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Business North - Business Law |
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Stimulus law poses potential bonanza for Iron Range
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6/30/2009 by Matthew Hanka |
The American Recovery and Reinvestment Act that President Obama signed on Feb.17 provides capital and tax incentives aimed to invigorate the renewable energy industry, rebuild the nation’s roads, bridges and mass transit systems and provide qualified tax credits to businesses and individuals.
It will have widespread effects on business in the Midwest, and specifically on the Iron Range.
Generally, the federal stimulus bill employs a combination of tax benefits, direct spending and bond and loan programs. With regard to direct grants and contracts, such federal agencies as the departments of Education, Health and Human Services and Energy play a part in deciding who receives stimulus funds. Sometimes the money will go directly to state government. At other times, it will go directly to a business, school or other qualifying organization. What benefits can Northeastern Minnesota expect to see?
Infrastructure related funding
Northeastern Minnesota can hope to benefit from the Act’s expanded investment in transportation and infrastructure. The construction sector has been particularly hard hit by the slowed economy. Nationally, the industry has lost 1.22 million jobs since December 2007. Obviously, these job losses have been felt in the northeast region. Stimulus investments in transportation and infrastructure aim to alleviate the job losses, and make a long-term investment in modernizing and improving the infrastructure related services that we use everyday.
The law will provide several hundred million dollars to Minnesota for transportation needs. The Minnesota Department of Transportation (MnDOT) has reported 60 new construction, paving, bridge and safety projects will begin in Greater Minnesota over the next 12 months. One of the stimulus-funded projects is along state Highway 61, where crews are applying anti-skid treatment in the two tunnels north of Two Harbors. Another project will include an $18 million resurfacing of U.S. 53.
Minnesota water infrastructure projects also will benefit from a recent $107 million stimulus award from the U.S. Environmental Protection Agency (EPA) to the Minnesota Public Facilities Authority to help finance overdue improvements to drinking water and sewer projects. About $72 million of these funds go to Clean Water and Drinking Water State Revolving Funds programs that provide low-interest loans for wastewater treatment projects, non-point source pollution control and watershed management. In addition, the U.S. Army Corps of Engineers Environmen-tal Infrastructure Assistance Program recently received $10 million in stimulus funds for 18 water treatment projects in Northeast Minnesota.
Another smaller scale stimulus-funded infrastructure project includes $557,000 to the Forest Service for use in improving conditions on the Superior National Forest trail system. This will benefit the northeast region’s important tourism industry by improving hiking trails, portages, cross-country skiing trails, snowmobiling and ATV trails.
Finally, construction began in May on the Ash River neutrino physics laboratory about 40 miles south of International Falls. The University of Minnesota is receiving $40.1 million — the single largest stimulus appropriation in the region — for the lab. When it opens in 2014, the lab will expand study of the role of subatomic particles called neutrinos in the origin of the universe. The Department of Energy is providing an additional $9.9 million in stimulus funding to project manager Fermilab near Chicago.
Renewable and clean energy
Nationally, more than $42 billion is provided in stimulus appropriations for energy programs, mainly for energy efficiency and renewable energy. Most of this funding must be obligated by Sept. 30, 2010. The law provides more than $21 billion in energy tax incentives, primarily for energy efficiency and renewable energy. How will this affect Northeastern Minnesota?
A recent study by Pew Charitable Trusts found that clean energy sector job growth in Minnesota significantly outpaced overall statewide employment expansion in the period 1998-2007 (see the full report at www.pewtrusts.org/ cleanenergyeconomy). Minnesota attracted nearly $50 million in clean technology venture capital in the past three years. Of note, the report finds that Minnesota ranks No. 4 among states in wind energy production.
There is no doubt the northeast region is rich in natural resources. Wind energy, biomass, geothermal and new mining technologies represent just some of the resources and new technologies that may play a huge role in making Northeastern Minnesota a driving force behind a new clean energy economy. Under the Act, such business may benefit through tax incentives, direct spending and bond and loan programs.
Among those tax incentives the stimulus law provides is a three year extension of a production tax credit for electricity derived from wind facilities placed in service by Dec. 31, 2012, as well as for geothermal, biomass, hydropower, landfill gas, waste-to-energy and marine facilities placed in service by Dec. 31, 2013. The tax incentives also include an expanded investment tax credit for developers of wind, geothermal, biomass and other eligible technologies. The Act includes a program that allows project developers to apply for a grant from the Treasury Department in lieu of an investment tax credit to reduce project-financing costs. There also are advanced energy manufacturing credits that may apply to projects creating or retooling manufacturing facilities to make components used to generate and store renewable energy. Finally, for certain businesses, the Act extends a carry-back period for net operating losses from two to five years.
Businesses also may benefit from the law’s direct spending programs. It provides $16.8 billion in direct spending for renewable energy and energy efficiency programs over the next 10 years. Of that overall total, $4.5 billion is to be used to modernize the nation’s electrical grid, and $6.5 billion is for assistance in financing transmission systems.
However, $2.5 billion is available for renewable energy efficiency and research and development. This money is appropriated to the Department of Energy. Included is $800 million is for the department’s Biomass Program and $400 million for the Geothermal Technologies Program.
Additionally, Iron Range businesses may benefit from the law’s bond and loan programs. Included is $1.6 billion for new clean energy renewable bonds to finance wind, biomass, geothermal, hydropower and other projects. The Act also provides $6 billion for temporary loan guarantees for renewable energy power generation and transmission projects that begin construction by Sept. 30, 2011.
The promise
The goals of the Act are to improve infrastructure, fund innovation and provide jobs. Northeastern Minnesota can hope to see added jobs from construction projects related to transportation and general infrastructure. Many of these projects already are well underway. In addition, the Act’s funding and tax benefits may spur new investment in Iron Range clean and sustainable energy projects, and aid in the utilization of the northeast region’s natural resources and ingenuity.
Matthew H. Hanka is an attorney practicing at Fryberger, Buchanan, Smith & Frederick, P.A. You can reach him in the firm’s Duluth office at 218.722.0861.
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