Energy Sec. Hazel O'Leary says the Clinton administration is willing to negotiate on details, but it is not retreating from the concept of a BTU tax on U.S. fuels.
The Clinton administration has been working with energy industries and trade groups on the BTU tax but not with groups that oppose the levy (OGJ, Mar. 8, p. 24).
The Natural Gas Council (NGC), consisting of the American Gas Association, Natural Gas Supply Association, Interstate Natural Gas Association of America, and Independent Petroleum Association of America, is urging the administration to require gas utilities to collect the BTU tax from consumers.
NGC said, "The natural gas industry strongly opposes imposition of any BTU tax at the city gate, any point (including the inlet or the outlet) of the pipeline system, or at the wellhead.
"Attempting to impose the tax at any of these points will result in considerable confusion, significant burdens in collection, operations, and administration and will thwart the administration's stated goal of preventing significant economic disorders.
"While our associations are on record that they do not support energy taxes, we pledge to work constructively with the appropriate individuals within your administration on unresolved issues in the economic package.
"We want to stress at the beginning of these discussions the importance of correctly designating the collection point of any natural gas tax."
On a related subject, James Nugent, Texas Railroad Commission chairman, recommended to Treasury Sec. Lloyd Bentsen that propane not be taxed at 60cts/MMBTU, like an oil product, but rather at the 26cts/MMBTU for other fuels.
About 60% of the nation's propane comes from gas wells and the rest from oil.
"Since propane and natural gas are products of the same source, propane clearly should be treated exactly as natural gas" Nugent wrote Bentsen.
IMPORTS ISSUE
On the question of taxing imports, Ashland Oil Inc. said, "If the tax on imports is based on BTU content, the tax on imported gasoline would be 30-40cts/bbl less than the tax paid by domestic refiners on crude oil. This would give foreign refiners a significant competitive advantage before taking into account taxes on fuel used in the refining process."
It said because of nonfuel use exemptions for products like asphalt, lube oil, and petrochemical feedstocks, most of the tax would have to be passed through on transportation fuels. "The BTU tax could add 10-15cts/gal to consumer gasoline prices on top of an estimated 10-15cts/gal increase for reformulated gasoline."
And Ashland said "The passage of a BTU tax would send a strong signal that the administration believes the U.S. economy can absorb higher energy prices. Consequently, Organization of Petroleum Exporting Country producers may seek to claim such benefits for themselves by raising prices."
The Coopers & Lybrand accounting firm, Dallas, said the BTU tax would increase production costs and cut prices, causing abandonment of marginal wells. John Swords, the firm's energy taxation director, said, "No additional energy tax should be imposed without relief for marginal wells to keep them producing."
Copyright 1993 Oil & Gas Journal. All Rights Reserved.
