Washington (Platts)--3Jul2008

US Senate Republican leaders who have opposed budget offsets for tax
extensions on Thursday proposed a compromise to finance continuing credits for
renewable energy resources set to expire in December.

In a letter to Democratic leaders of the Senate and US House of
Representatives, Senate Minority Leader Mitch McConnell, a Kentucky
Republican, suggested replacing the proposed offsets with a reduction in the
2009 budget resolution. This would pay for tax credits for developing wind,
solar and other renewable energy resources without creating an even greater
budget deficit, he said.

McConnell said that tapping non-defense discretionary spending in the
2009 budget resolution, which was set $25 billion above President Bush's
request, would satisfy offset opponents.

Senate Republicans have blocked the House-passed tax extension package,
(H.R. 6049), over its budget offsets that involve delaying a tax break for
multinational companies and closing a loophole for high-income taxpayers who
defer taxes with offshore havens. These senators, like the White House, have
preferred no offsets for existing tax incentives.

But a coalition of fiscal conservative House Democrats known as the Blue
Dogs were adamant about including the means to pay for these tax breaks in any
legislation passed by the House.

Wind and solar developers have anxiously urged Congress to act soon,
citing 116,000 jobs and nearly $19 billion in investments in the renewable
energy industry at risk if the tax incentives expire.

The House-passed energy tax credit package would extend the wind
production tax credit by one year. For other renewable energy resources,
including biomass, hydropower and geothermal, both measures also would have
provided a three-year extension of the production tax credit through 2011.

For solar energy, H.R. 6049 would extend the residential and business
investment tax credit for six years and lift the current annual credit cap for
residential from $2,000 to $4,000.

The legislation also would authorize $2 billion for the Clean Renewable
Energy Bonds program created in 2005 to help finance wind, biomass, geothermal
and other renewable energy projects developed by state, local and tribal
governments, electric cooperatives and public power providers.

The offices of Senate Majority Leader Harry Reid, a Democrat from Nevada,
and Speaker of the House Nancy Pelosi, a California Democrat, could not be
reached for comment on McConnell's letter. Congress is in recess until Monday.

--Cathy Cash, cathy_cash@platts.com