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US House Bill Could Generate $13 Billion For Clean Energy January 12, 2007

Posted by notapundit in Congress, Politics, US News.
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WASHINGTON (Dow Jones)–U.S. House Democrats’ legislative plan to press oil and natural gas companies to pay new drilling fees would bring the federal government between $10 billion and $13 billion, key lawmakers said Friday.

Democrats aim to use those funds to boost clean, renewable energy programs and reduce the country’s dependence on foreign oil.

Oil industry officials argue that the Democrats’ legislative proposal would actually increase the country’s dependence on foreign oil by snatching away key drilling incentives.

But renewable energy producers, like those in the solar industry, are pleased. They are hoping lawmakers will use the funds to extend crucial tax credits.

While the bill is expected to win approval in the House when it comes up for a vote Thursday, it is unclear if the Senate will follow suit.

“Energy companies may have been able to get away with ripping off the American public with their royalty free leases while Republicans were in control, but those days have come to an end with Democrats running the show,” Rep. Maurice Hinchey, D-N.Y., said in the statement. “We will not allow Congress to continue lining the pockets of energy company executives at the expense of the American people.”

A provision Hinchey crafted with Rep. Edward Markey, D-Mass., is included in the energy bill, which has been dubbed the “Creating Long-Term Energy Alternatives for the Nation,” or CLEAN, Act.

Under one section of the bill, oil and gas companies that don’t renegotiate flawed drilling contracts would be barred from winning future leases in the Gulf of Mexico.

Energy companies who currently hold royalty-free leases would either have to choose to renegotiate those leases to include royalty payments or they could opt to pay a $9-per-barrel conservation fee on oil and $1.25-per-million-Btu fee for gas on resources extracted under those leases.

The Government Accountability Office has estimated that the loophole allowing companies to escape paying royalties could cost the federal government as much as $60 billion if it is not fixed.

“The bill that we are introducing is the first step in charging a new direction for the nation’s energy policy,” Markey said in a statement.

Markey noted that the overall bill also includes provisions that would repeal regulations that allow energy companies to forgo paying royalties when producing energy in deep wells in shallow water, Alaska offshore areas and in the National Petroleum Reserve in Alaska.

“Next Thursday, the House will debate this legislation, and I predict, will pass it,” Markey said.

The CLEAN Act would also disqualify oil and gas companies from receiving a reduced corporate tax rate provided in a 2004 tax bill. Repealing the tax break would raise between $5 billion and $6 billion in tax revenue over the next decade, a House Democratic aide said.

Additionally, Democrats plan to reduce the geological write-off for large energy companies by extending the write-off period to seven years from five years. This would raise about $1 billion in tax revenues over 10 years.

Still, the oil industry warns about negative consequences.

“If you take money from the oil industry, you lose the incentives to produce,” Mark Kibbe, API’s tax policy analyst, said in a recent briefing. “The more we take these things away…we’re going to rely more and more on imported oil. They’re not going to bankrupt any of the major oil companies, but they will impact where they produce.”

By Maya Jackson Randall, Dow Jones Newswires

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