II 

109TH CONGRESS 

2D SESSION S. 2673 

To temporarily reduce the Federal fuel tax through the suspension of royalty 

relief for oil production and certain energy production tax incentives. 

IN THE SENATE OF THE UNITED STATES 

APRIL 27, 2006 

Mr. THUNE (for himself and Mr. GRAHAM) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To temporarily reduce the Federal fuel tax through the suspension of royalty relief for oil production and certain 

energy production tax incentives. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Gas Price Reduction Act of 2006’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—TEMPORARY REDUCTION IN HIGHWAY FUEL TAX RATE 

Sec. 101. Reduction in highway fuel tax and maintenance of Highway Trust 

Fund. 


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Sec. 102. Floor stock refunds. 

Sec. 103. Floor stocks tax. 

Sec. 104. Benefits of tax reduction should be passed on to consumers. 

TITLE II—SUSPENSION OF ROYALTY RELIEF 

Sec. 201. Suspension of royalty relief. 

TITLE III—SUSPENSION OF CERTAIN ENERGY PRODUCTION TAX 

INCENTIVES 

Sec. 301. Suspension of deduction for development expenditures. 

Sec. 302. Suspension of deduction for certain mining exploration expenditures. 

Sec. 303. Suspension of deduction for intangible drilling and development costs. 

Sec. 304. Suspension of credit for producing fuel from a nonconventional 

source. 

1 TITLE I—TEMPORARY REDUC2 TION IN HIGHWAY FUEL TAX 

3 RATE 

4 SEC. 101. REDUCTION IN HIGHWAY FUEL TAX AND MAINTE5 NANCE OF HIGHWAY TRUST FUND. 

6 (a) IN GENERAL.—Section 4081 of the Internal Rev7 enue Code of 1986 (relating to imposition of tax on gaso8 line, diesel fuel, and kerosene) is amended by adding at 

9 the end the following new subsection: 

10 ‘‘(f) TEMPORARY REDUCTION IN TAXES ON GASO11 LINE, DIESEL FUEL, AND KEROSENE.— 

12 ‘‘(1) IN GENERAL.—During the applicable pe13 riod, each rate of tax referred to in paragraph (2) 

14 shall be reduced to zero cents per gallon. 

15 ‘‘(2) RATES OF TAX.—The rates of tax referred 

16 to in this paragraph are the rates of tax otherwise 

17 applicable under— 


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1 ‘‘(A) clause (i) and (iii) of subsection 

2 (a)(2)(A) (relating to gasoline, diesel fuel, and 

3 kerosene), determined without regard to sub4 paragraph (B) or (C) of subsection (a)(2), and 

5 ‘‘(B) paragraph (1) of section 4041(a) (re6 lating to diesel fuel) with respect to fuel sold 

7 for use or used in a diesel-powered highway ve8 hicle. 

9 ‘‘(3) APPLICABLE PERIOD.—For purposes of 

10 this subsection, the term ‘applicable period’ means 

11 the period beginning after the date of the enactment 

12 of the Gas Price Reduction Act of 2006, and ending 

13 before October 1, 2006. 

14 ‘‘(4) MAINTENANCE OF TRUST FUND DEPOS15 ITS.—In determining the amounts to be appro16 priated to the Highway Trust Fund under section 

17 9503, an amount equal to the reduction in revenues 

18 to the Treasury by reason of this subsection shall be 

19 treated as taxes received in the Treasury under this 

20 section.’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall take effect on the date of the enactment 

23 of this Act. 

24 SEC. 102. FLOOR STOCK REFUNDS. 

25 (a) IN GENERAL.—If— 


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1 (1) before a tax reduction date, a tax referred 

2 to in section 4081(f)(2) of the Internal Revenue 

3 Code of 1986 has been imposed on any liquid, and 

4 (2) on such date such liquid is held by a dealer 

5 and has not been used and is intended for sale, there 

6 shall be credited (without interest) to the person 

7 who paid such tax (hereafter in this section referred 

8 to as the ‘‘taxpayer’’), against the taxpayer’s subse9 quent semi-monthly deposit of such tax, an amount 

10 equal to the excess of the tax paid by the taxpayer 

11 over the amount of such tax which would be imposed 

12 on such liquid had the taxable event occurred on the 

13 tax reduction date. 

14 (b) CERTIFICATION NECESSARY TO FILE CLAIM FOR

15 CREDIT.— 

16 (1) IN GENERAL.—In any case where liquid is 

17 held by a dealer (other than the taxpayer) on the tax 

18 reduction date, no credit amount with respect to 

19 such liquid shall be allowed to the taxpayer under 

20 subsection (a) unless the taxpayer files with the Sec21 retary— 

22 (A) a certification that the taxpayer has 

23 given a credit to such dealer with respect to 

24 such liquid against the dealer’s first purchase of 


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1 liquid from the taxpayer subsequent to the tax 

2 reduction date, and 

3 (B) a certification by such dealer that such 

4 dealer has given a credit to a succeeding dealer 

5 (if any) with respect to such liquid against the 

6 succeeding dealer’s first purchase of liquid from 

7 such dealer subsequent to the tax reduction 

8 date. 

9 (2) REASONABLENESS OF CLAIMS CER10 TIFIED.—Any certification made under paragraph 

11 (1) shall include an additional certification that the 

12 claim for credit was reasonable based on the tax13 payer’s or dealer’s past business relationship with 

14 the succeeding dealer. 

15 (c) EXCEPTION FOR FUEL HELD IN RETAIL

16 STOCKS.—No credit or refund shall be allowed under this 

17 section with respect to any liquid in retail stocks held at 

18 the place where intended to be sold at retail. 

19 (d) DEFINITIONS.—For purposes of this section— 

20 (1) the terms ‘‘dealer’’ and ‘‘held by a dealer’’ 

21 have the respective meanings given to such terms by 

22 section 6412 of such Code; except that the term 

23 ‘‘dealer’’ includes a producer, and 

24 (2) the term ‘‘tax reduction date’’ means the 

25 day after the date of the enactment of this Act. 


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1 (e) CERTAIN RULES TO APPLY.—Rules similar to the 

2 rules of subsections (b) and (c) of section 6412 of such 

3 Code shall apply for purposes of this section. 

4 SEC. 103. FLOOR STOCKS TAX. 

5 (a) IMPOSITION OF TAX.—In the case of any liquid 

6 on which tax would have been imposed under section 4081 

7 of the Internal Revenue Code of 1986 during the applica8 ble period but for the amendments made by this title, and 

9 which is held on the floor stocks tax date by any person, 

10 there is hereby imposed a floor stocks tax in an amount 

11 equal to the tax which would be imposed on such liquid 

12 had the taxable event occurred on the floor stocks tax 

13 date. 

14 (b) LIABILITY FOR TAX AND METHOD OF PAY15 MENT.— 

16 (1) LIABILITY FOR TAX.—A person holding a 

17 liquid on the floor stocks tax date to which the tax 

18 imposed by subsection (a) applies shall be liable for 

19 such tax. 

20 (2) METHOD OF PAYMENT.—The tax imposed 

21 by subsection (a) shall be paid in such manner as 

22 the Secretary shall prescribe. 

23 (3) TIME FOR PAYMENT.—The tax imposed by 

24 subsection (a) shall be paid on or before the date 

25 which is 6 months after the floor stocks tax date. 


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1 (c) DEFINITIONS.—For purposes of this section— 

2 (1) HELD BY A PERSON.—A liquid shall be con3 sidered as ‘‘held by a person’’ if title thereto has 

4 passed to such person (whether or not delivery to 

5 the person has been made). 

6 (2) GASOLINE, DIESEL FUEL, AND AVIATION

7 FUEL.—The terms ‘‘gasoline’’ and ‘‘diesel fuel’’ have 

8 the respective meanings given such terms by sections 

9 4083 of such Code. 

10 (3) FLOOR STOCKS TAX DATE.—The term 

11 ‘‘floor stocks tax date’’ means October 1, 2006. 

12 (4) APPLICABLE PERIOD.—The term ‘‘applica13 ble period’’ has the meaning given such term by sec14 tion 4081(f)(3) of such Code. 

15 (5) SECRETARY.—The term ‘‘Secretary’’ means 

16 the Secretary of the Treasury or the Secretary’s del17 egate. 

18 (d) EXCEPTION FOR EXEMPT USES.—The tax im19 posed by subsection (a) shall not apply to gasoline, diesel 

20 fuel, kerosene, or aviation fuel held by any person exclu21 sively for any use to the extent a credit or refund of the 

22 tax imposed by section 4081 of such Code is allowable for 

23 such use. 

24 (e) EXCEPTION FOR FUEL HELD IN VEHICLE

25 TANK.—No tax shall be imposed by subsection (a) on gasVerDate Aug 31 2005 02:26 May 04, 2006 Jkt 049200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2673.IS S2673

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1 oline, diesel fuel, or kerosene held in the tank of a motor 

2 vehicle. 

3 (f) EXCEPTION FOR CERTAIN AMOUNTS OF FUEL.— 

4 (1) IN GENERAL.—No tax shall be imposed by 

5 subsection (a)— 

6 (A) on gasoline held on the floor stocks tax 

7 date by any person if the aggregate amount of 

8 gasoline held by such person on such date does 

9 not exceed 4,000 gallons, and 

10 (B) on diesel fuel or kerosene held on such 

11 date by any person if the aggregate amount of 

12 diesel fuel or kerosene held by such person on 

13 such date does not exceed 2,000 gallons. 

14 The preceding sentence shall apply only if such per15 son submits to the Secretary (at the time and in the 

16 manner required by the Secretary) such information 

17 as the Secretary shall require for purposes of this 

18 subsection. 

19 (2) EXEMPT FUEL.—For purposes of para20 graph (1), there shall not be taken into account fuel 

21 held by any person which is exempt from the tax im22 posed by subsection (a) by reason of subsection (d) 

23 or (e). 

24 (3) CONTROLLED GROUPS.—For purposes of 

25 this subsection— 


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1 (A) CORPORATIONS.— 

2 (i) IN GENERAL.—All persons treated 

3 as a controlled group shall be treated as 1 

4 person. 

5 (ii) CONTROLLED GROUP.—The term 

6 ‘‘controlled group’’ has the meaning given 

7 to such term by subsection (a) of section 

8 1563 of such Code; except that for such 

9 purposes the phrase ‘‘more than 50 per10 cent’’ shall be substituted for the phrase 

11 ‘‘at least 80 percent’’ each place it appears 

12 in such subsection. 

13 (B) NONINCORPORATED PERSONS UNDER

14 COMMON CONTROL.—Under regulations pre15 scribed by the Secretary, principles similar to 

16 the principles of this subparagraph shall apply 

17 to a group of persons under common control 

18 where 1 or more of such persons is not a cor19 poration. 

20 (g) OTHER LAW APPLICABLE.—All provisions of law, 

21 including penalties, applicable with respect to the taxes 

22 imposed by section 4081 of such Code shall, insofar as 

23 applicable and not inconsistent with the provisions of this 

24 section, apply with respect to the floor stock taxes imposed 


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1 by subsection (a) to the same extent as if such taxes were 

2 imposed by such section 4081. 

3 SEC. 104. BENEFITS OF TAX REDUCTION SHOULD BE 

4 PASSED ON TO CONSUMERS. 

5 (a) PASSTHROUGH TO CONSUMERS.— 

6 (1) SENSE OF CONGRESS.—It is the sense of 

7 Congress that— 

8 (A) consumers immediately receive the 

9 benefit of the reduction in taxes under this title, 

10 and 

11 (B) transportation motor fuels producers 

12 and other dealers take such actions as nec13 essary to reduce transportation motor fuels 

14 prices to reflect such reduction, including imme15 diate credits to customer accounts representing 

16 tax refunds allowed as credits against excise tax 

17 deposit payments under the floor stocks refund 

18 provisions of this title. 

19 (2) STUDY.— 

20 (A) IN GENERAL.—The Comptroller Gen21 eral of the United States and the Attorney Gen22 eral of the United States shall conduct a study 

23 of the reduction of taxes under this title to de24 termine whether there has been a passthrough 

25 of such reduction. 


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1 (B) REPORT.—Not later than June 30, 

2 2006, the Comptroller General of the United 

3 States and the Attorney General of the United 

4 States shall report to the Committee on Fi5 nance of the Senate and the Committee on 

6 Ways and Means of the House of Representa7 tives the results of the study conducted under 

8 subparagraph (A). 

9 TITLE II—SUSPENSION OF 

10 ROYALTY RELIEF 

11 SEC. 201. SUSPENSION OF ROYALTY RELIEF. 

12 (a) NEW LEASES.— 

13 (1) REQUIREMENT.—The Secretary of the Inte14 rior (referred to in this title as the ‘‘Secretary’’) 

15 shall suspend the application of any provision of 

16 Federal law under which a person would otherwise 

17 be provided relief from a requirement to pay a roy18 alty for the production of oil or natural gas from 

19 Federal land (including submerged land) occurring 

20 on or after the date of enactment of this Act during 

21 a period in which— 

22 (A) for the production of oil, the average 

23 price of crude oil in the United States during 

24 the 4-week period immediately preceding the 


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1 suspension is greater than $50.00 per barrel; 

2 and 

3 (B) for the production of natural gas, the 

4 average wellhead price of natural gas in the 

5 United States during the 4-week period imme6 diately preceding the suspension is greater than 

7 $6.25 per 1,000 cubic feet. 

8 (2) DETERMINATION OF AVERAGE PRICES.— 

9 For purposes of paragraph (1), the Secretary shall 

10 determine average prices, taking into consideration 

11 the most recent data reported by the Energy Infor12 mation Administration. 

13 (b) RENEGOTIATION OF EXISTING LEASES.— 

14 (1) REQUIREMENT.—The Secretary shall, to 

15 the maximum extent practicable, renegotiate each 

16 lease authorizing production of oil or natural gas on 

17 Federal land (including submerged land) issued by 

18 the Secretary before the date of the enactment of 

19 this Act as the Secretary determines to be necessary 

20 to modify the terms of the lease to ensure that a 

21 suspension of a requirement to pay royalties under 

22 the lease does not apply to production described in 

23 subsection (a)(1). 

24 (2) FAILURE TO RENEGOTIATE AND MODIFY.— 


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1 (A) IN GENERAL.—Beginning on the date 

2 that is 1 year after the date of enactment of 

3 this Act, a lessee that does not renegotiate a 

4 lease described in paragraph (1) in accordance 

5 with that paragraph shall not be eligible to 

6 enter into a new lease authorizing production of 

7 oil or natural gas on Federal land (including 

8 submerged land). 

9 (B) TRANSFERS.—A lessee shall not be eli10 gible to obtain by sale or other transfer any 

11 lease described in paragraph (1) issued before 

12 the date of enactment of this Act, unless the 

13 lessee— 

14 (i) renegotiates the lease; and 

15 (ii) enters into an agreement with the 

16 Secretary to modify the terms of the lease 

17 in accordance with paragraph (1). 

18 TITLE III—SUSPENSION OF CER19 TAIN ENERGY PRODUCTION 

20 TAX INCENTIVES 

21 SEC. 301. SUSPENSION OF DEDUCTION FOR DEVELOPMENT 

22 EXPENDITURES. 

23 Section 616 of the Internal Revenue Code of 1986 

24 is amended by adding at the end the following new sub25 section: 


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1 ‘‘(f) NONAPPLICATION OF SECTION.—This section 

2 shall not apply with respect to any expenditure paid or 

3 incurred during the period beginning on the date of the 

4 enactment of this subsection and ending on the date on 

5 which aggregate revenues resulting from the provisions of, 

6 and amendments made by, sections 201 through 304 of 

7 the Gas Price Reduction Act of 2006 are estimated by 

8 the Secretary to equal the aggregate appropriations made 

9 to the Highway Trust Fund by reason of section 

10 9503(f)(4).’’. 

11 SEC. 302. SUSPENSION OF DEDUCTION FOR CERTAIN MIN12 ING EXPLORATION EXPENDITURES. 

13 Section 617 of the Internal Revenue Code of 1986 

14 is amended by adding at the end the following new sub15 section: 

16 ‘‘(j) NONAPPLICATION OF SECTION.—This section 

17 shall not apply with respect to any expenditure paid or 

18 incurred during the period beginning on the date of the 

19 enactment of this subsection and ending on the date on 

20 which aggregate revenues resulting from the provisions of, 

21 and amendments made by, sections 201 through 304 of 

22 the Gas Price Reduction Act of 2006 are estimated by 

23 the Secretary to equal the aggregate appropriations made 

24 to the Highway Trust Fund by reason of section 

25 9503(f)(4).’’. 


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1 SEC. 303. SUSPENSION OF DEDUCTION FOR INTANGIBLE 

2 DRILLING AND DEVELOPMENT COSTS. 

3 Section 263(c) of the Internal Revenue Code of 1986 

4 is amended by adding at the end the following new sen5 tence: ‘‘This section shall not apply with respect to any 

6 costs paid or incurred during the period beginning on the 

7 date of the enactment of this sentence and ending on the 

8 date on which aggregate revenues resulting from the provi9 sions of, and amendments made by, sections 201 through 

10 304 of the Gas Price Reduction Act of 2006 are estimated 

11 by the Secretary to equal the aggregate appropriations 

12 made to the Highway Trust Fund by reason of section 

13 9503(f)(4).’’. 

14 SEC. 304. SUSPENSION OF CREDIT FOR PRODUCING FUEL 

15 FROM A NONCONVENTIONAL SOURCE. 

16 Section 45K of the Internal Revenue Code of 1986 

17 is amended by adding at the end the following new sub18 section: 

19 ‘‘(h) NONAPPLICATION OF SECTION.—This section 

20 shall not apply with respect to any fuel sold during the 

21 period beginning on the date of the enactment of this sub22 section and ending on the date on which aggregate reve23 nues resulting from the provisions of, and amendments 

24 made by, sections 201 through 304 of the Gas Price Re25 duction Act of 2006 are estimated by the Secretary to 


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1 equal the aggregate appropriations made to the Highway 

2 Trust Fund by reason of section 9503(f)(4).’’. 

Æ 


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