Budget pressures have put the squeeze on U.S. industry and federal oil and gas research and development in recent years.
The Gas Research Institute, Chicago, which conducts an array of R&D for the industry, has felt that pressure.
Many of its projects are funded by surcharges on interstate gas transmission, and it has had to reduce staff and cut its budget 20% to $175 million (OGJ, Feb. 26, p. 36).
Tax credit
David Webb, GRI policy and regulatory affairs senior vice-president, says it would ease the budget crunch if Congress removed disincentives for collaborative industry research.
A law that expired last June allowed companies a tax credit of 20% on 100% of certain research and experimentation (R&E) expenditures during a baseline level. The 20% credit also applied to 65% of outside research.
Last year's budget reconciliation bill, vetoed by President Clinton, would have continued the 20% R&E credit and raised the 65% limit for outside collaborative R&D to 75%.
The energy industry wants Congress to reinstate that 20% credit and extend it to 100% of collaborative research.
Webb said, "At the time the expired R&E tax credit was written, collaborative research was not prevalent in industry. However, with shrinking R&D dollars available, it is becoming more common to see companies pool their resources to participate in collaborative research."
Congress has even passed a law allowing companies to join in such joint R&D without violating antitrust laws.
The National Association of Regulatory Utility Commissioners (Naruc), Interstate Oil & Gas Compact Commission, the Electric Power Research Institute, and GRI are urging Congress to expand the credit to collaborative R&D.
Naruc said, "Without this incentive, the gas and electric industries may succumb to competitive pricing pressure and constrain their research contributions. This incentive is especially critical in light of the budget cuts in the federal research programs like those of the Department of Energy."
The proposal, which is not oil and gas specific, would allow the credit if a nonprofit institution managed the R&D and made the results available to the public. Projects would have to be supported by at least 15 member companies, with no three combined providing more than 50% of the funds.
Congress and key federal agencies support the idea. But as usual, the problem is money.
The congressional joint taxation committee has estimated a collaborative R&D credit of only 15% could deny the Treasury $85 million in fiscal 1997, then trend downward in later years.
Critical measure
Webb said chances are very slim the proposal will be enacted in this Congress, but it will be pushed in the next.
He said the biggest beneficiaries in the oil and gas industry will be independents without R&D facilities.
Webb stressed that research is critical to the future of the gas industry in a continuing era of low energy prices.
"Because of past R&D we are currently enjoying plentiful supplies of natural gas at low costs. To ensure the same level of stability for the future, R&D must be continued on a federal level and on a private level."
Copyright 1996 Oil & Gas Journal. All Rights Reserved.
