The Energy Policy Act of 2005 (EPACT 2005), which was signed into law on August 8, 2005, is a national energy plan designed to increase domestic energy production, encourage energy conservation and efficiency, and promote the development and use of renewable and alternative energy sources. The legislation contains numerous provisions covering energy production, conservation, distribution, storage, efficiency, and research. It includes mandatory energy conservation and efficiency standards; creates tax credits for businesses and individuals making energy-efficient improvements; and provides tax incentives and loan guarantees for energy production of various types.

• Extends royalty relief for natural gas production from deep wells in shallow waters of the Gulf of Mexico and for natural gas and oil production in deep waters of the Gulf of Mexico. The Secretary of the Interior has discretion in granting the relief based on the market price of the resource.
• Expands the Outer Continental Shelf Lands Act to include the Planning Areas offshore Alaska for royalty suspension at the Secretary of the Interior’s discretion.
• Requires the Minerals Management Service (MMS) to conduct a comprehensive inventory and analysis of the estimated natural gas and oil resources on the Outer Continental Shelf (OCS). The inventory includes moratoria areas that are currently closed to natural gas and oil leasing. An initial report to Congress was due within 6 months.
• Gives MMS the authority to manage and oversee alternative-energy related projects on the OCS. Prior to this provision, there was a gap in the law with respect to alternative-energy projects. This provision provides 27 percent sharing of any revenue generated from these types of projects in distances up to 3 miles seaward of State waters.
• Creates a new coastal impact assistance program in an effort to boost States’ interest in opening offshore areas. The program will provide $250 million from OCS revenues per year for fiscal years 2007 to 2010 to six energy-producing coastal States: Alabama, Alaska, California, Louisiana, Mississippi, and Texas. The allocation to each State will be based on the ratio of OCS revenue generated off a State’s coast to the total OCS revenue in Federal waters.
• Clarifies the role of the Federal Energy Regulatory Commission (FERC) as the final decisionmaking body on the construction, expansion, or operation of any facility that exports, imports, or processes liquefied natural gas. However, FERC must consult with the States on safety issues.
• Authorizes FERC to permit a natural gas company to provide storage and storage-related services at market-based rates if it believes the company will not exert market power.
• Provides tax incentives for the oil and natural gas industries that include treatment of natural gas distribution lines as 15-year property, treatment of natural gas gathering lines as 7-year property, and exclusion of prepayments on natural gas supply contracts with government utilities from arbitrage rules.
• Directs the Department of Energy (DOE) to establish a competitive program to provide grants for projects that enhance the recovery of oil or natural gas while increasing the sequestration of carbon dioxide.
• Requires DOE to initiate a process for the leasing of Federal lands for research on oil shale, tar sands and other conventional fuels.
• Reauthorizes the Methane Hydrate Research and Development Act of 2000 and directs DOE to facilitate and develop partnerships among government, industrial enterprises, and institutions of higher education to research, identify, assess, and explore methane hydrate resources.
• Directs DOE to conduct a study on petroleum and natural gas storage capacity and operational inventory levels, nationwide and by major geographical regions. Results of the study, including findings and any recommendations for preventing future supply shortage, are to be reported to Congress.
• Mandates a new oil and gas research and development program called the Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Research and Development Program, funded at a level of $50-million-per year (through September 30, 2014) from royalties, rents, and bonuses from Federal onshore and offshore oil and gas leases.

In accordance with EPACT 2005, the Federal Energy Regulatory Commission, the Department of Energy, and the Minerals Management Service have taken several actions to encourage investment in energy infrastructure. FERC issued new rules (Order 678) in June 2006 that allow market-based rates for interstate natural gas storage capacity in an effort to encourage expansion of storage capacity. FERC also set up a pre-filing process for potential developers of onshore LNG facilities in order to speedup the application process and facilitate cooperation with State and local officials (Order 687). Since EPACT was enacted in August 2005, FERC has approved 10 new LNG import facilities and expansions at 5 operating or previously authorized import facilities (as of August 2008). The pre-filing process is also available for pipeline applicants.

DOE established a program to provide grants for cost-shared projects to enhance oil and natural gas recovery through carbon dioxide (CO2) injection, while also sequestering CO2. DOE reports indicate that an additional 89 billion barrels of U.S. oil could be recovered through CO2 injection. A grant was awarded for a demonstration project in the Citronelle oil field in Alabama. According to DOE, an estimated 64 million barrels of oil could be recovered from the Citronelle field through CO2 injection.

DOE established two committees to advise the Department on the development and implementation of programs related to ultra-deepwater and onshore unconventional natural gas and other petroleum resources. Funding for the projects comes from lease bonuses and royalties paid by industry to produce oil and gas on Federal lands. Approximately $15 million was available from 2007 funding for ultra-deepwater resource projects, $13.9 million for unconventional resource projects, $3.2 million for projects related to technology challenges for small producers, and $12.5 million for complementary research. The unconventional resources program for 2007 and 2008 focused on research and development projects that target gas shales, water management for both coalbed methane and gas shales, and tight sands. According to the Energy Information Administration (EIA), total proved reserves of dry natural gas in the United States at the end of 2007 was at its highest level in the 31 years EIA has published annual reserves data, particularly because of the rapid development of unconventional gas resources. Shale proved reserves, in particular, increased by 50 percent in 2007 and accounted for about 9 percent of U.S. natural gas proved reserves.

As part of its new authority over alternative-energy related projects on the OCS, MMS formed the Office of Offshore Alternative Energy Programs to develop and implement policy, analysis, and overall management of the OCS alternative energy leasing and operations program. It also adopted an interim policy for installation of offshore data collection and technology testing facilities relating to wind and wave resources and ocean currents. Proposed final rules governing leases for offshore alternative energy projects were published in July 2008. MMS also revised leasing and royalty policies for geothermal energy development on Federal lands, allowing counties a share of royalty revenues.