THE BUSH ENERGY PLAN faces an uncertain future in Congress after the change in control of the US Senate

THE BUSH ENERGY PLAN faces an uncertain future in Congress after the change in control of the US Senate

June 01, 2001
THE BUSH ENERGY PLAN faces an uncertain future in Congress after the change in control of the US Senate.

The plan calls for several changes in tax law that would affect the project finance community.

The president asked the Treasury Department to work with Congress to allow either an investment tax credit or faster depreciation for cogeneration facilities — called “combined heat and power” plants. A cogeneration facility would have to jump through at least two hoops to qualify. First, at least 20% of the energy output would have to be in the form of steam or other useful thermal output, according to a version of the proposal introduced earlier this year by Senator Frank Murkowski (R. - Alaska) in the Senate. Bush has not said yet what percentage he is proposing. Second, the plant would have to have an energy efficiency of at least 70% at normal operating rates, or 60% for smaller power plant of up to 50 megawatts. The energy efficiency is the energy content of the output compared to the energy content of the fuel that went into the power plant.

Bush also wants to extend an existing tax credit of 1.7 cents a kWh for generating electricity from certain renewable fuels. The current credit can be claimed on electricity produced from wind, closed-loop biomass and poultry litter. Bush did not endorse an extension for poultry litter. However, he called for expanding the definition of biomass that qualifies to include most types of biomass and to allow the credit at power plants that co-fire with biomass and coal.

In a surprising development, Bush said he wants to expand the section 29 tax credit — a tax credit currently of $1.059 an mmBtu that can be claimed by producers of synthetic fuel from coal or gas from biomass, tight sands, coal seams or Devonian shale — to cover “new landfill methane projects.” Bush said projects at landfills that are already required by federal law to tap the gas might qualify for a lower credit than projects at other landfills.

Finally, Bush said he wants to reward Americans who buy hybrid cars using fuel cells between 2002 and 2007 with a new tax credit.

The plan faces an uncertain future in Congress. Democrats are expected to take charge in the Senate in early June after Senator James Jeffords (R. - Vermont) announced he was leaving the republican party, throwing control in the closely-divided Senate to the democrats. Republicans had said they hoped to move the energy plan through Congress this summer. Things will now take more time.

Another complicating factor is it is not clear there is any money in the budget for additional tax relief this year after the republicans spent the full amount authorized on a $1.35 trillion tax cut for individuals.

Keith Martin