Now that we have rung in 2015, let us hope that we can usher in newfound bipartisan consensus in Washington, D.C. on energy and transportation policy. Skeptics might point to looming clashes between the Republican-led Congress and the Obama Administration over environmental regulations, such as EPA’s effort to regulate CO2 emissions from existing power plants. Yet, I see more than a glimmer of optimism for cooperation between the Administration and Congress on energy and transportation legislation for the coming year. While Congress is focusing initially on legislation to approve the Keystone XL pipeline, it is not too early to think about other energy and transportation bills that could enhance U.S. energy security, increase clean energy generation, and create jobs and economic growth.
In particular, here are three bipartisan energy and transportation ideas which Congress should consider this year.
Master Limited Partnerships Parity Act
In 2013, Senator Chris Coons (D-DE) and Senator Jerry Moran (R-KS), among others, introduced the Master Limited Partnerships Parity Act, which would amend the federal tax code to allow renewable energy companies to qualify as Master Limited Partnerships (“MLPs”). Under the current federal tax code, only oil and natural gas, coal, and pipeline companies can qualify as MLPs, a business structure that is taxed as a partnership but also allows the entity to trade ownership interests on the market.
Allowing renewable energy companies to qualify as MLPs can enhance their ability to attract private capital, which is particularly important if Congress decides to not renew the Production Tax Credit (“PTC”) this year for wind energy. Last December, Congress extended the PTC through the end of 2014, but key Republicans, such as Senate Finance Committee Chair Orrin Hatch (R-UT), have stated Congress is unlikely to pass another extension.
In addition, the Master Limited Partnerships Parity Act can eliminate an existing loophole in the federal tax code that only benefits fossil fuel companies. The Master Limited Partnerships Parity Act is consistent with Senate Finance Committee Ranking Member Ron Wyden’s (D-OR) goal of reforming the tax code to provide parity for all sources of energy, and the measure could be part of a broader effort to reform the corporate tax code.
Federal Gasoline Tax Increase
Revenue from the federal gasoline tax is deposited in the Highway Trust Fund, which provides funding for transportation projects. Congress has not increased the federal gasoline tax since 1994; with drivers logging fewer miles on the road, the Highway Trust Fund is facing a significant shortfall. Last June, Senator Chris Murphy (D-CT) and Senator Bob Corker (R-TN) introduced legislation that would increase the federal gasoline tax 12 cents over two years, and after that, the tax would be indexed to inflation. Despite Senator Corker’s sponsorship, this legislation recently looked like a long shot, given conservative Republicans’ general aversion to increasing taxes.
Then, several things happened that have improved the prospects for this legislation. First, gasoline prices have dropped from their 2014 peak of $3.69 per gallon in April to $2.16 per gallon as of January 9. The dramatic decrease in gasoline prices has perhaps softened the impact and the political blowback of a proposal to increase the federal gasoline tax. Second, high-profile Senate Republicans, including Senator Hatch, Senate Environment and Public Works Committee Chair James Inhofe (OK), and Senate Commerce Committee Chair John Thune (SD), all have recently expressed an openness to considering an increase in the federal gasoline tax. And, in a recent Washington Post op-ed, influential conservative commentator Charles Krauthammer came out in strong support for an increase in the federal gasoline tax.
Our country needs expanded infrastructure funding to improve the safety of our roads and highways and enhance our economic competitiveness. A modest increase in the federal gasoline tax is a bipartisan solution to achieving this important goal.
Energy Security Trust
While there has been a discussion about a whole host of energy bills in recent days and weeks, there has unfortunately not been talk about legislation to establish an Energy Security Trust. Over the last several years, President Obama, Senate Energy and Natural Resources Committee Chair Lisa Murkowski (R-AK) and others have floated various proposals relating to an Energy Security Trust, but the general gist is that the federal government would use revenue from oil and gas development on federal lands to fund renewable energy development. In 2013, there was some initial hope that this Energy Security Trust concept could gain traction after President Obama proposed it in his State of the Union address, but momentum stalled due to disagreements between the Administration and Republicans over whether the funding for renewable energy programs should come from existing or new oil and gas production.
The question is now with Republicans controlling both the Senate and the House, can Congress and the Administration find a consensus on an Energy Security Trust. For instance, would the Administration be able to accept using expanded development in some Western lands in exchange for increased funding for renewable energy programs given the altered political environment? The answer is unclear but it is a question worth asking.
Unquestionably, there are significant ideological and political obstacles to Congress and the Administration finding consensus on important energy and transportation legislation this year. Nonetheless, it is encouraging that there a number of bills with bipartisan support that could significantly move energy and transportation policy forward in a positive manner. Here’s hoping that 2015 is a year of action on bipartisan energy and transportation legislation.
Andrew Shaw is an Associate at McKenna Long & Aldridge LLP