Uncertainty for propane MLPs tax status and motor fuel tax incentives

Paul Ryan’s new House speakership promises to challenge the propane industry politically as it hasn’t been challenged by any speaker, Democrat or Republican, in a generation. The leadership changes on Capitol Hill will bring a new sense of urgency to the policy debates and all but guarantee that tax reform will be a top agenda item in this and the next Congress or until it is enacted.

Speaker Ryan Will Challenge the Political Status Quo
What does the new speakership mean for the industry? Despite his rising national profile, Speaker Ryan is still something of an unknown outside his close Wisconsin circle — and very much a wild card — part iconoclast, part policy wonk, but also a master of policy detail. As speaker, Ryan will implement a view of limited government that is pro-business but is also market-driven.

For propane, this may represent a double-edged sword. Ryan is “pro-business” in seeking lower business and individual tax rates and relief from the crushing overregulation. But his market-driven philosophy will cause uncertainty when it comes to preserving the tax status of the propane MLPs and motor fuel tax incentives.

The problem for propane is that Ryan has long opposed using the tax code to grant incentives or economic advantage as he sees it to one sector of the economy to the detriment of another sector. For Ryan this skews economic forces and creates winners and losers artificially by subsidizing potentially unsustainable markets. So he’ll argue, “Build a better mousetrap and the world will beat a path to your door.” The long and the short of it is this: The over-the-road tax credits that the industry has enjoyed for more than a decade are in serious jeopardy. Philosophically, Speaker Ryan opposes them. There will be no automatic extensions once tax reform is on the table.

Ryan and his staff — one of the best on the Hill — will challenge the industry aggressively: “Are the motor fuel tax credits building the over-the-road market? “How many propane vehicles were on the road before the credits were enacted and how many are on the road now?” “Why should the American taxpayer continue to support and subsidize the over-the-road motor fuel market for propane?” “Should this subsidy be made permanent or should it sunset?” “Are there other propane incentives that might provide more bang for the taxpayer buck?”

How to engage Speaker Ryan? The industry is well positioned on many fronts. It operates in all 50 states and has built a first-rate grass-roots program to reach all 435 House members and 100 senators. But this will be a whole new ballgame. The industry is going to have to organize as never before to preserve the status quo and build on it.

Meeting Ryan’s Challenge Will Require Bold Strategies, Proactive Thinking
Targeted stakeholder coalitions and campaigns are being organized all over Washington, D.C. Examples include groups organized to preserve percentage depletion for the mining and aggregates industries; the oil depletion allowance; the wind production tax credit; mortgage interest deduction; and the credit union tax-exempt status.

Keep Your Industry Friends Close and Your Competition Closer
Building targeted motor fuel and other issue coalitions nationally and regionally within the National Propane Gas Association and the state associations will be critical in showcasing the broad industry support for current tax and policy programs. It may be necessary for the propane industry to reach out to the other clean fuel groups to build more comprehensive alliances or restructure its own advocacy internally to reflect the broad technologies the industry has developed and continues to develop. Propane should investigate other tax incentives and funding in traditional markets such as off-road and agriculture and in new and evolving markets such as in golf, hospitality and resorts, back-up power, combined heat and power, construction, and industrial applications where the industry is developing world-class products.

Speaker Ryan’s task of uniting House Republicans behind tax reform and other issues will be daunting, and the 2016 presidential elections will only complicate that process. But unlike in years past, there is the likelihood of significant institutional change in the House that will impact the legislative process top to bottom. The traditional ways of addressing the many issues impacting propane and other industries have grown stale and ineffective and the debate has been incomplete, inadequate, and divisive. Speaker Ryan will challenge the House and its membership directly and with it every stakeholder with skin in the game.

This will provide the propane industry with an opening to have a similar conversation about its priorities and its strategies for representing its varied policy interests and complex membership.

The industry should therefore consider Ryan’s speakership as an opportunity to highlight and promote propane as a clean, green energy source for America. So that what may initially seem to be an onerous political challenge really becomes a positive showcase that results in the greater utilization of this premier domestic fuel.

Joe Colaneri is director, public affairs for Foley & Lardner, a Milwaukee-based national/international law firm located in 17 U.S. cities and foreign countries. He was previously executive director of the Propane Vehicle Council from 1996-2002.