WHEN PRESIDENT George W. Bush recently signed the Energy Policy Act of 2005 (HR-6) into law, he provided the solid waste industry with the realization of one of its top legislative goals: extending the Section 45 tax credits for landfill-gas-to-energy (LFGE) and waste-to-energy (WTE) facilities that generate electricity. The bill extends the “placed-in-service” window that LFGE and WTE projects must meet to be eligible for the tax credits by two years and doubles the length of the payout period.
The placed-in-service window for LFGE and WTE facilities, which began on Oct. 23, 2004, was set to expire at the end of this year. The new law extends the deadline to Dec. 31, 2007. The law also extends the payout of the tax credits from five years to 10 years. The amount of the credit — a baseline rate of 0.75 cents per kilowatt hour (kWh) that is indexed for inflation — remains the same.
Bruce Parker, president and CEO of the Washington-based National Solid Waste Management Association (NSWMA), and John Skinner, executive director and CEO of the Silver Spring, Md.-based Solid Waste Association of North America (SWANA), both praise the tax-credit extension, saying that their organizations are pleased with the provisions of the bill. “It will allow a lot more facilities to come online and to qualify for the credits,” Skinner says.
However, both NSWMA and SWANA were disappointed that the final legislation did not include a recycling equipment tax-credit provision proposed by Sen. Jim Jeffords, I-Vt. Jeffords' proposal, which he called the Recycling Investment Saves Energy Act (RISE), would have allowed companies to claim up to 15 percent of the cost of equipment used to process recyclable materials as a tax credit. The provision was included in the version of the energy bill that the Senate passed, but it was removed when a conference committee of House and Senate members met to reconcile the different versions of the bill that each chamber had approved.
“Hopefully, we can try again and get [the recycling provision] passed,” Parker says.
The new law calls for the Department of the Treasury, in consultation with the Department of Energy (DOE), to conduct a study that will examine the energy-saving effects of recycling glass, paper, plastic, steel, aluminum and electronic equipment. The study, due in August 2006, also will identify tax incentives that would encourage the recycling of such materials.
In the meantime, the energy legislation will create the Clean Renewable Energy Bonds (CREB). The bonds are designed to encourage public entities, such as local governments and electric cooperatives, to develop facilities that generate electricity from renewable sources in the same way that the Section 45 tax credits encourage the private sector to build such projects. According to the law, governmental bodies, electric cooperatives and similar organizations can issue bonds to raise capital to build LFGE and WTE facilities. Instead of the issuer then paying interest to the bondholder, the federal government will give the holder a tax credit. The law says that no more than $800 million in CREBs can be issued nationwide.
The reauthorization of the Renewable Energy Production Incentive (REPI) is another notable feature of the energy bill. REPI is a program run by the DOE that provides incentive payments to public entities that generate electricity from renewable sources such as landfill gas. The DOE stopped accepting applications for REPI payments in September 2003. Under the new law, renewable energy projects that begin operations before Oct. 1, 2016, would be eligible to receive REPI payments, which equal 1.5 cents per kWh (1993 dollars and indexed for inflation), for a 10-year period.
Solid waste industry members have downplayed REPI, noting that it is funded only by annual congressional appropriations, which can be relatively small. In the past, the average annual appropriation for the program has been about $5 million, according to a DOE official.