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Producer Relief Addressed in Emergency Bill

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 producers.

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, Kelly said.

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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