Dear ABC Members,

Yesterday morning, the House Ways & Means Committee introduced the Growing Renewable Energy and Efficiency Now (GREEN) Act and the ABC issued our press release commending the action. This draft legislation includes several provisions that support the biogas industry and is described by the Committee as “a comprehensive approach to tackling climate change by using the tax code to extend and expand renewable energy use and reduce greenhouse gas emissions.” 


In this member alert, we dive deeper from our press release into the actual legislation so you can better understand what's in the draft legislation and what's next.

Key Elements of the GREEN Act
The bill includes three initiatives that the ABC has sought, including: the creation of an 30% investment tax credit (ITC) for RNG- and heat-based biogas systems; the extension of the Section 45 production tax credit for renewable electricity (and ability to choose the ITC in lieu of); and, the extension of the Alternative Fuel Excise Tax Credit for biogas and renewable natural gas used as a vehicle fuel. 

Sec. 101. Extension of Production Tax Credit for Renewable Electricity (§§ 45 and 48(a)(5))
This provision extends the production tax credit (PTC) for renewable electricity produced from renewable energy resources. The PTC is extended for facilities for which commence construction by the end of 2024, so it is both forward looking, for five years, and also will extend the credit retroactively for two years from the current expiration date of Dec 31, 2017. Qualifying renewable resources include: open and closed loop biomass; landfill gas (municipal solid waste); trash (municipal solid waste); qualified hydropower; and, marine and hydrokinetic renewable energy facilities.

This is great news for biogas facilities which are currently producing or have the capability to produce renewable electricity. Projects can either choose to receive the PTC ($0.012 per kWh, half of what wind is offered) or irrevocably choose to use the 30% ITC instead. The credit also includes the current safe harbor allowing projects that commence construction by 2024 or expend 5% of the eventual project costs to qualify for the credit beyond 2024.

Sec. 102. Extension of the Investment Tax Credit ITC (§ 48)
This provision extends the current ITC, which allows taxpayers to claim a credit for up to 30% of the cost of qualified energy property. Furthermore, the ITC has been expanded to include energy storage technology, waste energy recovery property, qualified biogas property, and linear generators. These technologies are eligible for the 30% ITC through the end of 2024. The ITC is also extended beyond 2024 with a phase down to 26% in 2025 and 22% in 2026. Several of these are new tax credits that we have been fighting for, especially the one for qualified biogas property. Biogas systems or parts of them can also qualify under the energy storage and waste to energy provisions depending on the project.

"Qualified biogas property" in this case is defined as property that converts biomass into a gas (which is at least 52% methane) for productive use. Electricity produced from property receiving an ITC under this provision is not also eligible for benefits. Nutrient recovery technologies that are attached to biogas systems will qualify for this ITC; however, stand-alone nutrient recovery technologies (i.e., without a biogas system) are not included in the current version of the bill. 

This credit also includes the current safe harbor allowing projects that commence construction by 2024 or expend 5% of the eventual project costs to qualify for the full credit beyond 2024 and a reduced credit beyond 2026 depending on when safe harbor is established or construction has officially commenced.

This provision incorporates aspects of the Agricultural Environmental Stewardship Act (H.R. 3744), a bill introduced by Congressmen Ron Kind and Tom Reed in the 116 th Congress. While this provision has many great things for our industry, unfortunately, stand-alone nutrient recovery technology was not included in this current draft. We will be working with our colleagues at The National Milk Producers Federation on education and outreach efforts to ensure that the full range of nutrient recovery technologies are included in the final bill. 

Sec. 202. Extension of excise tax credits relating to alternative fuels (§§ 6426 and 6427)
This provision extends the excise tax credits for alternative fuels and alternative fuel mixtures at the pre-expiration level of $0.50 per gallon through 2021 and phases the credit down to $0.38 in 2022, $0.25 in 2023, and $0.17 in 2024. The credit expires at the end of 2024.

The GREEN Act clarifies that for purposes of the alternative fuel mixtures credit, an alternative fuel mixture does not include a mixture that includes liquefied petroleum gas, p-series fuels, compressed or liquefied natural gas, liquefied hydrogen, fuel derived from coal gasification and sequestration, and biomass fuel. The provision provides a retroactive extension of these credits for qualified sales occurring between January 1, 2018, and the date of enactment of the provision, and requires the Secretary of the Treasury to issue guidance to provide for a one-time submission of claims related to these credits.

Where Do We Go From Here?
On the whole, this is very,very good news for entire industry. The comprehensive inclusion of so many provisions shows that many in Congress understand the value the biogas industry provides as a climate protecting strategy. The Committee seems to also understand how important it is to create a level playing field in our tax code to allow natural market forces to work. However, while this is a significant milestone in many ways, and especially gratifying for the ABC staff and members who have been pushing for these provisions, this is also a draft legislation from a Committee and has a ways to go to become law.

We understand that the House Ways and Means Committee does not intend to mark up this bill until February, although other steps will be taken before then in Capitol Hill. Additionally, the entirety of the GREEN Act is highly unlikely to be adopted by the Republican-led Senate. Nevertheless, this House-released version of renewable and climate change priorities is an important first step to moving any renewable energy tax package forward.

We now look to the Senate to provide their list of priority tax initiatives. Aspects of the GREEN Act may or may not be contained in whatever the Senate releases. Senators Brown (D-OH) and Roberts (R-KS) have introduced companion legislation (S. 2542) to the Agricultural Environmental Stewardship Act (i.e., the 30% ITC for heat- and RNG-based biogas projects plus nutrient recovery systems) which could make the provision establishing a new ITC for biogas more likely to be contained in the Senate package. Still, much remains to be determined. 

Typically, a tax package such as the GREEN Act is not passed by Congress on its own but would be attached to some “must pass” legislation. In the past, the tax package has attached itself to the annual appropriations package, which may be the vehicle this year as well. While the current continuing resolution (CR) expires next week, its anticipated that a new CR will be passed allowing federal funding to continue until December 20. Funding deadlines just before the Christmas holidays tend to focus legislators on the important task at hand, which means that we may see a package come together before the end of the year.  We are optimistic for a positive outcome and will keep you abreast of developments as they emerge. 

Finally, regardless of the outcome, the achievement of having three provisions important to the biogas industry contained in the GREEN Act should not be overlooked. The ABC has been pushing for inclusion of the Agriculture Environmental Stewardship Act since 2010. We have been pushing for parity with our compatriots in the renewable electricity space and extension of the alternative fuel excise tax credit since 2015. Having these three provisions included in this draft bill is no small feat which could not have been accomplished without the support of the Cosponsors of our bills and you, our members, who advocate on behalf of the industry’s priorities in-person, by phone and email. We thank you all for your continued support of our industry and look forward to continuing to work as we advocate for the positive outcome of these provisions. 

As always, you're welcome to contact me with any questions and we also welcome any of you to join us at 2pm this Thursday for our Policy Committee meeting. Email us for call instructions.

Maureen

Maureen J. Walsh 
Director of Federal Policy
American Biogas Council
1211 Connecticut Avenue NW, Suite 650
Washington, DC 20036
1 (202) 681-6092