A pending corporate tax bill may be as good as it gets this year for industry lobbyists still looking for energy legislation to come from a sharply divided Congress.
The House of Representatives, on a 251-178 vote June 17, approved HR 4520, a bill considered this year to be "must pass" legislation because it repeals a US tax law deemed illegal by the World Trade Organization.
Adding to the sense of urgency is the European Union, which this spring followed through with its threat to impose expensive new tariffs on US goods until the offending provision—called the Foreign Services Corporation/Extraterritorial Income Act—is gone.
Adding energy
Pending House and Senate measures still would provide tax goodies to US companies that sell to foreign markets, but it would be under a framework that ostensibly does not violate international trade rules.
Because the legislation is one of the few bills this election year that may pass Congress, various business interests, including energy companies, want to see their favorite provisions included in the measure.
The Senate in May passed its own version of the corporate tax bill, S. 1637. It includes $19.4 billion in energy tax provisions for oil, gas, coal, renewable, nuclear, and energy efficiency programs that were originally in a languishing comprehensive energy bill (OGJ, May 18, 2004, p. 30).
The Senate bill also includes incentives to build an Alaska natural gas pipeline to the Lower 48. Pipeline-related provisions include an enhanced oil recovery credit, accelerated depreciation, and a floor price provision. The House has never approved pipeline tax breaks, although last November during some energy bill discussions it did agree to conditionally support as much as $18 billion in federally backed loan guarantees.
White House resistance
The White House never has fully supported new oil and gas tax credits and incentives, saying the current congressional proposals are too expensive.
Lawmakers from oil and gas states have sought anywhere from $4 billion to $8 billion in tax relief measures over a 10 year period under various legislation. Most of the proposals aim to benefit smaller US independents—producers and refiners that serve domestic markets.
House leaders say they want to keep energy tax incentives with comprehensive energy legislation. Their corporate tax bill does not include new energy tax breaks. It does, however, renew an expiring tax provision supported by the White House.
The House bill would extend the 100% of net income limitation on percentage depletion for oil and gas from marginal wells through Dec. 31, 2005.
It may be September before House and Senate lawmakers meet and reconcile their differences on the tax bill. That gives lobbyists plenty of time to get some favorites into a final bill before Congress leaves in October for the fall elections.
A sudden oil supply shock or a summer blackout also could dramatically reshape the outcome of any energy legislation, comprehensive or otherwise.