The House Democratic leadership is planning a Jan. 18 vote on a package that would remove key oil industry tax breaks and fix flawed deep water Gulf of Mexico leases that currently allow royalty waivers regardless of oil and gas prices.
It would steer billions of dollars in new revenues to alternative energy development. Specifics of the tax and royalty plan, and the new alternative energy funding, have not been released.
"Sources around Washington expect the House to pass this easily and, indeed, give it very good odds in the Senate. It also looks as if it would be rather unlikely that the Bush administration would veto it," the analysis says.
The package is expected to target tax breaks that allow oil companies to quickly write off certain oil exploration costs and oil companies' eligibility for another tax break on income from domestic manufacturing.
It will also include a mechanism for ensuring royalties are paid on deep water leases issued in 1998 and 1999 that were mistakenly written without "price thresholds" that end royalty relief when energy prices are high.
The Interior Department earlier this week announced it will raise the royalty rate on new deep water leases to 16.7 percent from 12.5 percent, which it said would increase royalty revenue by $4.5 billion over 20 years.
The Stanford Group also says the beneficiaries of the new alternative energy spending are not yet clear, adding that if ethanol programs are addressed through the upcoming farm bill, then more money could be available for offsetting renewable energy production tax credits, advanced coal technologies and solar power.
"More money could also help fund loan guarantee and investment tax credit programs or more research programs at the Department of Energy," the note states.
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