IPAMS says House bills have critical tax, leasing reforms for independents

The US House of Representatives is due to consider legislation next week that includes tax provisions the oil industry has sought for years. A four-bill energy tax package contains a mix of tax changes, energy studies, and leasing provisions. Most were in President George W. Bush's energy strategy.


By the OGJ Online Staff

HOUSTON, July 27 -- The US House of Representatives is due to consider legislation next week that includes tax provisions the oil industry has sought for years.

A four-bill energy tax package contains a mix of tax changes, energy studies, and leasing provisions. Most were in President George W. Bush's energy strategy.

Senate committees have yet to report their energy reform bills. The Senate Finance Committee is expected to begin marking up tax legislation in September.

The Independent Petroleum Association of Mountain States said the House legislation "contains a number of critical provisions ... that could impact independent producers for years."

Some of the tax provisions are those that independents also have sought for years, including expensing of geological and geophysical costs and delay rental fees.

In an outline of the key points in the bills, IPAMS said the Energy Tax Policy Act of 2001 (H.R. 2511) contains "relief for independent producers from unreasonable tax provisions that are burdensome and that slow or even preclude the production of much needed oil and gas resources." They include:

-- The enactment of a marginal well tax credit to keep marginally economic wells in production and to enhance optimum recovery of domestic oil and natural gas.

-- Eliminating the net income limitation on percentage depletion to keep marginally economic wells in production and maximize recovery of domestic resources.

-- Allowing companies to expense geological and geophysical costs and delay rental payments in the year incurred.

-- Extending the net operating loss carryback period to 5 years to enable producers to recover from losses much sooner.

-- Extending the Sec. 29 tax credit for production from nonconventional sources and a phased-in repeal of the Alternative Minimum Tax.

IPAMS said the Energy Security Act (H.R. 2436) requires:

-- The study of existing rights of way across Federal lands to establish the foundation for pipeline and electricity transmission additions.

-- A study of the energy production potential of federal lands, which IPAMS said together with the current study of federal land withdrawals and other restrictions "is a critical step in identifying which federal lands that hold resource development potential can be made available for leasing and development."

-- The review by federal agencies of regulations that act as barriers to emerging energy technology.

-- The formation of an interagency task force to expedite the environmental review and permitting of interstate gas pipelines.

-- A study of impediments to efficient lease operations.

-- The elimination of unwarranted denials and stays of lease issuance and unwarranted restrictions on lease operations.

-- Government consideration of royalty in-kind provisions that "will provide a fair return to the government while not increasing the burden or costs for independent producers."

-- Partnerships between industry and government to conduct research and development and to transfer technology to the field that enhances the recovery of oil and natural gas resources.

-- A tax credit to keep marginally economic wells in production.

-- Royalty tax credits for the cost of environmental studies that producers must make for the public benefit.

IPAMS said the Energy Advancement and Conservation Act (HR 2587) requires federal agencies to review their regulations to eliminate barriers to emerging energy technologies and to advance pipeline research and development.

And IPAMS said the National Monument Fairness Act (HR 2114) creates a system of checks and balances for National Monument designation that safeguards against potential abuses.

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