White House backs oil, gas tax breaks in House energy package
Rep. Bill Thomas (R-Calif.), House Committee on Ways and Means chairman, Wednesday said the White House endorses $13 billion in tax incentives for the oil and gas industry proposed in the committee bill. The Bush administration's own energy blueprint, on which the House bill was based, did not endorse similar incentives.
By the OGJ Online Staff
WASHINGTON, DC, Aug. 1 -- Rep. Bill Thomas (R-Calif.), chairman of the powerful House Committee on Ways and Means, Wednesday said the White House endorses $13 billion in oil and gas production tax incentives over 10 years proposed in the committee bill.
Thomas said the Bush administration "was very pleased" with the tax portion of H.R. 4, the 510-page comprehensive energy bill that addresses energy issues from the wellhead to the burner tip.
Energy Sec. Spencer Abraham, speaking with Thomas at a press conference on the eve of the energy bill debate, said he was not aware of an administration position on the incentives but the White House "was very hopeful" the bill would be passed this week.
Thomas's view of the White House position runs counter to President George W. Bush's comments during his campaign last year, when he would not endorse new business tax breaks. And the White House's own energy blueprint, on which the House bill was based, did not propose expanding tax incentives for the oil industry.
Administration officials last month privately said that even the marginal well incentives, which are estimated to cost $8 billion over 10 years, are too high a price tag for the budget. And predictably, the tax incentives have become a lightening rod for bill opponents (OGJ Online, July 19, 2001).
"The bill, much like the president's energy proposal, takes us back to a much earlier era, to a 1950s world of big oil and refineries," said House Minority Leader Dick Gephardt (D-Mo.).
Nevertheless, House Republican lawmakers have been undeterred. The measures include a phased-in marginal well production credit of up to $3/bbl if oil prices fell below $18/bbl and 50�/Mcf if gas prices are below $2/Mcf. The maximum production on which a credit could be claimed would be 1,095 boe/year.
The bill would allow producers to expense delay rental payments for leases and suspend the 65% limit on percentage depletion until Jan. 1, 2007.
The suspension of the 100% net-income limitation for marginal wells would be extended 5 years. Geological and geophysical costs incurred in connection with oil and gas exploration could be deducted.
The bill also would allow net operating losses from oil and gas properties to be carried back for up to 5 years, allow "business energy credits" to be applied against the alternative minimum tax; repeal the AMT preference for intangible drilling costs; and repeal the minimum tax limitation on enhanced oil recovery credits.
The Democratic-controlled Senate is not expected to vote on broad energy legislation until early fall and deepwater royalty incentives and tax issues are expected to be items of contention. As in the House, a bipartisan group of lawmakers from producing states will seek tax incentives to boost oil and gas production.