To put it kindly, pushing tax legislation through the U.S. Congress is a haphazard process, threatened at every step by fiscal and political complications.
But the door seems ajar for a tax bill this summer, and industry is in a good position to gain some relief.
The House of Representatives has passed a bill with five oil provisions. Four of them were included in a Senate finance committee bill that the full Senate is likely to approve.
If the House and Senate bills contain the same measures, it`s unlikely a conference committee would delete them.
The major problem is the Clinton administration, which thinks the Republican bills are far too generous. (The House-passed bill would cost $792 billion.)
The administration has threatened a veto and has rejected proposals for a compromise that would settle at about $500 billion. Something still may be worked out.
U.S. producers would welcome some tax relief, especially since Congress did nothing for them during the severe 1998-99 depression.
The best chance for relief had been a tax credit to keep marginal wells producing during low price periods, but it appears to be dead.
The House-passed bill extends for 5 years the suspension of the net income limitation provision with respect to percentage depletion for marginal wells. It was due to expire at the end of 1999.
The bill includes a net operating loss provision that allows for a 5-year carryback.
It suspends for 6 years the 65% net taxable income limit on percentage depletion, effective Dec. 31, 1998.
The bill would allow delay rental payments to be deducted currently, effective Jan. 1.
And, effective Jan. 1, it would allow geological and geophysical costs to be deducted currently-something the industry has sought for more than a decade.
The Senate finance committee`s bill omitted the suspension of the 65% net taxable income on percentage depletion.
Both the House and Senate bills would relax alternative minimum tax provisions, something the oil industry has found particularly onerous. The House bill would phase out the AMT for individuals by 2008 and also gradually remove it for corporations.
Lee Fuller, Independent Petroleum Association of America`s government relations vice-president, said, "The politics of the tax bill will drive our chances of success, and they`re hard to read at this juncture. They`ll take a while to settle out.
"Still, there are some positive signs to suggest that Congress and the administration want to move toward some resolution of the issues."
Fuller said the oil-specific provisions aren`t extremely costly-around $800 million over 5 years-and thus haven`t become targets for opposition.
Also, the pinch-penny treasury department has been "remarkably subdued" in its comments on the oil provisions.
Fuller said, "We`re very pleased with what`s happened in both houses. The dynamics behind the oil and gas provisions in this bill seem very favorable to us, but they still will be defined by the larger policy questions."