Incentives approved
for energy production

Last month, the U.S. Congress signed and President Bush signed the Emergency Economic Stabilization Act of 2008, a 450-page law primarily designed to stabilize the domestic financial markets.

Most of the media attention on this $700 billion package focused on how it could help ease the credit crunch and stabilize financial markets. Thus, it was easy to overlook that the bill also contained the Energy Improvement and Extension Act of 2008, which was a 140-page section that addressed energy production incentives, transportation and domestic fuel security provisions, and energy conservation and efficiency provisions.

Among the tax incentives made available in this bill are these:

• Extension of Clean Renewable Energy Bonds (CREBs). The bill authorized an additional $800 million of new CREBs which can be used by nonprofit utilities to finance renewable energy development.

Among the facilities eligible for CREB financing are those that generate electricity from wind, biomass and other forms of renewable generation. The law also reserves one-third of the amount available for electric cooperatives to issue, and extends the termination date for existing CREBs by one year.

The purchaser of a CREB is issued a tax credit by the U.S. Treasury to be deducted from future income tax liabilities, and in effect, allows the nonprofit utility to provide interest-free financing for renewable energy project. Originally, the CREB funding option for nonprofit utilities was lead by Rep. Earl Pomeroy in the Energy Act of 2005. Rep. Pomeroy was again instrumental in getting the program extended in this legislation for another year.

• Extension and modification of the production tax credit (PTC) through Dec. 31, 2009. This tax credit allows investor-owned utilities to deduct from their federal income tax an amount equal to 2.1 cents per kilowatt-hour for every kilowatt-hour of electricity produced from wind and certain other renewable energy sources. This PTC, as it’s commonly called, has been instrumental in jump-starting the millions

The bill also provides several tax incentivesof dollars of investment in wind farms in North Dakota and across the country over the past few years.

• Tax credits for carbon capture. The law authorizes up to $1.5 billion in tax credits for the creation of advanced coal power projects that capture and sequester at least 65 percent of the facility’s carbon dioxide (CO2) emissions and certain coal gasification projects that capture at least 75 percent of the facility’s CO2. This provision is important to North Dakota’s and the nation’s development of coal-based generation, as many believe future projects will need to include carbon capture and storage.

• Tax credits for carbon sequestration. The law provides a $20 tax credit for each ton of carbon captured and sequestered using long-term geological storage from qualifying projects and a $10 tax credit for each ton of carbon captured and used for enhanced oil or gas recovery efforts. This provision is important to North Dakota, as well as Basin Electric Power Cooperative’s subsidiary, Dakota Gasification Company, is already capturing C02 and selling it to a Canadian oil company to enhance oil recovery in Saskatchewan. There is great interest from oil companies operating in western North Dakota to use CO2 for enhanced oil recovery in the future as well.

• Tax credits for transportation and fuels. The law provides buyers of plug-in electric cars a tax credit ranging from $2,500 to $7,500, and it also extends a $1 per gallon production tax credit for biodiesel through 2009. These consumer-friendly credits will encourage use of new vehicles and new fuels.

to develop the solar power industry in our country.