Legislation

Published on: May 7, 2009

Momentum Increasing for Use of Natural Gas in Vehicles

Boone Pickens’ efforts to promote natural gas as an alternative to gasoline in vehicles seems to be gaining momentum. In a column published by the Huffington Post, Pickens said that the recent advances in extraction of natural gas from shales is a “game-changer.” “One study estimates that we have enough natural gas to satisfy current demand for the next century.” Pickens reports that H.R. 1835, the NAT GAS Act, has strong bipartisan support in Congress. the NAT GAS Act provides incentives for installation of compressed natural gas (CNG) fueling stations and use of CNG in large trucks and fleet vehicles.

Natural gas gives off 25% less carbon dioxide than oil for the same amount of energy produced. About 1/3 of total U.S. carbon dioxide emissions come from burning of gasoline in internal combustion engines. For a good summary of the use of CNG, go to the U.S. Department of Energy’s website on Energy Efficiency and Renewable Energy.

Although Texas leads the nation in natural gas production, it is behind ten other states in the number of CNG fueling stations.

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Published on: April 20, 2009

Congress preserves oil and gas industry tax provisions

By John McFarland

Congress passed the 2010 federal budget without adopting the Obama Administration’s proposal to eliminate several tax provisions favorable to the oil and gas industry, including percentage depletion and expensing of intangible drilling costs. See my earlier post discussing these tax provisions. Adam Haynes, EVP of Texas Independent Producers and Royalty Owners Association (TIPRO), was quoted in TIPRO’s April 17 newsletter as saying that that the industry had “dodged a bullet,” and that repeal of these tax provisions, which purportedly cost taxpayers $80 billion a year, “would very negatively impact the exploration for needed energy here and throughout the nation.”

Published on: April 14, 2009

Obama’s Proposal to Repeal Energy Industry Tax Breaks

By John McFarland

President Obama, in an attempt to recoup some of the money being spent to revive the economy, proposes to repeal several tax provisions near and dear to the oil and gas industry:

Enhanced oil recovery credit
Marginal well tax credit
Expensing of intangible drilling costs
Deduction for tertiary injectants
Passive loss exception for working interest owners in oil and gas properties
Manufacturing tax deduction for oil and gas companies
Percentage depletion deduction for oil and gas
Not surprisingly, the oil and gas industry is mounting a huge lobbying campaign to prevent loss of these tax benefits.

The only one of these tax benefits that directly affects royalty owners is the percentage depletion deduction. Currently, 15% of royalty income is deductible as “percentage depletion.” The deduction is intended to recognize that the sale of oil and gas is in part the sale of a depleting asset, so that a portion of the royalty should be treated like a return of capital rather than as income.

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Published on: April 13, 2009

NAT GAS Act Introduced in House

By John McFarland

H.R. 1835, the New Alternative Transportation to Give Americans Solutions Act of 2009 (NAT GAS Act) was introduced in the U.S. House of Representatives by Dan Boren (D-OK), John Larson (D-CT) and John Sullivan (R-OK). Its purpose is to promote the use of natural gas in vehicles, with an emphasis on large trucks and fleet vehicles. It wiould provide incentives for installation of natural gas fueling stations. It is the first legislation to promote Boon Pickens’ plan to use domestic natural gas to reduce dependence on foreign oil.