U.S. producers are pushing for extensions of federal nonconventional gas tax credits.
The credits, applied to gas produced from tight formations and other nonconventional sources such as coalbed methane and Devonian shales, are to expire soon.
Mid-Continent Oil & Gas Association, Washington, D.C., says, "It is our judgment that legislative action on (Internal Revenue Code) Section 29 credits would most likely occur this fall in the context of budget reconciliation.
"The schedule could, however, be advanced if Congress and the administration enter into a serious budget summit agreement."
Mid-Continent is working to extend beyond Dec. 31, 1990, the date by which coalbed methane and Devonian shale wells must be spudded to qualify through 2000 for the tax credit, worth about 83/Mcf.
The yearend deadline has helped buoy the rig counts in Alabama's Black Warrior basin and New Mexico's San Juan basin.
Baker Hughes Inc.'s latest drilling rig count shows that 47 rigs are active in New Mexico compared with 32 a year ago and 23 in Alabama compared with only 7 last year.
Coalbed methane prospects are being drilled in most other oil and gas producing states, and Devonian shale drilling activity is heavy in Michigan and West Virginia.
TIGHT SANDS CREDIT
It is becoming increasingly difficult to qualify for the tight sands gas tax credit, MidContinent said.
Deregulation, Federal Energy Regulatory Commission orders, and court decisions have left little gas eligible for the tax credit, currently 52/Mcf,
FERC Order 523, issued Apr. 18, holds that tight sands gas temporarily released from a regulated contract subject to recall by the original buyer is deregulated during the release period if sold on the spot market.
The order, which provides that the gas is reregulated if recalled, seems to question whether spot deliveries made during the release period are eligible for the credit, the association said.
Mid-Continent is working to remove the requirement that tight sands gas be regulated in order to qualify for the credit.
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