KEY SENATORS URGE U.S. ENERGY TAX BREAKS

Key Senate energy committee members are urging Congress to consider energy tax changes to encourage U.S. oil and gas production. The energy committee reported a comprehensive energy policy bill to the Senate floor in June, and that measure is expected to be debated this fall. But the bill did not contain energy tax measures because they are the jurisdiction of the finance committee.

Aug. 26, 1991

3 min read

Key Senate energy committee members are urging Congress to consider energy tax changes to encourage U.S. oil and gas production.

The energy committee reported a comprehensive energy policy bill to the Senate floor in June, and that measure is expected to be debated this fall.

But the bill did not contain energy tax measures because they are the jurisdiction of the finance committee.

Instead, energy committee chairman Sen. Bennett Johnston (D-La.) wrote finance committee chairman Sen. Lloyd Bentsen (D-Tex.) asking him to consider a series of changes because "energy tax measures play a fundamental role in directing national energy policy."

Aides said the finance committee is unlikely to consider the tax changes soon.

Joining Johnston in the appeal were energy committee members Sens. Malcolm Wallop (R-Wyo.), Jeff Bingaman (D-N.M.), Conrad Burns (R-Mont.), Don Nickles (R-Okla.), and Pete Domenici (R-N.M.).

WHAT THEY WANT

The senators said oil imports could be restrained through a "reasonable floor price for oil, which would provide an important incentive to stimulate exploration and development of our domestic resource."

They recommended an oil import fee be collected when the international price of crude oil falls to less than $20/bbl and the price of refined products or petrochemical feedstocks fall to less than $22.50/bbl. The fee would be the difference between the imported price and the floor levels of $20 and $22.50.

They urged the finance committee to remove intangible drilling costs (IDCs) and percentage depletion from the alternative minimum tax (AMT) and corporate preference reductions of the tax code.

They said Congress should allow a tax credit for maintaining or increasing production from marginal wells and should extend the nonconventional fuels tax credit for coal seam gas (Section 29 Credit) and allow it to offset the AMT.

They also urged the finance committee to repeal an Internal Revenue Service ruling (No. 77-176) that holds that under certain circumstances an assignment of a working interest in a lease in exchange for an obligation to drill for oil and gas results in taxable income to the driller.

The senators said the ruling discourages use of joint arrangements to explore for oil and gas.

They said the committee may also want to consider allowing early accrual of expenses related to removal of offshore oil and gas production facilities, restoration of full expensing of IDCS, and current expensing of geological and geophysical costs.

They proposed a permanent extension of the research credit for energy and energy technologies scheduled to expire Dec. 31, extension of the business energy tax credit for 5 years, and design of a tax system to encourage use of fuel efficient automobiles.