Year-end bill to impact energy industry for years to come

February 3, 2016 By    
Author: Rambling Traveler / photo on flickr

Author: Rambling Traveler / photo on flickr

Several agreements were reached that will impact the energy industry for years to come following the completion of the first session of the 114th Congress.

Among the agreements Congress passed is H.R. 2029, a bill to fund the federal government for 2016 and bring tax relief to households, small businesses and families, as well as many special interests.

Not surprisingly, the bill – with $1.1 trillion in spending – had something for everyone. This allowed most legislators to support the bill while still giving them political cover to object to certain parts they did not like. That’s the nature of political compromise these days, especially as Congress has not been able to do its most basic work: fund the government through the annual appropriations process. It always says it will, but that rarely happens.

While Republican leaders avoided a government shutdown by passing the bill, they also included a $622 billion tax package that is not paid for through corresponding budget offsets or new revenue.

Republicans insist these “tax extenders,” or credits, will stimulate the economy beyond the loss of revenue. Unfortunately, the evidence for their claim is not as clear as the GOP would have us believe.

Democrat support of the bill centers around household tax credits they see as providing economic security for the middle class, a legacy issue for President Obama and a linchpin in the 2016 Democratic platform. As a result of the negotiations, two critical tax benefits for Democrats – the earned income tax credit and the child tax credit – were made permanent. No longer will there be a fight over whether to extend them.

In a win for the oil industry and Republicans, Congress included a repeal of the ban on domestic oil exports. Put in place during the Arab oil embargo of the 1970s, industries decried its negative impact on domestic production. Environmentalists, on the other hand, believe lifting the ban is a mistake because, in their minds, the United States should move away from fossil fuels and “fracking” to extract more oil. But the environmental lobby did not go away empty-handed, winning an extension of wind and solar tax credits.

For decades, proponents of the export ban have cited domestic security as a reason to keep it in place. The reality is that, unlike the natural gas market, the market for refined oil products is more intertwined with the global market.

There is reason for concern, though. The abilities of aging U.S. oil refineries to move products may be beyond their capacities. All it takes these days to show the fragility of our domestic market, our refining limitations and shipping constraints is a harsh winter, let alone a hiccup in the Middle East, a hostile government or a possible terrorist act. In the short term, expect critics of the repeal to blame the ban’s removal if U.S gasoline prices rise significantly this election year.

Also of interest to the energy industry and business community is a tax credit for alternative fuels and alternative fuel pumps. A five-year extension of bonus depreciation, a permanent extension of Section 179 expensing, more than $3.3 billion in funds for the Low Income Home Energy Assistance Program and language that effectively allows the status quo for hours of service for commercial motor carriers are other noteworthy measures.

The spending package is also significant because of what it does not include. Despite Republican attempts to use the power of the purse to kill President Obama’s key policies on health care and climate change, the bill did not repeal Obamacare. The law did deal a blow, however, delaying several key taxes that funded the law.

Also, despite efforts of the coal industry, the bill did not defund the Environmental Protection Agency’s ability to proceed on its rule to cut 30 percent of carbon dioxide emissions from power plants by 2030. In addition, Obama will still have the ability to help fund the United Nations’ Paris climate change agreement, another legacy issue for the president.

At its most basic, the bill funds the federal government through September and gives the business community some relief from recent uncertainties.

In the spirit of a new year, let’s hope the tax breaks lead to real investments that shore up our domestic energy industries, create domestic jobs and strengthen the U.S. economy. And let’s just hope the bill to pay for all this doesn’t arrive too soon.

 

Lisa Bontempo was a longtime energy lobbyist, including 13 years with the National Propane Gas Association. She remains involved in national politics and can be reached at lisabontempo@msn.com.

Comments are currently closed.