President Clinton has told U.S. oil state congressmen he favors the export of Alaskan North Slope (ANS) crude and use of tax incentives to preserve marginal oil production.
At a June 14 meeting with 75 oil state congressmen, 10 of the lawmakers briefed Clinton on their package of energy proposals (OGJ, Mar. 28, p. 35). After the session, many of the congressmen praised Clinton for his open mindedness.
Sen. David Boren (D-Okla.), leader of the coalition of congressmen, said, "The president took notes, he responded, and he showed a willingness to work with us."
Sen. John Breaux (D-La.) said the meeting was the first time in 21 years a president has shown real concern about the problems of the oil industry.
Rep. Billy Tauzin (D-La.) said, "We got his attention today, and the response was positive."
But Sen. Bennett Johnston (D-La.), energy committee chairman, said although the mood of the meeting was good, the prospect of administration action "is not yet definitive."
Rep. Don Nickles (R-Okla.) went further. He said the congressmen want action, but "all we got was sympathy and understanding."
The oil state coalition jelled last winter when West Texas intermediate was selling for less than $14/bbl.
Boren said, "Although the price of oil has rebounded to $18/bbl, the need remains to address the problems facing the oil industry."
Five representatives and five senators each made 2 min presentations on issues such as royalty relief for marginal wells, ANS exports, oil imports, tax credits, drilling the Arctic National Wildlife Refuge, regulatory relief, expensing of geological and geophysical costs, royalty reductions for deepwater production, heavy oil production in California, insurance problems created by the 1990 Oil Pollution Act, and Bureau of Land Management (BLM) actions.
Treasury Sec. Lloyd Bentsen warned the congressmen that offsetting revenues must be found for any proposals that would deny money for the Treasury.
STRIPPER RELIEF
Clinton acknowledged the importance of maintaining marginal oil production and urged lawmakers to work with the Congressional Budget Office (CBO) to devise an acceptable stripper proposal.
Deputy Energy Sec. Bill White, who attended the meeting, said the president thought there should be enough data available on marginal wells to justify incentives.
White said the National Petroleum Council, the energy secretary's industry advisory board, is to release a report on marginal wells next month "which ought to allow CBO and members of Congress to come up with a plan that would be revenue neutral."
Boren was optimistic a proposal could be drafted, observing that Texas has enacted incentives for stripper production that resulted in $3 in state revenue for every $1 lost in credits (OGJ, Mar. 28, p. 75).
Boren said without such a federal credit, wells would be plugged and tax revenue would be lost. "We have a very strong argument, we feel, and the president suggested that we all make it together to CBO, not based on some hypothesis but based on historical records."
Rep. Bill Brewster (D-Okla.) said, "We have submitted a very modest proposal. The maximum credit for existing marginal wells and for new wells is $3/bbl or the natural gas equivalent. To protect the federal Treasury and prevent a windfall, the full tax credit is available only when the price of oil is $14/bbl or less and, more important, no credit is available if the price of oil were to rise to $20/bbl."
Rep. Cal Dooley (D-Calif.) urged Clinton to consider lowering royalty rates on federal land, saying it could increase production 750,000 bbl/year.
Sen. Jeff Bingaman (D-N.M.) called for greater cooperation between industry and federal land managers in the West. He said BLM is considering incentives to assist marginal oil wells and bring abandoned gas production back on line.
Sen. Pete Domenici (R-N.M.) urged President Clinton to require that new regulations affecting producers and refiners not be implemented until their effect on the industry has been evaluated.
ANS EXPORTS
Clinton's endorsement of ANS crude exports came as a surprise.
He qualified it by saying exports should be on U.S. tankers and noted there might be problems making the provision consistent with the international General Agreement on Tariffs and Trade, and the measure should not undercut U.S. negotiators working to reduce international shipbuilding subsidies.
Rep. Bill Thomas (R-Calif.), one of the briefers, said the president did not make a commitment to support a repeal on the current ban on exports of ANS crude, but Clinton was "positive."
Thomas said, "President Clinton did indicate that he would like to try to work out the problem created by the export ban, but he would go no further."
DOE's White told reporters the National Economic Council has found "positive economic benefits from relaxing the ban on imports," but the GATT provision may restrict U.S. ability to require that exports take place in U.S. vessels.
White said a GATT challenge to such exports could cause the entire Jones Act, which requires shipments between U.S. ports be on U.S. built and manned vessels, to be invalidated. He called that "taking one step ahead and two steps back."
The Department of Energy is expected to release a study soon regarding the export of ANS crude.
White said, "If we could get shipment of American oil from the North Slope aboard American ships with American crews, our study finds that would cause a net increase in jobs to Americans."
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
