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Feature Article

Looking for Profits? Focus on Policy, Not Politics

By Roger S. Conrad on Nov. 9, 2014

On the federal level, the 2014 midterms serve as a prologue to 2016, when a range of issues affecting essential-services industries could be decided for a generation. The next few years will bring plenty of sturm and drang, but don’t expect much action.

Although the Republican-led US Senate will be able to introduce legislation affecting energy, telecommunications and other industries, neither chamber has anything close to a veto-proof majority.

And with Republicans well short of the 60 votes needed to invoke cloture on Senate debate, Democrats will be able to take a page out of their rivals’ book and filibuster literally any bill to death.

Only bills with broad bipartisan support have a chance of becoming law, ruling out legislation related to Internet neutrality and efforts to derail the Environmental Protection Agency’s (EPA) proposed rules to limit carbon dioxide emissions. (See EPA’s Crackdown on CO2 Emissions: An Indecent Proposal?)

Two tax-related measures could gain approval. The first is an extension of bonus depreciation, an accounting construct that translates into major cash savings for infrastructure builders. The second involves an extension of Production Tax Credits for ongoing wind-power projects.

Both measures enjoy strong support from industry and the White House. And they mean real money for a wide range of essential-services companies tracked in our Utility Report Card.

Some readers have expressed concern that the government could end the tax advantages associated with master limited partnerships (MLP). Such an outcome appears extremely unlikely.

Not only do MLPs have many friends in Congress, but taxing publicly trades partnerships would also net the US Treasury a few billion dollars—at most.

Moreover, the 2016 election cycle has already started. Even now, there’s little to no incentive to enact what’s sure to be an unpopular tax, especially for pro-energy Republicans.

Congressional Republicans likely will introduce legislation designed to force the Obama administration to rule on the long-stalled Keystone XL pipeline. GOP leaders have promised to send a bill authorizing the pipeline’s construction to the president’s desk in January, daring him to veto it.

On the other hand, elections in Arkansas, North Carolina, South Dakota and West Virginia swapped Democratic Senators who supported Keystone XL’s cross-border leg for Republicans who also back the controversial pipeline. This same situation could play out in Alaska and Louisiana if the Republicans ultimately win out in these races.

In short, questions still remain about whether the pipeline’s backers have enough votes to bring the bill to the Senate floor. These forces also likely lack the necessary support to override a presidential veto.

The best hope for Keystone XL remains a compromise between President Obama and Republicans that includes concessions on some environmental issues.

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