The Independent Petroleum Association of America has experienced several setbacks recently.
Oddly enough, it declared victory after the Senate deleted a Canadian import review amendment from the energy bill.
IPAA also declared victory last April after Sens. Pete Domenici (R-N.M.) and Tim Wirth (D-Colo.) inserted it. The provisions would have transferred the Department of Energy's authority to approve gas imports to the Federal Energy Regulatory Commission and required FERC to ensure that imports had no anticompetitive effect on U.S. producers.
RATE METHOD ISSUE
Small producers had complained FERC's use of the modified fixed variable rate method shifts a significant portion of a U.S. pipeline's fixed costs into the commodity cost rate component. Canada uses a fixed variable rate design that keeps the fixed costs on the demand charge component.
Domenici said when buyers compare commodity rates the purchaser will always buy Canadian gas unless the U.S. producer reduces his wellhead price by an amount at least equal to the amount of fixed costs FERC assigns to the pipelines' commodity component. The disadvantage will vary at least 18-42/Mcf.
The Domenici-Wirth amendment was as good as dead anyway. Although its sponsors withdrew it, everyone knew Sen. Bill Bradley (D-N.J.) had lined up 51 votes to kill it.
The battleground now shifts to FERC, where the pending "mega-NOPR" rulemaking to unbundle gas pipeline services would allow straight fixed variable rates.
The Senate gave independents a bit of window dressing in the energy bill regarding the alternative minimum tax.
It approved a resolution by Sen., Don Nickles (R-Okla.) urging the finance committee to review the effect of the AMT on U.S. oil and gas producers and to take such action as may be appropriate to promote domestic production."
Such a resolution has a nice ring to it, but it is not binding on the finance committee.
The reality is that AMT relief has looked pretty bleak since the Bush administration proposed AMT relief for business in its budget message-but not for the oil industry.
'COMMODITY CHECKOFF'
A third setback saw IPAA abandon its plans for a mandatory "commodity checkoff" program.
The IPAA executive board accepted a task force's recommendation that any such program be strictly voluntary.
The proposal would have sought legislation to impose a fee on all U.S. oil and gas production to fund a multimillion dollar industry public relations campaign.
California independents opposed the idea, saying their profit margins on production are small enough as it is.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
