Another angle: Alaska gas line provisions added to tax measure in U.S. Senate

Larry Persily

Petroleum News government affairs editor

Backers of federal tax incentives for an Alaska natural gas line are trying another way to reach the Senate floor. Instead of pinning all their hopes on the stalled energy bill, they are trying to add the pipeline provisions to a corporate tax bill that may have a better chance of passage.

The gas line incentives in the revised tax bill include accelerated depreciation for the pipeline and tax credits for the gas treatment plant that would be constructed on the North Slope. The two provisions combined are worth about $500 million in tax breaks to a private developer of the line to carry Alaska gas to market.

“Whether or not that strategy is immediately successful, I think we’ll now see a pattern of attaching various provisions of the energy bill to other legislation,” said John Katz, director of the state of Alaska’s office in Washington, D.C.

“The Senate leadership has released the hostages,” Katz said, allowing members to look for other bills to possibly carry their favorite energy bill provisions to passage.

The revised tax bill also includes a third federal incentive for the Alaska gas line — tax credits to protect producers if the wellhead value of North Slope gas ever drops below $1.35 per thousand cubic feet. “We’re told by friends and foes alike that the commodity-risk provision will not survive the legislative process,” Katz said.

The Alaska natural gas project incentives, along with billions of dollars in tax breaks for renewable energy, coal and energy efficiency nationwide, were added to a bill needed to settle a trade dispute with the European Union. The legislation would repeal a tax break for U.S. exporters — which the World Trade Organization has declared illegal — and replace it with a tax cut for U.S.-based manufacturers.

But partisan battles over possible non-energy amendments to the bill could further delay action by the full Senate. The political battles include Democratic proposals to amend the bill to penalize U.S. companies that move jobs overseas, extend federal unemployment insurance benefits for an additional six months, and block the administration’s plan to limit overtime for white-collar workers.

“The bad news is that the bill may or may not get out of the Senate,” Katz said.

Senate Majority Leader Bill Frist, R-Tenn., announced the expanded 900-plus-page tax bill April 5, including the energy provisions.

Among the energy incentives added to the bill is a new personal income tax credit for wind-generated electricity and solar water heating systems — as long as none of the power is used for heating swimming pools or hot tubs.

The measure was scheduled for its first procedural vote April 7, though final passage could take a bit longer. The Senate will break for a week for Easter, with House members taking a two-week vacation. The Senate changes, if approved, would require the bill to go to a House-Senate conference committee to settle the differences, followed by another round of votes in each chamber.

Even if the tax bill stalls out, nothing is lost, said Chuck Kleeschulte, spokesman for Sen. Lisa Murkowski, R-Alaska. The energy bill is still alive and could come before the full Senate for a vote later this spring, though serious partisan battles within the Senate and disagreements with the House have held up the bill since late November.

“This is an attempt to speed the process along,” Kleeschulte said. “Rather than wait for the energy bill, we’ll do this in pieces.”

A couple of key gas line incentives that are in the energy bill but not in the revised tax bill are an 80 percent federal loan guarantee for the project and streamlined permitting and judicial review provisions. Those could be added to a separate bill at a later date, Kleeschulte said.