Unconvinced that the latest uptick in domestic oil pricessignals a turnaround, domestic producers last week descended on theWhite House and Capitol Hill to make a direct pitch for marginalwell tax credits, exploration and production (E&ampP) incentivesand other economic reforms to boost the ailing oil and gasindustry.

Producers, particularly independents, weren’t encouraged in theleast by the slight rise in the price of West Texas Intermediate(WTI) crude stemming from the announced production cuts by theOrganization of Petroleum Exporting Countries (OPEC). They urgedthe Clinton administration and Capitol Hill lawmakers not to belulled into thinking that the price blip meant that reforms for thedomestic oil and natural gas industry were no longer needed.

“Certainly some people look at that [price rise] and say ‘wellyour problem is solved because OPEC’s going to announce productioncuts.’ We support restraint from the suppliers of oil around theworld. The problem is that even after the announced cuts, the priceof oil is still at about $14 a barrel. That translates into pricesin the field from about $8 to $12 a barrel,” said George Yates,chairman of the Independent Petroleum Association of America(IPAA). The price of WTI crude hovered at the $15 mark last week.

“When you see it at $17 or $18 and headed north, you know thatthe oil industry can start getting back to work. The price [impact]as a result of the OPEC announcement is still extremely low. OPECstill does not seem to have any credibility in the market. And weare not going to let that be used as an argument against majorlegislative reform,” he told reporters during a press conference onCapitol Hill last Thursday.

The briefing came at the end of IPAA’s week-long “CrudeAwakening Campaign,” during which independents met with top-rankingadministration officials and then with Senate and House lawmakersrepresenting energy-producing states. They presented an “Oil PriceCrisis Relief Resolution” signed by more than 50,000 producersandthe local political/business interests urging the federalgovernment to take a number of steps, such as continuing to fillthe Strategic Petroleum Reserve with oil purchased from domesticproducers and to support marginal well tax credits, to lift oil andnatural gas producers from their currently depressed state.

The IPAA showed its support for the efforts of Sen. Kay BaileyHutchinson (R-TX) and Rep. Wes Watkins (R-OK), who have been the”primary sponsors” of marginal well tax relief legislation inCongress. It also backed a comprehensive measure sponsored by Sen.Pete Domenici (R-NM), which incorporates the “concepts” of theWatkins and Hutchinson measures and proposes a number of otherforms of relief.

IPAA’s Yates emphasized that the relief was being sought forboth oil and gas. “This is not an oil industry and separately a gasindustry.” He said the industry shrunk by 15% last year in terms ofjobs, and that production was down 8% in one year, or 565,000barrels/day. The gas market, Yates believes, could be the biggestvictim of downsized production capacity. “We’re [being] called uponby the administration in the next several years…to meet atremendous growth in demand for natural gas. That’s going to bevery difficult to do as that [production] infrastructure erodes.”

Several Senate and House lawmakers from both sides of the aisle- Senate Energy Committee Chairman Frank Murkowski (R-AK), Sen.Jeff Bingaman (D-NM), Reps Kay Granger (R-TX), Lamar Smith (R-TX),Max Sandlin (D-TX) and Watkins, to name a few – made appearances atthe IPAA briefing to show their support for independent producers.”The oil industry…has lost almost 50,000 jobs since the pricecollapse began in November 1997. Why isn’t the White Housesupporting them and why isn’t Congress passing tax incentives andrelief for the domestic oil and gas industry?” asked Smith, whoadded these were long “overdue.”

Independent producers and lawmakers called on the federalgovernment to offer price support to the oil and gas industrysimilar to that which was extended to the domestic steel industryto offset the effects of the dumping of foreign steel in the U.S.”The U.S. imports twice as much oil as steel,” yet “steel pricesare high while oil prices are low,” Smith said. “We can’t standby…while foreign governments pick off our basic industries one byone by one. And that’s what’s happening to the oil and gasindustry,” noted Rep. Sandlin.

Watkins said he was “taking a full court press” to the problemsfacing producers. In addition to his tax-relief proposal formarginal well producers, he noted he intended to propose theEnvironmental Equalization Act, which would subject foreignproducers who import oil into the U.S. to the same environmentalrestrictions – and costs – that domestic producers face. “I thinkthat in all fairness the imported oil brought into this countryfrom other areas should also be confronted with that situation.”

Earlier in the week, both independent and major producers metwith key administration members at the White House. Although nospecific policy changes were promised, Clinton officials agreed toset up a high-level working group to “look at all the issues,”including the prospect of tax relief and other forms of economicaid.

Gene Sperling, director of the National Economic Council, “willplay an important role” in the working group, as well as WhiteHouse Chief of Staff John Podesta, Yates said. Also, the panelpossibly could include officials from “relevant departments oragencies,” such as Energy, Treasury, Commerce and Interior, notedIPAA President Gil Thurm. “I didn’t get a sense that there wasn’tany timeframe for this,” according to an association spokesman,”but we would hope that it [the group] would be formed quickly.”

The White House meeting “was designed to raise the awarenesslevel of the administration” with respect to the plight of domesticoil and gas producers, many of which have closed their wells due touneconomic crude prices. “We think that was accomplished. Theadministration officials proved to be good listeners,” Thurm noted.

Among those at the session, which lasted more than one hour,were Podesta, Treasury Secretary Robert Rubin, Energy SecretaryBill Richardson and representatives from four major petroleumindustry associations – the IPAA, the American Petroleum Institute,the Domestic Petroleum Council and U.S. Oil and Gas. Industryofficials praised Richardson for organizing the meeting.

Susan Parker

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