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Tax Relief Bill Bans Drilling in Montana's Rocky Mountain Front Range

The tax relief legislation that President Bush signed last Wednesday to open the eastern Gulf of Mexico to drilling also included a permanent ban on all future oil and gas drilling in Montana's Rocky Mountain Front Range.

"It is a done, done deal now," said Sen. Max Baucus (D-MT). Baucus, the incoming chairman of the powerful Senate Finance Committee, used his position as a lead negotiator on the Tax Relief and Health Care Act of 2006 to include a provision that will make permanent a 1997 moratorium on new oil and gas leases on the Front and make it easier to retire existing leases.

While widely applauded by Montanans and environmentalists, this action was "discouraging" for independent oil and gas producers, said Aaron Bernstein, a spokesman for the Independent Petroleum Association of America. "To open up one area to drilling and then restrict another area is a bit of a contradiction," he told NGI.

The provisions imposing the ban on Rocky Mountain Front drilling, as well as providing producers with access to the gas-rich Lease Sale 181 area of the eastern Gulf, were tucked into the $40 billion tax and heath package (HR 6111) that Congress approved earlier this month (see Daily GPI, Dec. 11), and that President Bush signed into law last week (see Daily GPI, Dec. 21).

Baucus said the outright ban on new leases also will allow a coalition of nonprofit groups to purchase existing leases from oil and gas companies and retire them without fear that the federal government would turn around and reissue the leases in the future.

In addition, the new law also includes an incentive for lease-holding energy companies to sell their leases to conservation groups, Baucus said. It offers a tax holiday -- equal to 25% of the capital gain received by the seller -- for sales of leases to nonprofit groups that agree to retire the leases. This provision applies to 60 current leases on the Front.

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