More than 100 U.S. congressmen and oil industry groups last week agreed to an oil industry relief package.
They plan to discuss the list of legislative and administrative proposals with President Clinton at a meeting early in April (see related story, p. 75).
Sen. David Boren (D Okla.), leader of the group, said, "Our nation's energy and economic security are at risk. We already have lost over 10,000 jobs and more will follow. In the past, Congress and the administration have addressed crises due to floods, earthquakes, and problems in the auto industry. Now we must address this one as well."
WHAT'S PROPOSED
For existing marginal wells, the congressmen propose a $3/bbl tax credit on the first 3 b/d of oil production and a 50cts/Mcf credit for the first 18 Mcf of gas production.
The marginal well definition would be expanded to include "high water cut" leases on which water makes up 95% of production and oil production is 25 b/d or less.
For wells drilled after June 1, 1994, there would be a $3/bbl tax credit for the first 15 b/d of oil and a 50cts/Mcf tax credit for the first 300 Mcfd of gas.
The production tax credits would phase out as oil prices increase between $14 and $20/bbl and as gas prices climb between $2.49 and $3.55/Mcf. The credits would apply against regular taxes and the alternative minimum tax.
On other topics, the congressmen recommended that producers be allowed to currently expense geological and geophysical costs.
They urged elimination of the net income limitations on percentage depletion. Now, the depletion deduction cannot exceed 100% of income from the property, and deductions from an properties cannot exceed 65% of taxable income.
The congressmen said Congress should end the ban against exporting Alaskan North Slope crude "provided full and adequate protections for the domestic merchant marine industry are assured," meaning that exports would be in U.S. ships.
They said Congress should consider a per barrel tax credit to encourage deep water (400 m or deeper) and frontier production.
ADMINISTRATIVE ACTION
The congressmen also said the Clinton administration could take several steps to help the industry.
First, they said, the administration should relax suggested rules to implement the financial responsibility provisions of the 1990 Oil Pollution Act.
They urged the Minerals Management Service to reassess its royalty rules, reduce the royalty on marginal gas production from public lands, and withdraw proposals for tougher collection of gas royalties.
They said the Environmental Protection Agency should drop plans to tighten rules on underground injection practices. And the Interior Department should not shift from the existing "multiple use" land management policies to a new "ecosystem management" approach.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
