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When asked about the provision's origins, Senate Finance Committee aides at first said they did not know, only that it did not "originate" with Grassley. One aide noted that the Senator "ultimately is responsible for everything in [the bill], but routinely with such bills, other committee members propose certain ideas, and he accepts them or rejects them as he sees fit."
Asked again by TIME to identify the author, the Senate Finance aide later wrote in an e-mail, "the provision originated as an amendment from Sen. [Rick] Santorum [a Pennsylvania Republican]. Sen. [Gordon] Smith [an Oregon Republican] had a similar amendment co-sponsored by several other Senators, Republicans and Democrats. Chairman Grassley accepted the Santorum amendment ... It's routine for him to accept non-controversial provisions that way rather than have the committee vote on each amendment ... So now the Santorum amendment is in the bill." A Santorum aide said the senator pushed the provision to "provide parity for the non-conventional fuel tax credit with other energy tax credits and to provide certainty for taxpayers." He added that it would also "allow coke plants" to take advantage of tax incentives, claiming "this is important to the steel industry, which employs thousands of Pennsylvanians -- making it more competitive in the global market." Coke, produced from coal or crude oil, is used in steelmaking.
The bill is now part of Congress's budget-reconciliation process. But there is no synfuel amendment in the House bill, meaning that it cannot become law unless the House conferees agree to the Senate provision. Bill Thomas, the California Republican who heads the House Ways and Means Committee, by some accounts is not in favor of the synfuel provision, but whether he will actively oppose it remains to be seen. There are already major differences between the House and Senate reconciliation bills on much larger issues like Medicare, so the odds are that synfuel may slip through again.
Another Senate supporter of the credit is Orrin Hatch of Utah, the ranking Republican on the Finance Committee. An aide said Hatch believes the new provision in the Senate bill "helps make the current credit work better." Utah-based Headwaters Inc., one of the synfuel industry's most active companies, licenses its technology as well as sells materials to synfuel producers. "If the tax credits under Section 29 of the Internal Revenue Code are repealed or adversely modified," the company said in its latest annual report, "Headwaters Energy Services' profitability will be severely affected."
The synfuel lobby contends that the exemption from the run-up in oil prices is necessary to create stability in the industry. "We think it is very fair legislation," Gordon Gillette, chief financial officer of Teco Energy Inc., a utility based in Tampa, Fla., told investment analysts last month. "It eliminates the uncertainty that we have right now and are dealing with right now on oil prices."
And the synfuel lobby expects to carry the day too, largely because Congress has bigger issues to deal with. Kirk Benson, the chairman and CEO of Headwaters, told analysts that "in the world of Washington, D.C., what we want to do isn't material ... It's an afterthought."
Whatever the outcome, the battle over the provision is little more than a warm-up for the legislative fight that will take place in 2007. That's when the tax credit is set to expire and the industry will seek to make it permanent. As Headwaters' Benson has told analysts, with a touch of understatement: "It will become an intense topic in '07."