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On Federal Tax Credits and a State Energy Plan

First, we take note of late-breaking news: Congress adjourned before the holidays without renewing a number of expiring tax breaks, including a $1 per gallon biodiesel blenders’ tax credit set to expire on Dec. 31. The New England Fuel Institute, noting this development in a “Legislative Update” said it will continue to press for a retroactive extension of the biodiesel tax credit when the new Congress meets in January.

NEFI added, “We will also inform lawmakers of our concerns over a proposal to move the tax credit upstream from blenders to producers.” A NEFI Task Force warned that a move to a producers-only tax credit “would harm regional supplies of biodiesel and increase prices on consumers of biodiesel-blended heating oil. NEFI prefers an extension of the existing tax credit for two or three years while Congress examines these issues.”

In other news, the Connecticut Energy Marketers Association chalked up a win for its members when the state’s Department of Energy and Environmental Protection backed away from a plan that would have expanded natural gas availability as part of a clean energy policy meant to reduce emissions. (See “Connecticut Drops Plan to Expand Natural Gas Capacity,” in the Dateline section of the December 2016 issue of Fuel Oil News.)

The Department announced in the fall that it was cancelling a request that sought “proposals for natural gas resources, including liquefied natural gas, natural gas pipeline capacity and natural gas storage.” The additional capacity was to have been part of upgrade[s] being made to interstate pipelines owned by Houston-based Spectra Energy, according to news reports.

“I’m extremely encouraged by the recent [decision] to abandon some of the interstate pipeline projects,” says Chris Herb, president of the Connecticut Energy Marketers Association. Connecticut failed to reach its own annual goals for converting heating oil users to natural gas, Herb says, and that was a sign that its policy was failing. But one of the main drivers behind the failure of the plan appears to have been that expanding natural gas availability and usage “does not allow [the state] to meet their greenhouse gas reduction goals, and that’s a really big deal in Connecticut,” Herb says. “It’s a bipartisan priority.”

Herb adds, “It just took a little time to sink in that Bioheat is a better alternative when measuring emissions than natural gas and all the methane leaks that occur in Connecticut.” A report that NORA submitted to Congress “was the game-changer,” Herb says, referring to a report titled, “Developing a Renewable Biofuel Option for the Home Heating Sector,” released in May 2015 by the National Oilheat Research Alliance. Among the findings of the report was that biodiesel blends at 20% (B-20) with ultra-low sulfur heating oil are lower in greenhouse gas emissions than natural gas when evaluated over 100 years, while blends of 2% (B-2) or more are lower in GHG emissions than natural gas when evaluated over twenty years.

Herb says he thinks the state’s position changed after “they finally really took a look at the science and the data,” which support the conclusion “that the only commercially available fuel that can actually contribute to reduced greenhouse gas emissions and reduced emissions in general is Bioheat.”

But a new energy plan for the state of Connecticut, expected to be revealed in February, might pose a comparable though different challenge to fuel oil marketers, Herb says.

“Without being privy” to actual details, Herb says he anticipates that emissions from transportation are to be targeted, with an emphasis on electric vehicles as the solution. But the fuel oil industry might face a challenge too, Herb says, from another anticipated element of the state’s plan. “I think what we’re going to experience is what Maine and Vermont have had a heavy dose of the past year or two, which is a serious look at heat pump technology,” he says.

But heat pump technology would not help the state meet its own clean energy and emissions goals, Herb says. “It makes no sense to put additional pressure onto the electric grid in Connecticut by shifting heating towards an electricity-based technology and the transportation sector from gasoline to electricity,” he says. “So we are willing, ready and able to take on that challenge because it doesn’t make sense just like the natural gas pipelines didn’t make sense.”

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