Relief plan

U.S. oil-state congressional representatives proposed a package of measures last week to provide some relief to U.S. producers hammered by low oil prices. Members of the Congressional Oil and Gas Forum threw their individual oil bills into an omnibus measure, which would offer producers regulatory changes, federal leasing reforms, and limited tax relief. The package will be introduced soon, but it faces some formable hurdles. Relatively few days remain this session for the time-consuming

April 6, 1998

3 min read

Patrick Crow
Washington, D.C.
[email protected]

U.S. oil-state congressional representatives proposed a package of measures last week to provide some relief to U.S. producers hammered by low oil prices.

Members of the Congressional Oil and Gas Forum threw their individual oil bills into an omnibus measure, which would offer producers regulatory changes, federal leasing reforms, and limited tax relief.

The package will be introduced soon, but it faces some formable hurdles. Relatively few days remain this session for the time-consuming legislative process.

The forum members plan to hold hearings on some of the measures and then to attach them as amendments to other legislation. Sen. Frank Murkowski (R-Alas.) promised quick hearings before the energy committee, which he chairs.

The other key problem is finding revenues to offset the costs of some of the tax relief items. That will be tough, but Sen. Pete Domenici (R-N.M.), the budget committee chairman, pledged to work on it.

What it does

The bill would allow producers to give the federal government its royalty crude rather than pay its value in cash (OGJ, Mar. 30, 1998, p. 33).

A law requiring the sale of $209 million worth of oil from the Strategic Petroleum Reserve later this year would be reversed. U.S. producers argue the depressed market does not need more oil. Sen. Murkowski recently inserted a provision in a budget bill to block the sale.

The Environmental Protection Agency would be admonished not to regulate oil and gas drilling and production wastes as being hazardous.

Certain federal lease inspection and enforcement functions would be transferred from the Bureau of Land Management to state agencies.

After federal tracts are nominated, BLM and the Forest Service would have to offer them at competitive oil and gas lease sales within 90 days.

BLM would be given permanent authority to reduce royalties for stripper wells on federal lands. It also could waive lease rentals and minimum royalty provisions.

Marginal wells (producing heavy oil or less than 15 b/d) would get a maximum $3/bbl tax credit for the first 3 b/d. Marginal gas wells (under 90 Mcfd) would get 50¢ for the first 18 Mcfd.

Producers who reopen wells that have been abandoned for at least 2 years would not have to pay federal taxes on any resulting production.

Operators could expense geological and geophysical costs. And water injection and horizontal drilling would be eligible for the Enhanced Oil Recovery Tax Credit.

Cooperation

The interesting thing about the oil package was that it was compiled at all. It demonstrated more industry cooperation than is usually seen.

As Sen. Don Nickles (R-Okla.), observed, "Seldom do we have the industry so united, with independents, majors, and folks in between. Despite what the administration may say, we plan on making this law later this year."

But the bill still smacks more of public relations than practicality.

Many of the provisions have been on industry's "wish list" for years. The Clinton administration strongly opposes some of them. And even the sponsors admitted only pieces of the bill could be passed.

But it's a start.