Congressional analysts estimate that the 2005 energy bill will increase direct spending by $2.2 billion from fiscal 2006 through 2010 and reduce federal revenue by a projected $7.9 billion from fiscal 2005 through 2010.
Douglas Holtz-Eakin, director of the Congressional Budget Office, made the estimates in a July 27 letter to House Energy and Commerce Committee Chairman Joe Barton (R-Tex.).
CBO and the Joint Committee on Taxation’s preliminary analysis shows that within Title III, the portion of the bill dealing with oil and gas, the biggest direct spending effect is $1 billion from coastal impact assistance. The bill budgets $250 million/year for this purpose in fiscal years 2007-10.
Other outlays will total $203 million from fiscal 2005 through 2010 and $402 million from fiscal 2005 through 2015, according to the preliminary analysis.
The joint taxation committee identified oil and gas tax breaks in the bill that represent $2.09 billion over 5 years and $2.82 billion over 10 years. The provisions, which affect both upstream and downstream operations, include:
• A temporary 50% expensing of refining equipment, including an allowed pass-through to cooperative owners, through Dec. 31, 2011, with an estimated federal budget impact of $659 million from 2005 through 2010 and $406 million from 2005 through 2015.
• Treatment of gas utilities’ distribution pipelines as 15-year properties (excluding assets subject to binding contracts entered into on or before Apr. 15, 2005, and limited to original-use property) through Dec. 31, 2010 ($384 million over 5 years and $1.02 billion over 10 years).
• Allowing amortization of all geological and geophysical expenditures over 2 years ($337 million from 2005 through 2010 and $974 million from 2005 through 2015).
• Allowing use of the Sect. 29 tax credit as a general business credit component through Dec. 31, 2007, having the biggest impacts in fiscal 2007 ($275 million) and fiscal 2008 ($301 million), leading to a $506 million 5-year impact.
• Raising the definition of a small refiner, for exemption from the oil depletion deduction, to a maximum run of less than 75,000 b/d from 50,000 b/d ($75 million over 5 years and $158 million over 10 years).
The committee also said that the bill’s alternative fuel and motor vehicle tax exemptions will cost the federal treasury nearly $1.19 billion over 5 years and $1.42 billion over 10 years.
The largest impact within this section will come from the alternative motor vehicle fuel credit, with breaks totaling $283 million in fiscal 2006, $254 million in fiscal 2007, $142 million in fiscal 2008, and $110 million in 2009.
Although the amounts drop to between $10 million and $19 million annually in subsequent years, the committee estimated that the motor vehicle fuel credit’s impact will be $875 million over 5 years and $874 million over 10 years.
The alternative fuel and motor vehicle impacts also include a provision to extend excise tax provisions and the income tax credit for biodiesel fuel through Dec. 31, 2008, and to create similar incentives for renewable diesel during the same period. This represents costs to the federal treasury totaling an estimated $67 million in fiscal 2007, $101 million in fiscal 2008, and $26 million in fiscal 2009.
Revenue impacts
The committee also expects the energy bill to generate revenue totaling more than $1.49 billion during 2005 and 2010 and nearly $3.03 billion during 2005 and 2015.
The biggest component comes from the oil spill liability trust fund, which lawmakers reactivated to run through Dec. 31, 2014. It forecasts payments starting at $150 million in fiscal 2006 and rising steadily to $360 million in fiscal 2014 before tapering off to $135 million in 2015.
Revenue from the oil spill liability trust fund will total an estimated $1.25 billion over 5 years and $2.51 billion over 10 years, the committee said.
Another important revenue-raising provision extends the leaking underground storage tank trust fund financing rate through Sept. 30, 2011; expands its application to all fuels, and repeals refunds for leaking underground storage tanks.
This will generate $33-36 million/year, or an estimated $171 million over 5 years and $349 million over 10 years, the joint taxation committee said. ✦
