President Clinton last week signed a bill into law thatestablishes a multi-million dollar federal loan-guarantee programto help independent oil and natural gas producers recover from theeffects of depressed crude oil prices. The measure was passed bythe House earlier this month, and approved by the Senate in June.

The program will set aside $500 million for emergency loans tosmall producers and service companies, which will be able to borrowup to $10 million each until the funds for the program run out. Itwill provide a government-backed repayment guarantee for 85% ofeach loan, which means that commercial lenders would be able tooffer more lenient terms to producers than they would otherwise.

It’s “hard to determine” when the loan-guarantee program willbegin, but the Independent Petroleum Association of America (IPAA)is urging that it be implemented “swiftly,” said Craig Ward, theIPAA’s director of crude oil policy. It is proposing that theprogram be modeled after a similar one for the agricultureindustry.

Commerce Department Secretary William M. Daley, Securities andExchange Commission Chairman Arthur Levitt and Federal ReserveBoard Chairman Alan Greenspan will serve on the board overseeingthe loan program. Greenspan will be chairman.

“These loan guarantees will help us recover from the severedamage we have sustained by making alternative capital sourcesavailable to some producers and service companies,” said IPAAChairman George Yates.

Susan Parker

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