organization of the Petroleum 
Exporting Countries (OPEC) members.

On a microeconomic level, by using electricity as an alternative fuel 
source, American families can benefit from significant savings and be 
insulated from volatile petroleum fuel prices that rise and fall with 
the world oil market. Even when the price at the pump is relatively 
low, electricity costs are lower--and more stable. On average, driving 
on electricity costs the equivalent of a dollar per gallon of gasoline.

As part of a portfolio of policies promoting fuel diversity, tax 
incentives for electric drive vehicles and infrastructure accelerate 
innovation and investment in technologies that strengthen our economy, 
reduce our vulnerability to volatile global markets, and provide 
sustainable transportation alternatives.

In addition, the emerging electric drive value chain is creating jobs 
in research, development and manufacturing of advanced components and 
vehicles, recharging and refueling infrastructure, and consumer 
services.

The incentives also advance national and regional efforts to establish 
energy and environmental security through fuel diversity. According to 
the National Research Council, reducing greenhouse gas emissions from 
light-duty vehicles by 80% by 2050 can best be achieved with strategies 
that lead to the large-scale commercialization of zero-emission 
vehicles--both hydrogen fuel cell vehicles (FCVs) and plug-in electric 
vehicles (PEVs). The same study estimated that the public and private 
benefits resulting from the large-scale deployment of FCVs and PEVs 
would exceed the costs by an order of magnitude.\1\
---------------------------------------------------------------------------
    \1\ Zero Emission MAP: The Effect of Monetary Incentives on Sales 
of Advanced Clean Cars in the United States: Summary of the Evidence by 
Gustavo Collantes and Anthony Eggert, University of California-Davis, 
September 1, 2014.

Eight states have signed a Memorandum of Understanding to deploy 3.3 
million Zero-Emission Vehicles by 2025. Federal investment incentives 
reduce the initial costs of advanced technologies and help new 
industries to achieve economies of scale that lead to the large-scale 
---------------------------------------------------------------------------
commercialization needed to achieve these goals.

A comprehensive tax reform effort should include tax policies that grow 
U.S. competitiveness and enhance our energy and environmental security. 
In the interim, it is critically important to extend the incentives 
that are currently promoting investment in emerging transportation 
technologies.

Extending the Section 30C Alternative Fuel Vehicle Refueling Property 
Credit.

To promote growth in the electric vehicle market, electric vehicle 
infrastructure must expand as well. This technology-neutral credit 
helps individuals and businesses invest in the refueling/recharging 
infrastructure that supports electric, fuel cell, and other alternative 
fuel vehicle needs.

The federal infrastructure credit is an effective, low-cost incentive 
that supports investment in electric drive and other alternative fuel 
vehicles. Plug-in electric drive vehicles entered the market in 
December 2010, with sales growing to a cumulative total approaching 
half of a million on the road today. In the same time period, charging 
stations open to the public have grown to almost 14,000 charging 
stations, with more than 33,000 charging outlets, in the United 
States.\2\
---------------------------------------------------------------------------
    \2\ DOE station locator.

This is a strong start, but the industry is still in its infancy, and 
hurdles for new technology in this segment are high. A multi-year 
extension of the credit would provide the necessary certainty to 
reinforce private investment across the electric and alternative fuel 
markets, growing investment in vehicles and technology and speeding the 
---------------------------------------------------------------------------
establishment of integrated alternative transportation systems.

Extending the Section 30B Incentive for Fuel Cell Electric Vehicles.

Fuel cells utilize hydrogen to produce electricity. FCEVs are zero-
emission vehicles--they produce no tailpipe pollution except water 
vapor. In addition, compared to internal combustion vehicles, FCEVs 
greatly reduce greenhouse gas carbon emissions even when accounting for 
the full hydrogen fuel lifecycle. When using hydrogen generated from 
solar or wind electrolysis, total lifecycle CO2 emissions 
are eliminated completely. FCEVs are up to three times more efficient 
than conventional vehicles, and when natural gas is used as a source 
for hydrogen, FCEVs are the most efficient way to use this abundant 
domestic resource in cars.

Electric drive vehicles, including FCEVs, are critical to meeting 
national and state clean transportation imperatives. Many of the 
world's leading automotive companies will begin mass production of 
FCEVs in the next couple of years, with Hyundai and Toyota already in 
the California market and Honda poised to enter the market in the 
fourth quarter of this year. As is often the case with breakthrough 
technologies, fuel cell vehicles have an initial cost hurdle. 
Mitigating this through a purchase incentive helps consumers acquire 
more efficient, cleaner running cars and encourages industry to invest 
in the supply chain.

The Section 30B credit, however, expires at the end of 2016--just as 
the fuel cell vehicle market is being established and as multiple 
companies are making market entry plans. The credit is a performance-
based incentive for an advanced technology that is necessary to meet 
our goals for reducing petroleum dependence and fostering zero-emission 
transportation. Extending the credit, on the terms upon which 
manufacturers have relied, will help these advanced vehicle 
technologies establish a foothold in the market and provide additional 
clean vehicle options to consumers.

We look forward to working with this committee on comprehensive reform 
of the tax code. In the interim, we urge you to ensure the critical 
policies that support energy and economic security are maintained 
through expedited action on extenders legislation.

We thank you for the opportunity to submit our testimony and for your 
consideration.

                                 ______
                                 
                     Geothermal Energy Association

                      209 Pennsylvania Avenue, SE

                          Washington, DC 20003

                          Phone: 202-454-5261

                           Fax: 202-454-5265

                       http://www.geo-energy.org/

              Statement of Karl Gawell, Executive Director

Mr. Chairman, Ranking Member Wyden, and Members of the Committee, the 
Geothermal Energy Association is pleased to be able to submit this 
statement on the subject of ``Energy Tax Policy in 2016 and Beyond.''

U.S. energy tax policy over the last several decades has attempted to 
address concerns over energy supply, the environment and national 
security by providing incentives for the production of renewable 
energy, energy efficiency, conservation and alternative energy 
production. In addition, tax incentives for the domestic production of 
fossil fuel also promote energy security by attempting to reduce the 
nation's reliance on imported energy sources. The effect of these 
policies reduces our dependence on foreign oil, has also diversified 
our nation's energy portfolio and helped our nation to become more 
energy independent.

It is important, however, that such incentives do not discriminate 
between renewable technologies and encourage growth for all proven 
sources of renewable energy.

Geothermal power was left out when Congress passed longer-term tax 
incentive legislation as part of the PATH Act of 2015. This was an 
unfortunate oversight for the Nation's energy future. Developing our 
Nation's geothermal potential is an investment in learning how to tap 
an enormous resource. To achieve stable growth in the geothermal 
industry, long-term, predictable incentives are needed to spur 
innovation, allow fair competition and boost new geothermal power 
growth.

New geothermal power plants that commence construction by December 31, 
2016 can qualify for the Production Tax Credit or a 30% Investment Tax 
Credit. Geothermal power seeks parity under Section 48 with solar, 
whose 30% ITC was extended for 5 years with start of construction 
beginning by the end of 2019 and then phasing out through 2023. Without 
a leveling of this playing field for renewables, geothermal cannot 
compete fairly with solar and wind.

Utility-scale geothermal power generation has historically been part of 
the Section 48 Investment Tax Credit (``ITC'') along with solar. The 
Energy Policy Act of 2005 expanded the renewable technologies that were 
eligible for tax credits, and made them available to both new solar and 
geothermal facilities through either a 30% ITC or a 1.8 cent/kWhr 
Production Tax Credit (``PTC''). In 2009, ARRA eliminated this 
distinction by providing geothermal developers with the option of 
claiming a 30% ITC and having it paid in cash, in lieu of the Section 
45 Production Tax Credit. During this time, many developers found that 
utilization of the 30% ITC was preferable to the PTC.

Both types of credits helped spur growth and innovation in the U.S. 
geothermal power industry:

      From 2006 to 2014, 34 geothermal power projects were completed 
in the United States, adding 678 MW of new capacity to the grid and 
growing the national industry by about 20%. This involved about $3 
billion in new investment, bringing economic development to rural areas 
of the West.

      This period of growth also spurred innovation. The years 2006 to 
2014 saw the installation of a new advanced technology flash plant, the 
first triple flash plants, a new solar/geothermal hybrid plant, binary 
(ORC) power plants utilizing new, more efficient technology with non-
carbon based working fluids, distributed power generation with building 
heating system, and co-produced power from oil/gas wells.

      From 2006-2014 the number of states producing geothermal power 
doubled. Alaska, California, Hawaii, Idaho, Nevada, New Mexico, North 
Dakota, Oregon and Utah are all geothermal power producers today.

In 2009, Congress also extended the credit for new solar facilities by 
8 years to accommodate their long lead-times. Unfortunately, it did not 
provide the same time extension to utility-scale geothermal power 
plants. Instead, geothermal tax credits were extended in several short 
interval time periods over this period. Because geothermal facilities 
can take 5-7 years from beginning of drilling to commercial production, 
the effectiveness of the geothermal tax credits in the most recent 
years has been limited because of the uncertainty created by the short 
tax credit extensions that have been enacted.

Extending geothermal power the 30% ITC on the same terms as solar will 
stimulate new development by providing a longer-term incentive with a 
gradual phase out. This will have many benefits, including:

Jobs: In addition to producing many drilling and construction jobs, 
geothermal power plants employ more permanent, on-site, full-time 
employees per unit produced than other renewable generation sources--
about 2.13 persons per MW in the U.S. And in addition, consume more 
supplies and materials that increase the indirect jobs associated with 
geothermal power plants.

Economy Boost: In the U.S., over the course of 30 to 50 years an 
average 20 MW facility will pay nearly $6.3 to $11 million dollars in 
property taxes plus $12 to $22 million in annual royalties. Seventy-
five percent of these royalties ($9.2 to $16.6M) go directly back to 
the state and county. Geothermal power plants are often located in 
rural, economically challenged areas and provide a significant economic 
input to the community.

Locally Produced: Geothermal power can offset electricity currently 
imported, keeping jobs and benefits in local communities.

Near-Zero Emissions: Binary geothermal plants--the most common in the 
U.S.--produce near-zero emissions.

Small Footprint: Geothermal has among the smallest surface land 
footprint per kilowatt (kW) of any power generation technology.

Baseload Reliability: Geothermal power provides consistent electricity 
throughout the day and year--continuous baseload power and flexible 
power to support the needs of variable renewable energy resources, such 
as wind and solar. No high cost backup or firming power is needed. 
Geothermal also provides the most efficient use of existing 
transmission infrastructure and provides grid stability.

Sustainable Investment: Energy resource decisions made now for sources 
of electric power have 40-50 year consequences, or longer. Using 
renewables like geothermal resources avoids ``price spikes'' inherent 
in fuel resource markets. Geothermal energy is an investment in stable, 
predictable costs. Investing in geothermal power now, pays off for 
decades to come.

The PATH Act extended Section 48's 30% Investment Tax Credit for solar 
technologies beginning construction by 2019 and phasing out through 
2023. Geothermal often competes with solar, particularly in states that 
have adopted renewable portfolio standards (RPS). Congress did not 
intend to legislate solar as the marketplace winner, which we are 
concerned may be the result if the current ITC imbalance is not 
addressed. Thus we urge the Committee to support parity between solar 
and geothermal. It would be fair, would engender healthy competition, 
and would continue to encourage innovation in these technologies.

                                 ______
                                 
                              Havtech Inc.

                            9505 Berger Road

                           Columbia, MD 21046

                          (301) 206-9225 MAIN

                           (301) 497-9610 FAX

                        http://www.havtech.com/

Senate Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

June 14, 2016

Dear Representative:

We are writing to you today in regards to the Subcommittee on Tax 
Policy's recent member day hearing on tax legislation. We applaud the 
commitment voiced by Chairman Brady at the hearing to return to a 
regular order process for consideration of improvements to the tax 
code. As you seek ways to grow our economy and create jobs, we strongly 
urge a multi-year extension of the Section 179D tax deduction for 
energy efficient commercial and multifamily buildings at the earliest 
opportunity before it expires on December 31, 2016.

Our Company, Havtech Inc, an applied HVAC manufacturer's representative 
and engineering/energy conservation firm, with over 130 employees in 
the state of Maryland has been heavily involved in the reduction of 
energy consumption in many public facilities. These facilities consist 
mainly of public schools where our company, through energy saving 
recommendations, and use of energy saving equipment/systems, has been 
able to assist the state and counties with significant reduced 
operating costs, large energy consumption reductions, and large 
decreases in carbon foot print. The 179D program has been instrumental 
in allowing us to offer the public school systems extremely competitive 
energy solutions that would not have been possible otherwise. Without 
the 179D program at least 70-80 percent of the projects we have done 
would not have been economically viable. Significant projects that 
Havtech has seen through completion with great success for the 179D 
program include North East High School, Watkins Mill High School, and 
Diamond Elementary School--in the state of Maryland.

As you know, 179D directly supports two national priorities: Job 
Creation and Energy Independence. Section 179D was introduced into the 
tax code with the Energy Policy Act of 2005. It has been extended four 
times and will expire on December 31, 2016. Since the inception of 
179D, it has assisted thousands of building owners and tenants in 
retaining jobs and increasing profitability; it has also increased job 
creation in the trades, where energy efficiency retrofits create large 
numbers of high paying jobs for a labor pool that was particularly 
impacted by the economic downturn. At the same time, 179D helps reduce 
our nation's dependence on foreign oil, thereby increasing America's 
energy security.

Jobs

Energy efficiency projects require enormous skilled and semi-skilled 
work forces. By cost justifying projects, EPAct therefore plays a 
direct role in supporting a major source of employment in our state.

Lighting retrofits require lighting designers, laborers to remove and 
dispose existing fixtures, distribution centers to store the new 
lighting material, laborers to stage the new material near the job site 
and electricians to install the new fixtures.

HVAC retrofits require engineers for project system design, substantial 
U.S. manufacturing activity (most HVAC equipment is heavy and made in 
the U.S.), U.S. steel procurement and HVAC mechanics to install.

The building envelope involves a wide variety of manufactured and 
workshop materials including roofs, walls, windows, doors, foundations 
and insulation. In addition to the labor required to create these 
products, large numbers of roofers, carpenters, installers and laborers 
are needed to handle the material and incorporate it into a building.

In addition, reduced building expenses allow for the retention of jobs 
on the building owners' end.

Energy Security

Our nation's goal of becoming energy independent cannot be achieved 
through domestic oil and natural gas production alone. Energy 
Efficiency is an untapped natural resource. Commercial buildings 
represent 20% of our nation's energy use. ``Drilling'' for building 
energy efficiency is the least costly natural resource we have. For 
building owners, the up-front cost of retrofitting is expensive, but 
with utility and government assistance working together with building 
owners, energy use reductions between 20% and 50% can be obtained.

Commercial building energy efficiency is a critical way by which 
utilities can meet newly established national guidelines for carbon 
emission reductions. By improving the cost benefit equation of an 
energy efficiency retrofit, Section 179D thereby plays an important 
role in helping utilities comply with national policy while 
simultaneously reducing the need for the construction of costly new 
power plants.

Looking Ahead

Today, taxpayers and industry understand how to prospectively use 179D 
to achieve the greatest possible energy reduction far better than they 
did 8 years ago. This extension will empower our country to realize 
major energy efficiency gains and will not represent a material cost to 
Treasury. With the use of dynamic scoring the efficiency gains will 
increase taxable income over time for commercial building owners, and 
thereby reducing Treasury's losses from accelerating the depreciation. 
The tax collected from added profits obtained through energy savings 
quickly outweigh the foregone tax revenue created by 179D.

Conclusion

Section 179D supports a key investment in the American economy: energy 
efficiency. Energy efficiency is a force-multiplying investment that 
saves energy, saves money, and sustains and creates American jobs. 
Comprehensive energy efficiency upgrades drastically improve the 
reliability and performance of the nation's building stock, while 
reducing demand on our energy supply. We urge you to include multi-year 
extension of EPAct 179D in upcoming legislation.

Sincerely,

Norm Long, PE
President

                                 ______
                                 
             Hearth, Patio, and Barbecue Association (HPBA)

                    1901 North Moore St., Suite 600

                          Arlington, VA 22209

                           tel. 703-522-0086

                           fax. 703-522-0548

                     http://www.hpba.org/Membership

June 28, 2016

Senate Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

The Honorable Orrin Hatch           The Honorable Ron Wyden
Chairman                            Ranking Member
Committee on Finance                Committee on Finance
U.S. Senate                         U.S. Senate

Chairman Hatch and Ranking Member Wyden:

As the trade association representing manufacturers, retailers, 
distributors, and servicers of wood and pellet stoves and inserts, in 
addition to other sectors of the hearth, patio and barbecue industries, 
we are writing to urge your support for an extension of the residential 
energy efficiency 25(C) tax credit that will expire December 31, 2016. 
More specifically, we support the provision for energy efficient 
building property that provides a $300 dollar-for-dollar credit for 
purchasing, among other products, biomass-fueled stoves that are at 
least 75 percent efficient. There is an inherent up-front cost to 
purchasing a new biomass stove, but there also exists a long-term gain 
for homeowners and communities.

This federal tax credit incentivizes consumers to make energy-conscious 
purchases that they otherwise may not have made. Furthermore, in light 
of new Environmental Protection Agency (EPA) regulations for new 
residential wood heaters, the first new regulations for this product 
category in over 20 years, this credit supports an industry that is 
making significant adjustments to their businesses and investing in R&D 
to comply with new testing and performance requirements. A stable, 
reliable tax credit for biomass stoves would help struggling small 
businesses make their products more marketable to a customer base that 
very badly needs such an incentive to even walk through the front door.

The on-again-off-again nature of this credit has made it very difficult 
for manufacturers and retailers to market the credit's availability to 
their customers. As such, the tax credit has frequently acted less like 
an incentive and more like a happy accident for those who were made 
aware of the credit after having already made a qualifying purchase. 
Only in 2009 and 2012 was the credit extended both retroactively and 
forward for the next fiscal year. With stability in this part of the 
tax code, more consumers, most of which are middle-class households, 
would actually be incentivized to make a qualifying purchase which is 
the purpose of a tax credit. In addition, the credit is particularly 
useful in areas of the country that are encouraging residents to change 
out an older, non-EPA-certified stove for a new EPA-
certified stove in order to help meet air quality standards for 
particulate emissions. This is especially prominent in the areas of 
Logan, UT and Lakeview, OR as well as other regions of the U.S. with 
similar topographical features.

The Sec. 25(C) tax credit, first established by the Energy Policy Act 
of 2005, saw the addition of the provision for efficient biomass stoves 
upon passage of the Emergency Economic Stabilization Act of 2008. The 
American Recovery and Reinvestment Act of 2009 (the ``Stimulus Bill'') 
increased the credit amount from $300 to $1,500 making it a more robust 
credit for American taxpayers. Internal Revenue Service (IRS) data 
indicates that taxpayers reported spending $25.1 billion in 2009 and 
$26 billion in 2010 on remodeling costs associated with both qualified 
energy efficiency improvements and residential energy property 
costs.\1\, \2\ For small businesses, which make up the vast 
majority of this industry, that translates into more sales, service 
jobs, and satisfied customers--three key factors for growing a small 
business.
---------------------------------------------------------------------------
    \1\ IRS Statistics of Income (SOI) Tax Stats--Individual Income Tax 
Returns, Line Item Estimates. 2009 (p. 128, line 4), 2010 (p. 130, line 
4). Downloaded from: https://www.irs.gov/uac/soi-tax-stats-individual-
income-tax-returns-line-item-estimates.
    \2\ The Sec. 25(C) tax credit, referred to by the IRS on IRS form 
5695 as ``Residential Energy Credits,'' is comprised of two provisions: 
the first, for ``qualified energy efficiency improvements,'' and the 
second for ``residential energy property costs.'' The biomass stove tax 
credit is part of the latter.

For tax years 2009 through 2012, over 92 percent of households that 
claimed the credit had an adjusted gross income (AGI) under $200,000 
and two-thirds of the households claiming the credit had an AGI of 
under $100,000. During the same period of time, about 40 percent of 
households that claimed the credit had an AGI of under $75,000.\3\ 
Clearly an incentive for middle class families, the credit helps reduce 
homeowners' energy use, lowering their utility bills and increasing 
their home's value.
---------------------------------------------------------------------------
    \3\ IRS, SOI Tax Stats--Individual Statistical Tables by Size of 
Adjusted Gross Income. Table 3.3: All Returns: Tax Liability, Tax 
Credits, and Tax Payments. Years 2009, 2010, 2011, 2012. Downloaded 
from: https://www.irs.gov/uac/soi-tax-stats-individual-statistical-
tables-by-size-of-adjusted-gross-income.

The tax credit for purchasing a qualifying biomass stove has the 
potential to not only help U.S. taxpayers make an up-front purchase for 
a long term investment, but also to help a well-seasoned industry that 
is addressing the multitude of challenges that come with a new 
regulation. Some may argue that energy tax credits only serve to 
artificially support fledgling industries. That is not the case with 
the biomass stove industry. Manufacturers and retailers of wood and 
pellet stoves are almost all small businesses that are proud of the 
long tradition of their company and role in the development of the 
biomass stove industry. Today's EPA-certified stoves are highly 
efficient, clean burning, are up to 50 percent more energy efficient 
than stoves made before 1990, and can use \1/3\ less wood for the same 
heat.\4\ The biomass stove industry and the EPA both strongly agree 
that the investment in a new EPA-certified stove is well worth the cost 
and adoption of these new technologies would be accelerated with the 
existence of a strong, stable biomass stove tax credit.
---------------------------------------------------------------------------
    \4\ Environmental Protection Agency. Burn Wise Energy Efficiency. 
Accessed June 23, 2016 from https://www.epa.gov/burnwise/burn-wise-
energy-efficiency.

We urge you to renew the biomass stove tax credit, part of Sec. 25(C), 
as you consider tax policy reform and means by which to make energy tax 
credits more effective and beneficial for U.S. taxpayers. Thank you for 
your consideration of our request and we hope to be a resource to you 
---------------------------------------------------------------------------
and your staff as these discussions continue.

Sincerely,

Ryan Carroll
Director, Government Affairs

                                 ______
                                 
                    Heat is Power Association (HiP)

                      2215 S. York Road, Suite 202

                          Oak Brook, IL 60523

                          www.heatispower.org

The Honorable Orrin Hatch           The Honorable Ron Wyden
Chairman                            Ranking Member
Senate Committee on Finance         Senate Committee on Finance
Washington, DC 20510                Washington, DC 20510

June 24, 2016

Dear Chairman Hatch and Ranking Member Wyden:

The Heat is Power Association (HiP) appreciates this opportunity to 
provide comment on the Senate energy tax policy hearing held on June 
14, 2016. HiP is the U.S. trade association for the waste heat to power 
(WHP) industry. WHP captures heat that would otherwise be vented into 
the atmosphere from industrial processes and uses it to generate 
electricity with no additional fuel, combustion, or emissions. As such, 
WHP turns waste heat into a resource for clean electricity generation 
and an economic driver for global competitiveness. WHP can also help 
address critical public policy objectives related to increasing 
industrial efficiency and reducing emissions of greenhouse gases and 
criteria pollutants.

We applaud the Senate Finance Committee's approval last year of 
bipartisan legislation (S. 913) that clarifies that WHP is a qualifying 
technology in Section 48 of the IRC. S. 913 will diversify our nation's 
energy mix, create on site power while lowering fuel use and emissions, 
promote enhanced competition among all of our nation's energy sources, 
and reduce the cost of WHP technologies. We hope you will continue to 
support such measures and we urge Congress to include this 
clarification in any additional energy tax legislation this year.

In addition, we support Ranking Member Wyden's technology-neutral clean 
energy tax incentive proposal (S. 2089) and stand ready to work with 
Senator Wyden and others to help advance this proposal as Congress 
considers comprehensive tax reform.

Thank you for your attention to this request. We look forward to 
working with you to bring the many benefits of WHP to the nation's 
clean power generation mix.

Sincerely,

Susan Brodie
Executive Director

                                 ______
                                 
                   Large Public Power Council (LPPC)

                    1050 Thomas Jefferson Street, NW

                          Washington, DC 2007

    The Large Public Power Council (``LPPC'') submits this statement 
for the record of the June 14, 2016 hearing held by the Senate 
Committee on Finance related to energy tax policy and, in particular, 
regarding tax incentives for renewable energy. LPPC's members have long 
been in the forefront of the development and use of renewable energy 
resources, despite the fact that, in contrast to investor-owned 
utilities, there has never been an effective federal incentive for 
renewable energy projects directly benefiting public power. As further 
described below, we urge Congress to enact an incentive for renewable 
energy investment by public power.

    LPPC is an organization comprised of 26 of the nation's largest 
community-owned power utilities. LPPC member utilities own and operate 
more than 86,000 megawatts of generation capacity and over 35,000 
circuit miles of high voltage transmission lines. LPPC's members serve 
more than 30 million Americans.

    The members of LPPC, like other State and local governments, rely 
on tax-exempt financing to obtain long-term financing of their energy 
infrastructure projects, including renewable energy projects, and the 
availability of tax-exempt financing remains critical to LPPC. However, 
as the Committee is aware, the Internal Revenue Code has long contained 
much more generous and effective investment tax credits (``ITC'') and 
production tax credits (``PTC'') for renewable energy projects. 
Although structured as a credit against taxes, these programs are, in 
substance, direct subsidies to eligible recipients. As governmental 
entities, LPPC's members are not eligible to receive the subsidies 
provided by the ITC and PTC except through the use of arrangements in 
which another entity owns the renewable energy project and sells the 
electricity through a power purchase agreement (``PPA'') to a public 
power system at a price that reflects a portion of the federal subsidy. 
The remainder of the federal subsidy from the ITC and PTC is retained 
by the owner of the project (or a tax credit investor). These PPA 
arrangements are relatively complex and, more importantly, result in a 
portion of the federal subsidy not being used to support the renewable 
energy projects. This inefficiency costs the federal government revenue 
and means that public power systems are receiving a lesser federal 
subsidy than investor-owned utilities.

    LPPC believes that Congress should enhance the existing tools that 
it has previously created to provide a direct, more efficient federal 
subsidy to public power. There is simply no reason to provide investor-
owned utilities with incentives for renewable energy at levels 
substantially above those provided to public power.

    LPPC suggests that the simplest method to accomplish this goal 
would be to make the PTC and ITC refundable tax credits. Although 
Congress has generally not favored refundable business tax credits, 
they have been used at times, including in the Section 1603 grant 
program for renewable energy that was enacted in 2009. A program of 
direct grants or a refundable tax credit for which public power systems 
are eligible would be an effective and efficient federal subsidy for 
renewable energy.

    In lieu of direct grant or refundable tax credit programs, another 
option would be to provide for the expanded use of the direct payment 
bonds feature that exists under current law. For example, the new clean 
renewable energy bond program (``CREBs'') provides public power (and 
electric cooperatives) with the ability to issue taxable bonds to fund 
renewable energy projects and then receive cash payments from the IRS 
based on the interest due on those bonds. The federal payment under the 
CREBs program is set at a level designed to provide a subsidy 
comparable to that provided under the ITC and PTC programs. Although 
CREBs could provide the effective subsidy for renewable energy for 
which LPPC has been advocating, the program contains a limitation on 
the amount of CREBs that may be issued by public power and 
cooperatives, which largely defeats the purpose of the program. Stated 
simply, the volume cap has meant that only a tiny fraction of the cost 
of public powers' renewable energy facilities can be funded in this 
manner, making the existing CREBs program of very limited value. The 
volume cap on CREBs should be eliminated, just as there is no cap on 
the amount of PTCs or ITCs available to investor-owned utilities.

    We note that in 2015, the Democratic members of the Committee 
proposed the creation of ``clean energy bonds.'' This proposal would 
create a tax credit bond with a direct payment feature that would make 
that program similar to CREBs. Unfortunately, the subsidy contained in 
the proposal, equal to 28 percent of the amount of the interest paid on 
the bonds, would make this program of limited value. The risk that this 
subsidy would be reduced by sequestration is a further concern with 
this program. If, however, the subsidy rule under this program was set 
at 70 percent of the interest paid on the bonds, as the CREBs program 
is, it would be an effective mechanism for public power to finance 
renewable energy projects.

    In lieu of a tax credit bond program, another option would be to 
make the PTC and ITC refundable tax credits. Although Congress has 
generally not favored refundable business tax credits, they have been 
used at times, including in the Section 1603 grant program for 
renewable energy that was enacted in 2009. A program of direct grants 
or a refundable tax credit for which public power systems are eligible 
would be an effective and efficient federal subsidy for renewable 
energy.

    LPPC recognizes the importance of renewable energy to America's 
future. Although we have suggested certain mechanisms to provide 
comparable tax incentives to LPPC's members, we are eager to work with 
the Committee to create a tax incentive for public power that is 
comparable to the incentives provided to investor-owned utilities.

    LPPC appreciates the opportunity to provide input to the Committee 
on energy tax issues.

                                 ______
                                 
                       MDR Specialty Distribution
RE: Section 179D Energy Efficient Commercial Buildings Deduction Should 
Be Extended

Dear Chairman Hatch and Ranking Member Wyden:

We are writing to you today in regards to the Committee on Finance 
Hearing titled ``Energy Tax Policy in 2016 and Beyond.'' As you seek 
ways to grow our economy and create jobs, we strongly urge a multi-year 
extension of the Section 179D tax deduction for energy efficient 
commercial and multifamily buildings at the earliest opportunity before 
it expires on December 31, 2016.

Our Company, MDR Specialty Distribution has a warehouse and office 
space with over 62,000 square feet. We are working to become more 
efficient by replacing all our lighting with LED fixtures. We are 
located in Virginia and have 20 employees. By having 179D available to 
us it will ease the burden of the original outlay to complete the job.

As you know, 179D directly supports two national priorities: Job 
Creation and Energy Independence. Section 179D was introduced into the 
tax code with the Energy Policy Act of 2005. It has been extended four 
times and will expire on December 31, 2016. Since the inception of 
179D, it has assisted thousands of building owners and tenants in 
retaining jobs and increasing profitability; it has also increased job 
creation in the trades, where energy efficiency retrofits create large 
numbers of high paying jobs for a labor pool that was particularly 
impacted by the economic downturn. At the same time, 179D helps reduce 
our nation's dependence on foreign oil, thereby increasing America's 
energy security.

Jobs

Energy efficiency projects require enormous skilled and semi-skilled 
work forces. By cost-justifying projects, EPAct therefore plays a 
direct role in supporting a major source of employment in our state.

Lighting retrofits require lighting designers, laborers to remove and 
dispose existing fixtures, distribution centers to store the new 
lighting material, laborers to stage the new material near the job site 
and electricians to install the new fixtures.

HVAC retrofits require engineers for project system design, substantial 
U.S. manufacturing activity (most HVAC equipment is heavy and made in 
the U.S.), U.S. steel procurement and HVAC mechanics to install.

The building envelope involves a wide variety of manufactured and 
workshop materials including roofs, walls, windows, doors, foundations 
and insulation. In addition to the labor required to create these 
products, large numbers of roofers, carpenters, installers and laborers 
are needed to handle the material and incorporate it into a building.

In addition, reduced building expenses allow for the retention of jobs 
on the building owners' end.

Energy Security

Our nation's goal of becoming energy independent cannot be achieved 
through domestic oil and natural gas production alone. Energy 
Efficiency is an untapped natural resource. Commercial Buildings 
represent 20% of our nation's energy use. ``Drilling'' for building 
energy efficiency is the least costly natural resource we have. For 
building owners, the up-front cost of retrofitting is expensive, but 
with utility and government assistance working together with building 
owners, energy use reductions between 20% and 50% can be obtained.

Commercial building energy efficiency is a critical way by which 
utilities can meet newly established national guidelines for carbon 
emission reductions. By improving the cost benefit equation of an 
energy efficiency retrofit, Section 179D thereby plays an important 
role in helping utilities comply with national policy while 
simultaneously reducing the need for the construction of costly new 
power plants.

Looking Ahead

Today, taxpayers and industry understand how to prospectively use 179D 
to achieve the greatest possible energy reduction far better than they 
did 8 years ago. This extension will empower our country to realize 
major energy efficiency gains and will not represent a material cost to 
Treasury. With the use of dynamic scoring the efficiency gains will 
increase taxable income over time for commercial building owners, and 
thereby reducing Treasury's losses from accelerating the depreciation. 
The tax collected from added profits obtained through energy savings 
quickly outweigh the foregone tax revenue created by 179D.

Conclusion

Section 179D supports a key investment in the American economy: energy 
efficiency. Energy efficiency is a force-multiplying investment that 
saves energy, saves money, and sustains and creates American jobs. 
Comprehensive energy efficiency upgrades drastically improve the 
reliability and performance of the nation's building stock, while 
reducing demand on our energy supply. We urge you to include multi-year 
extension of EPAct 179D in upcoming legislation.

Sincerely,

Herbert A. Toms III
President

                                 ______
                                 
                     National Biodiesel Board (NBB)

 
 
 
605 Clark Ave.                       1331 Pennsylvania Ave., NW
PO Box 104898                        Suite 505
Jefferson City, MO 65110-4898        Washington, DC 20004
(800) 841-5849 phone                 (202) 737-8801 phone
(573) 635-7913 fax                   http://nbb.org/ |  http://
                                      biodiesel.org/
 


Senate Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

We appreciate the opportunity to submit a written statement to the 
Senate Finance Committee for the record of the June 14, 2016 hearing 
titled, ``Energy Tax Policy in 2016 and Beyond.''

The National Biodiesel Board (NBB) is the U.S. trade association 
representing the biodiesel and renewable diesel industries. Biodiesel 
and renewable diesel are renewable, low-carbon diesel replacement fuels 
made from a variety of fats and oils, including recycled cooking oil, 
animal fats and plant oils such as soybean oil and canola oil. The EPA 
has determined, based on the performance requirements established by 
the Energy Independence and Security Act, that biodiesel qualifies as 
an ``Advanced Biofuel'' under the Renewable Fuel Standard (RFS), 
meaning it reduces greenhouse gas emissions by at least 50 percent, 
according to EPA analysis, when compared to petroleum diesel. Biodiesel 
is the only commercial-scale fuel sold and produced across the United 
States to achieve this designation. The fuel meets a strict fuel 
specification set forth by ASTM International, the official U.S. fuel-
certification organization, and it is primarily used in blends of 5 
percent to 20 percent. Biodiesel does not require special fuel pumps or 
engine modifications.

With biodiesel plants in nearly every state in the country, the 
biodiesel tax incentive is proven to create jobs and economic activity 
nationwide--not just at biodiesel refineries but also in agriculture, 
manufacturing, rendering, transportation, and other associated 
industries. Biodiesel plants are a primary economic engine in many 
rural communities. The incentive is also lowering fuel prices for 
American consumers, particularly in the diesel market that powers much 
of the nation's commerce.

In part as a result of the tax incentive, biodiesel use in America has 
grown from roughly 112 million gallons in 2005 when the tax incentive 
was first implemented to nearly 2.1 billion gallons last year. Many 
truck stops and retail stations across the country today sell diesel 
blends containing 10 percent to 20 percent biodiesel. This is not just 
helping to create a new American energy industry, it is significantly 
reducing pollution while strengthening our energy security by 
diversifying our fuel sources. Biodiesel also accounts for the vast 
majority of Advanced Biofuel being delivered under the RFS today.

Despite its success, the incentive has expired repeatedly in recent 
years and is slated to lapse yet again at the end of 2016. This cycle 
of uncertainty surrounding the incentive has severely disrupted the 
growth and development of the U.S. biodiesel industry.

Biodiesel manufacturing is a difficult and capital-intensive 
enterprise, and biodiesel remains a young, developing industry. It 
needs predictable federal tax policy to continue to attract investment, 
build infrastructure and continue growing so that it can compete with 
incumbent industries that have long received favorable tax preferences. 
When compared to other major fuels such as gasoline, diesel and 
ethanol, biodiesel is at a fundamentally different stage of 
development.

The loss of this tax incentive, even temporarily, effectively amounts 
to a tax increase on the industry that has invested billions in 
production and to consumers who purchase diesel fuel. It would hamper 
growth and stunt investment in an industry that is helping to lead U.S. 
innovation toward a cleaner, more diversified domestic fuel supply.

On behalf of producers across the country and thousands of employees in 
the industry, NBB is calling on Congress to act quickly in adopting a 
seamless, long-term extension of the biodiesel tax credit that provides 
the stability and incentive necessary to drive growth and investment.

Additionally, we would like to again take this opportunity to convey 
our industry's united support for reforming the incentive into a 
domestic production credit that stimulates American jobs and 
manufacturing.

As you know, this Committee approved this cost-saving reform in 2015 
without objection. Senators recognized that we should not be spending 
hundreds of millions of dollars annually to support foreign fuel 
production, and that U.S. tax policy should instead be aimed at 
developing U.S. production and jobs.

Unfortunately, the reform was not included in the final tax extenders 
legislation Congress passed late last year. Since then, new government 
data show the problem has only grown in scale. According to year-end 
EPA figures for 2015, biodiesel imports to the U.S. skyrocketed last 
year to a record of 670 million gallons, roughly one-third of the U.S. 
market. Under the current blender's structure of the tax incentive, 
each of these gallons--simply by being blended in the U.S.--was 
eligible for the $1-per-gallon credit.

Spending more than $600 million annually to stimulate foreign fuel 
production was clearly not the intent of Congress in creating this 
incentive. This is a loophole that should be closed, and according to 
the Joint Committee on Taxation, doing so would save the Treasury some 
$90 million as imports are reduced and domestic production rises.

Not only is it the right thing to do for taxpayers, but it would 
restore fair competition for American biodiesel producers. Under the 
current system, foreign biodiesel producers are receiving subsidies in 
their country of origin and then shopping their fuel to the U.S. to 
access the U.S. incentive. This double dipping of incentives gives them 
a tremendous cost advantage--creating a situation where a U.S. tax 
incentive that was specifically intended to stimulate American 
biodiesel production is helping give foreign companies a competitive 
edge over their American counterparts.

According to a recent economic study, every 100 million gallons of U.S. 
biodiesel production supports roughly 3,200 jobs. The tax incentive 
should be structured in a way that gives American companies a fair 
chance at creating those jobs here in the U.S. With more than 1.5 
billion gallons of unused production capacity standing ready to be 
deployed nationwide, the U.S. industry is poised to grow and hire with 
the right policy.

Again, thank you for the opportunity to submit comments on this matter. 
Please don't hesitate to call us at (202) 737-8801 with questions.

Sincerely,

Anne Steckel
Vice President, Federal Affairs

                                 ______
                                 
                 National Hydropower Association (NHA)

                  25 Massachusetts Ave., NW, Suite 450

                          Washington, DC 20001

                            Tel 202-682-1700

                            Fax 202-682-9478

                             www.hydro.org

On behalf of the members of the National Hydropower Association (NHA), 
we appreciate this opportunity to submit comments to the Senate Finance 
Committee for the record regarding its June 14, 2016 hearing on energy 
tax policy and how the tax code affects the energy industry, 
particularly with respect to hydropower project development, and what 
policies have the most merit as the Congress looks forward towards tax 
reform.

We look forward to working with the Committee and the Congress on 
approaches that can achieve the goals of tax reform while also 
continuing to support the expansion of U.S. hydropower resources.

The National Hydropower Association is a nonprofit national association 
dedicated to promoting the growth of clean, affordable U.S. hydropower, 
which includes conventional hydropower, pumped storage, marine and 
hydrokinetic (MHK), as well as conduit projects. NHA represents more 
than 220 companies from Fortune 500 corporations to family-owned small 
businesses. Our members include both public and investor-owned 
utilities, independent power producers, developers, manufacturers, 
environmental and engineering consultants, attorneys, and public 
policy, outreach, and education professionals. NHA members are involved 
in projects throughout the United States, including both federal and 
non-federal hydroelectric facilities. NHA members own and operate the 
majority of the non-federal hydropower generating facilities in the 
United States.

Hydroelectric power is the nation's single largest source of renewable 
electricity, generating close to 50% of renewable power in the U.S. In 
addition to its clean energy profile, hydropower projects provide a 
number of additional benefits, such as integrating and firming power 
from other intermittent electricity sources, flood control, irrigation, 
water supply, recreation and more.

Though a tremendous existing resource, hydropower has substantial 
potential to grow. Of the 80,000 dams in the United States, only 3% 
have power generating facilities. The rest were originally built for 
the other purposes outlined above. However, new studies and reports 
have demonstrated new project opportunities throughout the hydropower 
sector including, adding new generation equipment to existing non-
powered dams and other water infrastructure, upgrades and efficiency 
increases at existing hydropower facilities, pumped storage, conduit 
and marine energy projects, and even new stream reach deployments. 
Sustainable hydropower projects can be built to access this vast 
untapped hydropower capacity if the Congress provides the right market 
signals through smart and balanced tax policies.

Most Members of Congress say that they are for an ``all of the above'' 
energy policy and that the tax code should not be choosing winners and 
losers in the nation's energy mix--NHA agrees. However, that is 
currently not the case and has not been for many years. Although 
hydropower was made eligible for the section 45 production tax credit 
(PTC) in 2005 and MHK in 2008, the applicable credit rate for our 
technologies, as well as other baseload renewable resources, has been 
only 50% of the tax credit rate provided to wind facilities. There was, 
and continues to be no policy basis for this differential, which was 
based solely on revenue concerns at the time.

This credit rate differential has placed the hydropower industry at a 
very significant competitive disadvantage over the past decade in 
responding to state-level solicitations for renewable electricity 
contracts in states with renewable energy portfolio standards. Efforts 
to equalize the credit rate over the past decade have also been 
stymied--largely because the germaneness test applied to tax extenders 
bill in recent years generally made policy changes out of order.

Last year's PATH Act further exacerbated the competitive imbalance 
between incentives for wind and solar and other renewables, including 
hydropower. While the PTC for hydropower, MHK and other 50% credit rate 
technologies was extended only through the end of 2016, the section 45 
PTC for electricity produced from wind facilities was extended through 
the end of 2019.

The 30% investment tax credit (ITC) for both residential solar energy 
property (sec. 250) and business solar energy property (sec. 48) was 
extended through the end of 2019. In addition, the placed-in-service 
requirement for solar property under sec. 48 was replaced by a 
``beginning of construction'' rule and the permanent 10% ITC will be 
retained.

This incentive imbalance will have a dramatic negative impact on 
investment in hydropower over the coming decades. The Energy 
Information Administration's Annual Energy Outlook 2016 Early Release 
\1\ estimates that with the Administration's Clean Power Plan (CPP) in 
place, in combination with the long-term extension of the wind credit, 
wind generation will grow by nearly 150% over the period from 2015-
2040. Examining the impact of the tax credits alone, wind will still 
grow by 110% over the same period. Solar generation will grow by nearly 
twelvefold over the period between 2015-2040 if the CPP remains in 
place or by ninefold due to the incentives alone.
---------------------------------------------------------------------------
    \1\ U.S. Energy Information Administration, ``Annual Energy Outlook 
2016 Early Release: Annotated Summary of Two Cases,'' May 17, 2016, p. 
30.

On the other hand, EIA estimates that electricity from baseload 
renewables (hydropower and others) will remain relatively flat in 
comparison. The EIA report indicates that wind and solar capacity 
additions are driven by tax credit extensions and declining costs in 
both the CPP and no CPP case estimates.\2\ This disparity for 
hydropower and the other baseload renewables is exacerbated further by 
the much longer development timelines the industries face--timelines 
that have also negatively impacted the ability to use the tax credits.
---------------------------------------------------------------------------
    \2\ Ibid., p. 28.

We strongly support the efforts of Ranking Member Ron Wyden and his 
Democratic colleagues on the Committee to develop long-term technology 
neutral incentives for alt renewable energy sources in the context of 
tax reform. In the meantime, at a minimum, we believe it is only fair 
and appropriate to extend the PTC (and the election to take the ITC in 
lieu of the PTC) for hydropower and other non-wind PTC technologies 
---------------------------------------------------------------------------
through 2019.

Given the extraordinary potential for expansion of hydropower 
deployment and job creation, NHA also supports these common-sense 
energy incentive reforms:

Increasing the Production Tax Credit Rate. Throughout the history of 
the PTC program, hydropower and marine energy have received only half 
the credit rate available to other renewable energy sources. There was, 
and continues to be, no tax or energy policy justification for placing 
hydropower at such a competitive disadvantage. Increasing the tax 
credit for hydropower will create a burst of investment and unlock the 
huge job and energy potential of this technology.

Clean Renewable Energy Bonds (CREBs) Program. A significant portion of 
hydropower projects in the U.S. are owned by public power providers, 
electric cooperatives and state and local governments. CREBs, first 
created in 2005, were a very effective tool that helped these entities 
to grow America's hydropower resources, with little cost to the 
taxpayer. NHA supports extending the CREBs program.

Allowing Pumped Storage to Qualify for the Investment Tax Credit and 
Clean Renewable Energy Bonds (CREBs) Program. Expanding our nation's 
energy storage capacity is essential to ensuring a secure and stable 
grid as well as integrating more renewable energy--and today, pumped 
storage technology is the only cost-effective, large-scale energy 
storage method. Currently, there are no incentives for energy storage 
project development, including pumped storage, which hinders deployment 
and further innovation. NHA supports an ITC and CREBs eligibility for 
all energy storage technologies, which will help drive pumped storage 
projects and help America deploy an even wider array of clean, 
renewable power across the grid.

Preserving Tax-Exempt Financing for Municipalities. State and local 
governments and governmental entities, including public power 
utilities, have utilized municipal bonds as a financing tool for new 
infrastructure projects, including hydroelectric and other renewable 
energy projects. Historically, interest paid on municipal bonds is 
exempt from federal tax, which allows these entities to issue bonds at 
reasonable rates and assists in meeting their capital needs. NHA, on 
behalf of our public power utilities, believes the interest exclusion 
should be preserved. To do otherwise, would impose higher borrowing 
costs that will limit investment in critical infrastructure, including 
energy infrastructure like hydropower projects.

Once again, NHA appreciates this opportunity to discuss the importance 
of continued federal tax policy to the hydropower sector as a means to 
support project deployment.

                                 ______
                                 
                National Propane Gas Association (NPGA)

                      1899 L Street, NW, Suite 350

                          Washington, DC 20036

                            Tel 202-466-7200

                            Fax 202-466-7205

                            Web www.npga.org

Chairman Hatch and Ranking Member Wyden:

On behalf of the National Propane Gas Association (NPGA), I commend the 
Senate Finance Committee for holding this hearing, ``Energy Tax Policy 
in 2016 and Beyond.'' I submit these comments for the record, and 
appreciate the opportunity to discuss several sections of the tax code 
that have greatly helped propane gain acceptance as an alternative 
vehicle fuel.

NPGA is the national voice for the odorized propane gas industry. 
NPGA's nearly 3,000 member companies--the majority of which are small, 
family-owned businesses--fuel homes, businesses, and vehicles in all 50 
states and territories. But, it is propane's use as a vehicle fuel that 
has grown tremendously due to two important tax incentives: The 
Alternative Fuel Tax Credit and the Alternative Fuel Vehicle Refueling 
Property Credit.

Unfortunately, these two provisions are slated to expire at the end of 
2016. As the Committee discusses the merits of renewable and 
alternative energy tax incentives, I ask that you consider a long-term 
extension of these important credits.

Assisted by the demand generated by these two tax credits, 
technological innovation has created new and efficient uses for 
propane. This has been particularly true in vehicle technologies. 
Fleets around the country have increasingly turned to propane-fueled 
vehicles as an alternative to traditional gas and diesel vehicles. They 
are choosing propane for a variety of reasons, such as improved 
environmental and health benefits when compared to conventional fuels. 
For example, propane engines produce 12% less CO2 emissions, 
20% less NOX emissions, and 60% less CO emissions than 
gasoline engines. They also produce 80% less smog-producing hydrocarbon 
emissions than diesel engines.

These environmental and health benefits have encouraged the adoption of 
propane in a key marketplace--school buses. In addition to cleaner air, 
propane-powered buses are 50% quieter than their diesel counterparts. 
Transporting our nation's students in cleaner, quieter buses has been a 
positive development in school districts around the country.

Increased adoption of propane vehicles not only benefits the 
environment, but it also allows American companies to utilize a 
domestically produced fuel. Propane production--80% of which is a 
product of natural gas processing--is soaring as part of the boom in 
American natural gas and crude oil production. In fact, the United 
States is now a net exporter of propane, and domestic sources of 
propane are capable of handling 100% of our country's demand.

Accordingly, the increased use of propane as a vehicle fuel is helping 
create American jobs, making the United States more energy independent, 
and leading to the deployment of more environmentally friendly 
vehicles. Without the Alternative Fuel Tax Credit and the Alternative 
Fuel Vehicle Refueling Property Credit, these successes would have been 
dramatically more limited.

The Alternative Fuel Credit has served as the deciding factor for many 
companies who were on the fence about adopting an alternative fuel. The 
50 cents-per-gasoline gallon equivalent of propane has supported many 
fleets' decision to make the switch to propane. Unfortunately, 
uncertainty about the future of the credit has limited its 
effectiveness. Enacting into law a long-term extension of the 
Alternative Fuel Credit would help maximize propane's potential 
utilization as a vehicle fuel.

The Alternative Fuel Vehicle Refueling Property Credit has worked in 
conjunction with the Alternative Fuel Credit to spur growth in the 
propane industry. Since our country's energy refueling infrastructure 
is predominantly dedicated to conventional fuels, it has been 
instrumental in helping build a network of propane refueling stations. 
Additionally, it has incentivized fleets to have their own centralized 
refueling infrastructure onsite by reducing the initial costs of 
installation.

Again, thank you for holding this important hearing on energy related 
tax incentives. Thank you for allowing me to submit these comments for 
the record, and I look forward to discussing a long-term extension of 
these important credits with the Committee.

Sincerely,

Richard Roldan
President and Chief Executive Officer

                                 ______
                                 
                       The Pew Charitable Trusts

                       901 E St., NW, 10th Floor

                          Washington, DC 20004

The Honorable Orrin G. Hatch        The Honorable Ron Wyden
Chairman                            Ranking Member
Committee on Finance                Committee on Finance
219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
Washington, DC 20510                Washington, DC 20510

June 27, 2016

Dear Chairman Hatch and Ranking Member Wyden:

Thank you for your leadership in initiating a discussion of the 
direction and scope of U.S. energy tax policy. On behalf of the Pew 
Clean Energy Initiative, I urge your consideration and adoption of tax 
provisions that will help strengthen our nation's position in the 
burgeoning clean energy marketplace and our energy security.

Historically, tax policy has played a central role in encouraging U.S. 
energy innovation, production, deployment and trade. Some incentives 
have been in place for more than a century, encouraging the maturation 
of fossil resources, including coal, oil, and natural gas. Subsidies 
also helped spur the development of the nuclear industry in the United 
States. In recent years, tax incentives have advanced alternative 
energy sources like solar, wind, geothermal, fuel cells, and biomass. 
As a result, the country has a range of power options that make our 
electricity system more resilient, reliable, and affordable.

It is in our national interest to continue developing innovative 
technologies in order to remain competitive in the global energy 
economy. According to the International Energy Agency, electricity 
generation from renewables will surpass that from natural gas and 
double the amount derived from nuclear this year, becoming the second 
most important global energy source. Over a longer timeframe, Pew 
research projects that worldwide electric generating capacity from 
renewable sources will grow nearly sixfold by 2030. Companies and 
countries are turning to these resources because they enhance energy 
security, protect the environment, and grow new industries.

Clean energy represents a significant economic opportunity for U.S. 
innovators, entrepreneurs, manufacturers, project developers and 
investors. In 2014, $310 billion was invested worldwide in clean energy 
goods and services, growing almost 17 percent from 2013. By 2030, 
renewables will attract approximately $5 billion annually-or more than 
65 percent of private investment in global power generation. 
Unfortunately, U.S. competitiveness in the sector is only as certain as 
our policies.

The Pew Clean Energy Initiative has undertaken research and worked 
closely with industry to understand the challenges that businesses are 
facing and how these impact the United States' competitive position. 
Time and again, experts have cited policy uncertainty as the overriding 
impediment to clean energy investment and progress by businesses and 
investors. The inconsistent nature of U.S. tax incentives makes it 
challenging for our companies to develop the supply chains and business 
models they need to succeed and for investors to have the assurance 
they require to deploy capital. Our annual research tracking clean 
energy investment and deployment trends clearly demonstrates that 
policy matters. Those countries with consistent, long-term energy and 
tax policies are most likely to attract private investment.

We urge you to consider several key principles and tax initiatives in 
the short term in order to strengthen the United States' ability to 
capitalize on the emerging domestic and international clean energy 
markets in the long term:

First, reinforce existing incentives for clean energy technologies.

The Production Tax Credit and Investment Tax Credit, commonly referred 
to as the PTC and ITC respectively, have been cornerstones of U.S. 
energy policy for much of the past decade. These credits have helped 
stimulate investment, deployment, and manufacture of renewable and 
efficient products and processes, thereby driving down technology costs 
and encouraging deployment.

The Fiscal Year 2016 Consolidated and Further Continuing Appropriations 
Act, H.R. 2029, provided extensions of tax incentives for wind and 
solar power, to the exclusion of several other clean and efficient 
energy technologies that currently qualify under the ITC and are set to 
expire at the end of this year. These technologies also have a place in 
the future of the U.S. power generation mix and should be supported 
through policy.

The omnibus phased out the PTC for wind, under Section 45 of the 
Internal Revenue Code, over a period of 5 years. The bill also phased 
out the 30 percent ITC for solar power, both under the Section 48 
investment tax credit and Section 25D residential incentive. However, 
the omnibus bill did not extend incentives for other technologies 
listed in Section 48, such as combined heat and power (CHP), fuel 
cells, geothermal, microturbines and small wind property. Nor did it 
provide extensions for non-solar technologies in Section 25D, such as 
fuel cells, geothermal heat pumps and small wind property.

I urge you to act immediately to extend the ITC across the board and 
establish parallel tax treatment for the excluded technologies. These 
incentives are critical for reducing costs, allowing greater 
competition among all of our nation's energy sources, creating jobs, 
and diversifying our nation's energy mix.

Additionally we recommend that efficient industrial energy systems 
receive incentives that are on par with other clean and efficient 
systems accessing the ITC.

We must harness technologies that encourage power generation efficiency 
and resiliency, reduce pollution, and enhance productivity. Combined 
heat and power and waste heat to power (WHP) systems capture the wasted 
thermal output usually released into the atmosphere and use it to heat 
nearby buildings and/or to generate additional electricity. These units 
are typically fueled with natural gas, biomass, waste, wood, and 
sometimes coal. CHP and WHP systems can provide base load electricity 
generation with at least double the efficiency compared to typical grid 
power. If located on-site at a manufacturing facility, hospital, 
school, or residential building, these systems can also improve 
resiliency against power outages.

The ITC, as currently constructed, offers narrow capacity limits for 
CHP systems, disqualifying many worthy projects. We recommend that the 
ITC or any comparable credits in the future increase the credit from 10 
to 30 percent of the capital costs of a project, increase the project 
cap from the first 15 megawatts (MW) of the project to the first 25 MW, 
and eliminate the system-wide capacity cap. CHP currently supplies more 
than 82.7 gigawatts (GW), or 12%, of the nation's electricity capacity 
and, according to a Department of Energy study, there are 240.6 GW of 
additional capacity from this technology, almost three times the amount 
of capacity that is currently operational.

Furthermore, WHP installations that could monetize 10 GW of clean 
electricity, heating, and cooling capabilities are excluded from the 
current definition of qualifying technologies for the ITC. In early 
2015, the Senate Finance Committee approved S. 913, a bill championed 
by Senators Dean Heller and Tom Carper, as part of a package of tax 
policies. These provisions would have resolved this technical 
oversight. Unfortunately, it was not included with most of the rest of 
the package in the omnibus that became law. Since there is no fuel used 
in capturing waste heat, this technology should be included in future 
tax incentives at the same rate as other renewable and efficient 
competitors.

Additionally, the bipartisan POWER Act (S. 1516/H.R. 2657) would give 
CHP technologies parity with other clean and efficient power sources, 
remove restrictions that limit the full use of this efficient resource, 
and include WHP as a qualifying technology under the ITC. We urge you 
to include this measure as part of any legislation aimed at improving 
the U.S. tax system.

Finally, we recommend expanding Master Limited Partnerships (MLPs), to 
clean energy technologies.

A wide variety of economic, regulatory, and legal barriers favor 
incumbent technologies. These barriers threaten the ability of new 
companies to gain a competitive foothold, diminish consumer choice, and 
inflate the prices of emerging technologies. Government tax policy 
should help break down barriers to competition. Expanding MLPs to clean 
energy technologies is a critical way to create greater parity in the 
tax code among energy resources.

MLPs are business structures that allow taxation at the stakeholder 
instead of corporate level and provide greater access to low-cost 
capital. They are a proven mechanism for leveraging financing for the 
traditional power sector, having attracted more than $450 billion of 
investment to fossil fuel projects in the U.S. over the last 30 years. 
However, clean energy systems do not have access to these incentives, 
placing them at a financial disadvantage. Congress should pass the bi-
partisan MLP Parity Act (H.R. 2883) to extend MLPs to a broad suite of 
energy technologies, thereby allowing them to access a larger pool of 
private capital.

As Congress considers future, long-term energy tax policies, we 
encourage the Finance Committee to adopt provisions that promote 
domestic innovation and support promising new industries. A technology-
neutral approach to the tax code can ensure that clean, efficient, and 
resilient inventions have access to the same or similar tax treatment 
as those that currently exist today.

As the global demand for clean energy continues to rise, it is 
imperative that the U.S. maintain its leadership position by providing 
tax policies that help drive-down costs and ensure long-term certainty 
for the industry.

Thank you again for the opportunity to provide a statement for the 
record. We hope these recommendations give context to your work and 
demonstrate that the tax initiatives Congress adopts will shape 
America's economic, environmental, and energy future for many years and 
decades to come. We look forward to working with you as Congress 
considers policy measures that will improve the U.S. tax system for the 
energy industry.

Sincerely,

Phyllis Cuttino
Director, Clean Energy Initiative

                                 ______
                                 
                          PMH Associates, Inc.

                       1217 B North Church Street

                          Moorestown, NJ 08057

                   (856) 273-0554 Fax (856) 273-7701

                       http://pmh-associates.com/

June 13, 2016

RE: Section 179D Energy Efficient Commercial Buildings Deduction Should 
be Extended

Dear Chairman Hatch and Ranking Member Wyden:

We are writing to you today in regards to the Committee on Finance 
Hearing titled ``Energy Tax Policy in 2016 and Beyond.'' As you seek 
ways to grow our economy and create jobs, we strongly urge a multi-year 
extension of the Section 179D tax deduction for energy efficient 
commercial and multi-family buildings at the earliest opportunity 
before it expires on December 31, 2015.

Our company, PMH Associates, Inc. of Moorestown, New Jersey, employees 
19 people. Fifty-eight percent of our recent sales activity is 
generated by companies applying for this energy tax credit. As you can 
see, the success of our company and the livelihood of 19 families, is 
tied to the ability for companies to initiate energy efficiencies.

As you know, 179D directly supports two national priorities: Job 
Creation and Energy Independence. Section 179D was introduced into the 
tax code with the Energy Policy Act of 2005. It has been extended four 
times and will expire on December 31, 2016. Since the inception of 
179D, it has assisted thousands of building owners and tenants in 
retaining jobs and increasing profitability; it has also increased job 
creation in the trades, where energy efficiency retrofits create large 
numbers of high paying jobs for a labor pool that was particularly 
impacted by the economic downturn. At the same time, 179D helps reduce 
our nation's dependence on foreign oil, thereby increasing America's 
energy security.

JOBS

Energy efficiency projects require enormous skilled a semi-skilled work 
forces. By cost-justifying projects, EPAct therefore plays a direct 
role in supporting a major source of employment in our state.

Lighting retrofits require lighting designers, laborers to remove and 
dispose existing fixtures, distribution centers to store the new 
lighting material, laborers to stage the new material near the job site 
and electricians to install the new fixtures.

HVAC retrofits require engineers for project system design, substantial 
U.S. manufacturing activity (most HVAC equipment is heavy and made in 
the USA), U.S. steel procurement and HVAC mechanics to install.

The building envelope involves a wide variety of manufactured and 
workshop materials including roofs, walls, windows, doors, foundations, 
and insulation. In addition to the labor required to create these 
products, large numbers of roofers, carpenters, installers, and 
laborers are needed to handle the material and incorporate it into a 
building.

In addition, reduced building expenses allow for the retention of jobs 
on the building owners' end.

ENERGY SECURITY

Our nation's goal of becoming energy independent cannot be achieved 
through domestic oil and natural gas production alone. Energy 
efficiency is an untapped natural resource. Commercial Buildings 
represent 20% of our nation's energy use. ``Drilling'' for building 
energy efficiency is the least costly natural resource we have. For 
building owners, the up-front cost of retrofitting is expensive, but 
with utility and government assistance working together with building 
owners, energy use reductions between 20% and 50% can be obtained.

Commercial building energy efficiency is a critical way by which 
utilities can meet newly established national guidelines for carbon 
emission reductions. By improving the cost benefit equation of an 
energy efficiency retrofit, Section 179D thereby plays an important 
role in helping utilities comply with national policy while 
simultaneously reducing the need for the construction of costly new 
power plants.

LOOKING AHEAD

Today, taxpayers and industry understand how to prospectively use 179D 
to achieve the greatest possible energy reduction far better than they 
did 10 years ago. This extension will empower our country to realize 
major efficiency gains and will not represent a material cost to 
Treasury. With the use of dynamic scoring, the efficiency gains will 
increase taxable income over time for commercial building owners, and 
thereby reducing Treasury's losses from accelerating the depreciation. 
The tax collected from added profits obtained through energy savings 
quickly outweigh the foregone tax revenue created by 179D.

CONCLUSION

Section 179D supports a key investment in the American economy; energy 
efficiency. Energy efficiency is a force-multiplying investment that 
saves energy, saves money, and sustains and creates American jobs. 
Comprehensive energy efficiency upgrades drastically improve the 
reliability and performance of the nation's building stock, while 
reducing demand on our energy supply. We urge you to include multi-year 
extension of EPAct 179D in upcoming legislation.

Sincerely,

Peter M. Honeyford, President
[email protected]

                                 ______
                                 
                             RSC Architects

                  3 University Plaza Drive, Suite 600

                          Hackensack, NJ 07601

                            t: 201-941-3040

                            f: 201-941-5426

June 14, 2016

Senate Committee on Finance
Dirksen Senate Office Building
Washington, DC 20510-6200

RE: Section 179D Energy Efficient Commercial Buildings Deduction Should 
Be Extended

Dear Chairman Hatch and Ranking Member Wyden:

We are writing to you today in regards to the Committee on Finance 
Hearing titled ``Energy Tax Policy in 2016 and Beyond.'' As you seek 
ways to grow our economy and create jobs, we strongly urge a multi-year 
extension of the Section 179D tax deduction for energy efficient 
commercial and multifamily buildings at the earliest opportunity before 
it expires on December 31, 2016.

Our Company is a full-service, 36-person architectural firm that has 
been providing programming, planning, external and interior design, and 
construction administration for the last 44 years. The firm has been 
employing sustainable materials and designs into all of our projects 
since its inception in 1971. An example is our LEED certified North 
Hudson Community College North Campus facility. The energy savings 
realized on this facility will benefit the taxpayers for years to come 
and reduce our energy requirements.

As you know, 179D directly supports two national priorities: Job 
Creation and Energy Independence. Section 179D was introduced into the 
tax code with the Energy Policy Act of 2005. It has been extended four 
times and will expire on December 31, 2016. Since the inception of 
179D, it has assisted thousands of building owners and tenants in 
retaining jobs and increasing profitability; it has also increased job 
creation in the trades, where energy efficiency retrofits create large 
numbers of high paying jobs for a labor pool that was particularly 
impacted by the economic downturn. At the same time, 179D helps reduce 
our nation's dependence on foreign oil, thereby increasing America's 
energy security.

Jobs

Energy efficiency projects require enormous skilled and semi-skilled 
work forces. By cost justifying projects, EPAct therefore plays a 
direct role in supporting a major source of employment in our state.

Lighting retrofits require lighting designers, laborers to remove and 
dispose existing fixtures, distribution centers to store the new 
lighting material, laborers to stage the new material near the job site 
and electricians to install the new fixtures.

HVAC retrofits require engineers for project system design, substantial 
U.S. manufacturing activity (most HVAC equipment is heavy and made in 
the U.S.), U.S. steel procurement and HVAC mechanics to install.

The building envelope involves a wide variety of manufactured and 
workshop materials including roofs, walls, windows, doors, foundations 
and insulation. In addition to the labor required to create these 
products, large numbers of roofers, carpenters, installers and laborers 
are needed to handle the material and incorporate it into a building.

In addition, reduced building expenses allow for the retention of jobs 
on the building owners' end.

Energy Security

Our nation's goal of becoming energy independent cannot be achieved 
through domestic oil and natural gas production alone. Energy 
Efficiency is an untapped natural resource. Commercial Buildings 
represent 20% of our nation's energy use ``Drilling'' for building 
energy efficiency is the least costly natural resource we have. For 
building owners, the up-front cost of retrofitting is expensive, but 
with utility and government assistance working together with building 
owners, energy use reductions between 20% and 50% can be obtained.

Commercial building energy efficiency is a critical way by which 
utilities can meet newly established national guidelines for carbon 
emission reductions. By improving the cost benefit equation of an 
energy efficiency retrofit, Section 179D thereby plays an important 
role in helping utilities comply with national policy while 
simultaneously reducing the need for the construction of costly new 
power plants.

Looking Ahead

Today, taxpayers and industry understand how to prospectively use 179D 
to achieve the greatest possible energy reduction far better than they 
did 8 years ago. This extension will empower our country to realize 
major energy efficiency gains and will not represent a material cost to 
Treasury. With the use of dynamic scoring the efficiency gains will 
increase taxable income over time for commercial building owners, and 
thereby reducing Treasury'slosses from accelerating the depreciation. 
The tax collected from added profits obtained through energy savings 
quickly outweigh the foregone tax revenue created by 179D.

Conclusion

Section 179D supports a key investment in the American economy: energy 
efficiency. Energy efficiency is a force-multiplying investment that 
saves energy, saves money, and sustains and creates American jobs. 
Comprehensive energy efficiency upgrades drastically improve the 
reliability and performance of the nation's building stock, while 
reducing demand on our energy supply. We urge you to include multi-year 
extension of EPAct 179D in upcoming legislation.

Sincerely,

John Capazzi, AIA
President

                                 ______
                                 
                   Letter Submitted by Joseph Shepps

Senate Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

Dear Mr. Chairman and Committee Members:

After reviewing the most recent Senate Finance Committee hearing on 
energy tax policy, I grew frustrated hearing the arguments between 
parties on how to move forward on tax policy. Even during times when 
our country is at political odds, Congress should be able to push aside 
party lines and come together in agreement on comprehensive tax 
reform--an issue that affects businesses and households on a daily 
basis.

As a concerned citizen, I am troubled that Congress cannot come 
together to create a bipartisan effort over an issue that is imperative 
to the United States.

Another issue that I found frustrating to listen to during this hearing 
was how America's tax system plays industries against one another. Our 
system should not be in the business of picking winners and losers of 
industries, in which some sectors are politically favored and others 
face unfair discrimination.

A 21st-century tax system is needed for our 21st-century economy. 
Comprehensive tax reform is an issue that must be addressed immediately 
in order for American businesses to compete fairly and without bias in 
global markets. Otherwise businesses, and the jobs they provide, will 
move to an economy, which has a more competitive corporate tax rate and 
an up-to-date tax system.

I encourage Congress to act upon the urgent need for comprehensive tax 
reform that treats all sectors equally. Set aside party bickering and 
come together to work towards a new tax system that reflects modern 
needs.

Sincerely,

Joseph Shepps

                                 ______
                                 
                   Letter Submitted by Brian Spalding

Senate Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

Dear Mr. Chairman and Committee Members:

After listening to the most recent Senate Finance Committee hearing on 
energy tax policy, I felt the need to express my opinions on tax reform 
as a Pennsylvanian and a manufacturer. The status of our nation's tax 
system is appalling. Not only is it outdated, but certain d interest 
groups and critics have used the tax code to create competition between 
industries that result in an unfair and biased market system.

We are a nation that is lagging behind in creating a 21st-century tax 
system. We need policy that encourages growth, free and fair 
competition, and opportunity for all American businesses. Starting with 
a complete overhaul of our tax system, America needs a clean slate to 
build upon in order to boost economic growth.

I'm tired of seeing a system that plays industries against each othe--
every sector should have the same opportunities as the next, and it's 
not government's role to pick winners and losers with tax policy. With 
the upcoming release of a comprehensive tax reform blueprint, I hope to 
see these changes made in order to build a better system for our 
businesses.

Sincerely,

Brian Spalding

                                 ______
                                 
                              Wendel, LLC

                      Centerpointe Corporate Park

                       375 Essjay Road, Suite 200

                        Williamsville, NY 14221

                              716-688-0766

                      https://wendelcompanies.com/

June 22, 2016

Senate Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

RE: Section 179D Energy Efficient Commercial Buildings Deduction Should 
Be Extended

Dear Chairman Hatch and Ranking Member Wyden:

We are writing to you today in regards to the Committee on Finance 
Hearing titled ``Energy Tax Policy in 2016 and Beyond.'' As you seek 
ways to grow our economy and create jobs, we strongly urge a multi-year 
extension of the Section 179D tax deduction for energy efficient 
commercial and multifamily buildings at the earliest opportunity before 
it expires on December 31, 2016.

Our Company, Wendel, is a national design and construction firm 
headquartered in Williamsville, NY with 238 employees. One of our 
firm's specialties is in the area of energy efficiency. We are 
recognized by the National Association of Energy Service Companies 
(NAESCO) as an accredited Energy Services Company (ESCO). As a vendor-
independent company, Wendel works to solve our clients' energy problems 
through the implementation of cost-effective capital improvement 
projects. Our Energy Services team uses their engineering and 
construction expertise to develop and deliver solutions that are both 
environmentally friendly and economically responsible. We employ a 
staff of licensed Professional Engineers (PE), Certified Energy 
Managers (CEM) and Leadership in Energy and Environmental Design 
Accredited Professionals (LEED AP) to provide innovative solutions in 
energy management and system design.

The 179D tax deduction has greatly benefited our company. As designers 
of energy-efficient projects for government-owned facilities, the tax 
incentive helps to grow our business, keep our PEs, CEMs and LEED APs 
employed, while also supporting our mission to be stewards of the 
environment in how we operate as a company and how we pursue our energy 
efficiency projects.

As you know, 179D directly supports two national priorities: Job 
Creation and Energy Independence. Section 179D was introduced into the 
tax code with the Energy Policy Act of 2005. It has been extended four 
times and will expire on December 31, 2016. Since the inception of 
179D, it has assisted thousands of building owners and tenants in 
retaining jobs and increasing profitability; it has also increased job 
creation in the trades, where energy efficiency retrofits create large 
numbers of high paying jobs for a labor pool that was particularly 
impacted by the economic downturn. At the same time, 179D helps reduce 
our nation's dependence on foreign oil, thereby increasing America's 
energy security.

Jobs

Energy efficiency projects require enormous skilled and semi-skilled 
work forces. By cost-justifying projects, EPAct therefore plays a 
direct role in supporting a major source of employment in our state.

Lighting retrofits require lighting designers, laborers to remove and 
dispose existing fixtures, distribution centers to store the new 
lighting material, laborers to stage the new material near the job site 
and electricians to install the new fixtures.

HVAC retrofits require engineers for project system design, substantial 
U.S. manufacturing activity (most HVAC equipment is heavy and made in 
the U.S.), U.S. steel procurement and HVAC mechanics to install.

The building envelope involves a wide variety of manufactured and 
workshop materials including roofs, walls, windows, doors, foundations 
and insulation. In addition to the labor required to create these 
products, large numbers of roofers, carpenters, installers and laborers 
are needed to handle the material and incorporate it into a building.

In addition, reduced building expenses allow for the retention of jobs 
on the building owners' end.

Energy Security

Our nation's goal of becoming energy independent cannot be achieved 
through domestic oil and natural gas production alone. Energy 
Efficiency is an untapped natural resource. Commercial Buildings 
represent 20% of our nation's energy use. ``Drilling'' for building 
energy efficiency is the least costly natural resource we have. For 
building owners, the up-front cost of retrofitting is expensive, but 
with utility and government assistance working together with building 
owners, energy use reductions between 20% and 50% can be obtained.

Commercial building energy efficiency is a critical way by which 
utilities can meet newly established national guidelines for carbon 
emission reductions. By improving the cost benefit equation of an 
energy efficiency retrofit, Section 179D thereby plays an important 
role in helping utilities comply with national policy while 
simultaneously reducing the need for the construction of costly new 
power plants.

Looking Ahead

Today, taxpayers and industry understand how to prospectively use 179D 
to achieve the greatest possible energy reduction far better than they 
did 8 years ago. This extension will empower our country to realize 
major energy efficiency gains and will not represent a material cost to 
Treasury. With the use of dynamic scoring the efficiency gains will 
increase taxable income over time for commercial building owners, and 
thereby reducing Treasury's losses from accelerating the depreciation. 
The tax collected from added profits obtained through energy savings 
quickly outweigh the foregone tax revenue created by 179D.

Conclusion

Section 179D supports a key investment in the American economy: energy 
efficiency. Energy efficiency is a force-multiplying investment that 
saves energy, saves money, and sustains and creates American jobs. 
Comprehensive energy efficiency upgrades drastically improve the 
reliability and performance of the nation's building stock, while 
reducing demand on our energy supply. We urge you to include multi-year 
extension of EPAct 179D in upcoming legislation.

Sincerely,

Stewart Haney, President and CEO

                                   