White House officials hear industry's pleas

Patrick Crow
Energy Policies Editor

Oil industry representatives said they had a productive meeting with White House officials last week regarding the industry's depression. U.S. Energy Sec. Bill Richardson arranged the meeting and moderated most of it.

Twenty oil company and trade association officials met for an hour with Treasury Sec. Robert Rubin, White House Chief of Staff John Podesta, and National Economic Council Director Gene Sperling.

Richardson said, "The next step will be the creation of an interagency working group on energy issues, which will be led by the National Economic Council. "This group will work to ensure these issues receive the continued, high-level attention they deserve, while balancing national economic, energy, and environmental objectives."

Meanwhile, congressmen are calling for the administration to reexamine the threat of rising oil imports and Iraq's role in the oversupply situation.

Reactions

Red Cavaney, American Petroleum Institute president, said, "We asked the government to review the regulations and taxes affecting our industry-both existing and proposed-to see which ones can be made more cost-effective, more flexible, and less burdensome."

On taxes, API said the government should enact a marginal-well tax credit, make changes to the alternative minimum tax and percentage depletion, allow expensing of geological and geophysical costs, and delay rental payments. API also said the government should consider low-cost emergency loans for independent producers.

It said government should avoid reinstatement of the expired Superfund taxes and the Oil Spill Liability Trust Fund excise tax, as well as further limitations on the use of foreign tax credits.

George Yates, Independent Petroleum Association of America chairman, said, "The meeting gave us the opportunity to talk a bit about the shrinking of the oil industry, the loss of 40,000 jobs last year, and a 15% reduction in our production capabilities." He added that the discussion touched on how natural gas production could be lost as a result of the shrinking of the oil industry infrastructure.

Yates said independents asked the government officials "to change the message coming from the administration, at the highest level possible, to start paying attention to the domestic industry and clearly state the importance of the domestic industry to economic security and national security."

He said a second theme was, "We need to do something about Iraq, which has been dumping oil on a glutted market" due to the structure of the United Nations oil-for-aid program. "We pointed out that this was not the market at work; this was (due to) the government," said Yates.

Michael Linn, president and CEO of Meridian Exploration Corp., said Treasury officials asked if it was correct that 75% of oil companies were not paying income taxes now, and thus tax relief would have no effect on them.

Linn explained that some independents are owners of corporations and pay taxes individually: "There could be a statement that companies don't pay taxes, but there is a taxpayer out there."

Attendees

Other participants in the meeting were Ben Alexander, Dasco Energy Co. CEO; Peter Bijur, Texaco Inc. chairman and CEO; William Bradford, Halliburton Co. chairman; Jack Golden, BP Amoco plc exploration vice-president; Danny Conklin, Phil Con Development Co. chairman; IPAA's Yates; and Chadwick Deaton, Schlumberger Inc. executive vice-president.

Also attending were John Rex Jones, Jones Energy Ltd. president and CEO; Jerry Jordan, Jordan Energy Inc. president; Virginia Lazenby, Bretagne Co. chairman; Meridian's Linn; Jack Little, Shell Exploration & Production Co. president and CEO; Don MacPherson Jr., MacPherson Oil Co. president and CEO; Ray Seegmiller, Cabot Oil & Gas Corp. president and CEO; J. Michael Stinson, Conoco Inc. senior vice-president; Everett Taylor of Lucky Services Inc.; Gil Thurm, IPAA president; and Bill Whitsitt, Domestic Petroleum Council president.

Congressional action

Meanwhile, Rep. Mac Thornberry (R-Tex.) and 39 other House members have petitioned the Clinton administration to lower the caps on the amount of oil Iraq is permitted to sell under the U.N. program.

Thornberry said, "Not only is food and medicine failing to reach the Iraqi people, but it is becoming increasingly apparent that Saddam Hussein is using the program to flood the world with cheap oil and drive the prices downward.

"In short, it is a program that's not serving its original purpose and one that undermines U.S. policy by allowing Saddam Hussein to wage economic warfare on his neighbors."

Rep. Ernest Istook (R-Okla.) asked the Commerce Department to investigate the impact of oil imports on U.S. producers and national security.

The investigation could come under Sec. 232 of the 1962 Trade Expansion Act. That law allows the President to impose restrictions on imports if national security is threatened.

Istook asked that the investigation be completed within 60 days.

He said "Importing oil from Iraq-now the fourth largest source of foreign oil for the U.S.-is contrary to America's national security and should be curtailed."

Sen. Jeff Bingaman (D-N.M.) made a similar request. He said, "It is clear that our dependence on foreign oil has increased significantly in recent years. With domestic producers virtually on their backs, we need to pay especially close attention to the impact of these imports."

Commerce conducted a Sec. 232 inquiry in 1994 and concluded imports did threaten national security. In early 1995, President Clinton concurred with the finding but took no action.