Washington (Platts)--15Jun2007

The chairman of the US Senate Finance Committee has proposed $13.7
billion in energy industry tax credits over 10 years for inclusion in this
year's comprehenisve energy bill.

     Max Baucus, a Montana Democrat, unveiled the energy tax package late
Thursday in the midst of Senate floor debate over energy legislation. The
Finance Committee plans to mark up the energy tax package next Tuesday and
send it to the floor for inclusion in the energy bill (H.R. 6).  

     The $13.7 billion figure may irk energy companies because "the latest
draft is much leaner than was initially discussed" for this year's
comprehensive bill, said an analysis by the firm of Friedman, Billings, Ramsey
& Co.

     The Baucus plan would drastically cut subsidies to US oil companies, $1.5
billion of which will be used for coal-fired power plants to capture 70% of
greenhouse gases they would otherwise emit. The figure is 20% below the carbon
capture and storage technology the Bush administration touted under its
"FutureGen" intiative to build a 275-MW coal-fired power plant that captures
all but 10% of the GHGs it releases.

     The tax measure, the Energy Advancement and Investment Act, includes the
following provisions: 

     -- Extension of the clean energy production tax credit for qualifying
wind, biomass, geothermal, landfill gas and other facilities under Section 45
through 2010;

     -- Accelerated depreciation: 50% off equipment costs in the first year
of use for transmission lines carrying renewable energy, such as wind, to the
grid;

     -- Extension through 2010 of a 30% investment tax credit for Section 48
energy sources, solar and fuel cells, plus a 10% investment tax credit for
microturbines; and

     -- Creation of new tax credit bonds for advanced coal facilities and
continuation of "clean renewable energy bonds" authorized at $750 million a
year for 2008 and 2009 

     "We have to make a real turn toward sustainable energy policy in this
country, and this package of tax provisions will help to chart the right
course," Baucus in a statement Thursday. 

      The tax legislation is starting with identical provisions in both its
House and Senate versions, which is different than the usual policy of having
House members craft tax bills first and then sending them to the Senate, said
Steve Rosenstock, manager with the Edison Electric Institute. 

     Compared with broad energy legislation that contains different
provisions, the tax legislation contains less controversial elements,
Rosenstock said at a recent Washington conference that Platts sponsored.

     The congressional Joint Committee on Taxation said Friday that by cutting
subsidies to energy companies, Baucus has reduced the total net cost of the
bill to $866 million over 10 years.