Key legislative provisions favorable to natural gas production are winding up on the cutting-room floor as House-Senate negotiations over a broad energy bill come down to the wire.

Late Monday, Sen. Pete Domenici (R-NM) and Rep. W.J. “Billy” Tauzin (R-LA), who are overseeing conference negotiations on the bill, said they intended to have a conference vote on the energy bill “early next week” after the House returns from its one-week fall break. They further noted this would give House and Senate tax writers additional time to resolve the issues over which they are deadlocked.

“We plan to release the entire text of the draft conference report at least 24 hours in advance of that meeting. We are absolutely confident of putting a comprehensive energy bill on the president’s desk this year,” the Republican negotiators said.

Domenici confirmed late Friday that he plans to nix a contentious provision that calls for the federal government to inventory oil and natural gas resources in the Outer Continental Shelf (OCS). This came on the heels of a House vote last week instructing House-Senate conferees to strike the industry-backed provision from the broad energy bill.

Lawmakers from coastal states fear that an OCS inventory, which also would catalog oil and gas resources in offshore areas where drilling has been banned for years, would be the first step towards overturning the congressional and presidential moratoria on exploration and production activity off the West, East and Florida coasts.

Some also were pessimistic about the outcome of the House-Senate negotiations over whether to provide price supports to Alaska producers who would transport gas over the proposed 3,600-mile Alaska pipeline. The measure is backed by many in the Senate, but top House energy negotiators and the Bush administration are dead-set against it.

The price-support provision “is on life support right now,” said Don Duncan, vice president for federal and international government affairs for ConocoPhillips, one of three Alaska producers who would be involved in the construction of the Alaska line. “It is not going to make it at this point in my opinion,” he said Monday. However, if Senate and House leaders take control of the tax portion of the bill, there “may be a chance of reviving it,” Duncan told NGI.

Republican energy conferees over the weekend completed most of their work on the omnibus energy bill, but they still were at a stand-off on certain provisions in the $16 billion tax package, according to Capitol Hill aides. “The policy side [of the bill] is ready to go…we’re waiting on the tax writers,” said a Republican aide who is close to the negotiations.

With a conference vote on the bill a week away, “this leaves open the possibility that any deals struck on electricity or other issues could still unravel before the House returns next week,” wrote energy analyst Christine Tezak of Charles Schwab & Co. Monday.

The chief tax writers — Chairman Bill Thomas (R-CA) of the House Ways and Means Committee, Chairman Charles Grassley (R-IA) of the Senate Finance Committee and top Democrats — met Monday in an attempt to resolve the disputed tax issues. Some speculated that Senate Majority Leader Bill Frist (R-TN) and House Speaker Dennis Hastert (R-IL) might wrest control of the tax title if the tax writers were unsuccessful in settling their differences.

This was expected to be a “very, very tough conference [tax session]. A lot of animosity has been built up against Bill Thomas who continues to insist on the House position for everything,” an industry legislative analyst said.

Thomas is the chief opponent of proposed price supports for Alaska producers. Alaska gas producers contend that the construction of the pipeline from the Alaska North Slope to the Lower 48 states turns on whether or not they receive price supports from Congress in the energy bill. Without them, Duncan said ConocoPhillips will withdraw its financial support for the $20 billion Alaska pipeline.

The proposal at the center of the storm seeks to provide producers a 52 cents/MMBtu tax credit in the event Alaska gas prices fall below $1.35/MMBtu at the wellhead (excluding transportation and processing costs). It effectively would create a floor price of $1.35/MMBtu at the wellhead for gas produced in Alaska and delivered over the proposed Alaska line, providing producers with a “penny-for-penny” credit up to a maximum of 52 cents if wellhead prices fall below the established floor.

Negotiators also were reportedly considering a “payback provision,” which would require Alaska producers to return credits when delivered gas prices rebound to the $4.70 level.

Likewise, reports were widespread that negotiators will drop a provision supporting oil and gas drilling in the Arctic National Wildlife Refuge (ANWR), but Domenici declined to confirm this Friday. He has signaled in the past that he will take ANWR out if he believes it would threaten congressional passage of comprehensive energy legislation. ANWR likely will be one of the last items to be decided in conference committee, Domenici noted.

The removal of the OCS inventory and possibly ANWR “is what we’ve expected all along,” said a Democratic aide, adding that these shouldn’t been seen as “grand concessions” by Republican conferees. Nixing the two controversial items “is a bow to the electoral reality of both bodies: ANWR is poison in the Senate, [and] the OCS inventory is poison in the House.”

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