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House Subcommittee OKs Spending Bill Minus Producer Fee

A House appropriations subcommittee last Wednesday approved by voice vote a $32.3 billion spending bill for the Interior Department, Environmental Protection Agency and related agencies for fiscal year 2010. The measure did not include a $122 million fee favored by the Obama administration to force the development of existing nonproducing leases in the Gulf of Mexico (GOM). But the respite may only be temporary.

"Appropriations bills typically do not include authorizing language that would either change federal law...or apply taxes," said George Behan, a spokesman for Rep. Norm Dicks (D-WA), chairman of the Interior, Environment and Related Agencies Subcommittee of the House Appropriations Committee. That's why the proposed $122 million fee was not included in the spending bill, he noted.

The House committee that can authorize the fee on producers is the House Energy and Commerce Committee, Behan said. The spending bill's next stop is the full House Appropriations Committee on Thursday, where it will be marked up.

The aim of the proposed producer fee is to promote the development of existing oil and natural gas leases in the GOM that currently are not producing. House Democrats offered a similar proposal last year, which would have put producers in the unenviable position of having to either drill on their existing leases or face the prospect of paying higher fees (see NGI, June 23, 2008).

They claimed that producers were producing only about 20% of the offshore acres that they hold, and less than 30% of offshore the acres that they hold. House Democrats estimated that the unused areas could produce an additional 4.8 million b/d of oil and 44.7 Bcf/d of natural gas.

In the FY 2010 budget, the Obama administration also is seeking to increase permitting fees and repeal royalty incentives, as well as impose new inspection fees and an excise tax on offshore production (see NGI, May 11).

President Obama proposes to strip away more than $26 billion in tax credits and incentives from producers from 2010 through 2019. Specifically, he is seeking to eliminate the preferential time period treatment for geological and geophysical amortization for independent producers (estimated to cost producers $1.19 billion over 10 years); repeal the deduction for tertiary injectants ($62 million); repeal expensing of intangible drilling costs ($3.35 billion); repeal the Section 29 manufacturing credit for oil and gas companies ($13.29 billion); repeal the passive loss exemption for working interests in oil and gas ($49 million); repeal the percentage depletion for oil and gas ($8.25 billion); and cut funding for the oil and gas research and development program at the Department of Energy ($250 million).

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