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Rallying Behind the MLP bill

Just a couple of weeks ago, a bill that would help achieve the seemingly endless pursuit of leveling the playing field between the fossil fuel and renewable industries was introduced to the U.S. Senate.
By Anna Simet | May 10, 2013

Just a couple of weeks ago, a bill that would help achieve the seemingly endless pursuit of leveling the playing field between the fossil fuel and renewable industries was introduced to the U.S. Senate. The Master Limited Partnerships Parity Act would allow investors in renewable energy projects to access the corporate structure of master limited partnerships (MLP).

An MLP is a business structure that is taxed as a partnership, but its ownership interests are traded like corporate stock on a market. One of the main reasons MLPs are attractive to private investors is that income they generate is taxed only at the shareholder level, since it is treated as a partnership for tax purposes. The profits of C corporations, however, are taxed at both the corporate and shareholder level.

A notice explaining the bill, released by the office of Sen. Chris Coon, D-Del., explains that MLPs have only been available to investors in energy portfolios for oil, natural gas, coal extraction and pipeline projects. “These projects get access to capital at a lower cost and are more liquid than traditional financing approaches to energy projects, making them highly effective at attracting private investment. Investors in renewable energy projects, however, have been explicitly prevented from forming MLPs, starving a growing portion of America's domestic energy sector of the capital it needs to build and grow.”

The bulletin points out that because MLPs are so attractive to investors, they have been proven to bring new capital into American energy projects. That’s significant to the case of renewable-energy generation, because it is harder for investors to see as quick a return as compared to fossil fuel-based energy generation.

While the biomass and bioenergy industry are unanimously supporting the MLP bill, there is some quiet buzz that the bill may result in the nixing of the production tax credit (in fact, I read an interesting article about it this morning). All of the same projects that qualify for the PTC would qualify for MLPs, so when it comes time to consider the fate of the PTC again, it might be easy for some members of Congress to come at it in a one-or-the-other approach. That, obviously, would result in the renewable energy industry taking several steps backward.

That said, while we’re all supporting and rallying behind passage of the MLP bill, let’s keep that in the back of our minds. It’s possible that in the future, we may have to convince some Congress people that it should not be considered a replacement for the PTC

 

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