November 16, 2003 --- Vol. 9, No. 109November 2003

Energy bill ready for a vote; no ANWR or gas line tax credits, but includes NPR-A lease extensions

The House-Senate energy bill conference committee is scheduled to meet at 2 p.m. Eastern time Monday, Nov. 17, in Washington, D.C., to consider the long-awaited and long-worded — 1,149 pages — legislation dealing with coal, oil, gas, nuclear, renewable energy and electrical distribution.

The conference committee bill — drafted behind closed doors the past two months by Republican leaders — includes significant financial provisions to encourage construction of a natural gas pipeline from Alaska’s North Slope to mid-America. In addition to federal corporate income tax credits to assist in construction of the estimated $2 billion gas treatment facility on the North Slope, the bill also would grant the pipeline accelerated depreciation — seven years instead of the usual 15 years — to allow faster recovery for investors.

And the bill, which could be adopted by the committee as soon as Monday’s meeting, also provides for a federal loan guarantee of up to 80 percent of $18 billion in borrowing for the proposed project. The loan guarantee could be used for just the Alaska portion of the gas line or to cover both the domestic and Canadian mileage of the pipeline.

Gas line provisions also include streamlined permitting and appeal deadlines to speed up the regulatory process for the massive project.

The bill, however, does not include the most controversial of the federal tax incentives for the Alaska gas line. ConocoPhillips, BP and the state had pushed hard for a provision to grant federal tax credits to the producers whenever the wellhead value of North Slope gas dips below $1.35 per thousand cubic feet. Opponents defeated that effort, calling the provision an unfair subsidy that could hurt Lower 48 gas producers.

Alaska also did not win in its fight to obtain congressional approval for opening the Arctic National Wildlife Refuge to oil and gas drilling. Opponents’ filibuster threats kept ANWR out of the bill, although Alaska’s congressional leader in the fight, Republican Sen. Lisa Murkowski, said she will keep trying to push for ANWR until the end of the legislative process.

After adoption by the conference committee, the bill will go to the House and Senate for votes by the full chambers, where amendments are extremely difficult.

Alaska also could benefit from provisions in the bill that allow the secretary of the Department of the Interior to grant federal royalty relief for oil and gas production within the National Petroleum Reserve-Alaska, if it can be shown that the reduced royalties would encourage production in the area west of Prudhoe Bay.

The bill also allows the secretary of the Interior to extend NPR-A leases for an additional 10 years if the leaseholder can show it has explored the area but needs additional time to develop the lease.

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