The House last Thursday passed a massive corporate tax cut bill that included up to 18 tax incentives and credits for natural gas, electricity, renewable energy and other fuels. A vote by the Senate was expected to occur over the weekend, a Capitol Hill aide said.

The conference report on the $136 billion tax measure cleared the House by a wide margin (280-141), capping off a week of intense negotiations between House and Senate conferees. The report was forwarded to the Senate for action before it adjourns to campaign for the November elections.

Key gas-related provisions included a tax credit for marginal oil and gas wells when energy prices drop to low levels, and a seven-year depreciation for certain Alaska pipeline property placed in service after 2013 (H.R. 4520).

Other energy-related provisions in the wide-ranging tax bill called for expanding a credit for electricity produced from certain renewable resources; extending the enhanced oil recovery credit to Alaskan gas treatment plants; and deterring tax penalties for the disposition of or sale of transmission assets to comply with federal restructuring orders.

The marginal well amendment was offered by Sen. Jeff Bingaman (D-NM), a conferee and member of the Senate Finance Committee. It was a significant victory for independent oil and gas producers.

This is an “important backstop to ensure that we will not lose existing domestic production in the future simply because of the boom-and-bust nature of the industry,” Bingaman said.

There are more than 400,000 marginal oil wells in the United States, along with approximately 250,000 marginal gas wells. They provide about 25% of the nation’s oil and 10% of its natural gas, according to the Independent Petroleum Association of American (IPAA), which represents independent producers.

Marginal oil wells have an average production of not more than 15 barrels per day, while marginal gas wells have an average production of not more than 90 Mcf/d. Bingaman’s provision would allow a $3 a barrel tax credit for the first three barrels of daily production from an existing marginal oil well and a 50 cents/Mcf credit for the first 18 Mcf of gas production from a marginal well when prices drop below a certain level.

Earlier last week, an effort by Senate conferees to attach a loaded $12 billion, 10-year package of energy tax credits and incentives to the corporate cut tax legislation was rejected.

Sen. Craig Thomas (R-WY) sought to add energy tax breaks, but was met with opposition from the leaders of the conference committee, House Ways and Means Committee Chairman Bill Thomas (R-CA) and Senate Finance Committee Chairman Chuck Grassley (R-IA).

The Thomas proposal was a somewhat downsized version of the $19 billion energy tax package that the Senate passed in May as part its corporate tax bill (S. 1637).

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