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New MLP Parity Act Could Give a Boost to Geothermal/Renewable Energy Investors

U.S. Senators Chris Coons (D-Del.) and Jerry Moran (R-Kan.) have introduced legislation, S. 3275, or Master Limited Partnerships (MLP) Parity Act, which gives renewable energy projects access to a tax incentive available now only to oil, gas, and coal projects.

The act could "level the energy playing field by giving investors in renewable-energy projects access to a decades-old tax advantage now available only to investors in fossil fuel-based energy projects," they noted in their press release.  "The Master Limited Partnerships Parity Act 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."

Senator Coons said: “Despite all the political rhetoric about the need for an all-of-the-above energy strategy, our current tax code clearly picks winners and losers in the energy space.” He told press, “The MLP Parity Act helps level the playing field by giving investors in renewables and non-renewables access to the same highly attractive master limited partnership business structure. Congress should be setting a realistic and stable policy pathway to sustain innovations in domestic energy development, and help the market work to its fullest potential. That starts with leveling the playing field and giving renewable energy the same shot at market success as fossil fuels.”

“Master limited partnerships have been largely responsible for the tremendous growth in our country’s energy infrastructure,” Senator Moran said. “In order to grow our economy and increase our energy security, sound economic tools like the MLP should be expanded to include additional domestic energy sources. This legislation simply builds on a successful model, and I look forward to working with my Senate colleagues on policies that will drive innovation, create
American jobs, and grow our economy.”

An MLP 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. See also a white paper on the MLP Parity Act. Original cosponsors: Senators Jon Tester (D-Mont.), Al Franken (D-Minn.), Amy Klobuchar (D-Minn.), Sheldon Whitehouse (D-R.I.), and Jeanne Shaheen (D-N.H.).

This article was originally published in the GEA's Geothermal Energy Weekly and was republished with permission.

Lead image: Legislation concept via Shutterstock

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