Committee Passes Grassley’s Energy Tax Incentives Package
The Finance Committee today passed the chairman's modification to the Energy Policy Tax Incentives Act of 2005on a voice vote. The committee didn't adopt any amendments. The Joint Committee on Taxation has posted:
JCX-46-05: Description Of The Chairman's Modification To The Provisions of The "Energy Policy Tax IncentivesAct Of 2005" http://www.house.gov/jct/x-46-05.pdf
JCX-47-05: Estimated Revenue Effects Of The Chairman's Amendment In The Nature OfASubstitute To The"Energy Policy Tax Incentives Act Of 2005," Scheduled For Markup By The Committee On Finance On June 16,2005
Opening Statement of Chairman Grassley
Committee Consideration of the Energy Policy Tax Incentives Act of 2005
Thursday, June 16, 2005
On Tuesday, June 14th, I put forward the chairman’s mark on the Energy Policy Tax Incentives Act of 2005.This mark was a bipartisan product formulated with Senator Baucus, after consultation with all members of theFinance Committee. This package, once reported out of the Finance Committee, will be offered as an amendmentto the underlying energy bill. In my estimation, the Energy Policy Tax Incentives Act reflects a fair balance of theinterests of the members and effectively supports the development of energy production from renewable andenvironmentally beneficial sources. I’d like to briefly describe these tax incentives that will become part of the energybill. For years, I have worked to decrease our reliance on foreign sources of energy and accelerate and diversifydomestic energy production. I believe public policy ought to promote renewable domestic production that usesrenewable energy and fosters economic development.
Specifically, the development of alternative energy sources should alleviate domestic energy shortages andinsulate the United States from the Middle East-dominated oil supply. In addition, the development of renewableenergy resources conserves existing natural resources and protects the environment. Finally, alternative energydevelopment provides economic benefits to farmers, ranchers and forest land owners, such as those in Iowa who havelaunched efforts to diversify the state’s economy and to find creative ways to extract a greater return from abundantnatural resources.
Section 45 of the Internal Revenue Code currently provides a production tax credit for electricity producedfrom renewable sources including wind, biomass, and other renewables. The Energy Policy Tax Incentives Actextends the section 45 credit for three years. I have been a constant advocate of alternative energy sources. Sincethe inception 13 years ago of the wind energy tax credit, wind energy production has grown considerably. Inaddition, wind represents an affordable and inexhaustible source of domestically produced energy. Extending thewind energy tax credit through 2008 would support the tremendous continued development of this clean, renewableenergy source.
The Finance Committee’s amendment supports a maturing green energy source. Experts have establishedwind energy’s valuable contributions to maintaining cleaner air and a cleaner environment. Every 10,000 megawattsof wind energy produced in the United States can reduce carbon monoxide emissions by 33 million metric tons byreplacing the combustion of fossil fuels.
In addition, this proposal helps to empower our rural communities to reap continued economic benefits. Theinstallation of wind turbines has a stimulative economic effect because it requires significant capital investment whichresults in the creation of jobs and the injection of capital into often rural economic areas.
In addition, for each wind turbine, a farmer or rancher can receive more than $2,000 per year for 20 yearsin direct lease payments. Iowa’s major wind farms currently pay more than $640,000 per year to land owners, andthe development of 1,000 megawatts of capacity in California, for example, would result in annual payments ofapproximately $2 million to farm and forest landowners in that state.
Environmentally-friendly biomass energy production is a proven, effective technology that generatesnumerous waste management public benefits across the country. The biomass definition covers open loop biomass.Open loop biomass includes organic, non-hazardous materials such as saw dust, tree trimmings, agriculturalbyproducts and untreated construction debris. The development of a local industry to convert biomass to electricityhas the potential to produce enormous economic benefits and electricity security for rural America. In addition,studies show that biomass crops could produce between $2 billion and $5 billion in additional farm income forAmerican farmers. As an example, over 450 tons of turkey and chicken litter are under contract to be sold for anelectricity plant using poultry litter being built in Minnesota. This is a win-win; not only do the farmers not have topay to dispose of this stuff, they get paid to sell the litter. You could find similar examples throughout the Midwestand other farm regions across America. Finally, marginal farmland incapable of sustaining traditional yearlyproduction is often capable of generating native grasses and organic materials that are ideal for biomass energyproduction. Turning tree trimmings and native grasses into energy provides an economic gain and serves animportant public interest.
I am very proud of a long history of supporting new alternative energy concepts in the production ofelectricity. The chairman’s mark, as modified, continues that commitment. By using animal waste as an energysource, an American livestock producer can reduce or eliminate monthly energy purchases from electric and gassuppliers and provide excess energy for distribution to other members of the community.
Swine and bovine energy is truly green electricity, as it also furthers environmental objectives. Specifically,anaerobic digestion of manure improves air quality because it eliminates as much as 90 percent of the odor fromfeedlots and improves soil and water qualityby dramatically reducing problems with waste run-off. Maximizing farmresources in such a manner may prove essential to remain competitive in today’s livestock market. In addition, thetechnology used to create the electricity results in the production of a fertilizer product that is of a higher quality thanunprocessed animal waste.
The Energy Policy Tax Incentives Act is important to agriculture, rural economies and small business, andit is also important for domestic supply and energy independence. Rural America can play an important part in energyindependence and domestic supply. In addition to the production of electricity, this amendment includes additionaltax incentives for the production of alternative fuels from renewable resources. We continue the small producerscredit for the production of ethanol. We continue the incentive for the production of biodiesel. Biodiesel is a naturalsubstitute for diesel fuel and can be made from almost all vegetable oils and animal fats. Modern science is allowingus to slowly substitute natural renewable agricultural sources for traditional petroleum. It gives us choices for thefuture and it can relieve the strain on the domestic oil production to fulfill those important needs that agriculturalproducts cannot serve.
Renewable fuels like ethanol and biodiesel will improve air quality, strengthen national security, reduce thetrade deficit, decrease dependence on the Middle East for oil, and expand markets for agricultural products. TheEnergy Policy Tax Incentives Act amendment is a balanced package. I would like to note, with some satisfaction,that today we have the opportunity to do the people’s business in the way they want us to do business. This energytax incentives amendment was crafted in a bipartisan wayon an important initiative in a waythat reflects the diversityof our views and the diversity of our nation.
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