Producer Relief Addressed in Emergency Bill
Senate and House lawmakers are expected to vote this week on a
$15-billion emergency funding measure that, among other things,
would provide some long-sought relief to natural gas and oil
Although a number of energy friendly proposals were stripped
from the legislation, the bill still contains language that would
delay the Minerals Management Service's (MMS) implementation of the
final oil royalty valuation rule by four months and would
streamline the processing of coalbed-methane lease permits. The
House is expected to take up the bill today, while a Senate vote is
likely on Thursday.
Stripped from the legislation were proposals that would have
provided emergency loans to producers, offered millions of dollars
in producer royalty relief, and excused the interest owed by
producers on Kansas ad valorem tax refunds to customers. These
issues, which were deleted to assure President Clinton's approval
of the spending bill, are "by no means dead," however, said Patrick
Kelly, a spokesman for the Independent Petroleum Association of
America (IPAA). He said legislators promised that the issues,
especially the emergency loans and royalty relief, would be
revisited soon in another legislative vehicle.
From an energy standpoint, the IPAA views the emergency spending
legislation as half full rather than half empty, he noted. "We
obviously are very pleased that the moratorium language [for the
oil valuation rule] is still in there...Coalbed methane is another
very important component."
The original intent of the legislation was to provide emergency
funding for the war in Yugoslavia, but it has evolved into a
vehicle in which lawmakers are seeking funding for their own pet
projects, including energy.
Sen. Kay Bailey Hutchison (R-TX) successfully managed to keep
language in the bill that would defer until Oct. 1 the
implementation of new MMS rules that would boost the federal
royalties paid on crude production. The new rules had been
scheduled to go into effect on June 1. Keeping this in the
emergency spending legislation was a "big plus" for producers,
Also still in the bill is a provision that would provide about
$1 million to help speed up and streamline the processing of
coalbed-methane lease permits, particularly in Montana and Wyoming,
he told Daily GPI.
Eliminated from the bill was an amendment proposed by Sen. Pete
Domenici (R-NM) that would establish a $500 million program to
extend emergency loans to small oil and gas producers that have
been hit by rock-bottom oil prices. Also falling by the wayside was
an amendment by Sen. Jeff Bingaman (D-NM), which was "closely tied
to the Domenici proposal," that would offer $125 million worth of
royalty relief to independent producers. Under the Bingaman plan,
small producers would be able to decrease their royalty payments by
the like dollar amount that they spend to boost production output.
The IPAA believes the Domenici and Bingaman amendments will
re-surface later in other legislation, Kelly said.
But the future is a little bit more clouded for a proposal by
Sens. Sam Brownback and Pat Roberts, both Kansas Republicans, that
would forgive $200 million in interest payments owed by gas
producers on $140 million in Kansas ad valorem tax refunds to
customers. The Federal Energy Regulatory Commission originally
ruled that producers could pass the state tax on to their
customers, but it later reversed its decision, thus leaving
producers who purchased gas produced in Kansas in the 1980s to not
only pay customer refunds but interest also. Producers have argued
they shouldn't be required to pay the interest since their
non-payment of the ad valorem tax was based on a faulty FERC
decision. The IPAA's Kelly questioned whether the hot-bed issue
would be raised later by legislators.
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