The U.S. Congress has passed, and President Clinton is expected to sign, a bill providing federal loan guarantees for domestic oil and gas firms.
The House of Representatives approved the bill 246-176. Earlier, the Senate had passed it 63-34.
Under the program, independent petroleum producers and small business service companies will be able to borrow up to $10 million each until total loans reach $500 million.
The bill provides a government-backed repayment guarantee for 85% of each loan, making it possible for commercial lenders to offer more lenient terms than they would otherwise. It also provides loan guarantees totaling up to $1 billion for steel producers.
The oil loan program will be overseen by the Secretary of Commerce, the Chairman of the Federal Reserve, and the Chairman of the Securities and Exchange Commission.
George Yates, Independent Petroleum Association of America chairman, said the program will help producers maintain output and bring new oil and gas reserves to market.
Yates, president of Harvey E. Yates Co., Roswell, N.M., said, "Independent producers and service companies were devastated by 18 months of historically low oil prices. Our industry has shrunk by 15%, production has dropped precipitously, and the capital available to sink new wells has dried up.
"It's important to recognize that, even with prices today hovering around $20/bbl, the crisis for the independent oil producer is not over by a long shot. We've lost an entire investment cycle.
"With U.S. oil reserves being depleted faster than ever before, as consumer demand continues to rise, current production must be maintained, more discoveries are needed, and more technology is required to improve existing productivity. This requires money. For 18 months, the money has not been available for reinvestment.
"These loan guarantees will help us recover from the severe damage we have sustained by making alternative capital sources available to some producers and service companies."
