Lawmaker says US tax changes are needed to spur energy investment

Washington (Platts)--2May2007

US Senator Chuck Hagel, who is mulling a bid for the White House in 2008,
said Wednesday that the US tax code should be revised to encourage more
investment in energy and environmental projects.

Hagel, Republican-Nebraska, said current tax policy can discourage
investment in domestic electricity generation, petroleum refining and other
energy projects because US rules for capital depreciation are not as favorable
as those in other countries.

"The current federal tax code raises the cost of capital for US firms,
putting them at a competitive disadvantage, and makes it harder to provide
solutions to our energy and environmental policy goals," Hagel told reporters
at a briefing in Washington.

Hagel appeared at the event to endorse a study commissioned by the
American Council for Capital Formation, a pro-business think-tank. The ACCF
study compared how US tax rates and depreciation allowances for various
energy-related investments stack up against similar policies employed by
Canada, Mexico and nine other countries.

The study found that US companies take longer to recover their capital
costs on energy projects than non-US companies do. One part of the study
compared how quickly US and Canadian companies recover their costs after
investing in coal, natural gas or nuclear power plants.

US firms, on average, recover less than 38% of their original investments
during the first five years, and just 68% during the first ten years,
according to the study. Canadian companies, by contrast, recovered 80% and 97%
of their costs during these periods, it said.

Representative Jim Matheson, Democrat-Utah, also lauded the study. "Tax
policy is an important piece of the puzzle as we consider a comprehensive
energy policy in this Congress," he said. Matheson is a member of the House
Energy and Commerce Committee, which is currently working on one or more
energy-related bills.

--Brian Hansen, brian_hansen@platts.com