Washington (Platts)--11Sep2008

Key US Senate tax lawmakers on Thursday unveiled a roughly $40 billion
bipartisan package that would extend incentives for renewables, advance carbon
control technologies and boost alternative fuels for vehicles by repealing tax
breaks for oil and gas and an Outer Continental Shelf excise tax.

Senate Finance Committee Chairman Max Baucus, Democrat-Montana, and the
panel's senior Republican, Charles Grassley of Iowa, said they hope the plan
is included in energy policy legislation expected to come before the full
Senate next week.

Baucus said the package, which extends credits for wind development
through 20011 and solar projects for another eight years, must pass Congress
before lawmakers adjourn September 26 even if there is no consensus on an
energy policy bill.

"It is vital that at least the tax incentives pass this year," said
Baucus, who cited record-high $4/gallon gasoline as a driving force. "America
wants Congress to do something to show we get it."

Grassley said he expected the package to be part of an energy policy bill
that would expand domestic oil and gas exploration. Such energy policy bills
to open the OCS, including one from 16 senators from both parties and another
from the Senate Energy Committee Chairman Jeff Bingaman, Democrat-New Mexico,
are expected to come up for Senate debate next week.

Using funds from the tax offsets for various Senate projects has been a
opposed by Republicans in other packages earlier this year, but in this
package the offsets are for exact tax relief, Grassley said.

Grassley described the tax incentives as "oldies but also goodies" in
that senators have voted for them before. In addition to the multi-year
extensions for renewable tax credits that expire in December, the package
includes a 1.8 cents/kWh production tax credit for qualifying advanced nuclear
power facilities; $2.5 billion in credits for advanced coal and gasification
projects that demonstrate carbon capture; a three-year extension of the
production tax credits for bio-diesel and an extension of the volumetric
ethanol tax credit through 2011.

Nearly $14 billion over 10 years is expected to be raised by the repeal
of the "Section 199" manufacturing deduction for major integrated and
state-owned oil and gas companies.

A 13% excise tax on the removal price of taxable crude and natural gas
from federal OCS lands in the Gulf of Mexico following enactment of the bill
is expected to raise $17 billion over 10 years.

The legislation also would eliminate the distinction between "foreign oil
and gas extraction income" and "foreign oil-related income" and apply the
existing tax credit limit for extraction income or "FOGEI" to both. This is
expected to raise more than $2 billion.

A new provision would require basis reporting by brokers to the Internal
Revenue Service on transactions of publicly traded stock, commodities and
other items identified by the Department of the Treasury. The provision is
expected to raise nearly $8 billion over 10 years.