INDEPENDENTS' GROUP CALLS FOR FEE ON U.S. IMPORTS

The Independent Petroleum Association of America is calling for a fee on U.S. oil imports.

Such a fee would have the effect of raising the price of U.S. produced oil equal to the amount of the oil import fee (OIF). In 1992 oil imports averaged 8 million b/d, or 46% of U.S. consumption.

IPAA will urge President-elect Bill Clinton to consider an OIF as an alternative to a gasoline tax increase but does not plan to recommend things such as a dollar amount or whether it should be linked to a floor price.

IPAA Chairman Gene Ames, said last week, "We will send a formal communication to Mr. Clinton as soon as supporting documents can be assembled."

The association announced the decision after a series of developments that took only a week.

First, a group of independents met in Houston and asked the Clinton administration to develop energy security policies governing oil imports.

Among the group were Mitchell Energy Corp., Apache Corp., Pitts Energy Group, Anadarko Petroleum Corp., Santa Fe Energy Resources Inc., Louisiana Land & Exploration, and several gas pipelines.

On Jan. 11, IPAA's crude oil policy committee voted 20-5 to seek an OIF. The IPAA executive committee then ratified that recommendation and announced the move.

The OIF issue split IPAA after the oil price plunge of the mid 1980s but fell dormant in the face of stiff resistance from the Reagan and Bush administrations.

RIGHT ATMOSPHERE

Clinton has said he might consider a gasoline tax increase as part of a package that lowered other taxes for most citizens.

Ames said, "Clinton has given the signal on several occasions that he would consider an oil import fee."

In a December interview with the Wall Street Journal, Clinton said one alternative to a gasoline tax would be an oil import fee "which is different from a gasoline tax in the sense that it goes across oil products and therefore hits the states that use oil for other things, like home heating oil."

Clinton has the authority, under Section 232 of the Trade Expansion Act, to impose a fee. His new Treasury secretary, former Sen. Lloyd Bentsen (D-Tex.), can be expected to urge him to adopt an OIF. Bentsen has introduced bills to set a fee when oil imports reach 50% of consumption.

IPAA Pres. Denise Bode said, "We've been talking with the Clinton transition team throughout, and they say ff you have a case (for an oil import fee), now is the time to make it. "

IPAA will argue an import fee is a better choice than a gasoline tax increase because it would promote U.S. oil production and thus enhance energy security, create jobs in the U.S., help lower the trade deficit, and reduce tanker shipments of oil to the U.S. and thereby the risk of oil spills.

Ames said, "Two years ago we sent American servicemen and women to die to protect our suppliers of foreign oil, yet we are more dependent on those supplies today than we were then.

"This year we will import 8 million b/d. That translates into 5,000 supertankers carrying crude to our shores, ports, and harbors. When people ask, 'Can the Shetland Islands spill happen in U.S. waters?' our reply is 'Count on it.' Long Island could be like the Shetland Islands."

BENEFITS SEEN

Ames pointed out that the U.S. oil industry has lost 450,000 jobs in the past decade, the rig count is at an historic low, and bankers are severely limiting loans to independent producers because of oil price instability.

Bode said, "We're looking at oil prices going down now. We don't know how much further we can go in the oil industry."

Ames said if Iraq resumes oil exports this year it could "collapse" world oil prices. He said an OIF is sort of a last resort. "We've been through the last restructuring this industry can stand."

He said a fee could increase domestic production and hold oil imports to less than 50% of consumption.

Bode said a fee could be structured to reduce the concerns of northeast U.S. homeowners who rely on home heating oil and comply with the U.S. Canada, North American Free Trade General Agreement on Tariffs and Trade treaties.

Sen. Don Nickles (R-Okla.) applauded IPAA's action. "Of all the energy proposals advanced, such legislation would do the best job of restoring and maintaining a strong domestic energy and would be a major step toward reducing our suicidal dependence on foreign oil," Nickles said.

Nickles said he will reintroduce his bill calling for a $25/bbl floor price on imported oil.

Earlier, Edward Murphy, the American Petroleum Institute's director of finance, accounting, and statistics, said his association is neutral regarding an OIF because its membership is split.

Murphy conceded that a fee would increase U.S. production somewhat. But he said it would not reverse the trend toward higher oil imports.

Murphy said U.S. oil production fell a further 285,000 b/d, or 3.8%, in 1992 to 7.1 million b/d.

"This is the lowest arm al level since 1960. And, unfortunate , with well completions at their present level and bans on searching for oil in areas of the U.S. that are the most likely to contain large reserves, it is hard to see any reason for this trend to improve.

"The result of the decline in U.S. oil production and of higher product consumption was the first increase of imports in 3 years. We estimate that crude and products imports rose by 2.9% or 220,000 b/d last year to 7.847 million b/d."