US Senator Chuck Grassley Cut Through the Noise About energy Subsidies in Famous 2014 Address

The rhetoric around energy subsidies has been heated for years. Fossil fuel companies, their lobbyists, and their dark money front groups seem to always forget the myriad subsidies for dirtier energy when they are attacking the incentives that have helped renewable energy get off the ground. During debate on extending some of these incentives in 2014, United States Senator Chuck Grassley (R-Iowa) had clearly had enough of the forgetful fossil-fueled grandstanding when, on May 15, 2014, he delivered this eloquent address. From the great Senator Chuck Grassley:

“I’m aware that some of my colleagues have expressed opposition to some of the provisions in this package. I’d like to specifically respond to claims that have been made about wind energy and the wind production tax credit. I’m sympathetic to the argument that the tax code has gotten too cluttered with too many special interest provisions.  That’s the reason many of us have been clamoring for tax reform for years now. But, just because we haven’t cleaned up the tax code in a comprehensive way doesn’t mean that we should pull the rug out from under domestic renewable energy producers. Doing so would cost jobs, harm our economy, the environment and our national security.

I’m glad to defend the wind production tax credit and wind energy.  Wind energy:

  • Provides more than 4% of U.S. electricity
  • Supports 80,000 American jobs
  • Spurred $105 billion in private investment in the U.S. since 2005
  • Displaces more expensive and more polluting sources of energy, lowering electricity prices for consumers.

More than 70% of a U.S. wind turbine’s value is now produced in the U.S., compared to just 25% prior to 2005. More than 550 industrial facilities across 44 states manufacture for the wind energy industry. The wind industry today supports 80,000 American jobs.  The tax incentive has spurred $105 billion in private investment in the U.S. since 2005.

Opponents of the renewable energy provisions want to have this debate in a vacuum.  They disregard the many incentives and subsidies that exist for other sources of energy, and are permanent law.

For example, the 100 year-old oil and gas industry continues to benefit from tax preferences that benefit ONLY its industry. These are not general business tax provisions – they are specific to the oil and gas business.  Here are a few examples:

  • Expensing for intangible drilling costs
  • Deduction for tertiary injectants
  • Percentage depletion for oil wells
  • Special amortization for geological costs

These four tax preferences for this single industry result in the loss of more than $4 billion annually in tax revenue. Nuclear energy is another great example. The first nuclear power plant came online in the United States in 1958 – 56 years ago.  Nuclear receives special tax treatment for interest from decommissioning trust funds. Congress created a production tax credit for this mature industry in 2005, which is available until 2020. Nuclear also benefits from Price-Anderson, federal liability insurance, that Congress provided as a TEMPORARY measure in 1958.  This temporary measure has been renewed through 2025. Nuclear energy has also received $74 billion in federal research and development dollars since 1950.

Are these crony capitalist handouts?  Is it time to end market distortions for nuclear power? A Cato study found that “In truth, nuclear power has never made economic sense and exists purely as a creature of government.”

There’s also no truth to the claim that wind energy is somehow undercutting baseload power. Baseload nuclear and coal energy are being harmed by cheap natural gas, transmission congestion, and stagnant electricity demand.

The Chairman and CEO of NextEra Energy, James Robo, addressed this issue in an op-ed recently.  NextEra operates significant wind generation and a large nuclear fleet. He stated:

“We do not merely advocate for an ‘all-of-the-above’ energy strategy — we live it. And from our perspective, nuclear plants in competitive markets are not challenged by wind energy but by low natural gas prices caused by the shale gas revolution. Blaming the wind industry for the challenges in the merchant nuclear business may be politically expedient, but it will not help any company or technology operate more successfully in a low natural gas price environment.”

Wind energy and its incentive are not to blame for the market conditions affecting the economics of nuclear energy. So, I’d ask my colleagues a simple question:

Why is repealing a subsidy for oil or gas or nuclear energy production a tax increase on energy producers and consumers, while repealing an incentive for alternative or renewable energy is not?  It’s not intellectually honest.

I authored the wind incentive in 1992.  I know it won’t go on forever.  It was never meant to, and it shouldn’t.  I’m happy to discuss a responsible, multi-year phase out of the wind tax credit.  In 2012, the wind industry was the only industry to put forward a phase out plan. But, any phase out must be done in the context of comprehensive tax reform, where all energy tax provisions are on the table.  And, it should be done responsibly over a few years, to provide certainty and ensure a viable industry.

Chairman Wyden has expressed his determination that this be the last extenders bill prior to comprehensive tax reform. I share Senator Wyden’s sentiment in favor of putting an end to the annual kabuki dance that is tax extenders. Good tax policy requires certainty that can only come from long-term predictable tax laws. Businesses need certainty in the tax code so they can plan and invest accordingly.  Moreover, taxpayers deserve to know that the tax code is not just being used as another way to dole out funds to politically favored groups. However, the only sound way to reach this goal is through comprehensive tax reform.

I agree that there are provisions in extenders that ultimately should be left on the cutting room floor.  But, it is in tax reform where we should consider the relative merits of individual provisions.  Targeting certain provisions for elimination now makes little sense for those of us who want to reduce tax rates as much as possible.  Tax reform provides an opportunity to use a realistic baseline that will allow the revenue generated from cutting back provisions to be used to pay for reductions in individual and corporate tax rates.

I look forward to working with my colleagues in the future to enact tax reform and put an end to the headaches and uncertainty created by the regular expiration of tax provisions.  Right now our focus must be on extending current expired or expiring provisions to give us room to work toward that goal.  It is my hope that we can move quickly to reach a bipartisan agreement here in the Senate and come to a timely agreement with the House.

Taxpayers should not have to wait until December or January for us to act.”