Sen. Charles Grassley, an Iowa Republican who heads the Finance Committee, said the tax package "supports the development of energy production from renewable and environmentally beneficial sources."

The financial incentives will help promote alternative energy sources, which he said should ease US energy shortages and reduce America's reliance on crude oil imports from the volatile Middle East.

Grassley said he plans to offer the tax package next week as an amendment to a comprehensive energy bill being debated in the Senate.

The financial incentives include extending for three years through 2008 a tax credit for electricity produced from renewable sources like wind, biomass and solar energy.

The package also continues a tax credit for small ethanol producers as well as the incentives for production of biodiesel, which is made from vegetable oils and animal fats.

The maximum size for eligible small ethanol makers was doubled to producers with a production capacity of 60 million gallons a year.

The committee also reinstated the tax for the federal oil spill liability trust fund, which levies 5 cents on each barrel of crude received at a US refinery and on each barrel of imported petroleum product. The tax would last through 2014.

A separate tax for the leaking underground storage tank trust fund was extended for seven years through 2011. The tax is imposed at a rate of 0.1 cent per gallon on gasoline, diesel, kerosene and special motor fuel.

LINKS:

* Reuters top energy news [TOP/O]

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