Letter to Barack Obama, President of the United States - Master Limited Partnerships and Real Estate Investment Trusts
Letter
A bipartisan group of 29 Senators and Representatives sent a letter to President Obama Wednesday calling for Master Limited Partnerships and Real Estate Investment Trusts to be a priority in the federal government's "all of the above" energy strategy.
"Minor changes to the federal tax code could provide the renewable energy industry access to large pools of low-cost private capital," the lawmakers wrote. "Already, oil, gas, and coal infrastructure projects raise cheap capital by selling shares of Master Limited Partnerships (MLPs), as do energy transmission projects using Real Estate Investment Trusts (REITs). Wind, solar, and other renewable energy projects cannot use these investment tools and, therefore, suffer from high costs of capital."
"Opening MLPs and REITs to renewable energy would level the playing field by giving renewables the same access to low-cost capital enjoyed by oil, gas, coal and transmission infrastructure projects," the letter continues. "Small tweaks to the tax code could attract billions of dollars in private sector investment to renewable energy deployment, reduce the cost of renewable electricity by up to one third, and dramatically broaden the base of eligible investors. In fact, bipartisan legislation has already been introduced in both the House and the Senate (H.R. 6437 and S. 3275 respectively) to allow renewable energy projects to raise low-cost capital through the MLP structure. In the case of REITs, a straightforward ruling by the Treasury Department would allow access to this investment vehicle for renewable energy projects."
The letter, whose full text is included below, was led by the sponsors of the Master Limited Partnerships Parity Act: U.S. Senators Chris Coons (D-Del.) and Jerry Moran (R-Kan.), and U.S. Representatives Ted Poe (R-TX-02), Mike Thompson (D-CA-01) and Peter Welch (D-VT-AL). The legislation is a straightforward, powerful tweak to the federal tax code that could unleash significant private capital by helping additional energy-generation and renewable fuels companies form master limited partnerships, which combine the funding advantages of corporations and the tax advantages of partnerships.
A master limited partnership is a business structure that is taxed as a partnership, but whose ownership interests are traded like corporate stock on a market. By statute, MLPs have only been available to investors in energy portfolios for oil, natural gas, coal extraction, and pipeline projects. These projects get access to capital at a lower cost and are more liquid than traditional financing approaches to energy projects, making them highly effective at attracting private investment. Investors in renewable energy projects, however, have been explicitly prevented from forming MLPs, starving a growing portion of America's domestic energy sector of the capital it needs to build and grow.
A more detailed white paper on the MLP Parity Act can be found here: http://coons.senate.gov/mlp
Senators Jon Tester (D-Mont.), Al Franken (D-Minn.), Amy Klobuchar (D-Minn.), Sheldon Whitehouse (D-R.I.), Jeanne Shaheen (D-N.H.), Debbie Stabenow (D-Mich.), Lisa Murkowski (R-Alaska), Michael Bennet (D-Colo.), Scott Brown (R-Mass.), Tom Harkin (D-Iowa), Mark Begich (D-Alaska) and Mary Landrieu (D-La.) have cosponsored the Senate version of the legislation.
The MLP Parity Act has been endorsed by the American Wind Energy Association, Third Way, Solar Energy Industries Association, Biomass Power Association, Biotechnology Industry Organization, Ocean Renewable Energy Coalition, American Council on Renewable Energy, Natural Resources Defense Council, Advanced Biofuels Association, Offshore Wind Development Coalition, the Advanced Ethanol Council, Silicon Valley Leadership Group, International District Energy Association, and Environmental Entrepreneurs.
The text of Wednesday's letter is below:
December 12, 2012
The President
The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500
Dear Mr. President,
Over the past four years, the renewable energy sector has seen major reductions in technology costs, including a 75 percent decline in the price of solar panels and about a 25 percent decline in the price of wind turbines. But even as technology costs have dropped, the cost of capital required to deploy those technologies has remained stubbornly high -- inflating overall project costs and presenting a major barrier to wider deployment.
Minor changes to the federal tax code could provide the renewable energy industry access to large pools of low-cost private capital. Already, oil, gas, and coal infrastructure projects raise cheap capital by selling shares of Master Limited Partnerships (MLPs), as do energy transmission projects using Real Estate Investment Trusts (REITs). Wind, solar, and other renewable energy projects cannot use these investment tools and, therefore, suffer from high costs of capital.
Opening MLPs and REITs to renewable energy would level the playing field by giving renewables the same access to low-cost capital enjoyed by oil, gas, coal and transmission infrastructure projects. Small tweaks to the tax code could attract billions of dollars in private sector investment to renewable energy deployment, reduce the cost of renewable electricity by up to one third, and dramatically broaden the base of eligible investors. In fact, bipartisan legislation has already been introduced in both the House and the Senate (H.R. 6437 and S. 3275 respectively) to allow renewable energy projects to raise low-cost capital through the MLP structure. In the case of REITs, a straightforward ruling by the Treasury Department would allow access to this investment vehicle for renewable energy projects.
We strongly support moving America towards energy independence using an "all of the above" energy strategy. Renewable energy can play a critical role in accomplishing that goal. We ask that your administration move to unlock capital markets for broad-scale investment in renewable energy and help move our country towards cleaner, more efficient energy. We stand ready to work with you to accomplish this goal.
Sincerely,
Senator Chris Coons (D-DE)
Senator Jerry Moran (R-KS)
Senator Mark Begich (D-AK)
Senator Tom Harkin (D-IA)
Senator Lisa Murkowski (R-AK)
Senator Michael Bennet (D-CO)
Senator Jon Tester (D-MT)
Senator Scott Brown (R-MA)
Senator Al Franken (D-MN)
Senator Jeanne Shaheen (D-NH)
Representative Ted Poe (R-TX-2)
Representative Mike Thompson (D-CA-1)
Representative Peter Welch (D-VT)
Representative John Carney (D-DE)
Representative Betty McCollum (D-MN-4)
Representative Jim Moran (D-VA-8)
Representative John Garamendi (D-CA-10)
Representative Jan Schakowsky (D-IL-9)
Representative William Lacy Clay (D-MO-1)
Representative Larry Kissell (D-NC-8)
Representative Ben Ray Lujan (D-NM-3)
Representative Raul Grijalva (D-AZ-07)
Representative Lois Capps (D-CA-23)
Representative Gerry Connolly (D-VA-11)
Representative Doris Matsui (D-CA-5)
Representative Mel Watt (D-NC-12)
Representative Andre Carson (D-IN-7)
Representative Mike McIntyre (D-NC-7)
Representative Russ Carnahan (D-MO-3)
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