U.S. Congress to look at $21B energy tax package

Two U.S. lawmakers said today they plan to introduce a new energy tax package that offers $21 billion in incentives for electricity infrastructure, carbon capture, renewable energy, electric vehicles, and energy efficiency.

Senate Finance chairman Max Baucus and House Ways and Means chairman Charles Rangel said the House is expected to vote on the package as part of the larger energy bill this week.

If all goes well, the Senate will take a look at the bill next week.

As with an earlier proposal passed by the House in August (see What's next for the energy bill?), the incentives would be largely funded by repealing tax breaks for oil and gas companies. But this latest package would pull back $13 billion, down from the $16 billion in tax incentives that the earlier House bill had proposed to take away from oil and gas.

Under the latest proposal, the tax repeal would only affect the domestic manufacturing incentive for the top five integrated producers, while freezing the deduction at 6 percent for all others in the sector.

Congress is attempting to work out the differences between the House and Senate versions of an energy bill before the end of the year.

The number of days the lawmakers have left depends on how quickly they wrap up the remaining items on the agenda, said Mathew Beck, spokesman for the House Ways and Means committee.

"Some are suggesting we could be out as early as the 14th or 15th, and some folks are looking at it and saying, 'Well, we could go into the week before Christmas or the weekend before Christmas," said Beck.

House speaker Nancy Pelosi recently released a compromise on vehicle fuel standards which would require automakers to achieve a fleet average of 35 miles per gallon on their cars and light trucks by 2020, a 40 percent reduction from current standards (see U.S. lawmakers reach deal on CAFE standards).

The Senate included a similar standard in its version of the energy bill that it passed in June.

Beck said that negotiations on the energy bill in both chambers have included Republicans and Democrats.

"I don't want to say that it will be unanimous support, but I think that people expect that there will be strong support for provisions in the bill from both sides," he said.

Battling out the differences in the Senate and House versions may be the least of the lawmakers' problems, as the White House has threatened a veto over the earlier tax package, saying it could impede the development of domestic oil and gas production at a time when supplies are constrained and commodity costs are rising.

"We certainly hope the marriage of the package will eliminate the threat of a veto," said Beck.

Some of the incentives in today's package include a $6.6 billion extension of a renewable energy production tax credit for four years, through 2012. That would cover wind, biomass, geothermal, small irrigation hydropower, landfill gas, and trash combustion facilities.

The tax credit also includes a new category for plants that generate electricity from wave and tidal power.

And they didn't forget solar. Power from the sun would fall under the business solar, fuel cell, and microturbine investment tax credit, which extends the 30 percent investment tax credit for solar and fuel cells, and the 10 percent credit for microturbines for eight years, through 2016.

A residential energy-efficient tax credit for solar and fuel cells would also get an extension, running for another six years, through 2014.

Earlier this month, foreign and domestic solar CEOs said they expect to make some big expansions in the U.S. if the solar tax credits are extended (see Solar CEOs see light in U.S. energy bill).

The energy tax package also gives a boost to the investment tax credit for clean coal facilities, providing an additional $1.5 billion for clean coal electricity projects, and an additional $500 million for clean coal industrial gasification projects.

Plug-in electric vehicles are in there too, with a new credit of $3,000 per car.

For biofuels, cellulosic ethanol gets a new production tax credit of up to $1.01 per gallon. A tax credit for biodiesel would be extended for two years, and an ethanol incentive would be reduced by 5 cents in the first year after 7.5 billion gallons of ethanol are produced.

In 2006, 4.9 billion gallons of ethanol were produced in the U.S., with 4.6 billion gallons being made through September of this year, according to the Renewable Fuels Association.