Richardson Will Fill SPR With Royalty Oil
Energy Secretary Bill Richardson last week announced the Clinton
administration will allow producers with offshore federal leases to
pay part of their royalties with oil for a limited time rather than
with cash. This action would help to draw down the oil oversupply
that has been depressing prices and provide some relief, if only
temporarily, to small oil and gas producers. Richardson indicated
the department will disclose further initiatives this week to boost
lagging oil and gas production in the United States.
Under the program, the federal government will accept up to 28
million barrels of Central Gulf of Mexico oil to replenish the
portion of Strategic Petroleum Reserve (SPR) stockpile that it sold
off in 1996 and 1997 to pay for the reserve's operations. The
Interior Department's Minerals Management Services (MMS), which
collects royalties from production on federal property, will be
able to accept 100,000 barrels per day in lieu of royalties.
DOE spokesman Tom Welch said the program will take effect in
April and will last about nine months, during which time the
Treasury Department is expected to take in $300 million less in
royalty payments. Both DOE and Interior will oversee the program.
Welch declined to predict the impact on crude oil prices.
DOE's plan will provide "a first step in helping independent
producers stay in business," said Gil Thurm, president of the
Independent Petroleum Association of America (IPAA). "While DOE's
announcement is aimed at oil, it will also help maintain domestic
natural gas production. Our companies are set up so that both fuels
must carry their own weight. As a consequence, low oil prices are
dragging natural gas down, too."
DOE's proposal builds on the congressional efforts to purchase
oil for the SPR and, in turn, prop up prices. This year legislation
has been introduced by Rep. Lamar Smith (R-TX) and Rep. Mac
Thornberry (R-TX) providing for SPR acquisitions. In fact, the
DOE's initiative is almost a mirror image of Thornberry's
"Strategic Reserve Replenishment Act."
But "much more remains to be done," said Thurm. In past months,
the IPAA has backed a number of moves in Congress to provide
limited tax relief to producers when oil and gas prices hit
critical levels. Also relief measures are being addressed for state
taxes in Texas and Oklahoma.
"We are hopeful DOE's action will lead to direct action by
President Clinton to call a White House Conference on the impact of
low oil prices on America's critical domestic production. We've
requested a meeting, and are confident that with President
Clinton's help we can speed up enactment of a number of excellent
relief bills that have been introduced in the House and Senate."
©Copyright 1999 Intelligence Press, Inc. All rights
reserved. The preceding news report may not be republished or
redistributed in whole or in part without prior written consent of
Intelligence Press, Inc.