CLINTON WON'T ACT ON OIL IMPORTS; SENATE RELIEF MEASURE PROPOSED

The Clinton administration has concluded that growing reliance of the U.S. on low priced crude oil imports threatens national security but plans to take no special measures to combat the threat.

Meanwhile, the Oklahoma congressional delegation filed a bill proposing a tax credit for marginal oil production and other industry relief measures.

FINDING ON IMPORTS

The Commerce Department made the oil import finding in response to an Independent Petroleum Association of America request filed under Section 232 of the Trade Expansion Act.

The Department of Energy said President Clinton accepted the Commerce finding and in response ordered DOE to continue efforts to reduce energy consumption and increase production.

IPAA Chairman George Alcorn said, "The good news is the president agreed that oil imports pose a national security threat. The bad news is he's not going to do anything about it. That's a do-nothing approach from an administration that talks about taking action but fails to follow through.

"It is unprecedented for a president not to take any new action, direct or indirect, to address the national security threat. All other presidents who have concurred with the national security finding have proposed specific new initiatives."

Alcorn said IPAA asked for the investigation last March after a drop in world oil prices forced producers to shut in wells and lay off thousands of employees.

Last year the U.S. imported petroleum to supply more than 50% of domestic demand, a record, while domestic oil production fell to a 40year low.

"This industry has been made noncompetitive by overregulation and a confiscatory tax policy," Alcorn said.

"The lack of leadership and action by this administration again demonstrates a flawed view of national security and economic stability that cannot be allowed to prevail. Therefore, we are calling upon Congress to investigate the threatened impairment of national security and to act where the president has failed to do so."

DOE'S PLANS

Deputy Energy Sec. Bill White said the best strategy is to continue supply enhancement, conservation, and efficiency measures designed to reduce the nation's dependence on oil imports.

White said, "These policies do work. If our nation had not utilized new technologies to increase energy efficiency, we would consume almost 3 million b /d more imported oil than we do today. In addition, technological improvements have greatly reduced domestic finding costs during the last decade.

"We must do more to encourage domestic energy supply, however, and we will be making additional recommendations on regulatory and legislative reforms. In addition, we have continued to increase industry driven research on new oil and gas technologies while our department's budget as a whole has been going down by billions of dollars."

DOE vowed to work to lower the costs of regulatory compliance for oil and gas companies, diversify supplies of imported oil, maintain the Strategic Petroleum Reserve, and coordinate energy cooperation measures with other importing countries.

It plans to increase investments in energy efficiency to reduce oil consumption by 1.26 million b/d by 2010, increase investment in alternative fuels to reduce oil consumption by 2.2 million b/d by 2010, increase investment in production technology, encourage natural gas use, and invest more in renewable sources of energy.

DOE noted Energy Sec. Hazel O'Leary has asked the National Petroleum Council to report on the industry's most pressing problems and suggest methods to preserve its long term viability.

RELIEF LEGISLATION

On the day the administration announced its oil import stance, Oklahoma lawmakers introduced a wide-ranging industry relief bill.

It would provide a tax credit for present marginal wells, allowing $3/bbl for the first 3 bbl of oil production and 5Oo4/Mcf for the first 18 Mcfd of gas. High water cut production would be eligible for credits.

The bill also would allow $3/bbl for the first 15 b/d of oil and 50c/Mcf for the first 300 Mcfd from wells drilled after June 1, 1995.

The tax credits, which would apply against regular taxes and the alternative minimum tax, would phase out as oil prices rise between $14 and $20/bbl and gas prices rise between $2.49 and $3.55/Mcf.

The bill would repeal the net income limitation for computing percentage depletion, exclude marginal production from independents' 1,000 b/d percentage depletion limit, repeal the property allocation rule for computing depletion, freeze the percentage depletion rate at about 20%, allow expensing of geological and geophysical costs, and expand the enhanced oil recovery tax credit.

The legislation would roll back oil spill insurance provisions of the 1990 Oil Pollution Act, set a 6 year statute of limitations on federal oil and gas royalty collection actions, and repeal bans against the export of U.S. oil.

Rep. Bill Brewster (D-Okla.) filed a separate bill just to provide the $3/bbl marginal well tax credit.

Sen. Don Nickles (R-Okla.), chief sponsor of the Senate bill, admitted it will be "real tough" to win passage of the tax credits this year. He said industry has a better chance of getting regulatory relief.

He charged that the Clinton administration has shown little leadership to help the depressed oil industry, and its package for oil import relief is "a pathetic response to the problem we have."

Denise Bode, IPAA president, said, "This (Senate) bill goes a long way toward developing a national energy strategy that will make the domestic oil and gas producer more competitive.

"These energy initiatives are far reaching because they will impact virtually every producer who explores for and produces oil and natural gas in the U.S. The legislation is the foundation for much needed energy reforms and has the support of independent producers."

The Natural Gas Supply Association and American Petroleum Institute support the bill.