The Clinton administration is preparing to support U.S. legislation that would provide royalty relief for new deepwater production and any production off Alaska.
Bill White, deputy secretary of the Department of Energy, told the Senate energy committee the administration will support a bill the panel has approved but then qualified that support.
White explained the administration could not support the deepwater--more than 200 m--relief bill and a separate proposal for a $5/bbl tax credit for deepwater production. The administration will study the latter measure and report back to Congress soon.
White, who sits on a White House task force studying energy issues, said the bill "makes sense," but to approve deepwater relief, which would grant a royalty holiday until operators recover their cost of developing otherwise uneconomic fields, and a $5 credit might be "overkill."
Sen. Bennett Johnston (D-La.), energy committee chairman, argued the two proposals are not mutually exclusive because the legislation would not apply to projects that were otherwise economic to develop. Johnston said he soon will press for action on the bill by the full Senate.
Thomas H. Neel, CNG Producing Co. chief executive officer, told the committee, "This is an innovative approach which would provide the economic incentive to develop already discovered domestic hydrocarbons.
"It would be particularly important to companies like CNG, the large independents which are becoming so important in the gulf but do not have financial resources of the majors."
OTHER ISSUES
The energy committee bill also would order the Minerals Management Service not to revise the present area-wide leasing system in the central and western Gulf of Mexico. MMS is reviewing possible changes to its leasing approach.
And the bill has a provision to amend the 1990 Oil Pollution Act so its oil spill insurance requirements would apply only to offshore facilities and allow MMS to mandate less than the $150 million of insurance required in the original bill.
Assistant Interior Sec. Robert Armstrong said MMS has received 1,700 comments on a proposed rule, and among them "no one believes they can live with the $130 million requirement, and it's probably not necessary."
He said Congress must provide a legislative remedy because the law is straightforward and cannot be changed significantly through drafting of regulations.
Johnston said the administration must be very clear and very strong in its support for legislative changes. Armstrong said the administration soon will take a formal position.
White also said the Clinton team will issue a report by May 1 on whether it makes economic sense to allow exports of Alaskan North Slope crude to Pacific Rim countries. Current law banks such exports, and the oil is landed on the West or Gulf coasts.
ONSHORE LEASES
Armstrong reported the number of onshore federal teases has declined to 70,052 leases covering 47 million acres in 1993 from 134,000 leases covering 163 million acres in 1983.
But during the same period, the number of producing leases increased to 24,000 from 15,048 because royalty reforms reduced speculative leasing.
The number of producing wells on public land increased to 56,000 in 1993 from 45,000 in 1985 due to higher gas production.
Terry Belton, a Texaco Exploration and Production Inc. official, testified for the Rocky Mountain Oil & Gas Association. He said the Interior numbers don' tell the whole story.
Belton blamed "constantly rising access restrictions, costly leasing and permitting delays, and increased regulatory burdens" for constraints on exploration of federal land.
He said of the 360 million acres of federal land available for leasing, at least half are subject to severely restricted access due to administrative land management classifications such as outstanding natural areas, areas of critical environmental concern, experimental forests, semiprimitive nonmotorized recreation areas, and many wildlife areas.
"However " Belton said, "even less sensitive lands are being subjected to greater and greater environmental and operating constraints in an effort to placate a segment of the public which would prefer to eliminate all commodity uses, including energy exploration and development."
Belton said from 1985 to 1993, the number of acres under lease for oil and gas declined on Forest Service land by more than 80%--from 32 million acres to 6 million acres.
"The primary reason for this decline is perceived inadequacies in the ability of existing forest plans to serve as leasing decision documents. Therefore, the Forest Service decided to prepare new environmental impact statements addressing oil and gas leasing to supplement the forest plans on all but two of the 41 forests in the Northern, Rocky Mountain, and Intermountain regions."
He said the Forest Service has eliminated all but two of the regional minerals director positions, a job critical to oil and gas leasing.
Belton complained Interior's new ecosystem management approach, which considers the effect one use has on other uses and the environment, threatens leasing because there is no comprehensive set of standards and guidelines.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
