Congress Proposes Expanding Master Limited Partnerships to
Renewable Energy & Biofuel Projects
June 18‚ 2012
By
Jordan M. Collins and
David J. Leiter
On Friday, June 15, Senator Chris Coons (D-DE)
introduced S.3275, the bipartisan “MLP Parity Act,” a
bipartisan bill that would amend Section 7704 of the tax code by
enabling Master Limited Partnerships (MLPs) to own and finance
renewable energy and biofuel projects. Cosponsors of S.3275
include Senators Jerry Moran (R-KS), Jeanne Shaheen (D-NH),
Sheldon Whitehouse (D-RI), Jon Tester (D-MT), Amy Klobuchar
(D-MN), and Al Franken (D-MN).
As background, MLPs carry the fund-raising
advantages of a corporation: ownership interests are publicly
traded and offer investors the liquidity, limited liability, and
dividends of classic corporations. MLP market capitalization
exceeds $350 billion. With average dividends of just 6 percent,
proponents argue MLPs could substantially reduce the cost of
financing renewables, which currently rely on the participation
of the tax equity market, which primarily consists of a small
set of large investment banks.
Over the last several decades, MLPs have proven
to be highly effective at attracting private investment in
energy projects through the public markets. However, under
current law, MLPs have only been able to invest in oil, natural
gas, coal extraction, and pipeline projects. Approximately $290
billion (83 percent) of MLP investments have gone into
qualifying energy and natural resources. Of that, just over 80
percent has gone into midstream oil and gas pipeline projects.
The MLP Parity Act expands the definition of
“qualified” sources to include clean energy resources and
infrastructure projects. Specifically included are those energy
technologies that qualify under Sections 45 and 48 of the tax
code, including wind, closed and open loop biomass, geothermal,
solar, municipal solid waste, hydropower, marine and
hydrokinetic, fuel cells, and combined heat and power. The
legislation also allows for a range of transportation fuels to
qualify, including cellulosic, biodiesel, and algae-based fuels.
The MLP Parity Act does not affect any current MLP entity. All
projects currently eligible to structure as MLPs would continue
to qualify exactly as they would under existing law.
The MLP Parity Act has already gained
significant, public support from various sectors of the
renewable energy industry. A House companion bill is slated to
be introduced shortly by Rep. Mike Thompson (D-CA).
For more information on The MLP Parity Act, see
the whitepaper and website Sen. Chris Coons (D-DE) has created,
located
here.
A helpful analysis on the benefits of expanding
MLPs to renewables and biofuels was also recently published in a
New York Times article authored by Stanford
University’s Steyer-Taylor Center for Clean Energy Policy &
Finance and entitled “How
to Make Renewable Energy Competitive.”
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