ENERGY TAX CREDITS – REPEATING OURSELVES?

“…Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself…” Mark Twain.

The Senate repeated its September 23rd approval of the New Energy tax credits when it passed them again, 74-25, as part of the economic rescue package.

Now the House gets the chance to prove Mark Twain wrong by NOT repeating itself when it once again takes up the rescue package, and the New Energy tax credit extensions in it, measures the House rejected separately within the last few days.

Who would have thought it? Just 2 days ago the S.F. Chronicle went with a story reporting the financial meltdown would kill the New Energy tax credits. Instead, House politics almost killed the credits and then, suddenly, without warning, the Senate’s financial rescue package brought them back to life.

NewEnergyNews’ forecast, 2 days ago, of a dire fate for solar stock prices likewise went askew when the “facts” changed. The Senate put New Energy’s vital tax credit extensions into the rescue bill, H.R. 1424, Emergency Economic Stabilization Act of 2008 (EESA), giving life support to the markets in general and virtually rejuvenating solar stocks.

Why shouldn’t the New Energy tax credits be part of EESA? Nothing could be better for the U.S. economy than policy support to industries whose time has come. Recent studies suggest New Energy will lose nearly 120,000 jobs if the tax credits are not extended but add $20 billion in revenues to the U.S. economy if they are.

Gregory Wetstone, senior director of government affairs, American Wind Energy Association (AWEA): "We're constantly getting caught in these political crosscurrents, and it's time to move beyond that…"

Now the the Senate’s rescue package goes to the House. Will the House repeat their rejection? Some think so. Others think the House will rise to the occasion.

Representative Steve King (R-Iowa): "I think that they probably put enough sweeteners in it that they will be able to get the votes…"

If the Senate rescue package gets enough support in the House to pass, it will be due to 3 major areas of pro-active legislating by Senate leaders.

1st, EESA improves the original “bailout” by adding oversight on spending, eliminating golden parachutes for executives, setting up a return on the taxpayers’ investment, and helping homeowners who face foreclosure.

2nd, the new bill increases FDIC insurance on bank deposits from $100,000 to $250,000.

3rd, it includes a variety of tax benefits including the Alternative Minimum Tax protection and the New Energy tax credits extension.

Harry Reid (D-Nev), Majority Leader, Senate: “These tax cuts will create hundreds of thousands of jobs here in America, spark investment in the economy by small businesses, and help chart our course away from imported oil and toward the home-grown fuels of tomorrow…Every part of this bill…is aimed directly at the heart of our financial crisis… As Senator Obama said yesterday, there will be plenty of time to assign blame. Now is our time to work – not as Democrats and Republicans – but as guardians of the public trust – to forge a better day ahead.”

Many have given the Senate bill, if not endorsement, at least grudging tacit approval. Senator McCain (R-Ariz) , Senator Obama (D-Ill) and Senator Biden (D-Dela) all came in from the campaign trail to vote for it.

Senator Judd Gregg (R-NH), Ranking Member, Banking Committee: “If we fail to act, we fail the nation…To do nothing would neither be logical or responsible…”

As always, the House of Representatives is a different story altogether. Fiscally conservative Republicans and fiscally conservative Blue Dog Democrats have controlled proceedings so far on both the rescue package and the New Energy tax credits.

Many, however, say momentum is shifting toward support in local districts across the country. More importantly, phone calls to Representatives’ offices, earlier in the week reported to be overwhelmingly against the package, are now, it is said, evening out.

Representative John Yarmuth (D-KY), a “no” vote on the 1st House rescue bill: “Before the vote on Monday, I think our count was 965 to 60…On Tuesday, after the market dropped…the calls started out in the morning saying, ‘why don’t you do something.’ Once the market came back, they started evening out again. Now they are running about 50-50…This morning when the market was off a couple of hundred points, they said the calls were coming in saying do something, and when the market was up they stopped…So people are following the market pretty closely.”

View the full .DJIA chart at Wikinvest

click to enlarge

Yes, the market crash changed some House attitudes. The more liberal House members like the Senate package add-ons. And some conservatives see the wisdom of overlooking everyday rules pertaining to funding when the moment requires a $700 billion rescue.

Representative John Boehner (R-Ohio), Minority Leader, House: "[It has a] much better chance…[but I’m] not taking anything for granted."

It will only take a dozen members to change the votes they cast in Monday’s 228-to-205 rejection.

All members of the House are, of course, up for re-election. Their dilemma: Recent polls show 2/3 of the country is angry about the rescue plan but a growing minority (38-to-45%) believes it is "the right thing to do."

House Republicans are being pushed toward approval by the White House and by Senator McCain.

There are rumors Senator Obama is urging those House Democrats who will listen to him to back the Senate plan.

Here’s how Senate Majority Leader Reid described the Senate vote: “When called upon to choose between what is easy and what is right, we rejected what is easy and chose what is right…”

Neither Senator Reid nor Senator Obama, however, has much leverage with the most fiscally conservative of their party, the Blue Dog Coalition. The Blue Dogs do not trust party leaders or the Bush administration. And they hold the deciding votes.

Representative Lloyd Doggett (D-Texas): "The Senate measure has changed my position from 'No' to 'Heck no'…With the Senate amendment, the bailout has gone from bad to worse, $105 billion more in public debt worse."

“It’s gonna come down to Blue Dogs,” a Republican House staffer told NewEnergyNews.

And it will come down to a floor vote, no sooner than and probably on Friday.

Perhaps some Representatives will rise to the moment and prove Mark Twain wrong.

Mark Twain was rarely wrong but the current situation is a rare moment.

click to enlarge

Summary of H.R. 1424, Emergency Economic Stabilization Act of 2008 (EESA)

Tell the House to follow the Senate’s lead: H.R. 6049 at the American Wind Energy Association’s POWER OF WIND or the Solar Energy Industries Association’s TAKE ACTION.

Financial crisis threatens green tax credits
David R. Baker, October 1, 2008 (San Francisco Chronicle)
and
Word Reaches Congress: As the Market Goes, So Goes the Electorate
David M. Herszenhorn, October 1, 2008 (NY Times)
and
U.S. Senate Approves $700 Billion Financial-Rescue
Nicholas Johnston and James Rowley, October 1, 2008 (Bloomberg News)
and
Senate approves bailout after revisions, 74-25; Tax breaks are added to Wall Street package, but passage is far from certain
Maura Reynolds, Richard Simon and Nicole Gaouette, October 1, 2008 (LA Times)

WHO
The U.S. Senate, The U.S. House of Representatives

WHAT
The Senate passed H.R. 1424, Emergency Economic Stabilization Act of 2008 (EESA) by a 74-25 vote.

This GE study proved the wind tax credits, like other New Energy incentives, create revenues in the long run. (click to enlarge)

WHEN
- The Senate vote was October 1.
- The House vote is expected October 3.
- Congress is likely to adjourn for the election season as soon as this matter is settled.
- The tax credits expire December 31.

WHERE
The action shifts from the Senate to the House Thursday and Friday.

WHY
- H.R. 1424, Emergency Economic Stabilization Act of 2008 (EESA). Covers 5 major areas:
I. Stabilizing the Economy – EESA provides up to $700 billion to the
Secretary of the Treasury to buy mortgages and other assets, relieve financial institutions and make it possible for citizens and businesses to get credit. It also allows companies to insure assets.
II. Homeownership Preservation – EESA requires modification of bad loans (many due to predatory lending) to help owners keep their homes and improves the HOPE for
Homeowners program.
III. Taxpayer Protection – EESA sets up requirements that assure taxpayers they will benefit from any growth companies get from the act and requires the President to submit legislation to cover taxpayer losses from the program.
IV. No Windfalls for Executives – EESA prevents executives who made bad decisions from dumping bad assets and walking away with millions in bonuses. To gain EESA advantages, companies lose certain tax benefits and must limit executive pay and golden parachutes.
V. Strong Oversight – EESA allocates $250 billion immediately, then requires Presidential certification before the next $100 billion and the last $350 billion are allocated. It also requires ongoing reports from the Treasury Department and creates an Oversight Board and special inspector general to protect against waste, fraud and abuse.

This Navigant study shows the solar tax credit extension will pay off in huge revenues. (click to enlarge)

- The provisions regarding New Energy tax credits are based on those in H.R. 6049, which included:
(1) a 1-year extension of the wind energy industry’s production tax credit (PTC),
(2) a 2-year extension of a production tax credit for biomass, geothermal, hydrokinetic and some forms of solar,
(3) an 8-year extension of the solar energy investment tax credit (ITC),
(4) tax credits for pilot “clean” coal (carbon capture and sequestration, CCS) projects, coal-to-liquids projects, battery manufacturing, high-speed rail construction and green building,
(5) authorization for the National Academy of Sciences to assess IRS incentives’ impacts on greenhouse gas (GhG) emission abatement,
(6) tax credits for cellulosic ethanol and biodiesel production and a tax credit for the purchase of a plug-in hybrid electric vehicle,
(7) approves $3 billion in bonds and tax credits for efficiency and GhG abatement projects and construction,
(8) includes a package of extensions on tax breaks for teachers, hurricane victims and others.
- The bill also contains a compromise provision for the controversial Alternative Minimun Tax (AMT).
- The legislation is reported to save taxpayers $60 billion.

Money invested in New Energy pays itself back in jobs and revenues. (click to enlarge)

QUOTES
- Peter Darbee, CEO, Pacific Gas and Electric Co., on failure to extend the New Energy tax credits: "It would take us in exactly the wrong direction as a country, especially with respect to climate change..It would be a severe blow to the work I've been doing and the general movement in respect to renewables…"
- Richard Durbin *D-Ill): If we fail to act…we cannot say that in Congress we met our responsibility…”
- Kevin Swartz, president, Solel USA: "Investors like stable market conditions where the rules don't change very much, and all of this is not helpful…This is not very helpful at all," he said.
- Representative Jason Altmire (D-Penn), a “no” vote on the 1st House rescue bill: “My calls are still running 10 to 1 against the bailout, which sounds like a lot and is a lot…But before the vote, it was 30 to 1. After the vote, especially that afternoon as the market fell, our calls were about 50-50.”
- Mitch McConnell (R-Ky), Minority Leader, Senate: “We have had unprecedented cooperation…This is the kind of vote we were sent here by our people to cast…I think it is one of the finest moments in the history of the Senate..”
- Jean-Claude Trichet, President, European Central Bank: “It has to go, for the sake of the U.S. and for the sake of global finance…I am confident, but of course it is the decision of the U.S. Congress.”