Time for Master Limited Partnerships

By Mary Rosenthal | May 21, 2013

Anyone who reads Biomass Magazine knows that those of us across the wide range of renewable energy technologies may not all be able to agree on every policy proposal that comes down the line, but there is one piece of legislation that should be universally supported.

The recently introduced Master Limited Partnerships Parity Act legislation proposed by Sen. Chris Coons, D-Del., and a bipartisan group of co-sponsors, has the potential to accelerate commercialization of the next generation of domestically produced, sustainable energy, fuels and chemicals from almost any feedstock.

By giving renewable energy projects the same tax incentives and treatment that fossil fuel projects have enjoyed for decades, the MLPPA will help those companies overcome the so-called “valley of death,” the space between successful pilot or demonstration facilities and full-blown commercial facilities. It will also increase investment opportunities for a wider audience, allowing more people to “vote with their dollars.”

This is truly a technology-neutral approach. For many years, the biofuels industry has asked for similar policy treatment to the fossil fuels industry, and this is a powerful step in the right direction.

Overcoming the Valley of Death

Currently, many biofuel companies, including the algae industry, have been adept at raising early-stage capital for research and development. Yet, when it comes to the capital-intensive effort of building a facility, many biofuel companies are running into a challenge: the expense is considered too high for traditional venture capital, and too risky for traditional banks.  As a result, many companies are forced to spend more time raising funds than deploying technology.

Expanding the Master Limited Partnership provisions to renewable energy projects would assist in overcoming this problem, as MLPs are able to raise funds as corporations.  Ownership interests are publicly traded and offer investors liquidity, limited liability and dividends, but are operated and taxed as partnerships.  Due to the current regulations on MLPs, it has been primarily oil and gas companies that have benefited from the arrangement for some time, comprising more than 90 percent of MLPs. This bill levels the playing field, and gives renewable fuel companies the same tax treatment as their counterparts in the fossil world.

Increasing Investment Opportunity

In addition to leveling the playing field, MLPs open up an opportunity for consumers to play a role in financing clean energy projects in a way currently unavailable to them. Currently, a large majority of renewable energy projects are financed by a relatively small number of investors, which means only a few investors will reap the financial benefits of alternative energy’s success. MLPs would allow all Americans to make an investment in our clean energy future, and support the kinds of projects so many readers of this magazine are working to build.

Creating Jobs and Driving Economic Growth

We must be aware that capital availability for development of almost any renewable energy project will have a direct and positive impact on communities across America. Facility development creates well-paying, long-term jobs up and down the supply chain, and salary and revenue taxes resulting from commercial production are funneled back into state coffers, without requiring an increase in any tax rate.

It is an arrangement that can unleash a new investment engine in America, all without costing the government a single dime.

For the U.S. algae industry, the timing couldn’t be better. Last year, algae-based fuels were offered to consumers for the first time, and we are seeing new pre-commercial algae-to-fuel facilities come online. With the availability of MLPs, companies in our industry will have the necessary framework to accelerate the production of renewable, domestic fuels from algae.

Almost every other renewable energy and biomass industry would find MLPs similarly attractive. Let’s all get to work and voice our support for this bill.

Author: Mary Rosenthal
Executive Director, Algae Biomass Organization