Academic journal article Energy Law Journal

Report of the Legislation and Regulatory Reform Committee

Academic journal article Energy Law Journal

Report of the Legislation and Regulatory Reform Committee

Article excerpt

The push in Congress, begun in early 2001, to enact comprehensive energy policy legislation stalled yet again in 2004. Notwithstanding that fact, several provisions under discussion in that context, together with a handful of other legislative proposals, were passed by both houses of Congress in 2004 and signed into law by the President.


In 2003, both the House of Representatives and the Senate approved national energy bills. The bills differed in many material respects, but they shared the same number-H.R.6. A House-Senate conference committee reconciled the two bills and produced a conference report in November 2003. The House approved the conference report, but the Senate did not, lacking two votes to break a filibuster and seven votes to overcome a budget point of order.

In the spring of 2004, in response to concerns about the $31 billion cost of the 2003 energy bills, Senate Energy and Natural Resources Committee Chairman Domenici proposed a slimmed-down energy bill (S. 2095), estimated to cost approximately half as much as the 2003 energy bills. The Senate was unable to reach consensus to bring this bill to the floor. Various attempts were made to attach a comprehensive national energy policy bill to other vehicles making their way through Congress, but none of these efforts was successful.

However, in October 2004, a variety of provisions contained in the 2003 bills were passed by both houses of Congress and signed into law by the President. Provisions to jump-start an Alaska natural gas pipeline that had been under consideration for years became law as part of several different bills.


As part of the Military Construction Appropriations and Emergency Hurricane Supplemental Appropriations Act,1 Congress approved the Alaska Natural Gas Pipeline Act, which included an $18 billion loan guaranty, streamlined permitting, provisions for environmental review, and expedited court review.2 An assortment of other Alaska natural gas pipeline provisions was included in that Act. Additionally, the American Jobs Creation Act of 2004 (Jobs Act)3 provided seven-year tax depreciation for the pipeline and confirmation that the enhanced oil recovery credit applied to the gas processing facilities that will be associated with the pipeline.

Several other noteworthy tax provisions were included in the Jobs Act. Two provisions are designed to further the Federal Energy Regulatory Commission (FERC) and/or state electric restructuring initiatives by removing potential tax barriers to transmission divestment and open access. In addition, the Act expands the class of entities qualified for the production tax credit for electricity produced from certain renewable sources and extends the tax credit until January 1,2006.4

Section 909 of the Jobs Act allows a utility making a qualified sale of property (or stock or partnership interest in a corporation or partnership whose principal trade of business consists of providing electric transmission services) used to provide electric transmission services to an independent transmission company to recognize the gain ratably over an eight-year period beginning in the year of the sale.5 This deferred gain requires the seller to use its gain on the sale to purchase exempt utility property (i.e., property used for generating, transmitting, distributing, or selling electricity or natural gas) within four years of the year in which the sale or disposition occurs.6 An independent transmission company is defined as one approved by the FERC (i.e., a regional transmission operator (RTO) or similar entity), or an entity that the FERC determines is not a market participant and whose transmission facilities are placed under the operational control of an independent transmission company no later than January 1, 2007, or an independent transmission organization approved by the Public Utility Commission of Texas. …

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