US Policy Outlook for Renewable Energy
The United States went to the polls on November 6. President Obama was returned to another four years in the White House. Democrats picked up another two seats in the US Senate where they are expected to have an effective majority of 55 seats to 45 for the Republicans. The Republicans lost seats in the House, but still retain a majority of 16 out of 435 House seats in total.
A panel of veteran Washington lobbyists for renewable energy companies talked 34 hours after the polls closed about what the election results mean for the US renewable energy market.
The panelists are Joe Mikrut, formerly tax legislative counsel of the US Treasury under President Clinton and currently a partner at Capitol Tax Partners, Jonathan Weisgall, vice president for legislative and regulatory affairs for MidAmerican Energy Holdings, a large utility holding company that owns two US utilities, two natural gas pipelines and a large number of wind, geothermal and other renewable energy projects, Gregory Wetstone, a former chief lobbyist for the American Wind Energy Association and currently vice president of governmental affairs for Terra-Gen Power, a growing renewable energy developer with significant wind, geothermal and solar holdings, John Stanton, formerly general counsel of the Solar Energy Industries Association and currently vice president for government affairs for SolarCity, and Richard Glick, senior policy advisor to the US Secretary of Energy in the Clinton administration and currently vice president of government affairs for Iberdrola Renewables, the US development arm of a global utility headquartered in Spain. The moderator is Keith Martin with Chadbourne in Washington.
MR. MARTIN: The US elections this week produced a better result for Democrats than had been expected even two weeks ago. Congress is expected to return to Washington for a “lame duck” session in mid-November. It has a packed agenda as almost all significant business had been put off pending the elections. Now it is time to get down to work.
The lame duck session will run until the end of the year with the existing members of Congress, a significant number of whom are leaving office, and a new Congress will return in January.
The Republicans criticized Obama relentlessly during the campaign for the economic stimulus that the president persuaded Congress to enact in early 2009. They said it added too much to the national debt without bringing the unemployment rate down quickly enough, but if anyone benefited from the stimulus it was the renewable energy industry.
In the three years from 2009 through 2011, this market felt like running on a treadmill turned up to warp speed. The stimulus gave renewable energy companies grants for 30% of project costs as a temporary measure to replace a weak tax equity market. It gave them an expanded program of loan guarantees for renewable energy through the US Department of Energy. Both programs are now winding down.
In general, renewable energy in the United States has been driven by tax incentives at the federal level and by renewable portfolio standards in 29 states and the District of Columbia that require utilities to provide a certain percentage of their electricity from renewable energy.
When President Obama took office in 2009, he did so with an ambitious agenda to promote renewable energy. The real goal was to address global warming. Shifting electricity generation to wind, sunlight and other forms of renewable energy and away from fossil fuels was a way to help.
A year and a half later by the summer of 2010, the agenda had stalled. The “cap-and-trade” program to control carbon emissions failed in the House. A national clean energy standard, a federal green bank and help making it easier to build new transmission lines were further casualties.
Meanwhile, the market hit turbulence of its own making. It is hard for renewable energy developers to get utilities to sign long-term contracts to buy electricity. On top of that, low natural gas prices are making it hard for renewable energy to compete.
Renewable energy became highly politicized. Republicans in the House have been pursuing a noisy investigation into Solyndra and other asserted failures in the DOE loan guaran-tee program.
Joe Kelliher, a thoughtful former Republican chairman of the Federal Energy Regulatory Commission, said part of the problem was a new class of Republican freshmen in the House took office believing that US support for renewable energy started with the Obama administration and, as a consequence, they were opposed to it.
As the summer of 2012 gave way to a long Congressional recess and then the fall election campaign, the US Environmental Protection Agency remained on a path of tightening US regulation of mercury, SO2, NOx and carbon emissions from power plants. The Senate tax-writing committee voted in early August to extend production tax credits for wind farms for another year through 2013 and changed the deadline to complete projects to one merely to start construction.
In September, the Office of Management and Budget announced that Treasury cash grants paid on or after January 2 will be subject to a haircut of 7.6% under automatic spending cuts — called “sequestration” — that go into effect early next year.
Congress is facing an enormous “fiscal cliff.” On January 2, $984 billion in spending cuts take effect over nine years, and income, estate and payroll tax rates will increase.
On top of that, Congress will need to increase the federal debt ceiling by early next year or the government will run out of money, which is always an opportunity for trouble. The temporary difficulty getting House Republicans to go along with the debt ceiling increase in 2011 led to a one-notch downgrade in the US credit rating.
With that background, Jon Weisgall, what, if anything, have the election results changed? We had gridlock in Washington the last two and a half years. Will we have more of the same?
MR. WEISGALL: It is too early tell. There has been a rush immediately after the election by leaders of both political par-ties to say they are prepared to work together. The really important point is that we no longer have a president who will have to run for reelection. That may make it easier for him to reach agreement on key issues. We have had a president for the last four years who has been governing more on policy, and an opposition that was determined to deny him any political advantage if he compromised enough to get something done.
MR. MARTIN: Rich Glick, what if anything has changed for renewable energy?
MR. GLICK: You have to compare things to what we would have been facing if there had been a Romney sweep. The big-gest news for the renewable energy industry is that we have a president who has been a strong backer of renewable energy, and the president was reelected. His opponent was markedly less supportive of incentives for renewable energy, and those incentives became a campaign issue.
In the Senate, there has traditionally been strong bipartisan support for renewable energy. Senate Democrats, who are a key voting bloc for the administration’s programs, increased their majority.
There is bipartisan support for renewable energy in the House as well, but the Tea Party members who caucus with the House Republicans have been less keen to see the government promote renewable energy, so it remains to be seen how much the Democratic gains will translate into any specific actions by Congress. Bills must pass both houses to become law. However, all of that said, election night was a very good night for renewable energy.
MR. MARTIN: John Stanton, I suspect you felt really good yesterday about the election results. Do you feel as upbeat today?
MR. STANTON: The big question going forward is whether the Republican House and SuperPACs will continue their very aggressive attempt to politicize renewable energy in the wake of the election. We have seen a marked attempt by Republicans to shift from an all-of-the-above strategy on energy to isolate and alienate the renewable energy community.
My hope is that this sentiment cools significantly. If you look at the negative advertising, there was a concerted effort, by pillorying Solyndra, to undo the good will that solar companies have created in the marketplace. Polling suggests that support for solar energy among voters who identify themselves as Republicans fell from the low 90% range to the high 80% range as a result. When you look at the cross tabs in the polling data, you find that between “strongly agree” and “agree” 87% of self-identified Republicans think the federal government should play a leadership role in supporting solar energy deployment. One can only hope that the Republican leadership will look at this and think, “It was a big gamble on our part to try to alien-ate this one sector of our energy economy. It doesn’t seem to have worked, so let’s recalibrate."
I agree that we could not have hoped for a better election result, and that is true in many states and especially at the federal level.
MR. WETSTONE: There is no question that the election results were a plus for renewable energy. We had more at risk in this election than in any previous election. Renewable energy became something of a partisan target during the campaign. Hopefully, we can turn that around as the passions subside.
The re-election of the president is extremely important. He is a strong supporter. His position is that production tax credits should be permanent law and refundable. He supports a federal renewable portfolio standard. You can go down the list. Governor Romney was opposed to extending production tax credits, although he softened his position in the last week or so before the election.
It is significant that Senator Harry Reid, who has been an important champion for renewable energy, remains the Senate majority leader. The Senate tax-writing committee remains chaired by Max Baucus, another renewable energy supporter. The overall make up of the committee will not change. This is a committee that voted in August not only to extend the production tax credit, but also reformulated the provision to extend the credit for wind and other non-solar renewables for any project that starts construction by December 2013, regardless of when it is completed.
Production Tax Credits
MR. MARTIN: Joe Mikrut, let me shift gears on you and drill down into the details. Will production tax credits for wind be extended and, if so, when, for how long and at what level?
MR. MIKRUT: I believe the production tax credit for wind will be extended. Renewables have generally enjoyed bipartisan support, particularly in the Senate but also in the House. There have been some pockets of resistance. The reason the tax credit has not already been extended is not opposition to an extension as much as the difficulty finding any legislative vehicle to which to attach the extension. Nothing was moving through Congress.
There should be a suitable vehicle in the wake of the election. The production tax credit extension could get done in the lame duck session as part of a tax extenders bill. The tax extenders could be folded into a larger bill that addresses the fiscal cliff issues. One would hope Congress will start with what the Senate Finance Committee proposed, which is a one-year extension, with the deadline changed to a deadline to start construction rather than put projects in service. Extenders have a very good chance of being taken up in the lame duck session or early next year, and I expect something on production tax credits to be in that mix.
MR. MARTIN: There are rumors that Dave Camp, the chair-man of the House tax-writing committee, told the Republican committee members that he is okay with extending production tax credits for another year. Is that true?
MR. MIKRUT: I don’t know. Mr. Camp has always been a supporter of renewables. They are important to Michigan, where he is from. The committee has examined the approximately 80 expiring tax benefits. However, it has not met formally yet to mark up a bill.
MR. MARTIN: Should the Senate Finance Committee proposal, with a change in the deadline to one merely to start construction, be viewed as the best possible outcome, with a risk that what is enacted ultimately may be a compromise that is not quite as good?
MR. MIKRUT: I think that’s right. The most likely outcome is a one-year extension of current policy followed in the next Congress by an examination of all expiring tax benefits to see which should be made permanent and which discarded. So a start-of-construction rule probably is the high water mark. I do not see something more than that coming out of the House. The best one could hope for is for the House to acquiesce to the Senate position.
MR. MARTIN: Some Democrats, including Russ Sullivan, the staff director of the Senate Finance Committee, have told the wind industry that the only way to get an extension is to come in with a proposal for a phase out of the credit. Do you see a phase out being part of the discussion in the lame duck session?
MR. MIKRUT: I don’t think there will be time in the lame duck session to debate the broader policy questions. This is something that I think fits better when Congress takes up general corporate tax reform.
MR. WEISGALL: Let’s remember the tax extenders bill is a relatively small part of the larger debate on the fiscal cliff. Expiring tax incentives are probably about $20 billion of the total $500 billion in tax hikes that are part of the fiscal cliff, not to mention the spending cuts. There is tremendous pressure from the business community on Congress to delay immediate tax increases and spending cuts that could tip the economy back into recession. We could be helped by that pressure.
MR. WETSTONE: The coming negotiations to resolve fiscal cliff issues are key to finding a vehicle for the production tax credit extension. A lot will depend on the attitude of the Republican House speaker, John Boehner. It is not yet clear whether House Republicans will be willing to come to the table to strike a deal. We have seen conflicting signals in the last two days. We saw the stock market drop substantially in the wake of some hardline initial comments by Boehner. But the speaker issued a much more conciliatory statement the next day. How this ultimately plays out is going to be critically important. It will be tough for the two sides to come together in the lame duck session, though there will be tremendous pressure to do so. If it does not happen then, a deal is likely in January or February that carries a production tax credit extension.
We are looking at a two-step dance. We hope to get a one- or two-year extension, or the Senate Finance Committee version, enacted in the lame duck session or early in 2013, and then we move to the broader corporate tax reform debate. There is a potential that, as part of a broad review of corporate tax rates, Congress will look at a long-term phase down of the wind tax credit that could provide several more years of incentives, but at a declining value over time.
MR. MARTIN: The National Journal took a poll of Congressional insiders, and 79% said they believe that Congress will kick the can down the road so that sequestration will not take effect on January 2 as scheduled. Does anyone have a contrary view?
MR. GLICK: I agree that Congress will extend the deadline for sequestration, at least for the defense cuts. That came up during the presidential debates, and President Obama said flatly that sequestration of defense spending will not happen. The real question is whether sequestration will also be delayed for domestic spending.
There is a link to the renewable energy industry. Many renewables companies expect section 1603 grants on projects on which they started construction last year. These remaining grants may not be paid until after year end 2012. The section 1603 program is on a list of programs that are subject to sequestration. There is some question about whether projects, like wind farms, that are placed in service in 2012 but do not receive a check from the Treasury until 2013, will end up with a 7.6% haircut in their grants.
We are awaiting a ruling from both the Treasury Department and the Office of Management and Budget. If Congress delays sequestration for all spending, we will be okay. If not, we need the agencies to tell us whether projects completed in 2012 will suffer a haircut.
MR. MARTIN: Has Iberdrola asked Treasury for a decision?
MR. GLICK: We have asked the Office of Management and Budget. Treasury sent us to OMB, and we are waiting for some clarification from OMB. I think you are going to see some members of Congress weigh in on the issue as well.
MR. MARTIN: Is there anybody who does not think Congress will work out a deal ultimately to avoid going over the fiscal cliff?
MR. WEISGALL: There are two parts to the fiscal cliff. There are tax hikes and spending cuts. The 79% figure that you mentioned is in line with the bipartisan view that across-the-board spending cuts are not the way to run a railroad.
That said, the sequestration part of the fiscal cliff was the result of Congress kicking the can down the road in 2011 through the end of this year. I think there will be action on the fiscal cliff. I do not think it will be anything particularly comprehensive, and that is largely because of the need to address some of the bigger issues in general corporate tax reform, which will take time. MR. MARTIN: So no grand bargain, but a partial bargain?
MR. STANTON: I expect between now and the end of the year there will be an agreement to come up with $60 billion in cuts that takes us to June 1, 2013. The first six months of 2013 will be when they really try to wrap their heads around sequestration after a six-month delay.
There is consensus to provide the negotiators with breathing room to work out a deal. I think that is the best that can be hoped for in the lame duck session. I do not believe they will pick and choose which programs should fall under sequestration. If there is a delay in sequestration, my bet is it will be across the board.
MR. WETSTONE: I think there will be a partial bargain. They have to create a sense of forward motion. All we have seen to date is a series of punts. They decided to punt and create a super committee and then the super committee ended up unable to reach a deal, and they punted, and we ended up with the sequestration deadline.
On the heels of the election, both parties will feel a need to come to grips with at least some of the fiscal cliff issues. I think we are looking at some sort of deal, probably a partial punt, either in December or early in 2013. The corporate tax part of the plan will take some effort, but I think the production tax credit is well positioned to be included either as a straight extension or as a start-construction provision.
Corporate Tax Overhaul
MR. MARTIN: There was a sense from tax people on Capitol Hill as the summer and fall wore on that the odds of a massive overhaul of the corporate income tax were receding because the necessary spade work has not been done and nobody has stepped up to say how he would pay for it. Now with the need to deal with the fiscal cliff, won’t an overhaul of the corporate income tax almost certainly be part of any grand bargain?
MR. MIKRUT: Tax reform is likely to be part of the bargain. What we could very well see in the lame duck session is a down payment toward the spending and tax side of the grand bar-gain, with an agreement to do tax reform in the near future. The ultimate bargain will be some combination of spending cuts and revenue raisers and a commitment to corporate tax reform.
MR. MARTIN: How big of a threat is corporate tax reform to incentives like the solar investment tax credit that runs through 2016?
MR. MIKRUT: Everything will be on the table whether it is timing items like accelerated depreciation and the LIFO inventory method or permanent items like tax credits and the section 199 deduction. Everything will be examined. In 1986, we had the same examination and the solar tax credit survived. This time, I think there will be an examination of all the energy tax incentives and perhaps an attempt to rationalize everything by doing things more or less on a technology-neutral basis, assuming the decision is made to continue using the tax code to promote renewables or energy production in general.
MR. GLICK: I agree that all of these energy tax incentives are going to be on the table. I anticipate that during the tax reform process, which is probably going to take at least two years, a number of these tax incentives will be phased out. There will be a transition period, and it would be foolish for the wind or solar industry or any other technology receiving a credit not to plan for that.
The question is what the industry needs to survive and actually thrive. How long do we need to get to the point where we can be cost competitive without incentives?
There are other polices we might want to pursue that do not involve the tax code and do not cost the government money. As we talked about with the grand bargain and the debt, this country is going to be fiscally constrained for some time. We need to look at policies that do not require government spending and do not reduce government revenues. We need to look at policies such as a clean energy standard or carbon tax.
MR. WEISGALL: I think it is very unlikely that the investment tax credit for solar will go away before the end of 2016. I am not aware of any tax incentive that was terminated before its end date in the last 30 to 40 years. The last time the corporate income tax was overhauled was in 1986 with strong backing from President Reagan and the Democrats led by Speaker O’Neill, and even that was a tough two-year slog. I agree with Rich Glick. We are looking at 2014 at the earliest.
I don’t think we are going to see more spending from the next Congress on renewable energy. It would nice if Congress adopted a federal clean energy standard where the federal government would require utilities to supply a certain percentage of electricity from renewable sources, but I just do not see that getting through the next Congress.
MR. STANTON: I agree with Jon Weisgall. The House tax-writing committee chairman, Dave Camp, has been very clear that the investment tax credit that is currently scheduled to run through 2016 for solar will not be repealed before the scheduled expiration date. People have been deploying billions of dollars of capital with the expectation that the credit will be available through 2016 and a sudden change in policy is just not the type of message that the House wants to send to businesses. It will take quite some time for this grand bargain on tax deals to come together. This is a multi-year discussion. The notion that in the wake of this bitterly fought election there is going to be a willingness to come back and quickly reach some grand bargain, I just don’t see it. It is naïve and unrealistic.
The Remaining Renewables Agenda
MR. MARTIN: Rich Glick, you mentioned a federal clean energy standard. You heard Jon Weisgall say he doesn’t think the next Congress will go for it. Do you really think it has a chance?
MR. GLICK: I think President Obama will make a major push for it. It was part of his platform, and I think he views it as a way to address climate change in place of the more direct approach of cap and trade, at least in the generation sector.
The strongest advocate for a clean energy standard is Senator Jeff Bingaman. He is retiring. He was chairman of the Senate Energy Committee. Even though he is leaving, I expect his replacement as committee chairman, Senator Ron Wyden, will also be an advocate. There is strong support in the Senate for such a standard. Obviously, the House is more difficult. Some House members have taken a very strong position in the past opposed to it, and none of them is leaving office. They will stand in the way.
The real question is whether the next Congress will try to write a national energy policy that addresses emissions and other energy-related issues. If yes, then there is potential for a bargain to the extent the president and the Senate push for it. The chances for a national clean energy standard, while not great, are certainly not nil. If there is a broader energy bill, this could be a part of a compromise.
MR. MARTIN: What about a federal green bank? Is the idea dead?
MR. STANTON: I don’t think in the wake of all of the Solyndra bashing and the House passage of the “No More Solyndras Act” that we will see any new federal loan guarantee program for clean energy.
MR. MARTIN: Will the DOE loan guarantee investigation go away?
MR. STANTON: No, simply because it has been launched. It may assume a lower profile. My guess is the House will conclude that perhaps others looking at the same loan guarantee applications would have made different decisions on whether to lend, but there was no malfeasance. The bottom line is that if you are in the world of business, some investments succeed. Others fail. That’s the nature of business.
MR. MARTIN: Hurricane Sandy is causing the news media at least to take another look at climate change. Greg Wetstone, do you think this issue will be revisited by the next Congress?
MR. WETSTONE: You have the same issues with direct legislation to address climate change that were mentioned with the clean energy standard and then some. You could certainly see a path for climate legislation in the Senate, but it is not easy to see a path in the House. The interest in addressing climate change will continue to build among the American public. There will eventually be a tipping point where evidence and concern are so great that legislation will follow. I do not see enough movement in the next Congress, but the growing public concern will strengthen support for the clean energy agenda broadly, including the production tax credit.
MR. WEISGALL: I agree with the general point that Greg just made, but there was no mention of climate change in the presidential debate this year, and that is the first time since 1984. Even Dan Quayle in 1988 said the greenhouse gas effect was an important environmental issue and we need to look at alternatives to fossil fuels. The politics were against climate change, looking at the swing states of Ohio, Colorado and Virginia, for example, where Obama was trying to out-love Romney on coal and fossil fuel. That has an impact on what we would call a mandate.
The most effective way of dealing with greenhouse gas is to tax or regulate, and both of those were pretty toxic in this campaign. I see the US Environmental Protection Agency continuing to move forward with its regulatory agenda, but I do not see cli-mate change legislation of any sort, including a clean energy standard. I do not think we came out of the election with a mandate to work on that, despite the overall positive results for the clean energy agenda. Greg Wetstone hit it on the head, which is that the growing public sentiment that climate change is a problem affects the broad agenda, but I do not see the next Congress taking direct action on climate change. Carbon Tax?
MR. GLICK: A carbon tax is on the minds of both parties as they consider significantly reducing corporate and probably individual tax rates. In order to do that in a way that does not worsen the deficit, you have to bring in a lot of revenue. Some existing tax credits and deductions will have to be eliminated. That certainly does not get you nearly to where you need to be in terms of revenue to make up for the revenue loss associated with rate reductions. There has been increasing chatter about a carbon tax, even among some Republican and conservative-oriented groups. I could see a compromise where carbon taxes might be a tradeoff for significant reductions in corporate tax rates.
MR. MARTIN: Joe Mikrut, you were in the Clinton administration the last time carbon tax proposals were launched. They did not go anywhere in Congress. Do you think there is any possibility of a carbon tax getting through the next Congress?
MR. MIKRUT: Yes. When you start looking at the tax expenditures that have to be eliminated to bring the corporate tax rate down to 25% or 28%, almost all of them would have to go. Accelerated depreciation, LIFO, all of the credits have to go. That can be very difficult. Those items are in the tax code for a rea-son. They largely benefit the manufacturing sector which Congress has always tried to help. There may be a pressing need for an alternative revenue source. Many people support a value-added tax. Congress generally has been averse to doing a value-added tax.
The next best new revenue source is probably the carbon tax. Its scope is almost as broad as a VAT. It has environmental benefits. It is collected at very few collection points.MR. MARTIN: What odds would you place on the likelihood of a carbon tax?
MR. MIKRUT: I will say 20%.MR. GLICK: 25%.
MR. WETSTONE: I would put the odds a little lower. It is hard to see the House agreeing to any new taxes.
MR. MARTIN: Jon Weisgall, talk to us about California. The election results are very interesting there. The Democrats picked up a super majority in both houses of the California legislature. California has been a guiding light for the rest of the country on renewables. What do you make of the election results in California? How will it affect the renewable energy market?
MR. WEISGALL: The politics of renewable energy in California are very different from the politics at the national level. You can go from Gray Davis, a Democrat, to Arnold Schwarzenegger, a Republican, to Jerry Brown, a Democrat, and always have strong support for renewable energy. There is already a 33% target for renewable energy in the state. With this super majority, Governor Brown yesterday talked about “with great power, there is great responsibility.” The super majority lets the Democratic legislature raise taxes. I think it will be careful about that. The voters also passed a ballot initiative to allocate the first $5 billion of out-of-state taxes to things like energy efficiency and other renewable energy aspects of public buildings like schools.
In terms of policy, we may see California take a serious look at increasing its renewable energy target to 40% by 2025 or 2030. The state has had a 2,200-megawatt nuclear power plant down. There is a need for more generation, and there is strong support for renewables. The constraint is transmission. The state has only about 40% of the transmission capacity it needs even to support its existing renewable energy target of 33%.
MR. STANTON: Interestingly, both Proposition 39, which raises $1.1 billion annually, and Proposition 30, which raises $7 billion annually, largely emanated from the fact that Governor Brown’s legislative agenda has been blocked by the state legislature. The interesting thing about both is that, given the new Democratic majorities in both houses, neither would have been necessary. The additional revenue associated with Propositions 30 and 39 gives the state the ability to avoid draconian reductions in programs, which is a very good development for renew-able energy in the state.
MR. MARTIN: Voters in Michigan rejected a proposed constitutional amendment by a 2-to-1 margin that would have increased the state’s renewable portfolio target to 25% by 2020. It is currently 10% by 2015. Is this a sign of potential trouble in other states where RPS targets could be in danger?
MR. WEISGALL: I think it was unique to Michigan. There is already a 10% standard by 2015. It was not a pushback as much as a failure to go forward. It was also a constitutional amendment, not a ballot measure, because the legislature would have likely overruled it. Also, you have the Michigan utilities saying let’s get 10% by 2015 before increasing the target. They opposed it, and they outspent the advocates on advertising by a 3-to-1 margin.
Master Limited Partnerships
MR. MARTIN: The renewables industry has been lobbying Congress to allow master limited partnerships to be used by renewable energy companies. Do you foresee any action on that by Congress?
MR. MIKRUT: That will be an issue for corporate tax reform. One of the big issues in corporate tax reform is which legal entities should be able to operate without having to pay an entity-level tax. We will see a rationalization of those rules in tax reform. Absent some sort of energy bill, it is difficult to see an expansion of MLP treatment for renewables before then.
MR. MARTIN: The Senate Finance Committee has been talking about taxing partnerships with $50 million or more a year in income like corporations. That goes in the other direction from MLPs. Do you think that will be enacted as part of corporate tax reform?
MR. MIKRUT: I’m not sure. Tax reform prompts an examination of these questions. I am not so sure where everything will settle, but the issue of the appropriate treatment of MLPs, large partnerships and closely-held versus public vehicles will be debated.
MR. MARTIN: Will existing MLPs be grandfathered if the law changes?
MR. MIKRUT: Congress changed the law once and grandfathered existing MLPs, some of them with a toll charge. The transition rules are always the last thing decided in any legislative effort, and so it is something the existing MLPs will have to watch.