It has not been a pretty sight. Last week energy legislation finally reached the floor of the U.S. House of Representatives, shorn of its most loathsome pieces but lacking much in the way of stimulation to oil and gas production. Like the energy bill the Senate passed in February, the House effort concentrates on mandatory conservation and forced use of politically fashionable fuels.
At least the worst parts didn't survive. Lawmakers rejected a loopy energy committee proposal to make refiners and oil importers lend crude to the Strategic Petroleum Reserve. Henry Waxman (D-Calif.) withdrew an amendment to limit emissions of carbon dioxide. And the House, by a vote of 211-198, rejected a proposal by Jim Jontz (D-Ind.) to force more ethanol into a fuels market that doesn't want it.
LIMITED AMT RELIEF
The House did pass limited alternative minimum tax (AMT) relief-very limited. It applies only to independent producers, lasts only 5 years, and doesn't fully restore capital and cost recovery to drilling and production investments. It won't help much, but the gesture is nice. And, of course, there's the potential constitutional showdown over natural gas prorationing mischief in Oklahoma, Texas, and Louisiana, which representatives from gas consuming states see as an effort to raise prices.
Like its Senate counterpart, the House bill has its high points-utility reform, gas pipeline permitting improvements, and faster nuclear plant licensing, for example. Also like the Senate bill, it fails for its lack of perspective. Aside from granting limited AMT relief, it does nothing to promote domestic production of oil and gas, which together satisfy 65% of U.S. energy needs. And by dallying with the SPR setaside plan, the House showed it doesn't understand the jeopardy into which it forced refiners with its 1990 Clean Air Act amendments.
Hopes for domestic production faded last November when the Senate refused to consider a bill providing for leasing of the Arctic National Wildlife Refuge Coastal Plain. It's no coincidence that the withdrawal of major companies from U.S. exploration and production turned into full retreat after that. With the federal offshore resource mostly off limits, the mature U.S. became a niche play when the Senate capitulated on ANWR And what should refiners think when House energy committee Chairman Phil Sharp (D-Ind.) declares that the SPR setaside program won't hurt them because they can simply pass along its costs? A long period of thin to nonexistent refining margins has just ended. Clean air laws soon will require multibillion dollar investments, although regulatory specifics remain anyone's guess. Nearly 930,000 b/d of distillation capacity may close in the next 2 years. And Sharp says refiners shouldn't fret about setaside costs. Amazing.
HOSTILE TO INVESTMENT
Under all current energy legislation, the U.S. will remain peculiarly hostile toward major investments in exploration, production, and refining activities. Domestic oil supplies will suffer, and imports will grow. U.S. producers will continue to take their capital, their technology, and their jobs to more hospitable realms. Part of the refining industry seems destined to follow. Yet lawmakers will point to whatever energy bill emerges from the House-Senate conference as a legislative triumph.
Sorry. This is no triumph. This is another sad piece of the answer to a question politicians will be raising a few years from now, when the need for more domestic production, refining capacity, and technical leadership becomes apparent nationwide: How did we ever let this happen?
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
