The Senate unanimously passed two economic relief measures forindependent oil and gas producers on Tuesday. The bad news,however, is that the initiatives are part of a supplementalspending bill that President Clinton has threatened to veto becausethe expenditures – mostly for foreign aid efforts – would cut intospending for domestic programs that he supports.

One short-term relief initiative, sponsored by Sen. JeffBingaman (D-NM), would permit producers operating marginal wells toreduce their federal royalty payments by an amount commensuratewith their investment in the expansion of oil and natural gasproduction on federal lands.

About $125 million would be authorized for the royalty-reductionprogram, which would expire when either the benchmark price ofcrude oil reaches or exceeds $18 per barrel on the New YorkMercantile Exchange for 30 days; the money is completely spent; oron Sept. 30, 2000.

The relief is targeted at operators of marginal wells ononshore, non-Indian federal lands who then would pass along theroyalty deductions to others in their community in the form ofadditional work to boost production on federal lands.

Also approved as part of the spending package was an amendment,sponsored by Sen. Pete Domenici (R-NM), that would establish a$500-million federal Emergency Oil and Gas Guaranteed Loan Programand a special guarantee board to oversee the initiative. Theprogram, which would sunset in five years, would allow producersand servicing firms to borrow up to $10 million at “reasonable”interest rates.

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