Absent the usual pomp, President Bush on Friday signed into law a $136 billion corporate tax cut bill that provides a host of tax incentives and credits for natural gas, electricity, renewable energy and other fuels.
The president’s action came more than a week after the legislation, the “American Jobs Creation Act of 2004,” cleared both the House and Senate by unanimous margins (H.R. 4520).
Key natural gas-related provisions in the bill call for a seven-year depreciation for certain Alaska pipeline property placed into service after 2013, an extension of the oil recovery credit to Alaskan gas treatment plants, and a tax credit for marginal oil and gas wells when energy prices drop to low levels.
The Alaska tax credits complement a proposal in the $10 billion fiscal 2005 military construction appropriations bill, which cleared both houses and was signed by Bush on Oct. 13. The spending measure authorized an $18 billion federal loan guarantee to carry out the construction of a mega-pipeline from Alaska’s North Slope to the Lower 48 states (H.R. 4837).
Other energy-related provisions in the wide-ranging tax cut bill call for an expansion of a credit for electricity produced from certain renewable resources, as well as the deterrence of tax penalties for the disposition of or sale of transmission assets to comply with federal restructuring orders.
The Alaska-related tax initiatives were good news for parties interested in building the long-line Alaska system — a consortium of three Alaska producers (ExxonMobil, BP and ConocoPhillips), TransCanada Corp. and Enbridge Inc. The credit for marginal oil and natural gas wells was welcomed by independent producers.
Marginal oil wells have an average production of not more than 15 barrels per day, while marginal gas wells have an average production of not more than 90 Mcf/d. The bill would allow a $3 a barrel tax credit for the first three barrels of daily production from an existing marginal oil well, and a 50 cents/Mcf credit for the first 18 Mcf of gas production from a marginal well when prices drop below a certain level.
There are more than 400,000 marginal oil wells in the United States, along with approximately 250,000 marginal gas wells. They provide about 25% of the nation’s oil and 10% of its natural gas, according to the Independent Petroleum Association of America, which represents independent producers.
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