Sen. Pete Domenici (R-N.M.) has filed a comprehensive bill to help U.S. oil producers survive the current oil price depression, which he said is atypical of the industry's historic "boom-and-bust" cycles.
Some of the provisions would take effect as of the beginning of this year, while others are triggered by the price of oil. Some would kick in when foreign oil imports exceed 50% of U.S. consumption, and more drastic measures are triggered when they exceed 60%.
Domenici, the influential Budget Committee chairman, said, "This bill represents a comprehensive, graduated approach to ensure that the U.S. retains control of its foreign policy and its economic destiny.
"The world is feasting on cheap oil, and yet the oil patch is starving for capital. This bill addresses that credit crunch, which is made more painful, because producers have accumulated (federal) tax benefits and credits that they cannot use...because low prices have devastated their bottom line."
What it would doThe bill would provide a tax credit of up to $3/bbl, to keep marginal wells in production, similar to legislation already pending in both houses.
When U.S. oil prices fall below $14/bbl, the bill would allow producers and service firms a 10-year carryback for unused alternative minimum tax (AMT) credits and unused percentage depletion allowances.
It also would remove intangible drilling costs as an AMT preference whenever the price of oil falls to $14/bbl.
Claiming that the United Nations is allowing Iraq to deflate oil prices, Domenici would compensate U.S. producers by restoring percentage depletion to 27.5% and by allowing expensing of geological and geophysical costs.
Whenever U.S. oil imports exceed 50%-as they currently do-the bill would allow a 20% exploration and development credit "to reverse the trend of increased dependence on foreign oil."
And the bill would require the administration to implement a plan to ensure that they did not exceed 60%.
Domenici also co-authored legislation to establish a loan program for independents and service/supply companies (see story, p. 18).
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