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Debate on Energy Issues Expected as Tax Reform Heads to Conference

With comprehensive tax reform winning passage in the Republican-controlled Senate on Saturday, lawmakers in the House, where the GOP also holds sway, are preparing to hold conference committee talks to iron out differences, including on energy issues, between bills passed in the House and Senate.

Although both tax reform bills call for lowering the corporate tax rate from 35% to 20% and repeal of some credits enjoyed by the oil and gas industry, the Senate version includes a policy rider to open a portion of the Arctic National Wildlife Refuge (ANWR) to oil and gas development. Both bills also take divergent positions on a range of issues, including deducting state and local property taxes and mortgage interest.

"For too long, Americans have struggled to make ends meet in a weak economy," Sen. John Thune (R-SD), chairman of the Senate Republican Conference, said Saturday after the Senate passed HR 1, also known as the Tax Cuts and Jobs Act, on a 51-49 vote. "By cutting taxes for middle-income Americans and providing job creators with the environment they need to hire more workers and increase wages, this tax reform package will turn the economic tide and help Americans get ahead."

According to the version of HR 1 posted to Congress.gov on Monday, the Senate bill calls for repealing credits for enhanced oil recovery (EOR) and production from marginal oil and gas wells -- both of which were also included in the bill the House passed on Nov. 16. The Senate version also calls for modifying tax credits on electricity produced from some renewables, energy investment and nuclear power.

As it pertains to businesses, the Senate bill would also limit deducting net interest expenses to 30% of a business's adjusted taxable income; repeal the work opportunity tax credit; terminate the exclusion for interest on private activity bonds; modify the taxation of foreign income; and impose an excise tax on certain payments from domestic corporations to related foreign corporations.

Only Sen. Bob Corker (R-TN), who is retiring, said that while he supported several provisions of HR 1, he joined all Senate Democrats in opposing the measure because they said it would add to the national debt.

Changes To ANWR Provision

A Republican-led effort to open 2,000 acres of the 1.5-million acre coastal plain portion of ANWR, a region also known as the 1002 Area, to energy development, was almost tripped up at the eleventh hour by the Senate's parliamentarian.

Last month, the Senate Energy and Natural Resources Committee voted in favor of opening up the 1002 Area. The committee also approved plans for the Department of Energy (DOE) to draw down and sell 5 million bbl of crude oil from the Strategic Petroleum Reserve in Alaska (SPR-A) from fiscal years (FY) 2026-2027, with proceeds to go into the federal treasury.

But the Senate's parliamentarian determined that the committee's proposal violated the Byrd Rule, which governs budget reconciliation. According to reports, Sen. Lisa Murkowski (R-AK), committee chairman, was forced to submit an amendment revising the SPR-A sale to include 7 million bbl in FY2026-2027, with revenue capped at $600 million.

"Opening the 1002 Area and tax reform both stand on their own, but combining them into the same bill, and then successfully passing that bill, makes this a great day to be an Alaskan," Murkowski said in a joint statement with Sen. Dan Sullivan (R-AK) and Rep. Don Young (R-AK). Young vowed to "work with my House colleagues to ensure Alaska's interests are protected and our energy sector continues to be a global leader."

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