The Senate unanimously passed two economic relief measures forindependent oil and gas producers last week. The bad news, however,is that the initiatives are part of a supplemental spending billthat President Clinton has threatened to veto because theexpenditures – mostly for foreign aid efforts – would cut intospending for domestic programs that he supports.

One short-term relief initiative, sponsored by Sen. JeffBingaman (D-NM), would permit producers operating marginal wells toreduce their federal royalty payments by an amount commensuratewith their investment in the expansion of oil and natural gasproduction on federal lands.

About $125 million would be authorized for the royalty-reductionprogram, which would expire when either the benchmark price ofcrude oil reaches or exceeds $18 per barrel on the New YorkMercantile Exchange for 30 days; the money is completely spent; oron Sept. 30, 2000.

The relief is targeted at operators of marginal wells ononshore, non-Indian federal lands who then would pass along theroyalty deductions to others in their community in the form ofadditional 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 Programand a special guarantee board to oversee the initiative. Theprogram, which would sunset in five years, would allow individualproducers 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 thegame now is for the bill to get…enacted into law,” said IPAAspokesman Patrick Kelly. William Whitsitt, president of theDomestic Petroleum Council, agreed the proposals would be “helpful”to producers if combined with other efforts. He emphasized therewas no silver-bullet that could undo the effect of long-termdepressed crude prices on the oil and gas market. “There’s no oneor two things that are capable of totally reversing” that.

A similar House supplemental spending bill, which also faces apresidential veto, does not contain companions to the Bingaman andDomenici proposals. Nevertheless, aides said the senators believetheir measures will prevail during a House-Senate conference on thebill.

Susan Parker

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