Democrats unveil energy package to be voted on next week

WASHINGTON (AP) _ House Democrats next week will push to impose a conservation fee on oil and natural gas taken from the Gulf of Mexico if prices remain at current high levels. <br/><br/>Also, under a

Thursday, January 11th 2007, 9:32 pm

By: News On 6

WASHINGTON (AP) _ House Democrats next week will push to impose a conservation fee on oil and natural gas taken from the Gulf of Mexico if prices remain at current high levels.

Also, under a package of energy measures to be unveiled Friday, oil and gas companies would be barred from future Gulf lease sales unless they agree to renegotiate flawed 1998-99 leases that allowed them to avoid federal royalty payments.

The legislation is part of the House Speaker Nancy Pelosi's priority agenda that is being pushed through during the first 100 hours of business with Democrats in the majority. The Democrats plan to take up the bill next Thursday. Its prospects in the Senate are unclear.

Lawmakers of both parties have expressed anger at the refusal of oil and gas companies to rework the 1998-99 leases that were issued without a provision that required royalty payments if oil and gas prices soared _ as they have in recent years.

Congressional auditors have said the government has already lost some $2 billion in royalties and could lose as much as $10 billion over the life of the leases because of the mistake.

The bill "will address the broken royalties system," said Rep. Nick Rahall, D-W.Va., chairman of the Natural Resources Committee, adding that it will "put these (lost royalty) payments right back where they belong _ in the federal Treasury."

The oil and gas industry argues that the leases amount to a contract and should be honored as written, although five companies recently agreed to pay royalties on future production from such leases. More than 50 companies have declined to renegotiate.

The Democrats' bill would prohibit the Interior Department from selling leases to companies that do not agree to work out changes in the flawed leases.

The bill also calls for a $9 a barrel "resource conservation" fee on oil, and a $1.25 per million Btu fee on natural gas, for production in the Gulf as long as market prices remain at more than $34.73 a barrel for oil and $4.34 per million Btu for gas.

Those are also the price thresholds that were to have triggered royalty payments under the 1998-99 leases.

The Democrats' energy package also would repeal a tax break oil and gas companies received in 2004 on their domestic production. The tax provision was passed by Congress to help manufacturers compete with imports, but it also applied to the U.S. oil giants that in recent years have reported huge profits.

Critics of the tax break for the oil companies said it costs the government $700 million a year.

"We are rolling back subsidies for Big Oil to invest in alternative energy and find solutions to our nation's energy problem," said Rep. Charles Rangel, chairman of the tax-writing Ways and Means Committee.

Pelosi has said the revenue would go into a fund to promote renewable energy sources, but the bill does not provide specifics on that.