Senate and House lawmakers last week voted out a $15-billionemergency funding measure that, among other things, will give somelong-sought relief to domestic natural gas and oil producers. Thebill is expected to be signed by President Clinton.
Although a number of energy friendly proposals were strippedfrom the legislation, the surviving bill voted on by the twochambers contained language that will delay the Minerals ManagementService’s (MMS) implementation of the final oil royalty valuationrule by four months and will streamline the permitting process forcoalbed-methane leases.
Stripped from the legislation were the meatier proposals thatwould provide emergency loans to producers, offer millions ofdollars in producer royalty relief, and excuse the interest owed byproducers on Kansas ad valorem tax refunds to customers. Theseissues, which were deleted to assure Clinton’s approval of thespending bill, are “by no means dead,” however, said Patrick Kelly,a spokesman for the Independent Petroleum Association of America(IPAA). In fact, he noted, legislators promised to revisit theemergency loan program for producers in another legislative vehiclesoon, possibly before Memorial Day.
From an energy standpoint, the IPAA viewed the emergencyspending legislation as half full rather than half empty, Kellysaid. “We obviously are very pleased that the moratorium language[for the oil valuation rule] is still in there…Coalbed methane isanother very important component.”
The original intent of the legislation was to provide emergencyfunding for the war in Yugoslavia, but it evolved into a vehicle inwhich lawmakers sought funding for their own pet projects,including energy.
Sen. Kay Bailey Hutchison (R-TX) successfully managed to keeplanguage in the bill that will defer until Oct. 1. theimplementation of new MMS rules that would boost the federalroyalties paid on crude production. The new rules had beenscheduled to take effect June 1. Keeping this in the emergencyspending legislation was a “big plus” for producers, Kelly said.
Also still in the bill was a provision that will provide about$1 million to help speed up and streamline the permitting processfor coalbed-methane leases, particularly in Montana and Wyoming, hetold NGI.
Eliminated from the spending bill was an amendment proposed bySen. Pete Domenici (R-NM) that would establish a $500 millionprogram to extend emergency loans to small oil and gas producersthat have been hit by rock-bottom oil prices. Also falling by thewayside was an amendment by Sen. Jeff Bingaman (D-NM), which was”closely tied to the Domenici proposal,” that would offer $125million worth of royalty relief to independent producers. Under theBingaman plan, small producers would be able to decrease theirroyalty payments by the like dollar amount that they spend to boosttheir production output. The IPAA believes both the Domenici andBingaman amendments will be addressed in later legislation, Kellysaid.
Moreover, Capitol Hill aides noted they don’t plan to give up ona proposal by Sens. Sam Brownback and Pat Roberts, both KansasRepublicans, that would forgive $200 million in interest paymentsowed by gas producers on $140 million in Kansas ad valorem taxrefunds to customers, he indicated.
The Federal Energy Regulatory Commission originally ruled thatproducers could pass the state tax on to their customers, but thedecision was later reversed, thus forcing producers who purchasedgas produced in Kansas in the 1980s to not only pay customerrefunds but interest also. Producers have argued they shouldn’t beheld liable for the interest since their non-payment of the advalorem tax was based on a faulty Commission decision.
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