Skeptics may have wondered what a “conservation fee” on some holders of federal deepwater Gulf of Mexico leases issued in 1998 and 1999 without price thresholds had to do with a 5-year farm bill which the US House passed on July 27 with much fanfare. The provision, which the House Rules Committee added to HR 2419 a day earlier, was not simply slipped in as a last-minute amendment but was generally expected as a way of funding the farm bill’s energy programs, a House Agricultural Committee spokeswoman told me. It incorporates elements of HR 6, which the House passed in January as part of the Democrats’ “first 100 hr” effort, she said.
A full portion of the farm bill, Title IX, deals with energy. Its sections include loan guarantees for biofuel plants, a feedstock flexibility program for bioenergy producers, and dedicated ethanol pipeline feasibility studies.
The Congressional Budget Office estimates that putting what amounts to a new tax on 1998-99 deepwater leaseholders who have not voluntarily renegotiated terms would raise about $6.1 billion to pay for these agricultural energy programs over 10 years.
Crying foul
Most House members emphasized other aspects of the farm bill. Rep. Stevan Pearce (R-NM) was an exception. He observed during floor debate on July 26 that members of Congress cry foul when other countries abridge treaties and contracts of US companies working there.
When representatives of US oil companies in Venezuela protested after Hugo Chavez’s government told them to renegotiate terms or leave, the Venezuelans essentially said they had the right because “your own government is doing it,” Pearce said. “They were referring to language in this bill, and in HR 6, that affects the 1998-99 offshore leases.”
Another Republican lawmaker from New Mexico, Pete V. Domenici, ranking minority member on the Energy and Natural Resources Committee, said following the House’s passage of the farm bill that includes a provision aimed at recovering lost deepwater royalties was inappropriate.
“While I agree that it is unfortunate that an error made by the Clinton administration has cost the federal treasury revenues, a punitive provision such as the one in the House farm bill will not solve the problem. In fact, it will make matters worse by ensuring years of litigation,” he said. Imposing fees on domestic production would only raise prices and possibly delay leasing and development, Domenici added.
Similar signal
Republicans in general and Democrats from producing states can be expected to push for the provision’s removal when the farm bill reaches the Senate. But its inclusion showed where key House members turned to fund renewable and biofuel energy research and development.
The Senate Finance Committee sent a similar signal on June 19 when it proposed taxing new Gulf of Mexico production, repealing the manufacturing deduction for major oil companies’ domestic activities, and rewriting the foreign tax credit.