[Congressional Record Volume 141, Number 125 (Monday, July 31, 1995)]
[Extensions of Remarks]
[Pages E1563-E1564]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


         THE IMPORTANCE OF SECTION 29 TO LANDFILL GAS PROJECTS

                                 ______


                         HON. NANCY L. JOHNSON

                             of connecticut

                    in the house of representatives

                         Monday, July 31, 1995
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I am introducing today a 
bill to extend a tax credit in section 29 of the Internal Revenue Code 
for producing gas from biomass or synthetic fuels from coal. The credit 
expires at the end of next year. My bill would extend it for another 4 
years through the year 2000.
  This tax credit was originally enacted in 1980 in the aftermath of 
the oil embargo as an inducement for Americans to look for fuel in 
unusual places. The country had just gone through oil shortages, long 
lines at gasoline stations, spiralling inflation, and record-high 
interest rates driven by the increase in energy prices, followed by a 
deep recession. We were determined not be be held hostage again. To 
this end, Congress enacted a series of measures intended to use what 
fuel we have more efficiently and to give business incentives to tap 
sunlight, wind, geothermal fluid, biomass, and similar resources for 
fuel.
  The section 29 tax credit was part of the strategy. It was a credit 
of $3 for the equivalent of each barrel of oil in energy content 
produced from a list of unconventional fuels. The list included gas 
from Devonian shale, tight sand formations, coal seams, geopressured 
brine and biomass, and synethetic fuels from coal. None of these fuels 
could be economically produced without the credit. Congress provided 
for a phaseout of the credit if oil prices ever reached high enough 
levels again so that the market would produce them on its own. Both the 
amount of the credit and the phaseout prices are adjusted each year for 
inflation.
  The credit was originally scheduled to expire in 1989. It has been 
extended three times.
  The last time--in 1992--Congress drastically cut back the list of 
fuels that qualify to only two: gas from biomass and synthetic fuel 
from coal. An example of gas from biomass is methane produced by 
decomposing garbage at landfills.
  To a degree, the logic for continuing the credit shifted by 1992. In 
the case of landfill gas, the credit produced important environmental 
benefits by collecting a dangerous greenhouse gas that might otherwise 
be released into the atmosphere. This was on top of tapping a 
potentially useful fuel that was otherwise going to waste. In the case 
of synthetic fuels from coal, the country has tremendous coal reserves, 
but coal can be a dirty fuel and there was a desire to continue efforts 
to develop coal-based fuels as an alternative to burning straight coal.
  Why extend the credit again? My main interest is in seeing an 
incentive remain on the books to tap methane gas at landfills. We still 
are not doing enough in this area.
  Methane gas at landfills is a serious health and safety hazard. It 
must find an outlet or it can explode. During the 1980's, there were 
more than two dozen life-threatening explosions and at least three 
deaths at U.S. landfills.
  There are two possible outlets for landfill gases. Gas can migrate 
underground to adjoining properties, where it can kill or stunt 
vegetation by displacing oxygen from the ground. Alternatively, it can 
escape into the atmosphere. Contaminants in the gas contribute to air 
pollution and mix with sunlight to create smog.
  Landfill operators control the gas either by installing so-called 
passive systems, like trenches, barriers and vents to prevent gas from 
migrating underground and to give it an outlet into the atmosphere, or 
by installing so-called active systems where the gas is pumped to the 
surface and either flared, vented, or collected for use as a fuel.
  Use as fuel is still rare. There are approximately 6,000 landfills in 
the United States. At the end of 1990, gas was geing collected for fuel 
at just 97. In 1995, the figure is still only 143.
  Last year, the U.S. Environmental Protection Agency created a special 
Landfill Methane Outreach Program in an effort to encourage more 
collection of landfill gas for use as fuel. Methane is a greenhouse gas 
that contributes to global warming. It is the second largest 
contributor to global warming after carbon dioxide, and landfills are 
the single largest source of methane emissions, accounting for more 
than a third of total methane.
  Greenhouse gases are expected to increase by 14.5 percent during the 
1990's. The Clinton administration committed in April 1993 to hold 
greenhouse gas emissions to 1990 levels. The Landfill Methane
 Outreach Program is an effort to avert this increase. EPA is preparing 
a report to Congress on barriers to landfill gas projects, it has set 
up a hotline to cut through redtape, and it is in the process of 
signing cooperative agreements with States and utilities to encourage 
more landfill gas production.

  Air pollution officials--not just at EPA but also at the State and 
local levels--are eager to see the tax credit extended. The credit is 
just starting to have an effect at landfills. Most landfill owners have 
only recently become aware of it, and the pace of landfill gas 
development is increasing noticeably. It took almost 15 years to get 
the word out. There was almost a 50-percent increase in landfill gas 
projects in the last 5 years. The credit needs more time to reach its 
potential.
  EPA estimates that approximately 750 of the 6,000 landfills in the 
United States are candidates for landfill gas production. The experts 
believe it will not happen without the credit.
  My bill would do four things.
  First, it would extend the credit. The credit is currently scheduled 
to expire for projects placed in service after December 1996. Under the 
bill, this deadline would be pushed back 4 years through the year 2000.
  Second, it would push back the so-called expiration date for the 
credit by a commensurate number of years. Under current law, landfill 
gas projects must be in service by next year, but if they meet this 
deadline, then they qualify for tax credits on the gas produced through 
the current expiration date, 2007. My bill would push back the 
expiration date by 4 years through 2011.
  Third, my bill would eliminate a complication concerning expiration 
dates. There are two different expiration dates in the statute 
currently. The credit expires for pre-1993 projects in 2002. It expires 
for more recent projects in 2007. My bill would collapse these dates 
into a single expiration date of 2011 for all projects. There is a 
misconception that having made an investment to get a landfill gas 
project off the ground, the developer will continue producing gas after 
the credit expires. Many projects will not. Landfill gas production is 
not economic at most sites without the credit. Production will case, 
notwithstanding the capital investment the developer made to get the 
project going initially, because he cannot afford to operate at a loss. 
In addition, there are continuing capital costs that must be made to 
keep a project operating. Landfills expand. Garbage shifts underground. 
Pipes that have been put underground to collect the gas break or bend 
and new ones must be installed.
  Finally, my bill would make a technical change in section 29 that, at 
a 1994 House Ways and Means Committee hearing, the Treasury Department 
said it does not oppose. To qualify for section 29 tax credits today, 
the person producing the gas must sell it to an unrelated party. The 
reason for this requirement is obscure. Most landfill gas is used to 
generate electricity for sale to the local utility. Landfill gas 
projects are structured currently so that ownership of the gas 
collection equipment is in different hands than the electric generating 
equipment. It would be simpler if the producer of the gas could use it 
himself to generate the electricity. My bill would allow him to do just 
that. The bill would treat the unrelated-party sale requirement as 
having been met in cases where the producer uses the gas to generate 
electricity which is sold to an unrelated party.
  The Ways and Means Oversight subcommittee, which I chair, held a 
hearing on May 9, 1995, about whether to extend certain expiring tax 
benefits, including the section 29 credit. I look forward to extending 
the credit later this year before work on new landfill gas projects 

[[Page E 1564]]
grinds to a halt because developers are worried there is not enough 
time to get them into service.


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