Washington (Platts)--12Dec2007
The $21.8 billion tax package included in the US Senate energy bill to be
voted on Thursday is actually bigger than the $21 billion House-passed
version, but it changes slightly some of the provisions most opposed by the
oil and gas industry and it extends some refinery tax credits, according to a
document released Wednesday by the Senate Finance Committee.
Unlike the House-passed energy bill, which the Senate rejected last week,
the Senate version would repeal the section 199 manufacturers' tax deduction
only for the major integrated oil companies, not all US oil and gas producers.
Because of the change, the provision is expected to raise $9.4 billion, not
the $10 billion expected in the House-passed plan.
The Senate also removed from the House version the repeal of repealing
favorable depreciation for natural gas distribution lines. The House version
called for the removal of a temporary 15-year recovery depreciation period for
natural gas distribution lines placed in service after December 31, making all
lines in service after that time subject to a 20-year recovery period and a
35-year class life. This proposal was expected to generate $501 million over
10 years.
The Senate bill extends for two years -- through January 1, 2013 -- a
refinery expensing provision that provides 50% bonus depreciation for costs
incurred for a new refinery or an existing refinery to increase total capacity
by 5% or process nonconventional feedstocks at a rate equal or greater to 25%
of the total throughput of the refinery. The proposal will cost about $1
billion over 10 years, according to the committee.
Like the House version, the Senate tax package would raise $3.2 billion
by redefining how US-based multinational oil companies report their foreign
oil and gas extraction and refining income. This provision requires companies
to report more of the income in the extraction category, which the industry
said would increase their taxes and subject some of the income to double
taxation.
The tax package, like the House bill, also raises the amortization for
geological and geophysical expenditures from five years to seven years for
large integrated oil companies, a move that is expected to generate $103
million in revenues over the next decade. And it brings $854 million into the
Treasury by reducing by 5 cents to 46 cent/gal the ethanol-blending tax
credit. The changes would go into effect the first calendar year after the
year in which 7.5 billion gallons of ethanol, including cellulosic ethanol,
has been produced.
The revenues generated under the bill would, among other things, be used
to pay for a four-year extension of the production tax credit for renewable
energy sources, through December 31, 2012, at a cost of $6.6 billion over 10
years.
--Cathy Landry, cathy_landry@platts.com
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