Next stop for U.S. omnibus energy legislation is a House-Senate conference committee.
The Senate, after overcoming a series of last minute delays, passed a combined energy policy and energy tax bill 93-3 and named 33 senators to serve on the conference committee. The committee will begin merging the House and Senate bills when the House appoints its members.
The final roadblock to the bill was cleared July 29, when the administration and key senators agreed on a plan to fund bankrupt union health care coverage programs for retired coal miners (OGJ, Aug. 3, Newsletter).
AMT RELIEF
The biggest fight on the Senate floor was over a provision in the bill to grant independent producers relief from the alternative minimum tax (AMT).
The Senate voted 63-32 to preserve the provision, which eliminates the AMT tax preference for intangible drilling costs and percentage depletion.
Sen. Bill Bradley (D-N.J.) complained the AMT provision would benefit independents $1 billion during 5 years and give them a leg up on other industries and over integrated oil and gas producers.
"It is not clear to me why independent oil and gas producers should be treated better than a lot of other industries," Bradley said. "I am not arguing that our independent drillers are not having tough times. I know the rig count is down.
"I do not believe the AMT, however, is the primary cause of the industry's problems. Drillers are in bad shape because oil and gas prices are low."
He said at the least, the bill should restore the AMT provisions when oil prices recover.
Sen. Bennett Johnston (D-La.) said, "When the price of oil goes up, the AMT does not have its bite because independent producers would be making money and would be subjected to the ordinary tax rates."
Sen. David Boren (D-Okla.) said the AMT provision would not allow independents to reduce their taxable income more than 40%. "What they will have is a little more breathing room ... from a 70% effective tax rate."
Sen. Don Nickles (R-Okla.) said, "If the AMT provisions in this bill are passed, drilling would increase 1724% and result in almost 7,000 wells drilled each year. This would increase the rig count by at least 200.
"On average, each rig operating full time creates 150-200 jobs. Therefore, 30,000-45,000 jobs would be created in the U.S. in the first year alone as a direct result of eliminating the nondeductibility of drilling costs and percentage depletion under the AMT."
OTHER ISSUES
Bradley dropped a planned amendment to prevent states from prorating gas production. The House energy bill has such a provision.
The Senate approved an amendment by Sen. Larry Pressler (R-S.D.) to require federal inspection of intrastate hazardous liquid pipeline facilities in states where safety standards do not meet a prescribed level.
He said the amendment is in response to a Jan. 13 Williams Pipeline Co. leak of 200,000 gal of gasoline near Renner, S.D., less than 1 mile from a major aquifer.
The Senate also accepted an amendment by Sen. Frank Murkowski (R-Alaska) requiring a federal study of the potential effects of developing the Arctic National Wildlife Refuge Coastal Plain, declining use of the Trans-Alaska Pipeline System, and the effects on U.S. oil imports.
After the bill was passed, Robert Stewart, National Ocean Industries Association president, said, "It fails to provide for our most immediate energy concern by impeding the search for oil and gas reserves here at home.
"By refusing to allow exploration and production on the Outer Continental shelf and ANWR, Congress continues to let jobs and money be America's top exports. Future oil and gas production has to be a part of any sound energy policy for America."
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
