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Senate OKs Producer Relief; Clinton Veto Likely

Senate OKs Producer Relief; Clinton Veto Likely

The Senate unanimously passed two economic relief measures for independent oil and gas producers on Tuesday. 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 producers and servicing firms to borrow up to $10 million at "reasonable" interest rates.

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