The U.S. Senate has approved two oil industry relief measures as part of a $2 billion fiscal 1999 supplemental appropriations bill.
Both of the bills, approved last week, were sponsored by Sens. Pete Domenici (R-N.M.) and Jeff Bingaman (D-N.M.).
One amendment would create a $500 million Emergency Oil and Gas Guaranteed Loan Program. A board would oversee the initiative with a $2.5 million budget.
Independent producers and service/supply companies could obtain loans of up to $10 million at "a reasonable interest rate." The program would end in 5 years, although the loan terms could exceed that period.
The second amendment would allow any company operating a marginal well on federal lands to reduce its federal royalty payments by $1 for every $1 it spends to improve production. The program is authorized at $125 million.
The House of Representatives at presstime last week was expected to approve its own supplemental appropriations bill within a few days. Domenici will serve on the conference committee that reconciles the House and Senate bills.
Bingaman said the loan program would save many independents: "Ensuring cash flow is critical to keeping the oil industry in New Mexico working and drilling new wells."
Domenici said, "The oil and gas industry is a capital-intensive industry. Many of the companies have invested all of their profits during good times back into acquiring, exploring, and developing new resources.
"Some have borrowed money. Those loans are now coming due, and banks are less and less willing to roll those loans over. Oil patch bankruptcies are up, and lending is down.
"These bankruptcies have been fueled by the closure of an estimated 136,000 wells so far. I don't know what the future holds, but I do know that the industry needs assistance to keep afloat until oil prices return to a more normal price range."
Copyright 1999 Oil & Gas Journal. All Rights Reserved.