Daily GPI / NGI All News Access

House to Decide Producer Loan Guarantees

House to Decide Producer Loan Guarantees

The fate of a $500 million federal loan guarantee program for small oil and gas producers and their suppliers (H.R. 1664), okayed by the Senate last week, is still up in the air as the measure heads for a U.S. House-Senate conference committee and a vote in the House.

A spokesman for the Independent Petroleum Association of America (IPAA), said the group had been assured by House leaders the measure would go to a vote on the House floor within the next several weeks. "I am optimistic the bill will pass the House as well," IPAA Vice President for Government Affairs Lee Fuller said.

IPAA has been a strong supporter of the legislation under which the federal government would guarantee to pay off loans for producers in the program if the producers default. The measure is necessary, Fuller said, to help struggling small producers suffering the effects of super-low oil prices over much of the past 18 months. While oil prices have gone up in the last few months, there is no assurance they will stay up and producers still are having trouble raising capital. "These loans would help producers get their cash flow back in order," Fuller said.

Meanwhile, the measure caused some sharp divisions among oil state legislators in the Senate. Sen. Pete Domenici, R-NM, championed the measure, teaming up with the powerful Sen. Robert Byrd, D-WV, on a two-pronged loan guarantee program, one for oil and gas producers and another, much larger program, for the steel industry.

But the subsidy measures went against the grain for Sen. Don Nickles, R-OK, who said the guarantees would not help producers. Sen. Phil Gramm, R-TX, also a fiscal conservative, opposed government getting into the private sector. The final vote was 63-34.

The bill calls for the heads of the Federal Reserve, the Commerce Department and the Securities and Exchange Commission to set up a committee to lay out rules and run the program. Various tests would be applied to create a pool of producers eligible for loan guarantees of up to $10 million each. They would have to show they had suffered losses through price and production declines since 1997 and meet the test for independents under the Internal Revenue Service Code, which essentially means they have no refining or marketing divisions. Drilling companies or other suppliers would have to show they had exhausted other options and that a bank loan package would only be available under the loan guarantee program. Loan guarantee applications would have to be submitted by 2001 and the loans paid back by 2010.

©Copyright 1999 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1231
Comments powered by Disqus