IPAA'S ENERGY STRATEGY STANCE

The Independent Petroleum Association of America should rethink its resistance to the Bush administration's proposed National Energy Strategy (NES). The strategy does not contain everything independent producers want. It does contain much that they need. By demanding everything, IPAA increases chances that Congress will pass no energy strategy at all-or worse.

March 11, 1991

3 min read

IPAA wants the strategy to redress two problems especially troubling to the independent producing industry: tax laws that discourage drilling and price instability. That those are major and legitimate concerns of independents is beyond question. The issue is whether they should determine fate of the NES.

NES POLITICS

No one knows better than independent producers that current tax laws discourage drilling. But repairs don't have to occur through NES. Congress proved as much last year when it relaxed applicability of the alternative minimum tax to drilling costs. Price stability, too, would help independents. It would help everyone. To make government responsible for warranting prices, however, would be dangerous.

It was politically prudent, if nothing else, for the administration to exclude drilling tax relief and oil price supports from the NES. What independents seek as removal of penalties their opponents will blast as tax favors. And a citizenry devoted to cheap oil at any cost simply won't tolerate regulatory price props without a trade-off, such as a new .,windfall profit" tax. Outside oil and gas producing states, tax relief and price supports would have served the NES as vote repellents.

Even without those measures, the initiative faces trouble in a Congress more enamored of mandated conservation and tax hikes than of domestic petroleum supply. It needs IPAA's support. Failure of the producing industry to unite behind a production-oriented NES gives lawmakers the excuse to dismiss it out of hand.

That's what's happening, and it will hurt independents. Contrary to IPAA's claim that they are "almost totally ignored," independents would gain much from the NES. To be sure, Arctic National Wildlife Refuge leasing-focus of the NES political debate-means little to them. The measure's natural gas blueprint is another matter.

Independent producers increasingly are gas producers. An initiative that promotes production and use of gas should help them; this one would. It supports gas research, expedites pipeline construction, further broadens access to pipeline transportation, reforms rates, and ends most regulation of exports and imports. These steps would facilitate Federal Energy Regulatory Commission efforts to broaden the gas market and make it more accessible to producers and consumers.

The NES thus would help clarify rules of gas trade, restore confidence in contracts, and generate some degree of certainty about the value of gas at the wellhead. Independent producers need these improvements to a growing and vital part of their business. Yet IPAA risks losing the prospective gains by opposing the NES for what it omits.

REASONS FOR SUPPORT

No, the NES doesn't give independent producers everything they want. It doesn't do that for anyone. But it doesn't stop independents from pursuing tax relief, price supports, or anything else through other channels. It certainly wouldn't hurt them, which can't be said for what ultimately may be passed if Congress gets carried away. In fact, it would help independents with its gas initiatives at least.

That's a good reason for IPAA to support the measure. Here's another: The NES-because of its overdue attention to domestic production-would be good for the country.