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House Subcommittee OKs Spending Bill Minus Producer Fee

A House appropriations subcommittee Wednesday approved by voice vote a $32.3 billion spending bill for the Interior Department, Environmental Protection Agency and related agencies for fiscal year 2010. The measure did not -- to producers' benefit -- include a $122 million fee favored by the Obama administration to force the development of existing nonproducing leases in the Gulf of Mexico (GOM). But the respite may only be temporary.

"Appropriations bills typically do not include authorizing language that would either change federal law...or apply taxes," said George Behan, a spokesman for Rep. Norm Dicks (D-WA), chairman of the Interior, Environment and Related Agencies Subcommittee of the House Appropriations Committee. That's why the proposed $122 million fee was not included in the spending bill, he noted.

The House committee that can authorize the fee on producers is the House Energy and Commerce Committee, Behan said. The spending bill's next stop is the full House Appropriations Committee next Thursday, where it will be marked up.

The aim of the proposed producer fee is to promote the development of existing oil and natural gas leases in the GOM that currently are not producing. Its purpose is similar to the Democrats' "use-it-or-lose-it" legislation that failed in the House last year (see Daily GPI, June 27, 2008). House Democrats claimed in mid-2008 that producers were sitting on 68 million acres of leased public land, which they estimated could result in the production of an additional 4.8 million b/d of crude oil and 44.7 Bcf/d of gas.

In the FY 2010 budget, the Obama administration also is seeking to increase permitting fees and repeal royalty incentives, as well as impose new inspection fees and an excise tax on offshore production (see Daily GPI, May 8).

President Obama proposes to strip away more than $26 billion in tax credits and incentives from producers from 2010 through 2019. Specifically, he is seeking to eliminate the preferential time period treatment for geological and geophysical amortization for independent producers (estimated to cost producers $1.19 billion over 10 years); repeal the deduction for tertiary injectants ($62 million); repeal expensing of intangible drilling costs ($3.35 billion); repeal the Section 29 manufacturing credit for oil and gas companies ($13.29 billion); repeal the passive loss exemption for working interests in oil and gas ($49 million); repeal the percentage depletion for oil and gas ($8.25 billion); and cut funding for the oil and gas research and development program at the Department of Energy ($250 million).

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