When used directly to heat homes, to heat water and for cooking, natural gas emits 45 percent less carbon dioxide than coal and 30 percent less than heating oil. Natural gas water heaters and furnaces are more efficient than electric versions and have the added benefit of not adding to base load demand during peak hours. Electric water heaters also produce double the carbon dioxide emissions of natural gas.

In terms of efficiency, almost 70 percent of coal’s energy is lost by the time that coal-fired electricity reaches a customer. By contrast, only about 10 percent of natural gas’s energy is lost when it is produced and delivered directly to homes and businesses.

All of these attributes only highlight the important, and intelligent, role that natural gas plays in providing direct, reliable and low-carbon energy.

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Natural gas utilities that use OTC derivatives to manage price volatility will not be required to conduct OTC derivatives transactions on an exchange or through a clearinghouse.  We sought to clarify certain definitions in the legislation to make the exemption more clear.   While our legislative recommendations were not included, Senate Banking Committee Chairman Dodd and Senate Agriculture Committee Chairwoman Lincoln signed a joint letter to House Financial Services Committee Chairman Frank and House Agriculture Committee Chairman Peterson that addresses many our concerns.  This letter was incorporated into the Congressional Record on June 30^th by the two House Committee Chairmen.  This letter should provide valuable guidance to the SEC and CFTC as they develop regulations on these issues.  To view the joint letter, please click here.

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The president’s apparent about face came when he stated that, “if you make more than $250,000 a year, going back to the tax rates that existed under Bill Clinton are perfectly fair.” When it comes to dividend tax rates, this statement runs counter to everything the president has previously said and even contradicts his own budget proposal.

Now, I fully understand that he may be talking about something different, but AGA’s long involvement in supporting reasonable dividend tax rates helps us recognize when something may be afoot.

Millions of Americans, from all income levels and age groups, own stocks that pay dividends. Senior citizens and people reaching retirement age, in particular, represent a large community of investors who own dividend-paying stocks. In fact, many seniors rely on dividend payments to supplement their retirement income.

In addition to the concern that the tax rate on dividends could skyrocket to nearly 40 percent for taxpayers in higher brackets, the recently enacted Health Care Reform legislation will subject unearned income (dividends, capital gains, interest and passive income) to an additional Medicare tax of 3.8 percent for taxpayers at higher income levels.  So for some investors, their tax bill will reach nearly 44 percent.

That’s why AGA has been so supportive of President Obama’s proposed budget for fiscal year 2011 that maintains the 15-percent tax rate on dividends for most middle-income taxpayers and the zero-percent rate for low-income taxpayers. For married taxpayers earning more than $250,000 ($200,000 for single taxpayers), the tax rate on dividends is increased to a reasonable 20 percent.  It’s fair, it’s reasonable and it supports the investment efforts of hard working Americans in all tax brackets.

So, when I hear President Obama talk about going back to Clinton-era tax rates in such an open-ended way, I hope I’m just overreacting and not seeing the wrong kind of change for America’s investors.

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While AGA is closely monitoring the progress of climate legislation and the upcoming Copenhagen negotiations, we have not taken a stance on timelines and specific percentage targets. The primary reason is that trying to peer into a future full of competing legislation and partisan interests is likely an exercise in futility. Rather, AGA is focused on the achievement of more practical goals, such as how to continue to help move toward a reduced carbon future. It should be noted that the residential sector, using natural gas for heating, has a carbon footprint today that is essentially the same as it was in 1970 even though the number of households using natural gas has grown from 38 million in 1970 to 65 million today.

In actionable terms, when looking at the 2020 target reduction of 17 percent below 2005 levels of greenhouse gas emissions, natural gas can continue to play a key role in achieving that near-term goal. And on that point, the Business Council for Sustainable Energy (BCSE) agrees that maximizing the immediate use of natural gas, along with existing clean technologies of renewable energy and energy efficiency, is the most effective way to realistically reach these targets.

BCSE’s strategic vision establishes that in a near-term scenario leading to 2020, renewables, being zero- or low-carbon emission energy sources, can address incremental new energy demand to supplement existing energy supply. Meanwhile, increases in energy efficiency, which residential and commercial natural gas customers have led the nation in achieving for nearly three decades, can contribute to reductions in overall energy consumption and greenhouse gas emissions.

With respect to this partnership approach, BCSE points out that as the lowest carbon-emitting fossil fuel, natural gas is uniquely positioned to complement the addition of renewable energy to the existing grid. Natural gas is a reliable and efficient fuel and, when used appropriately as part of a diverse energy portfolio, can be an effective substitute for more carbon-intensive energy sources.

So while the debate about timelines and targets will no doubt continue, AGA is focused on the here-and-now technologies and resources that will actually affect change for our country, our environment and for the world’s climate.

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We cannot discuss the issue of domestic oil development in a vacuum because natural gas development is part of that story. That said, the short answer is yes, any legislation should include provisions to encourage domestic oil development. And it is not only the oil and natural gas industry that supports domestic production. Developing a reliable and home-grown energy supply is also a vital part of our national security. Many citizens of the states in which it would occur strongly support increasing domestic oil—and natural gas—production because they recognize both the importance of developing home-grown energy options and, especially now, the financial benefit to their states in the form of leasing royalties and jobs. However, politics and the politics of fear—specifically baseless claims about the environmental and safety threats posed by domestic production—habitually frustrate the efforts of those who wish to take action to reduce America’s dependence on foreign energy.

America’s onshore and offshore oil and natural gas production has an exceptional record of safety and environmental stewardship. There has not been a single significant oil or natural gas spill from a production rig for more than 40 years, including in the Gulf of Mexico during Hurricane Katrina! Domestic production also reduces America’s overall carbon footprint because, in addition to natural gas being the cleanest fossil fuel on the planet, local production of oil would reduce the demand for foreign drilling, storage and transportation via enormous tankers, all of which make significant contributions to carbon output.

Finally, the best way to address climate change, while still providing America with the energy it needs to grow its economy, is with a wide-ranging set of options, which is why AGA has long supported, to the fullest extent possible, the development of a diverse domestic energy supply, including oil, nuclear, wind, hydro, solar and, of course, domestic, abundant and clean natural gas.

Accessing and utilizing natural gas, and all of America’s other energy resources, is a key piece to solving the energy, energy security and climate change puzzle. But it is also important to note that increased fuel diversity would also allow more natural gas to be used directly in the residential and commercial market, where, for more than 40 years, natural gas customers have led the way in increasing energy efficiency and conservation, while reducing greenhouse gas emissions.

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If Congress does not act, on December 31, 2010, investors from all walks of life – whether individual retirees or pension fund managers – will face markedly increased taxes on their dividend income.  In fact, the maximum dividend tax rate will jump from the current 15 percent to almost 40 percent!

I was just in Albuquerque, New Mexico, speaking to more than two hundred investors who are concerned about what the future holds for them.  This event, an annual luncheon for members of the New Mexico Utility Shareholders Alliance, brought home to me the importance of face-to-face advocacy.  I had been invited to talk about this very issue and to let everyone in the room know that someone was looking out for them.

Looking out for America’s Investors

As the leading national grassroots advocacy organization dedicated to preserving fair and reasonable dividend tax rates, Defend My Dividend (DMD) is leading the fight to protect investors who depend on their dividends to make ends meet, to plan for the future and to provide themselves with a sense of security.

DMD is actively supporting proposals by President Obama and Senate Finance Committee Chairman Max Baucus (D-MT) to make permanent the current capital gains and dividend tax rates for the majority of Americans while capping the rate at 20 percent for higher-income families. Over the summer, Chairman Baucus introduced legislation that mirrors the capital gains and dividend policies in President Obama’s fiscal year 2010 budget.  They are sensible goals that support America’s investors and promote investment in the companies and businesses that are moving this country forward.

How We Got Here

Prior to 2003, dividends were taxed as ordinary income, with a maximum rate of 35 percent. After 2003, dividends were taxed at a 15 percent rate for all taxpayers. In 2006, Congress extended that dividend provision through 2010, while also lowering the tax rate to zero for the two lowest federal brackets.  Without action by congress, the dividend tax rate will rise to a maximum of 39.6 percent – in tough economic times, that’s just wrong.

This Really Does Affect Everyone

Many Americans depend on their dividend checks to supplement household income.  But did you know that lower dividend rates also help to attract much-needed capital for local energy utilities?  That’s important, especially at a time when utilities are making major investments in power generation and delivery facilities.

This is real money and it impacts real families.  In fact, the dividend tax rate reduction benefits more than 24.5 million households – 59 percent of which have incomes less than $75,000.  24 percent of households receiving dividends had incomes below $25,000. And 72 percent of households receiving dividends had incomes below $100,000.

Even if you don’t receive dividends yourself, if you invest in a 401(k), are part of a pension plan or even have shares of a mutual fund, dividends are probably a bigger part of your life than you realize.

DMD is preparing to step up its national grassroots campaign in 2010 by drawing attention to this one-year countdown and ensuring that congress supports President Obama and Chairman Baucus.

DMD is also expanding its message to make sure that every American understands that now more than ever, the fate of the dividend tax affects everyone.

To learn more about DMD and to learn how you can make your voice heard, visit www.DefendMyDividend.org today.

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