The $14 billion, 10-year energy tax package rode through the Senate Tuesday on the coattails of a broader corporate tax bill (S. 1637), which passed 92 to 5. It marked the first victory for the energy bill this year.

The Senate first had to turn back a drive by Sen. John McCain (R-AZ) to gut the energy tax provisions. By 85 to 13, GOP and Democrats voted against a McCain substitute amendment, which sought to eliminate the energy-related tax breaks and incentives that were piggybacked to the corporate tax bill in April. Only four Republicans and nine Democrats backed McCain’s proposal.

The Arizona Republican argued that the energy tax breaks would have “negligible” impact on boosting domestic oil and gas supply, and that coalbed methane producers, which accounted for 57% of the growth in U.S. gas production during the 1990s, didn’t appear to need any incentives from Congress. They haven’t been “waiting around” for the tax credits to prod them into action, he said.

Although Congress backed construction of a long-line Alaska gas pipeline, McCain asked “to what extent are we willing to mortgage [the federal] budget” to make it a reality. He blasted the floor credit for natural gas produced in Alaska and transported over the proposed pipeline from the North Slope to the Lower 48 states.

The corporate tax cut bill has turned into a “Christmas tree of goodies” for the energy industry, he charged.

But a number of senators rose up in support of the energy tax package staying in the broader tax bill. “It’s half an energy package, and it’s better than none,” said Sen. Pete Domenici (R-NM), chairman of the Senate Energy and Natural Resources Committee.

“This is not a silver bullet. [It] does not solve our energy problems,” but it’s a head start, said Sen. Jeff Bingaman (D-NM), the ranking minority member of the Senate energy panel.

“Congress has been playing political football” with the energy bill for years, noted Sen. Jim Bunning (R-KY). “It’s time to end the game.”

The Senate did not take up an amendment offered by Sen. Jon Kyl (R-AZ) to also gut the energy tax package. In addition, two other McCain amendments weren’t considered — one that would strike all of the oil and gas tax provisions, and another that would eliminate all Section 29 tax credits related to the production of fuel from unconventional sources.

The corporate tax cut bill got a major shot in the arm earlier Tuesday when the Senate overwhelmingly voted to limit debate and bring the broader tax measure to the floor for an up-or-down vote.

By 90 to 8, Republican and Democratic senators voted to invoke cloture on the corporate tax bill, also known as the Jumpstart Our Business Strength (JOBS) Act. This was a key breakthrough for the measure, which had been filibustered twice in recent weeks.

In early April, Senate Republican and Democratic leaders fastened the $14 billion energy tax package to the corporate tax cut bill. GOP leaders had hoped to attach the non-tax policy portion of the Senate energy bill (S. 2095) to a separate piece of legislation.

But the Senate last month defeated a GOP bid to piggyback the 900-plus page policy part of the energy measure to an unrelated bill banning Internet access tax (S. 150).

After surviving the McCain challenge to the energy tax package, Domenici said Tuesday he would “now turn my attention to getting the other half [policy portion of the energy bill] passed and enacted into law.”

The tax package offers incentives for the development of an Alaska natural gas pipeline, including a controversial floor price for natural gas produced in Alaska and transported over the proposed 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.

It also provides tax benefits and incentives for renewable fuel, alternative vehicles, conservation and energy efficiency, electricity produced using clean coal technology, nuclear decommissioning costs and energy-related research and development.

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