Sen. Murkowski to file omnibus energy policy bill on Monday

Sen. Frank Murkowski (R-Alas.), the Energy and Natural Resources Committee chairman, plans to introduce legislation Monday intended to reduce US oil import dependency to less than 50% by 2011 from the current 56%. The legislation is expected to influence the energy policy program that President George W. Bush's administration is preparing. Vice-President Dick Cheney is heading a cabinet task force drafting that plan.


By the OGJ Online Staff


HOUSTON, Feb. 23
�Sen. Frank Murkowski (R-Alas.), the Energy and Natural Resources Committee chairman, plans to introduce legislation Monday intended to reduce US oil import dependency to less than 50% by 2011 from the current 56%.

The legislation is expected to influence the energy policy program that President George W. Bush's administration is preparing. Vice-President Dick Cheney is heading a cabinet task force drafting that plan.

Most of Murkowski's bill will be referred to his committee, but key portions of it will go to the finance and environment committees. The Senate failed to act on a similar Murkowski bill last session.

A draft of Murkowski's bill was circulated on Capitol Hill last week.

Oil provisions
The bill directs the Interior Department to lease the coastal plain of the Arctic National Wildlife Refuge in northeastern Alaska, with adequate environmental protections.

It would earmark a portion of bid bonuses from oil and gas leases on all federal lands toward funding research into renewable energy research and development.

The bill amends the Outer Continental Shelf Lands Act to reestablish the Deep Water Royalty Relief Program that expired in 2000. It would permit faster capital cost recovery for very expensive deep water drilling activities.

It would establish a royalty in-kind (RIK) program that would allow producers operating on federal lands to pay royalties in the form of oil and gas through Sept. 30, 2006.

States would be allowed to collect the RIK for the federal government. States also could assume regulation of federal leases within their borders.

RIK oil could be taken for storage in the Strategic Petroleum Reserve (SPR) when crude oil prices are stable and low.

The bill would allow federal lessees to forego federal royalty payments during periods of low energy prices and instead make capital investment in energy production.

Tax measures
The bill allows a $3/bbl and 50�/Mcf tax credit for production from marginal wells (average daily production less than 25 boe/d) when prices are below $18/bbl or $2/Mcf, and then only on the first 1,095 boe/d produced. The credit could be carried back 10 years.

It extends the current 15% enhanced oil recovery tax credit to include horizontal drilling and other tertiary recovery methods designed to extend the life of a reservoir.

It also extends the existing tax credit for production of coalbed methane and heavy oil to projects placed in service between 2001 and 2008. The $3/bbl credit is extended until 2011 and phased out thereafter.

The bill repeals the 65% percent net income limit for percentage depletion of oil and gas wells operated by independent producers. It allows carry back or carry forward for up to 10 years any depletion not deductible because of net income limits.

It repeals the current 50% net income limit on percentage depletion of oil and gas wells.

The bill clarifies the existing small refiner exception to oil depletion rules so that the 50,000-b/d limit would be determined on an annual basis.

It allows geological and geophysical expenditures and delay rental payments to be expensed.

And it would make all pipelines, offshore drilling rigs and structures, refineries, and petroleum storage facilities eligible for 7-year depreciation to foster investment in infrastructure.

It allows full expensing of heating oil, natural gas, and propane storage facilities.

And it would allow a 10% investment tax credit for US-built offshore oil and gas drilling vessels and structures in excess of 10,000 gross tons.

Conservation programs
The bill would expand the Low Income Home Energy Assistance Program to $3 billion/year from $2 billion. It increases authorized emergency funds from $600 million/year to $1 billion/year. It also enlarges the Weatherization Assistance program, which provides grants to low-income households to improve energy efficiency.

State conservation programs would be given the goal of reducing energy use by 25% by 2010 compared to 1990 usage.

Federal agencies must increase the fuel economy of newly-acquired fleet passenger cars and light trucks by at least 3 mpg by 2005 compared to 2000.

Half of federal fuel purchases must be alternative fuels by 2005.

A $100 million/year program would provide funds for local governments to buy alternative fuel vehicles.

Homeowners who install renewable energy systems could be eligible for a $3,000 grant. Renewable systems include solar, photovoltaic, wind, biomass, waste, hydroelectric, or geothermal.

Reports
Federal agencies would have to inform the Energy Secretary prior to taking any action that could have a significant adverse effect on the supply or distribution of energy. The Department of Energy would prepare an annual report on all such actions, what mitigation was undertaken, and the short, mid, and long-term effects.

DOE would issue an annual report on US progress toward less than 50% dependence by 2011, with recommendations on use of renewable energy, conservation and increased production to meet goals. Reports in 2001, 2005, and 2008 must also assess refinery conditions. It would notify Congress if petroleum stocks dropped to critical levels on a national or regional basis.

The president would form an interagency panel on the SPR and report to Congress on options to strengthen it.

Each federal agency issuing rights-of-way for transmission lines or pipelines would report to the Federal Energy Regulatory Commission and DOE within 1 year on the ability of existing corridors to support new or additional capacity.

DOE would report annually on the condition of the domestic petroleum refining and distribution system, including possible incentives, streamlining of permitting and siting, and the effect of overlapping regulations.

FERC would report to Congress in 6 months on additional legislation it needs to certify gas pipelines.

DOE and FERC would establish a task force to expedite and facilitate environmental review and permitting of interstate gas pipelines.

The Transportation Department would develop an R&D program to ensure integrity of natural gas and hazardous liquid pipelines.

DOE would also launch a 5-year R&D program to improve reliability, efficiency, and integrity of gas transportation and distribution pipelines.

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