In a move that surprised many on Capitol Hill, Senate Republican and Democratic leaders reached a consent deal to attach the 10-year, $13 billion energy tax package to a corporate tax cut measure before leaving for Easter recess.

The deal, which came on April 8, was the result of intensive negotiations between Senate Majority Leader Bill Frist (R-TN) and Minority Leader Tom Daschle (D-SD) during which they were able to hammer out a “finite” list of first-degree amendments to the corporate tax reform bill (S. 1637).

With list in hand, both sides consented to a motion to recommit the corporate tax bill to the Senate Finance Committee and add a substitute amendment that piggybacks the energy tax package to the legislation, and severs it from the troubled comprehensive energy bill (S. 2095).

Frist and Daschle settled on 80 first-degree amendments — 50 to be offered by Senate Republicans and 30 to be proposed by Democrats. Because the energy tax piece is now officially part of the corporate tax cut bill, it was not listed among the amendments. Most of the amendments to be offered will deal with corporate tax reform, with only a handful expected to focus on energy.

Observers anticipate that the debate over the corporate tax cut measure could be an extended one since the list of amendments is lengthy — longer than either the GOP or Democrats had wanted.

Frist has signaled that the Senate will take up asbestos liability legislation when it returns from recess on Tuesday, a Capitol Hill aide said. The corporate tax cut bill, formally known as the Foreign Sales Corporation/Extraterritorial Income (FSC/ETI) measure, will likely be next on the agenda, with senators beginning consideration by late April, he noted. The full House has not acted yet on its corporate tax bill.

The agreement between Frist and Daschle came a day after Senate Democrats filibustered for the second time GOP efforts to add the energy tax package to the corporate tax bill (see NGI, April 12).

The accord was a “satisfying win” for Sen. Jeff Bingaman of New Mexico, ranking Democrat on the Senate Energy and Natural Resources Committee, said spokesman Bill Wicker. Bingaman “for months has made the case that the best way to achieve results on energy legislation is to break the stalled energy bill into smaller, more manageable pieces that focus on what is most needed and most likely to pass both houses of Congress.” The energy tax package is widely supported by both Senate Republicans and Democrats.

Passing parts of the energy bill, rather than one big broad measure, “seems to be the legislative approach that they’re taking now” in the Senate, the Capitol Hill aide said.

Chairman Pete Domenici (R-NM) of the Senate Energy Committee remains an unyielding advocate of comprehensive energy legislation, although earlier this month he supported the plans to strip out the tax portion from the energy measure and move it through the Senate on a separate track ahead of the rest of the legislation.

“The energy challenges this country faces cannot be addressed by bits and pieces of legislation that only solve one problem at a time. Those who suggest such a strategy can’t see the forest for the trees. We do not have the luxury of baby steps,” he said in a speech last week to the American Gas Association (AGA). “Our energy challenges are vast, multiple and urgent. They require a comprehensive solution.”

The $13 billion tax package proposes incentives for the development of an Alaska natural gas pipeline, including a controversial floor price for gas produced in Alaska and transported over the line; a new credit for oil and gas production from marginal wells, accelerated depreciation for gas gathering lines; and expensing of geological and geophysical costs, as well as a number of other initiatives.

Once the energy tax package clears the Senate, Domenici has said he will then turn his efforts to the policy portion of the energy legislation, which includes provisions to enforce electricity reliability standards; mandate the use of more ethanol; offer loan guarantees for the construction of the Alaska gas pipeline; repeal the Public Utility Holding Company Act; encourage clean coal; and enact a host of other proposals.

“While I am moving these two packages through the Senate, I [will] continue to work with House Energy and Commerce Chairman [Joe] Barton on resolving our differences with the House. Those differences are sharp and the political challenges are real,” he told the AGA group.

“But make no mistake, Chairman Barton and I share a strong resolve to deliver an energy bill to the president’s desk this year. I am meeting with Chairman Barton [this] week to map [out] our strategy,” he noted.

The House last November passed comprehensive energy legislation, which includes a $23.5 billion package of tax breaks and incentives for traditional and renewable energy producers.

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