November 19, 1974
Page 36440
Mr. MUSKIE. Mr. President, the Committee on Public Works has brought to the Senate a measure which is intended to provide short-term relief for the electric power consumers served by the Tennessee Valley Authority in order to assist in early installation of facilities necessary to reduce air and water pollution. The legislation before the Senate today was passed by the House in a very different form. As originally proposed, this legislation would have relieved the Tennessee Valley Authority from any requirement to repay to the Treasury a major portion of the investment made by the Nation's taxpayers in TVA which has become the Nation's and the world's largest electric utility.
The House bill would have permitted the Tennessee Valley Authority to write off its entire pollution control investment at the expense of the general taxpayer. This would have included even a writeoff of the energy costs of operating the control devices. The legislation as passed by the House would have voided the obligation of the electric power consumers in the Tennessee Valley to repay the Federal Treasury for a major portion of the taxpayer's investment in that utility. And the House bill would have established a weaker criteria for determining whether or not TVA's pollution control investment was in fact adequate technology under the requirements of the Clean Air Act.
The bill before the Senate today does not forego repayment of the national taxpayer's investment in the Tennessee Valley Authority. It does not forego the national taxpayer's equity in the Tennessee Valley Authority. And it does not create a circumstance in which the consumer of power sold by the Tennessee Valley Authority has an advantage over the consumers of power from other utilities throughout the country.
Mr. President, under existing law the consumers of power sold by private electric utilities receive benefits from existing policies. These include Federal tax credits, rapid amortization, and tax exempt bonds as a means of reducing the cost of complying with Federal and State pollution control requirements. None of these privileges are available to the ratepayers in the TVA. In fact, unlike the private electric utility ratepayer, TVA power consumers must pay 100 percent of the costs of a pollution control investment required of the TVA. This means that TVA's rates are rising at a much more rapid pace than the rates of consumers of private electric utilities. TVA
ratepayers are faced not only with the pressures of higher fuel costs due to increased price of coal but also must pay 100 percent of the cost of pollution control. Private electric utility ratepayers at least have the benefit of having part of their pollution control costs borne by the taxpayers of the Nation as a whole.
The legislation before the Senate only provides TVA short-term relief. Under the Senate Public Works Committee version, the Tennessee Valley Authority will be permitted to defer 5 years of annual $20 million repayments to the Treasury, thus extending the date in which TVA repays the Federal appropriation investment of $1 million from the year 2014 to the year 2019.
In the long run, this cost to the Treasury is mitigated in two ways. First: The eventual repayment of the deferred annual return of appropriation investment is required. Second: The interest payments on this new investment in TVA for pollution control costs must be repaid.
I underscore the fact that this annual repayment is deferred, not forgone. It is not given away. The bill simply adds a 5-year delay to the present requirement that $20 million be repaid each year. This will be allowed only if TVA uses those moneys to purchase certified pollution control equipment.
Second, this legislation permits TVA to take a credit against the interest it would have paid on the outstanding Federal appropriation investment to the extent that the total of any annual appropriation investment repayment and such credit are at least equal to TVA's pollution control costs. The effect of this credit is to permit TVA to use moneys for pollution control which previously have been collected in anticipation of the requirement to pay interest on Federal investment.
I might note, Mr. President, that the combination of the annual return on appropriation investment and the interest payment is less than half the anticipated investment in pollution control by the Tennessee Valley Authority. And, TVA's credit for pollution controls will not be automatically written off. Instead, these credits will be added to the total appropriation's investment in TVA. Thus, any dollars which TVA does not repay now will become a part of the appropriation's investment and draw interest in subsequent years.
If, as is expected, TVA obtains a credit of $300 million, then after 5 years the Treasury can expect to receive an annual interest dividend of $18 million in addition to the interest and dividend that TVA would otherwise be paying in those years. In 20 years, the entire credit for pollution control will be redeemed in interest dividends.
Mr. President, TVA is treated under Federal environmental statutes like any other private corporation. It must comply with both Federal and State law. It must obtain permits under the Water Pollution Control Act and it must adhere to implementation plans under the Clean Air Act. If States have permits to regulate pollution emissions or effluents, TVA must obtain and comply with those permits. This legislation continues that procedure.
Like private utilities which seek to obtain accelerated amortization of pollution control investments, TVA must obtain certification from both the State and Federal Environmental Protection Agency that those pollution control investments are consistent with the requirements of State and Federal law.
Mr. President, TVA would not be permitted to use the funds available under this credit and deferral procedure for pollution control strategies which did not reduce or control effluents or emissions. So-called intermittent control strategies, or what TVA calls the SDEL method, would not be eligible for funding under this provision. Stack gas scrubbers, electrostatic precipitators, cooling towers, and other facilities designed to reduce, control, or store pollutants would be eligible. But no facility would be eligible if its purpose is to disperse pollutants.
I would like to insert at this point in the RECORD the correspondence between myself and the Administrator of the Environmental Protection Agency on how this certification procedure works. In addition, I would like to include in the RECORD at this point legislative history from the Tax Reform Act of 1969 which spells out that pollution control certification must be for pollution control and is not available for pollution-dilution facilities.
The PRESIDING OFFICER. Without objection, it is so ordered. (See exhibit 1.)
Mr. MUSKIE. Mr. President, there is debate in the Congress as to the value of utilizing incentives and disincentives to control pollution. It is argued by some that this indirect subsidy of TVA should not be enacted, because it distorts the relationship between the consumer and pollution control costs. I am inclined to agree that goods ought to include as a part of their price the cost of pollution control. But we have in a number of ways acted because of an assumed national interest to permit certain pollution control costs to be spread to the taxpayer as whole rather than just to the consumer of a given product. Production of electricity is but one example.
As I have indicated, electric utilities have been able to take advantage of tax exempt bonds, investment tax credits, and accelerated amortization to reduce the impact on their ratepayers of pollution control costs. The bill before us provides temporary relief for TVA to reduce the impact of pollution control investment on its ratepayers. It is an imperfect mechanism. But I suggest to my colleagues that it will provide significant stimuli to the Nation's largest electric utility to again assert a leadership role in the development of new technology and new ideas. The TVA will be required to spend this money for the kind of pollution control investment that is clearly consistent with clean air and water laws. I would hope the TVA would utilize these funds to go beyond the mere requirements of law and provide new techniques, new technologies, and new methods to meet our environmental needs.
EXHIBIT 1
JUNE 24, 1974.
Hon. RUSSELL E. TRAIN,
Administrator,
Environmental Protection Agency,
Washington, D.C.
DEAR MR. ADMINISTRATOR: Attached is a letter which I sent today to Commissioner Donald Alexander of the Internal Revenue Service. In order to assist in this investigation I would appreciate receiving from you a report on "Pollution Control Facilities" which the Environmental Protection Agency has certified as eligible for accelerated amortization under the Tax Reform Act of 1989.
I will need sufficient detail to determine whether or not any depreciable property was included as a part of such "Certified Pollution Control Facilities" which was not eligible under the precise criteria set forth in the Senate Report on the 1969 Act.
You will note that the Act specifically prohibits rapid amortization for facilities such as those associated with intermittent control strategies and tall stacks. I am sure you will find this interesting and supportive of our shared position that tall stacks and intermittent control strategies are not acceptable air pollution abatement technology under the Clean Air Act.
If you have any questions, please contact Leon G. Billings of the Subcommittee on Environmental Pollution at 225-7859.
Sincerely,
EDMUND S. MUSKIE
Chairman, Subcommittee on Environmental Pollution.
U.S. ENVIRONMENTAL PROTECTION AGENCY,
Washington, D.C.,
August 2, 1974.
Hon. EDMUND S. MUSKIE,
Chairman,
Subcommittee on Environmental Pollution,
Committee on Public Works,
U.S. Senate,
Washington, D.C.
DEAR MR. CHAIRMAN: Your letter of June 24, 1974 requested information concerning pollution control facilities which EPA has certified to be eligible for accelerated amortization under section 169 of the Internal Revenue Code. You asked that the information be sufficiently detailed to enable you to determine whether any facilities were certified which did not meet the precise criteria set forth in the Senate Report on the 1969 Act. Our Regional offices were accordingly asked to submit copies of all certifications, or a list of all facilities which EPA has certified. These materials are attached.
This Agency concurs in your view that neither facilities associated with intermittent control strategies nor tall smokestacks are eligible for rapid amortization under section 169. Indeed, EPA's Guidelines for Certification, 36 F.R. 189, Sept. 29, 1971, state at paragraph 2(c)
Examples of Eligibility Limits:
The amortization deduction is limited to any new identifiable treatment facility which removes, alters, disposes of, or stores contaminants or wastes. It is not available for all expenditures for air pollution control and is limited to devices which actually remove, alter, destroy, dispose of or store air pollutants.
(1) Boiler modifications or replacements. Modification of boilers to accommodate "cleaner" fuels are not eligible for amortization: e.g., removal of stokers from a coal fired boiler and the addition of gas or oil burners. The purpose of the burners is to produce heat, and they do not qualify as air pollution control facilities. A new gas or oil fired boiler that replaced a coal-fired boiler
would also be ineligible for certification;
and at paragraph 7:
Dispersal of Pollutants. Section 160 applies to facilities which remove, alter, dispose of, or store pollutants – including heat. As the legislative history of the section makes clear, a facility which merely disperses pollutants cannot qualify.
Our examination of the attached certifications and lists has not disclosed any instance where tall smokestacks or facilities associated with intermittent control strategies have been certified.
Sincerely yours,
RUSSELL E. TRAIN.
JUNE 24, 19 74.
Hon. DONALD C. ALEXANDER,
Commissioner,
Internal Revenue Service,
Washington, D.C.
DEAR MR. COMMISSIONER: The Tax Reform Act of 1969 included a provision for rapid amortization of pollution control facilities. Pursuant to that law, the taxpayers were permitted to amortize over a 60-month period "certified pollution control facilities".
According to the Conference Report on the Tax Reform Act "The Conference substitute (on amortization of pollution control facilities) follows the Senate amendment." This is important because the Senate Report specifically defines "certified pollution control facilities" on page 250.
The following excerpt is of particular interest:
"The amortization deduction is to be available only with respect to a `certified pollution control facility', which generally is defined as depreciable property which is a separate identifiable treatment facility used to abate or control water or atmospheric pollution or contamination by removing, altering, disposing, or storing of pollutants, contaminants, wastes or heat, and which is appropriately certified. A building is not a pollution control facility unless it is exclusively a treatment facility. Thus, a pollution control facility does not include any facility which serves any function other than pollution abatement. Moreover, facilities which only diffuse pollution, as distinct from abating it, are not pollution control facilities.
"In other words, a pollution control facility is an installation which prevents or minimizes the direct release of pollutants into the air or water in the course of manufacturing operations. For example, a smokestack on a plant whose height was increased to disperse pollutants over a broader area would not be a pollution control facility, while a device which contained in a smokestack and actually abates the emission of pollutants is to be a pollution control facility. In addition, a facility that removes certain elements from fuel (for example, sulphur which would be released as a pollutant when the fuel is burned) would not be a pollution control facility.
I am informed that an extension and possibly expansion of this provision may be sought this year. In order to prepare for such an amendment, I would appreciate an evaluation of the use of this provision of the law. Specifically. I would like to know the types of facilities for which utilities, smelters and other fuel burning stationary sources have sought this deduction. I am concerned that some smelters and other utilities and fuel burning stationary sources may have claimed as certified pollution control facilities property which is not eligible for accelerated amortization.
I have sent a similar letter of inquiry to the Environmental Protection Agency's Administrator Russell E. Train. Your early response to this request will be appreciated.
If you have any questions, please contact Leon G. Billings of the Subcommittee on Environmental Pollution, at 225-7859. Sincerely,
EDMUND S. MUSKIE,
Chairman,
Subcommittee on Environmental Pollution.