- The Washington Times - Sunday, December 14, 2003

Despite having the finish line in sight, a three-year quest to pass a comprehensive energy bill fell short last month. When Congress returns from its recess, it will not be too late to straighten out this energy bill.

With war and near chaos reigning in the No. 1 oil-producing region in the world, with blackouts of 2003 still fresh on everyone’s mind, with gasoline and natural gas prices the highest in years, and with petroleum imports — and the corresponding trade deficit — heading for another record, how is it we cannot pass an energy bill?

For one thing, Congress has to do a better job pointing out to the public and the media that tax exemptions do not mean handouts, pork, subsidies, giveaways, grafts, gifts or anything of the sort. We have been using the tax code to spur energy development nearly as long as we have had taxes. The continual and misguided reference from those who oppose the bill to tax incentives as “giveaways” is intellectually dishonest, to say nothing of naive.

Short of sending our elected representatives out with picks and shovels to dig for coal, or hammers and wrenches to build windmills, what is it exactly we expect them to do? The answer is for them to establish a climate conducive to providing energy. What better way than to give those who identify, capture and bring energy to market a lower tax rate? What makes criticism of this approach so shallow is that it is hardly unique to energy. We use the tax code to promote everything.

Want that new factory to locate in your state instead of the one next to you? Establish an attractive tax structure. Want people to buy energy-efficient windows? Give them a tax rebate. Want some help on the money you shell out to watch the kids while you are work? Get a tax credit.

In all cases it is simply the Government taking less of your money. Tax incentives, particularly tax credits, can only be realized when there is tax liability or taxes are paid. There is no handout involved. The very critics making all the noise are using the tax code to depreciate their computers as they write their diatribes. Does this mean we are subsidizing the Fourth Estate? One of my former board members once observed that under the logic of tax breaks being subsidies, does removal of the so-called “Death Tax” penalty, i.e. not taxing people upon their demise, mean we are subsidizing death?

Perhaps the most maligned product impacted by this mindset is ethanol, made from domestic grains or other starch products, and used as an additive or replacement for gasoline. After an ethanol producer has developed a project, purchased grain, hired employees, paid state and federal taxes, and generally delivered the goods, he is rewarded by the government taking less of his money. Which part of that is a problem?

On the petroleum side, if there were not significant tax reductions to cover the cost of oil exploration and other costs incurred before the product comes to market, all that would have to be reflected in the sales price. The same for electricity — what critics call handouts to develop coal or natural gas allows those final costs to be kept in check. Otherwise, rates would be prohibitive.

We have to get serious about producing domestic energy, and we will need it all. Renewable technologies hold the most promise yet need the most assistance to compete with mature fossil fuels. As we learned from the release of last month’s study by the National Defense Council Foundation, the real cost of our dependence on imported oil dwarfs the tax incentives we provide to increase domestic supplies.

And I do not want to hear that the contribution of the renewable technologies is insignificant. Turning away from them now means one thing: We will import more oil.

The energy bill isn’t perfect. It is, however, realistic and the president and the Congress need to iron out the few remaining issues and get it passed. It isn’t about party politics either. The ethanol portion of the energy bill, for example, was originally crafted by Democratic Sen. Tom Daschle of South Dakota and Republican Richard Lugar of Indiana, with the tax piece agreed to by Republican Sen. Charles Grassley of Iowa and Democrat Sen. Max Baucus of Montana.

They can all take credit, there is plenty to go around. Pass the energy bill.

Doug Durante is executive director of the Clean Fuels Development Coalition, an organization that works on alternative fuels vehicle programs and is a prominent environmentalist.


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