Gas industry representatives applauded the Senate Finance Committee’s passage of energy tax legislation late Wednesday. The tax bill provides $4 billion in credits and incentives to the oil and gas industry. The full Senate is expected to begin debate soon on the national energy policy bill, which will include the tax incentives. A key issue going forward will be whether lawmakers can find budget offsets to fund the tax incentive program.

“The Senate Finance Committee has taken a long-term view of energy policy and has recognized that the increased use of natural gas will benefit our country’s economy, national security and environmental quality,” said American Gas Association CEO David N. Parker. He noted that the committee took steps to help local gas utilities expand their systems by allowing them to accelerate the depreciation schedule for new distribution pipelines.

“Natural gas use is expected to increase by 50% during the next 20 years…,” Parker noted. “But the pipes used by local utility companies to deliver natural gas must be expanded. Accelerated depreciation will make it easier for gas utilities to get the capital they will need to add roughly 255,000 miles of pipe during the next two decades.” The tax legislation also would benefit gas gathering companies by treating gathering lines as seven-year properties rather than 15-year assets.

For producers, the legislation includes incentives for production from marginal wells (or wells that produce less than 25 boe/d). It will provide a new credit of 50 cents/Mcf if prices fall below $2/Mcf. It also calls for a $3/bbl credit for oil production from marginal wells if oil prices fall below $18/bbl. The credits would be good for production up to 1,095 boe.

The bill also would encourage customers to use energy more efficiently, such as generating their own reliable supply of electricity, using natural gas fuel cells or combined heat and power systems. It also would work to improve air quality in urban and suburban areas through tax credits designed to boost the use of vehicles fueled with natural gas and other clean fuels.

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