Washington (Platts)--3Aug2007

US President George W. Bush's senior advisers will recommend he veto the
US House energy bills to be debated on the floor later Friday if they are
presented to the president in their current form, the Office of Management and
Budget said in a State of Administration Policy released Friday.

     "Because H.R. 2776 and H.R. 3221 fail to deliver American consumers or
businesses more energy security, but rather would lead to less domestic oil
and gas production, higher energy costs, and higher taxes, the president's
senior advisers would recommend that he veto these bills," the statement said.

     The House is to debate Friday two pieces of energy legislation--one a
legislative bill designed to promote renewable energy and roll back a number
of provisions in the Energy Policy Act of 2005, and the second a tax piece
that repeals $15.3 billion in oil and gas industry tax breaks included in the
2005 energy bill, redirecting the cost savings to new funding of incentives
for renewable and alternative fuels.

     The White House said it was particularly concerned about the repeal of
oil and gas industry tax credits, saying they would lead to higher energy
costs to US consumers and businesses. 

     "Repealing the manufacturing deduction for only the oil and gas industry
is a targeted tax increase that puts US industries at a disadvantage to their
foreign competitors," the OMB statement said. 

     "Changes to the foreign tax credit rules related to foreign oil and gas
extraction income and foreign oil-related income will also disadvantage
US-based companies by reducing their ability to compete for investments in
foreign energy-related projects," OMB added.

     The statement said the bill includes $8 billion in "expensive and highly
inefficient" tax credit bonds for renewable energy production and conservation
efforts. 

     "Current law already provides sufficient Federal assistance to encourage
these efforts," the statement said, adding that the administration also has
concerns with the structure and overall cost of some of the production and
investment tax credit incentives in the tax bill.

     The White House also noted it "strongly opposes" language that would bar
companies that hold controversial 1998-99 Gulf of Mexico leases from acquiring
new leases, or require them to pay a conservation fee, unless they agree to
accept price thresholds in the existing leases. 

     The fees would be $9/barrel on newly produced oil or $1.25/MMBtu of gas.
The fees would be effective when the prices of oil and gas exceed
$34.73/barrel and $4.34/MMBtu. 

     "This provision is likely to result in significant delays in lease sales
in the event that the provision is litigated," the statement said.

--Cathy Landry, cathy_landry@platts.com