II 

110TH CONGRESS 

1ST SESSION S. 115 

To suspend royalty relief, to repeal certain provisions of the Energy Policy 

Act of 2005, and to amend the Internal Revenue Code of 1986 to 

repeal certain tax incentives for the oil and gas industry. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 4, 2007 

Mr. OBAMA introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To suspend royalty relief, to repeal certain provisions of 

the Energy Policy Act of 2005, and to amend the Internal Revenue Code of 1986 to repeal certain tax incentives 

for the oil and gas industry. 

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 ‘‘Oil Subsidy Elimination for New Strategies on Energy 

6 Act’’ or the ‘‘Oil SENSE Act’’. 

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

8 this Act is as follows: 


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Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

TITLE I—TERMINATION OF CERTAIN PROVISIONS OF THE 

ENERGY POLICY ACT OF 2005 

Sec. 101. Termination of certain provisions of the Energy Policy Act of 2005. 

TITLE II—SUSPENSION OF ROYALTY RELIEF 

Sec. 201. Suspension of royalty relief. 

Sec. 202. Renegotiation of existing leases. 

TITLE III—REPEAL OF CERTAIN ENERGY TAX INCENTIVES 

Sec. 301. Repeal of tax subsidies enacted by the Energy Policy Act of 2005 for 

oil and gas. 

1 SEC. 2. FINDINGS. 

2 Congress finds that— 

3 (1) record highs in oil and natural gas prices 

4 have resulted in record profits for oil and natural 

5 gas producers and refiners; 

6 (2) oil prices are projected to remain high for 

7 the foreseeable future; 

8 (3) the Department of the Interior estimates 

9 that as much as $66,000,000,000 worth of oil and 

10 natural gas taken from the deep waters of the Gulf 

11 of Mexico over the next 5 years will be exempt from 

12 Government royalty payments, which could amount 

13 to the Government losing an estimated 

14 $7,000,000,000 to $9,500,000,000 based on antici15 pated production and current price projections for 

16 oil and gas, according to an analysis in the 5-year 

17 budget plan of the Department of the Interior; 


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1 (4) the chief executive officers of the top 5 oil 

2 companies stated at a November 9, 2005, joint hear3 ing of the Committee on Energy and Natural Re4 source of the Senate and the Committee on Environ5 ment and Public Works of the Senate that their 

6 companies did not need the Federal tax incentives 

7 provided in the Energy Policy Act of 2005 (42 

8 U.S.C. 15801 et seq.); 

9 (5) the Statement of Administration Policy of 

10 June 14, 2005, on the energy bill that would become 

11 the Energy Policy Act of 2005 states, ‘‘The Presi12 dent believes that additional taxpayer subsidies for 

13 oil-and-gas exploration are unwarranted in today’s 

14 price environment, and urges the Senate to eliminate 

15 the Federal oil-and-gas subsidies and other explo16 ration incentives contained in the bill.’’; and 

17 (6) incentives for the energy industry should be 

18 focused on the development of renewable energy re19 sources in the United States that will also promote, 

20 jobs, investment, innovation, and economic develop21 ment in rural, agriculture-dependent areas. 


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1 TITLE I—TERMINATION OF CER2 TAIN PROVISIONS OF THE EN3 ERGY POLICY ACT OF 2005 

4 SEC. 101. TERMINATION OF CERTAIN PROVISIONS OF THE 

5 ENERGY POLICY ACT OF 2005. 

6 (a) IN GENERAL.—The following provisions of the 

7 Energy Policy Act of 2005 are repealed as of the date 

8 of enactment of this Act: 

9 (1) Section 343 (42 U.S.C. 15903) (relating to 

10 marginal property production incentives). 

11 (2) Section 344 (42 U.S.C. 15904) (relating to 

12 incentives for natural gas production from deep wells 

13 in the shallow waters of the Gulf of Mexico). 

14 (3) Section 345 (42 U.S.C. 15905) (relating to 

15 royalty relief for deep water production). 

16 (4) Section 346 (Public Law 109-58; 119 Stat. 

17 794) (relating to Alaska offshore royalty suspen18 sion). 

19 (5) Section 357 (42 U.S.C. 15912) (relating to 

20 comprehensive inventory of OCS oil and natural gas 

21 resources). 

22 (6) Section 362 (42 U.S.C. 15921) (relating to 

23 management of Federal oil and gas leasing pro24 grams). 


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1 (7) Subtitle J of title IX (42 U.S.C. 16371 et 

2 seq.) (relating to ultra-deepwater and unconventional 

3 natural gas and other petroleum resources). 

4 (b) TERMINATION OF ALASKA OFFSHORE ROYALTY

5 SUSPENSION.— 

6 (1) IN GENERAL.—Section 8(a)(3)(B) of the 

7 Outer Continental Shelf Lands Act (43 U.S.C. 

8 1337(a)(3)(B)) is amended by striking ‘‘and in the 

9 Planning Areas offshore Alaska’’. 

10 (2) EFFECTIVE DATE.—The amendment made 

11 by this subsection shall take effect as of the date of 

12 enactment of this Act. 

13 TITLE II—SUSPENSION OF 

14 ROYALTY RELIEF 

15 SEC. 201. SUSPENSION OF ROYALTY RELIEF. 

16 (a) IN GENERAL.—Subject to subsection (c), the Sec17 retary of the Interior (referred to in this title as the ‘‘Sec18 retary’’) shall suspend the application of any provision of 

19 Federal law under which a person would otherwise be pro20 vided relief from a requirement to pay a royalty for the 

21 production of oil or natural gas from Federal land (includ22 ing submerged land) occurring after the date of enactment 

23 of this Act during any period in which— 

24 (1) for the production of oil, the average price 

25 of crude oil in the United States during the 4-week 


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1 period immediately preceding the suspension is 

2 greater than $34.71 per barrel; and 

3 (2) for the production of natural gas, the aver4 age wellhead price of natural gas in the United 

5 States during the 4-week period immediately pre6 ceding the suspension is greater than $4.34 per 

7 1,000 cubic feet. 

8 (b) DETERMINATION OF AVERAGE PRICES.—For 

9 purposes of subsection (a), the Secretary shall determine 

10 average prices, taking into consideration the most recent 

11 data reported by the Energy Information Administration. 

12 (c) REQUIRED ADJUSTMENT.—For fiscal year 2008 

13 and each subsequent fiscal year, each dollar amount speci14 fied in subsection (a) shall be adjusted to reflect changes 

15 for the 1-year period ending the preceding November 30 

16 in the Consumer Price Index for All Urban Consumers 

17 published by the Bureau of Labor Statistics of the Depart18 ment of Labor. 

19 SEC. 202. RENEGOTIATION OF EXISTING LEASES. 

20 (a) REQUIREMENT.—The Secretary shall renegotiate 

21 each lease authorizing production of oil or natural gas on 

22 Federal land (including submerged land) issued by the 

23 Secretary before the date of enactment of this Act as the 

24 Secretary determines to be necessary to modify the terms 

25 of the lease to ensure that a suspension of a requirement 


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1 to pay royalties under the lease does not apply to produc2 tion described in section 201(a). 

3 (b) FAILURE TO RENEGOTIATE AND MODIFY.—Be4 ginning on the date that is 1 year after the date of enact5 ment of this Act, a lessee under a lease described in sub6 section (a) shall not be eligible— 

7 (1) to enter into a new lease described in that 

8 subsection; or 

9 (2) to obtain by sale or other transfer any lease 

10 issued before that date, unless the lessee— 

11 (A) renegotiates the lease; and 

12 (B) enters into an agreement with the Sec13 retary to modify the terms of the lease in ac14 cordance with subsection (a). 

15 TITLE III—REPEAL OF CERTAIN 

16 ENERGY TAX INCENTIVES 

17 SEC. 301. REPEAL OF CERTAIN PROVISIONS OF THE EN18 ERGY POLICY ACT OF 2005 PROVIDING TAX 

19 SUBSIDIES FOR THE OIL AND GAS INDUSTRY. 

20 (a) REPEAL OF ELECTION TO EXPENSE CERTAIN

21 REFINERIES.— 

22 (1) IN GENERAL.—Subparagraph (B) of section 

23 179C(c)(1) of the Internal Revenue Code of 1986 

24 (relating to qualified refinery property) is amended 

25 by striking ‘‘January 1, 2012’’ and inserting ‘‘the 


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1 date of the enactment of the Oil Subsidy Elimi2 nation for New Strategies on Energy Act’’. 

3 (2) EFFECTIVE DATE.—The amendment made 

4 by paragraph (1) shall apply to property placed in 

5 service after the date of the enactment of this Act. 

6 (b) REPEAL OF TREATMENT OF NATURAL GAS DIS7 TRIBUTION LINES AS 15-YEAR PROPERTY.— 

8 (1) IN GENERAL.—Clause (viii) of section 

9 168(e)(3)(E) of such Code (relating to 15-year prop10 erty) is amended by striking ‘‘January 1, 2011’’ and 

11 inserting ‘‘the Oil Subsidy Elimination for New 

12 Strategies on Energy Act’’. 

13 (2) EFFECTIVE DATE.—The amendment made 

14 by paragraph (1) shall apply to property placed in 

15 service after the date of the enactment of this Act. 

16 (c) REPEAL OF TREATMENT OF NATURAL GAS

17 GATHERING LINES AS 7-YEAR PROPERTY.— 

18 (1) IN GENERAL.—Clause (iv) of section 

19 168(e)(3)(C) of such Code (relating to 7-year prop20 erty) is amended by inserting ‘‘and which is placed 

21 in service before the date of the enactment of the Oil 

22 Subsidy Elimination for New Strategies on Energy 

23 Act’’ after ‘‘April 11, 2005,’’. 


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1 (2) EFFECTIVE DATE.—The amendment made 

2 by paragraph (1) shall apply to property placed in 

3 service after the date of the enactment of this Act. 

4 (d) REPEAL OF NEW RULE FOR DETERMINING

5 SMALL REFINER EXCEPTION TO OIL DEPLETION DEDUC6 TION.— 

7 (1) IN GENERAL.—Paragraph (4) of section 

8 613A(d) of such Code (relating to certain refiners 

9 excluded) is amended to read as follows: 

10 ‘‘(4) CERTAIN REFINERS EXCLUDED.—If the 

11 taxpayer or a related person engages in the refining 

12 of crude oil, subsection (c) shall not apply to such 

13 taxpayer if on any day during the taxable year the 

14 refinery runs of the taxpayer and such person exceed 

15 50,000 barrels.’’. 

16 (2) EFFECTIVE DATE.—The amendment made 

17 by paragraph (1) shall apply to taxable years begin18 ning after the date of the enactment of this Act. 

19 (e) REPEAL OF AMORTIZATION OF GEOLOGICAL AND

20 GEOPHYSICAL EXPENDITURES.— 

21 (1) IN GENERAL.—Section 167 of such Code 

22 (relating to depreciation) is amended by striking 

23 subsection (h) and redesignating subsection (i) as 

24 subsection (h). 


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1 (2) CONFORMING AMENDMENT.—Section 

2 263A(c)(3) of such Code is amended by striking 

3 ‘‘167(h),’’. 

4 (3) EFFECTIVE DATE.—The amendments made 

5 by this subsection shall apply to amounts paid or in6 curred after the date of the enactment of this Act. 

Æ 


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