Senate OKs Producer Relief; Clinton Veto Likely
The Senate unanimously passed two economic relief measures for
independent oil and gas producers last week. The bad news, however,
is that the initiatives are part of a supplemental spending bill
that President Clinton has threatened to veto because the
expenditures - mostly for foreign aid efforts - would cut into
spending for domestic programs that he supports.
One short-term relief initiative, sponsored by Sen. Jeff
Bingaman (D-NM), would permit producers operating marginal wells to
reduce their federal royalty payments by an amount commensurate
with their investment in the expansion of oil and natural gas
production on federal lands.
About $125 million would be authorized for the royalty-reduction
program, which would expire when either the benchmark price of
crude oil reaches or exceeds $18 per barrel on the New York
Mercantile Exchange for 30 days; the money is completely spent; or
on Sept. 30, 2000.
The relief is targeted at operators of marginal wells on
onshore, non-Indian federal lands who then would pass along the
royalty deductions to others in their community in the form of
additional work to boost production on federal lands.
Also approved as part of the spending package was an amendment,
sponsored by Sen. Pete Domenici (R-NM), that would establish a
$500-million federal Emergency Oil and Gas Guaranteed Loan Program
and a special guarantee board to oversee the initiative. The
program, which would sunset in five years, would allow individual
producers and servicing firms to borrow up to $10 million at
"reasonable" interest rates.
The Independent Petroleum Association of America (IPAA)
expressed strong support for both initiatives. "The name of the
game now is for the bill to get...enacted into law," said IPAA
spokesman Patrick Kelly. William Whitsitt, president of the
Domestic Petroleum Council, agreed the proposals would be "helpful"
to producers if combined with other efforts. He emphasized there
was no silver-bullet that could undo the effect of long-term
depressed crude prices on the oil and gas market. "There's no one
or two things that are capable of totally reversing" that.
A similar House supplemental spending bill, which also faces a
presidential veto, does not contain companions to the Bingaman and
Domenici proposals. Nevertheless, aides said the senators believe
their measures will prevail during a House-Senate conference on the
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