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Congress Oks Producer Relief in Emergency Spending Bill

Congress Oks Producer Relief in Emergency Spending Bill

Senate and House lawmakers last week voted out a $15-billion emergency funding measure that, among other things, will give some long-sought relief to domestic natural gas and oil producers. The bill is expected to be signed by President Clinton.

Although a number of energy friendly proposals were stripped from the legislation, the surviving bill voted on by the two chambers contained language that will delay the Minerals Management Service's (MMS) implementation of the final oil royalty valuation rule by four months and will streamline the permitting process for coalbed-methane leases.

Stripped from the legislation were the meatier proposals that would provide emergency loans to producers, offer millions of dollars in producer royalty relief, and excuse the interest owed by producers on Kansas ad valorem tax refunds to customers. These issues, which were deleted to assure 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). In fact, he noted, legislators promised to revisit the emergency loan program for producers in another legislative vehicle soon, possibly before Memorial Day.

From an energy standpoint, the IPAA viewed the emergency spending legislation as half full rather than half empty, Kelly said. "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 evolved into a vehicle in which lawmakers sought funding for their own pet projects, including energy.

Sen. Kay Bailey Hutchison (R-TX) successfully managed to keep language in the bill that will 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 take effect June 1. Keeping this in the emergency spending legislation was a "big plus" for producers, Kelly said.

Also still in the bill was a provision that will provide about $1 million to help speed up and streamline the permitting process for coalbed-methane leases, particularly in Montana and Wyoming, he told NGI.

Eliminated from the spending 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 their production output. The IPAA believes both the Domenici and Bingaman amendments will be addressed in later legislation, Kelly said.

Moreover, Capitol Hill aides noted they don't plan to give up on 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, he indicated.

The Federal Energy Regulatory Commission originally ruled that producers could pass the state tax on to their customers, but the decision was later reversed, thus forcing 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 held liable for the interest since their non-payment of the ad valorem tax was based on a faulty Commission decision.

Susan Parker

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