Energy tax policy and regulation – what they are and what they should be – are the critical issues for the Presidential candidates, diverse energy experts agreed.

As with the candidates themselves, that was pretty much the end of the agreement in a Washington debate hosted by the American Petroleum Institute (API) Vote4Energy campaign. The experts split, politely, over what’s happening now and what that portends for the future, 40 years after the first oil embargo shocked Americans into paying attention to energy.

API President/CEO Jack Gerard argued that the federal government should “not pick winners and losers” but should let market forces decide what technologies and energies to use.

Gerard rejected Obama administration claims that some tax benefits available to oil and natural gas producers amount to subsidies. The tax provisions involved are normal business deductions, he said.

Kevin Smith, CEO of SolarReserve, said – hold on, there. When an oil pipeline is built, the owner gets to depreciate 50% of its cost in the first year. When SolarReserve builds a solar facility, it gets to depreciate only 30%.

Moreover, Smith said, there are no expiration dates on long-standing tax code provisions benefitting the oil and gas industries, while renewables are given subsidies with expiration dates every few years.

Level Playing Field?

“The crux is, we did pick winners and losers,” Smith said, but the US made choices 75 years ago to benefit coal and 50 years ago for oil. Now, new cleaner industries are being told “you have to compete,” he said.

Frank Verrastro, Senior Vice President, Center for Strategic & International Studies, said, “There was a good reason” years ago to craft the tax and other laws involved, but now it is difficult to change anything when so much competitive infrastructure is built based on those laws.

Speakers agreed enormous private investment will be needed in the near future for energy infrastructure and innovation, but Verrastro cautioned that private investment occurs only in a high-market-price environment.

API Vice President Kyle Isakower said private investment is held back by uncertainty over taxes and regulation. He said the industry is not looking to “relax” regulation, as other speakers suggested, but thinks drilling should continue to be regulated only by the states. Isakower said the industry concern is “additional, duplicative regulation.”

The crux is, we did pick winners and losers,” – Smith

Verrastro said he endorsed state regulation, “but we see communities struggling” with the impacts of hydraulic fracturing. He suggested there may be a role for federal “performance-based” regulation.

Gerard called existing state regulation “robust,” while Smith said he had worked on nuclear, natural gas, wind and solar generating facilities and couldn’t believe how relatively undemanding some drilling regulation is.

Gerard said oil prices are high in part due to the Obama administration’s environmental rules and limiting access to federal lands for energy companies, whether oil, gas or coal. Presidents can’t change world energy demand, but they can affect supply, he said.

Smith said expanding demand from emerging economies like China and India “will dwarf whatever we do.” Moreover, he said, “If gas were $10, there would be a big rush to drill no matter what the regulatory hurdles.”

Gerard said the coal industry is suffering due to the Obama administration’s opposition to some coal mines and new environmental limits.

Smith said it’s the low price of natural gas, not government regulation, that’s undermining the economics of coal.