	Action in the 110th Congress

The CLEAN Energy Act of 2007 ( H.R. 6 ) was introduced by the House Democratic leadership to revise certain tax and royalty policies for oil and natural gas and to use the resulting revenue to support a reserve for energy efficiency and renewable energy. Title I proposes to repeal certain oil and natural gas tax subsidies, and use the resulting revenue stream to support the reserve. According to the Congressional Budget Office (CBO), the provisions in Title I would make about $7.7 billion available for the reserve over the 10-year period from 2008 through 2017. In the floor debate, opponents argued that the reduction in oil and natural gas incentives would dampen production, cause job losses, and lead to higher prices for gasoline and other fuels. Proponents of the bill counterargued that record profits show that the oil and natural gas incentives were not needed. The bill passed the House on January 18 by a vote of 264-123. The tax incentives for the oil and gas industry in the EPACT05 originated in the106 th Congress's effort in 1999 to help the ailing domestic oil and gas producing industry, particularly small producers, deal with depressed oil prices. 109-58 . All the early bills appeared to be weighted more toward stimulating the supply of conventional fuels, including capital investment incentives to stimulate production and transportation of oil and gas. The House approved the conference report on July 28, 2005, and the Senate on July 29, 2005, clearing it for the President's signature on August 8 ( P.L. 109-58 ). The 2005 act became law at a time of very high prices for crude oil, petroleum products, and natural gas, and record oil and gas industry profits. The Tax Increase Prevention and Reconciliation Act ( P.L. H.R. The JCT estimates that the 2005 act provides about $2.6 billion in tax cuts for the oil and gas industry as a whole over 11 years, comprising about $1.1 billion for upstream operations and $1.5 billion for downstream, or refining and distribution, operations. However, because the oil spill liability tax and the Leaking Underground Storage Tank financing taxes are excise taxes on oil and petroleum products, and are imposed on oil refineries, the net effect of the 2005 act on the oil and gas refinery sector was a tax increase of about $1.3 billion over 11 years. Other Oil and Gas Tax Subsidies

The Energy Policy Act of 2005 expanded some (but not all) of the preexisting tax subsidies for oil and gas and introduced several new ones. Other Oil and Gas Tax Subsidies

A list of the preexisting federal tax subsidies (incentives) available for the U.S. oil and gas industry—those in effect before EPACT05 and still in effect today—(and their corresponding revenue loss estimates) appears in Table 2 .
The CLEAN Energy Act of 2007 (H.R. 6) was introduced by the House Democratic leadership to revise certain tax and royalty policies for oil and natural gas and to use the resulting revenue to support a reserve for energy efficiency and renewable energy. Title I proposes to repeal certain oil and natural gas tax subsidies, and use the resulting revenue stream to support the reserve. The Congressional Budget Office (CBO) estimates that Title I would repeal about $7.7 billion in oil and gas tax subsidies over the 10-year period from 2008 through 2017. In House floor debate, opponents argued that the cut in oil and natural gas subsidies would dampen production, cause job losses, and lead to higher prices for gasoline and other fuels. Proponents counterargued that record profits show that the oil and natural gas subsidies were not needed. The bill passed the House on January 18 by a vote of 264-123. This report presents a detailed review of oil and gas tax subsidies, including those targeted for repeal by H.R. 6.
The Energy Policy Act of 2005 (EPACT05, P.L. 109-58) included several oil and gas tax incentives, providing about $2.6 billion of tax cuts for the oil and gas industry. In addition, EPACT05 provided for $2.9 billion of tax increases on the oil and gas industry, for a net tax increase on the industry of nearly $300 million over 11 years. Energy tax increases comprise the oil spill liability tax and the Leaking Underground Storage Tank financing rate, both of which are imposed on oil refineries. If these taxes are subtracted from the tax subsidies, the oil and gas refinery and distribution sector received a net tax increase of $1,356 million ($2,857 million minus $1,501 million).
EPACT05 was approved and signed into law at a time of very high petroleum and natural gas prices and record oil industry profits. The House approved the conference report on July 28, 2005, and the Senate on July 29, 2005, clearing it for the President's signature on August 8 (P.L. 109-58). However, the tax sections originated in the106th Congress, with its effort in 1999 to help the ailing domestic oil and gas producing industry, particularly small producers, deal with depressed oil prices. Subsequent price spikes prompted concern about insufficient domestic energy production capacity and supply. All the early bills appeared to be weighted more toward stimulating the supply of conventional fuels, including capital investment incentives to stimulate production and transportation of oil and gas.
In addition to the tax subsidies enacted under EPACT05, the U.S. oil and gas industry qualifies for several other targeted tax subsidies (FY2006 revenue loss estimates appear in parenthesis): (1) percentage depletion allowance ($1 billion); (2) expensing of intangible drilling costs for successful wells and non-geological and geophysical costs for dry holes, including the exemption from the passive loss limitation rules that apply to all other industries ($1.1 billion); (3) a tax credit for small refiners of low-sulfur diesel fuel that complies with Environmental Protection Agency (EPA) sulfur regulations ($ 50 million); (4) the enhanced oil recovery tax credit ($0); and (5) marginal oil and gas production tax credits ($0).