• Energy Tax Facts
  • 1 Jul 13

Wall Street Journal: IPAA discusses role of taxes in continued oil and natural gas development

Some of the U.S. utilities that burn coal to generate electricity reacted with caution Tuesday to an Obama administration proposal to limit carbon-dioxide emissions, amid concern that the rules might target coal plants for emissions cuts, while letting other sources of emissions, such as petroleum fuels, off the hook.

“The devil is in the details; the rules have to be practicable and actionable and within the Clean Air Act,” said Brad Watson, a spokesman for Luminant, a large power-plant operator in Texas that burns coal in its plants. “Overall, we want to see a policy that’s broad and that would cover all sectors, not just the power sector and especially not just coal generators.”

American Electric Power Inc., a Columbus, Ohio-based owner of utilities and power plants, expressed cautious optimism for the rules, saying it hopes the administration will take a “balanced approach” that will includes flexibility for power-plant operators.

“The focus on resilience, clean coal technologies, electric vehicles, energy efficiency and transmission investment demonstrates that the administration is looking at a full portfolio of actions to address the issue—not just cutting emissions from power plants,” said Melissa McHenry, a spokeswoman for AEP.

Ms. McHenry added that AEP hopes the regulation will include “maximum flexibility within the confines of the Clean Air Act, relies on technologies that are commercially proven and takes into account the emission reductions that will be achieved in the next few years through the retirement of a significant portion of the existing fleet.”

In a speech Tuesday, President Barack Obama laid out a general outline for cutting greenhouse-gas emissions, boosting America’s use of clean energy, conserving energy and ensuring that U.S. cities are protected from severe weather events such as floods and storm surges.

The White House didn’t immediately provide details of an emissions-reduction plan. U.S. power companies have been expecting proposed regulations from the U.S. Environmental Protection Agency that would limit carbon-dioxide emissions from power plants, although it has been unclear what, exactly, the agency would propose.

Renewable-energy firms and industry groups applauded the plan, amid expectations that it would boost demand for clean energy and give solar, wind and other renewable-energy technologies a competitive edge that they don’t have now.

“This is our moment in time,” Rhone Resch, president of the solar-industry group Solar Energy Industries Association, said in a prepared statement. “America’s solar energy industry stands ready to do our part to help fight climate change and usher in a new era of clean energy in America and around the world.”

Mr. Resch added that the U.S. solar industry employs about 12,000 American workers already, at more than 5,600 companies, and that the nation currently has more than 8,500 megawatts of solar power installed, enough to serve about 1.3 million homes.

The U.S. oil and gas industry reacted to the proposal with mixed emotions, applauding the president’s embrace of natural gas as a relatively clean source of energy but balking at Mr. Obama’s calls for removing tax breaks on oil and gas production.

“While many details are yet to come, it’s worth noting that President Obama again recognized the benefits of natural gas as an American source of energy that is clean, reliable and affordable,” said Marty Durbin, president of America’s Natural Gas Alliance, a trade group.

Mr. Durbin, however, added that he was concerned that Mr. Obama “continues to single out the oil and natural-gas industry for punitive tax treatment.”

The Independent Petroleum Association of America, which represents small and midsize oil and gas producers, said in a statement that the speech was contradictory.

“The president accepts the many benefits of increased use of natural gas such as jobs, cleaner air and less reliance on foreign energy,” said IPAA president Barry Russell in the statement. “Yet at the same time his continued proposal to increase taxes on the industry will strip away capital that could decrease American natural gas and oil production” by up to 25%, he said.