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Congress close to passing energy bill Compromise on ethanol provision leads to hope of final passage Larry Persily Petroleum News Juneau Correspondent
It’s looking more likely that Congress will take action on a comprehensive national energy policy bill before it shuts down for Thanksgiving, with negotiators just about ready to announce a deal on federal tax subsidies to promote corn-based ethanol fuels.
Pushed and prodded by Vice President Dick Cheney, House and Senate energy bill negotiators have reportedly agreed on a plan to nearly double the use of ethanol-blended fuel by 2012. The ethanol-promoting, nickel-a-gallon tax break is the key energy bill issue for farm-state lawmakers.
If the tentative deal holds, the U.S. gasoline industry would be required to blend into its fuels at least 5 billion gallons of ethanol a year by 2012, up from 2.7 billion gallons this year, providing guaranteed market growth for farmers.
At 5 billion gallons, the federally supported ethanol market would equal in volume about 120 million barrels a year, or about 100 days worth of oil production from Alaska’s North Slope. Alaska looks for gas line and heavy oil incentives Alaska’s wish list for the energy bill is centered on two key federal incentives for oil and gas production. The state continues to lobby for a package of federal tax breaks for a $20 billion natural gas pipeline to mid-America, while also looking for an expansion of the federal tax credit program for heavy oil to include the North Slope.
Although the state and two of the three major North Slope producers want federal tax credits to protect the producers from the risk of low natural gas prices, it appears the bill will not include that provision. But it looks likely the bill will include a federal loan guarantee for the project, accelerated depreciation and tax credits for the gas treatment plant at Prudhoe Bay.
“There is some discussion about the scope of the loan guarantee for the pipeline,” said Katz, director of the state’s Washington, D.C., office. Some lawmakers want to limit the guarantee only as far as Alberta, believing federal assistance is not needed for new or expanded pipeline capacity south of that point, Katz said. Heavy oil big for Alaska Also of key interest to the state is the heavy oil tax credit program. The existing $3-per-barrel credit does not apply to wells producing more than about 30 barrels per day, an unreasonable and unusable limitation for the high-cost environment of Alaska, Katz said. The state estimates there are several billion barrels of heavy oil on the slope, mostly at West Sak and Schrader Bluff, but says it is too costly to remove the oil without federal tax credits and new technology.
“We’ve been pointing out that any loss to the U.S. treasury by the tax credits would be more than offset by the benefits to the nation,” Katz said.
Opposition to expanding the heavy oil tax break is coming from House Ways and Means Committee Chair Bill Thomas, R-Calif., who is more worried about the small oil wells in his own congressional district around Bakersfield. ChevronTexaco Corp. is the largest producer in the district, with more than 13,000 small wells in the area in 2001 producing 205,000 barrels per day — an average of less than 16 barrels per well — according to California state statistics. Governor has lobbied for bill “Thomas has some concerns about removing the volume restrictions” on the tax credit program, Katz said, adding that Alaska Gov. Frank Murkowski has spoken with several of the players in the negotiations in an effort to promote the state’s cause. Murkowski served 22 years in the Senate before leaving Washington last December to serve as Alaska’s governor.
Work on the energy bill started almost three years ago when Vice President Cheney issued the administration’s national energy priorities. Those priorities were drafted behind closed doors, just as the energy bill has been written by House-Senate Republican conferees meeting in private.
Congressional Democrats have complained loudly of being kept out of the negotiations, prompting Senate Energy and Natural Resources Committee Chair Pete Domenici, R-N.M., to promise the minority party it will have 48 hours to review the final bill before it comes before the conference committee for a vote.
That 48-hour promise means the bill probably will not come before the committee until after Congress returns to work from its Veterans Day break Nov. 11, Katz said. A likely schedule, he said, would be committee action on the bill the middle of the week, with votes in the House and Senate to follow.
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