Energy Tax Breaks Total $14.5 Billion

By Justin Blum
Washington Post Staff Writer
Thursday, July 28, 2005

Congressional negotiators completed work yesterday on a $14.5 billion package of tax breaks as part of a major energy bill that provides far less support for alternative energy and efficiency than many lawmakers had urged.

The tax package -- negotiated behind closed doors by lawmakers -- would award 58 percentof the total benefit over 10 years to traditional energy industries, including oil, natural gas, coal, electric utilities and nuclear power. About 36 percent of the total would go for renewable sources of energy, energy efficiency and cleaner-burning vehicles. The Senate had sought considerably more in tax incentives for conservation and alternative sources of energy in its version of the energy bill approved last month.

Both chambers are expected to approve the energy bill this week after years of failed attempts. Lawmakers who negotiated the tax provisions -- melding vastly different packages approved by the House and the Senate -- said the legislation would benefit consumers by encouraging more supplies and developing cleaner-burning forms of energy.

Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee, described the tax breaks as "well balanced among renewable energy, conservation and traditional energy sources" and said, "Renewable energy and conservation got a very big slice of the pie." Sen. Jeff Bingaman (D-N.M.), a member of the Finance Committee, said he wanted to see more spent on alternative energy and conservation.

Energy providers lobbied heavily for the tax provisions, and many were thrilled with the results. But taxpayer advocates and environmental groups complained that the bill would distribute billions in tax dollars to highly profitable companies that do not need government assistance at a time of soaring energy costs.

"They've created a complicated scheme of making sure a lot of different profitable energy industries are going to make off like bandits," said Keith Ashdown, vice president of policy at Taxpayers for Common Sense. He said the tax breaks help companies "pad their bottom line, but it doesn't really create new behavior in the energy industry."

The Bush administration had sought a $6.7 billion tax package, but the Joint Committee on Taxation said the 10-year net cost would be $11.5 billion. The bill would generate an estimated $3 billion in revenue to partly offset the $14.5 billion in tax breaks.

Despite the costs, White House spokeswoman Dana M. Perino said President Bush supports the energy bill, which he has sought passage of since he took office in 2001. "While we may not agree with every last detail, this is a really good bill that's good for consumers, good for business and good for the environment," Perino said.

Lawmakers said the tax breaks would help revive the nuclear industry and spur the development of cleaner-burning coal plants.

The measure includes tax breaks for the production of nuclear energy and the production of energy from alternative sources such as wind, biomass and geothermal means.

For the oil industry, the legislation would allow some costs associated with exploration to be deducted over a shorter period and would provide tax benefits when oil and gas production is delayed and a lease is extended.

In an effort to encourage more refining capacity, the legislation would grant tax breaks to expand capacity. Analysts have said that a lack of refining capacity is a factor helping to push up gasoline prices.

The measure would allow utilities less time to deduct the cost of natural gas distribution lines that connect homes and neighborhoods. The industry said the measure would encourage more rapid expansion of pipelines to newly built communities and the replacement of lines that are aging.

In an effort to encourage the expansion of the electrical grid, the bill would allow more rapid depreciation of assets used in the transmission and distribution of electricity.

The bill also includes tax breaks for the purchase of gasoline-electric hybrid vehicles and for improving the energy efficiency of homes and commercial buildings.

© 2005 The Washington Post Company