The $100 billion economic-stimulus bill narrowly approved by the U.S. House of Representatives last Wednesday contained a number of tax breaks and incentives designed to give a boost to independent oil and natural gas producers and producers of alternative energy.

By 216 to 214, House lawmakers voted out the Economic Security and Recovery Act of 2001 to help jump-start investments in the wake of the Sept. 11 terrorist strikes, which have been at least partly to blame for massive worker layoffs, depressing third-quarter profits and anemic stock prices.

The legislation came under immediate attack by Democrats and Republicans in the Senate, which still is working on an economic package. Sen. John Kerry (D-MA) complained that the House initiative was too heavily weighted towards corporations, such as energy companies.

In an effort to spur energy investment, the bill, HR 3090, would continue an existing waiver of the 100%-of-net-income-limit for oil and natural gas producers when deducting for percentage depletion costs. Specifically, independent producers could continue to disallow in excess of 100% of the net income derived from marginal wells for the taxable years between Dec. 31, 2001 and Jan. 1, 2004, according to the legislation.

Only independent producers and royalty owners — rather than integrated oil companies — can claim percentage depletion, which is a form of capital cost recovery. They can claim this for up to 1,000 b/d of oil production or the equivalent of domestic gas production.

The legislation also would repeal the corporate alternative minimum tax, a move that would be favorable to both major and independent producers.

Moreover, it offers a number of tax incentives to spur demand for alternative fuels: a tax credit for production of electricity from wind, biomass and poultry litter; tax deductions for qualified clean-fuel (natural gas, liquefied natural gas, liquefied petroleum gas, electricity and hydrogen) vehicle properties and refueling properties; and a tax credit for the purchase of electric vehicles.

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