US Senator looks to fast track renewal of expired marginal oil, gas credit

March 5, 2004
US Senate Finance Committee Chairman Chuck Grassley (R-Iowa) Thursday sought to renew an expired marginal oil and gas production credit now included in a stalled energy bill.

By OGJ editors
WASHINGTON, DC, Mar. 5 -- US Senate Finance Committee Chairman Chuck Grassley (R-Iowa) Thursday sought to renew an expired marginal oil and gas production credit now included in a stalled energy bill.

To move the provision forward, Grassley is trying to amend a pending "jobs" bill so it will extend the oil provision and three other energy-related tax relief plans that either already expired or are due to expire this year.

Senate Energy and Natural Resources Chairman Pete Domenici (R-NM) said late Thursday he supported Grassley's action. The New Mexico lawmaker further suggested that the inclusion of the four provisions would have no impact on his own energy bill, which is pending before the Senate and might be voted on later this month.

If approved by the full Senate, Grassley's proposal would give producers 1 more year to use the taxable income limit on percentage depletion for oil and gas produced from marginal properties. The amendment extends the deduction for the depletion of oil and gas wells, currently limited to 100% of the net income from the property in any year.

Two years ago, President George W. Bush signed an economic stimulus package designed to jump-start business investment; the law also extended the marginal credit through 2003. The provision originally expired Jan. 1, 2002 (OGJ, Mar. 25, 2002, p. 32).

Under Domenici's pending comprehensive energy legislation, the provision to extend the suspension also is included, but for longer periods. The energy bill is expected to include other domestic production incentives, but the ultimate fate of that legislation remains unknown, with consensus remaining elusive as Congress debates the measure into the spring.

Another provision that updates clean fuel programs also might get stripped from Domenici's energy bill, according to some industry lobbyists. The clean-fuel proposal has proven to be very controversial; the House says it will not accept the Senate version in its current form because it does not extend product liability protection to the fuel additive methyl tertiary butyl ether. But another piece of the clean fuel title, an ethanol mandate provision, is politically appealing to both the House and Senate, especially in an election year.

Other energy provisions
Other energy provisions Grassley is seeking to fast track out of the Senate include:

-- A tax credit for electricity produced from renewable resources, including wind, closed-loop biomass, and poultry waste. The 1-year extension applies to qualified facilities that include plants placed in service prior to Jan. 1, 2005.

-- A reinstatement of an electric vehicle credit. A 10% nonrefundable tax credit (maximum credit is $4,000) is available to buyers of qualified electric vehicles. The credit was scheduled to phase out during 2004-06. The amendment eliminates the scheduled phase out.

-- A reinstatement of clean-fuel vehicle property deductions. Certain costs of qualified clean-fuel vehicle property and clean-fuel vehicle refueling property may be expensed when such property is placed in service. The deduction for clean-fuel vehicle property was scheduled to phase out during 2004-06. Grassley's amendment eliminates the scheduled phase out.