US tax bill bans new oil, gas drilling in Rocky Mountain Front

Washington (Platts)--26Dec2006

Legislation that President Bush signed into law last week includes a
provision to permanently ban all new oil and gas drilling in Montana's Rocky
Mountain Front area, according to Senator Max Baucus (Montana-Democrat).

The Tax Relief and Health Care Act of 2006, which Bush signed last
Wednesday, included a large number of provisions, including a measure to open
about 8.2 million acres in the federal waters of the eastern-central Gulf of
Mexico to oil and gas drilling and allow the coastal states of Louisiana,
Mississippi, Alabama and Texas to receive a share of new royalty revenues.

But Baucus, who will become chairman of the powerful Senate Finance
Committee after the New Year, said in a statement that he used his position as
a lead negotiator on the legislation to include a provision that will make
permanent a 1997 moratorium on new oil and gas leases on the Front and make it
easier to retire existing leases.

Drilling on the Rocky Mountain Front has been the subject of passionate
debate for years. The front which runs for about 100 miles across west-central
Montana is known for its wildlife. While there are about 60 active leases in
the Front area, none are producing.

Baucus said the outright ban on new leases will also allow a coalition of
non-profit groups to purchase existing leases from oil and gas companies and
retire them without fear that the federal government would turn around and
reissue the leases in the future.

The provision also includes an incentive for lease-holding energy
companies to sell their leases to conservation groups. The provision provides
a tax holiday--equal to 25% of the capital gain received by the seller--for
sales of leases to non profit groups that agree to retire the leases.

Montana's congressional delegation is split on the ban. Republican
Representative Denny Rehberg, Montana's only member of the House, opposed
Baucus' provision, calling it "foolhardy" to limit drilling at a time when the
US was struggling to meet its energy needs.

The Tax Relief and Health Care Act of 2006, which Bush signed last
Wednesday, included a large number of provisions, including a measure to open
about 8.2 million acres in the federal waters of the eastern-central Gulf of
Mexico to oil and gas drilling and allow the coastal states of Louisiana,
Mississippi, Alabama and Texas to receive a share of new royalty revenues.

--Cathy Landry, cathy_landry@platts.com

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