Susan

Following a four-year upswing in spending between 1995 and 1998,domestic oil and natural gas industry expenditures for drilling inthe U.S. fell 15.2% in 1999, the American Petroleum Institute (API)reported last week.

U.S. offshore production of natural gas fell slightly; thenumber of new pipeline projects in the Gulf of Mexico droppeddramatically; Texas — the nation’s leading gas producer — tookhits to its production and consumption levels; California andWyoming experienced a robust boost in production; California sawthe sharpest rise in gas demand; residential users enjoyed theirsecond straight year of lower delivered gas prices; and pipelineimport capacity expanded considerably.

The Senate Commerce Committee last week voted out pipelinesafety reauthorization legislation that the natural gas pipelineindustry has billed as a “gross overreaction” to an explosionbrought on by a rupture in a products pipeline last June.

Absent a showing of market support, the Federal EnergyRegulatory Commission staff last week threatened to dismiss PetalGas Storage L.L.C.’s amended proposal in which it seeks to expandthe deliverability of its storage facilities in Mississippi.

The Federal Energy Regulatory Commission last week proposedreinstating its authority to make well determinations so thatqualified producers can obtain Section 29 tax credits for high-costgas wells that were drilled prior to 1993.

After several years of battling, both in the courts and at FERC,the Commission last week finally approved a version of El PasoNatural Gas’ 1996 rate and capacity-turnback settlement that seemedto satisfy all parties involved. But to get to that point, El Pasowas forced to make some big concessions along the way to quellconcerns.

FERC Chairman James J. Hoecker has named Susan G Pollonais ashis advisor on gas and oil issues, replacing Patricia W. Jagtiani,who has accepted a position with the Natural Gas SupplyAssociation. Pollonais has served as a public utility specialist inthe Office of Pipeline Regulations Division of Litigation since1997. From 1993 to 1997 she was a gas regulatory consultant andproject manager for Northern States Power.

Some of the “most pronounced” turnback activity for long-termfirm capacity can be expected to occur this year, next year and in2004, according to an analysis of the pipeline transportationmarket issued by the Energy Information Administration (EIA) lastweek.

The Senate unanimously passed two economic relief measures forindependent oil and gas producers last week. The bad news, however,is that the initiatives are part of a supplemental spending billthat President Clinton has threatened to veto because theexpenditures – mostly for foreign aid efforts – would cut intospending for domestic programs that he supports.