The U.S. Senate has blocked a bipartisan tax extenders package that includes a two-year extension of the production tax credit (PTC) and the investment tax credit (ITC) election for wind. There is hope, though, that a feud between Senate Republicans and Democrats can be resolved and progress will continue.
In a 53-40 procedural vote Thursday, Senate Republicans voted not to move the bill containing the tax extenders package forward. Sixty votes were necessary, and only one Republican voted yea. The Republicans blocked the bill because of a battle with Democrats regarding whether the former party will be allowed to propose amendments.
The Senate Finance Committee had passed the tax extenders package, known as the EXPIRE Act, in April before sending it to the full Senate. Although the legislation did not originally include a PTC extension, the incentive was later included as an amendment right before the Finance Committee's markup hearing. The PTC expired on Dec. 31, 2013, and the legislation would retroactively extend it through Dec. 31, 2015. In other words, wind projects that start construction this year or by the end of 2015 would be eligible to take advantage of the $0.023/kWh incentive. In addition, the bill extends wind developers' option to choose a 30% ITC in lieu of the PTC. Overall, the package also includes about 50 other expired U.S. tax breaks.
U.S. Sen. Michael Bennet, D-Colo., a strong supporter of wind power, has issued a statement following Thursday's vote to block the extenders package.
"This is yet another example of Washington not doing the work that Coloradans and the American people expect us to do," Bennet says. "This tax extenders bill was approved by the Senate Finance Committee with strong bipartisan support. Coloradans and the American people deserve better.
"The wind tax credit is an economic driver for Colorado's diverse energy industry," he continues. "It supports thousands of jobs up and down the supply chain. Delaying this extension risks the same type of economic damage we experienced that last time the credit was allowed to expire. We are committed to getting this done and will continue to look for every possible avenue [to] extend the PTC and ITC."
According to a Bloomberg Businessweek report, Senate Finance Committee Chairman Ron Wyden, D-Ore., plans to work with Republicans on an agreement and revive the bill on the Senate floor next week.
Orrin Hatch, R-Utah, the Senate Finance Committee's ranking member, also has indicated he will work with Wyden. "This is a bill that virtually everybody in this body wants, to a more or less degree," he said, according to Bloomberg. But Hatch did note that any agreement must include both political parties' right to make amendments to the bill.
David Burton, a partner at law firm Akin Gump Strauss Hauer & Feld, believes the bill will eventually pass both the Senate and the House, but not until after the midterm elections in November.
"This is definitely not the end," he says. "After we get through the elections, these political grandstanding votes over amendments unrelated to the tax extenders will be over, and during the lame duck session, politicians will be willing to do the right thing for the country and pass the extenders."
Mickey Leibner, government affairs advisor at law firm Mayer Brown, agrees.
‘The developments in the Senate yesterday were the latest example of a tax credit that provides jobs and spurs economic development across the country being held hostage for purely partisan reasons,’ says Leibner. ‘Of course, the process will continue, and I'm optimistic that the PTC's many supporters on both sides of the aisle will soon find a way to come together."
As the U.S. wind industry learned during the last battle to get the PTC extended, a so-called "lame duck Congress" approval could still halt progress. Last year, thanks to PTC uncertainty, the U.S. wind sector installed little more than 1 GW – representing a 92% drop from a record year in 2012.
"Ultimately, this start-and-stop way of extending the credit, as we've seen over the past few years, is quite harmful to the industry writ large," comments Leibner. "These projects take years to plan, permit and implement, and companies simply cannot responsibly do so if they do not know whether the PTC will even exist next year.’
Nonetheless, wind industry stakeholders believe that the EXPIRE Act is the best chance for a PTC extension. "The extenders bill is the only tax legislative vehicle on the horizon for 2014," Burton explains.
In fact, during the American Wind Energy Association's (AWEA) recent WINDPOWER Conference and Exhibition, AWEA CEO Tom Kiernan urged the industry to take action and call their legislators prior to the Senate's vote.
‘We are at a crossroads,’ Kiernan said. ‘We need to get the PTC extended.’
Following the Senate's Thursday vote to block the extenders package, AWEA has again called on the wind industry to reach out to lawmakers and lobby for the PTC.Â
Installation numbers aside, Burton suggests that if the PTC is not extended, U.S. factories and associated jobs are also at risk.
"The wind industry has done a great job of manufacturing a large percentage of wind turbine parts domestically, and that has created jobs and economic opportunity in the U.S.," he explains. Without the PTC, though, he says it would prove challenging for manufacturing plants to export parts and maintain job numbers.
"If we're not going to use the turbine parts here, it's not really feasible to export them because transportation costs make it uncompetitive. If we want to keep those jobs and keep those factories in the U.S., we need a PTC extension."
According to AWEA statistics, a permanent expiration of the wind PTC could cost as many as 37,000 jobs across the entire U.S. industry.
