House Democrat Offers Energy Tax Plan

Rep. Robert Matsui (D-CA) last week introduced an energy tax bill as a companion to the comprehensive energy legislation that was unveiled by Senate Democrats earlier this year. The Energy Security and Tax Incentive Policy Act proposes a number of tax incentives and credits to spur the construction of new interstate electric and natural gas transmission facilities -- notably an Alaska pipeline -- and more gas distribution lines, as well as additional gathering to promote development in remote areas.

It also calls for "counter-cyclical" tax credits to encourage marginal oil and gas drilling during periods of low prices, and developmental drilling and enhanced recovery work for gas and oil.

The centerpiece of the legislation addresses tax incentives to promote energy efficiency and greater use of renewable fuels by energy producers, residential consumers and businesses. Specifically, the bill provides tax credits for 10-30% of investments in renewable energy technologies and energy-efficient property used in business; tax deductions for increased energy efficiency in non-residential buildings; credits to manufacturers of high-efficiency clothes washers and refrigerators; credits for new energy-efficient residential construction; 15-30% write-offs of the installed cost of certain renewable and fuel cell property; and incentives for distributed generation facilities.

"Clearly, California and the western states need immediate and meaningful action by FERC. We need rate caps until this market is under control," he said, but he conceded that caps alone will not solve the crisis. "...[T]here are a number of problems causing today's market instability, so the long-term solution must be a national approach to improving conservation, production and transmission."

He noted the legislation expands his previous piece-meal proposals into an cohesive energy policy that seeks to address the energy needs of the entire nation. He cited the bill's provision on the Alaska pipeline as an example. In an effort to spur construction of a long-line pipeline to the Lower 48 states "sooner rather than later," Matsui proposes that a production tax credit of 25 cents/MMBtu be offered for gas produced and delivered into interstate commerce before Jan. 1, 2009.

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