- Current Issue
- Buyer's guide
Worried about Wyden
Wyden ascends to the chairmanship of the Energy Committee in a Senate that has a slightly larger Democratic majority than in the past Congress. The House remains in GOP hands and President Obama still occupies the oval office. Neither energy issues broadly nor pipeline issues specifically will be the first order of business in the Capital where legislators and the president try to fashion some sort of compromise on the "fiscal cliff" the country faces on Jan. 1, 2013. That is the $500 billion combination of tax increases and spending cuts that go into effect if the two parties don't agree on some sort of deficit reduction plan.
The need to come up with additional revenue certainly raises the possibility of higher taxes for the energy industry, primarily the producers. Jack Gerard, president of the American Petroleum Institute, says oil and gas producers pay an effective 41 percent corporate income tax rate. He says that is higher than the effective rate of 26 percent paid on average by all S&P industrials. He argues the major tax benefit oil companies enjoy is a cost recovery deduction, which is available to all industries. "Our view is we should all be treated equal, so if there is a decision made that the U.S. should have cost recovery provisions, it ought to apply to all industries."
Any elimination of current deductions would not affect pipelines. The threat to gas transmission companies comes more from the possibility of an increase in the individual tax rate on dividends, says Martin Edwards, vice president at the Interstate Natural Gas Association of America. Higher taxes on dividends would discourage some people from investing in pipeline companies, which are attractive investments because of their relatively high dividends. Similarly, any change in the tax status of master limited partnerships (MLPs), a category into which many pipeline companies fall, could also hurt the ability of MLPs to attract capital.
The next Congress is unlikely to revisit the issue of pipeline safety, having passed the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011. That bill, signed by President Obama on Jan. 3, 2012, made no significant changes to the integrity management program, although it did provide the Pipeline and Hazardous Materials Safety Administration (PHMSA) with a list of studies to do, and pipelines with some new information to collect and report.
Unhappy With Expanded PHMSA Data Request