The House of Representatives has approved a plan to limit U.S. gas prorationing by the states but rejected a move to require petroleum refiners and importers to place 1% of their oil or products volumes into the Strategic Petroleum Reserve.
The oil industry lobbied heavily against the SPR provision, which went down 263-135.
The House then passed its omnibus energy bill 381-37. It is designed to facilitate all types of energy production while promoting conservation.
The legislation also imposes bans on offshore leasing but gives independent producers limited relief from the alternative minimum tax (AMT) and does not include a mandate for use of ethanol in gasoline.
Linda Stuntz, acting deputy energy secretary, said "the bill is by no means perfect" but if the House-Senate conference committee moderates some provisions in the House measure, "we can see a path that would enable the administration to accept the bill."
PRORATIONING AMENDMENT
The House voted 238-169 to restrict states' natural gas prorationing rules. The amendment was a response to actions by Oklahoma and Texas to toughen such rules (OGJ, May 4, p. 27).
The action unleashed a flurry of protests by independent producers. No one in the petroleum industry voiced support for the measure.
Reps. Ed Markey (D-Mass.) and James Scheuer (D-N.Y.) offered the amendment, which allows prorationing for protection of correlative rights but bans prorationing, "that has the substantial purpose or effect of generally restricting natural gas production and raising the general price level of natural gas."
Scheuer said, "We are not trying to stop gas producing states from doing anything that is justifiable, that has a geologic reason. But if it does not have a geologic reason and the effect will be to ratchet down production and raise prices, we say no.- Markey said state prorationing actions have led to a speculative boom in natural gas prices, which have spiked the price 27% during the past couple of months. He said if the trend continues, it could cost consuming states $6 billion in higher gas costs during the next year.
Rep. Billy Tauzin (D-La.) replied Louisiana wellhead gas prices dropped from $2.66/Mcf in 1984 to $1.55 last year and $1.47 this year, while Massachusetts consumers paid $7.83 in 1984 and $8.05 last year. He agreed Massachusetts does have a consumer price problem, but it is not the wellhead price, "it has something to do with prices charged by the local distribution company."
Rep. Jack Fields (R-Tex.) said, "There is no provision in the Texas prorationing rules that sets gas production at less than market demand. Prorationing has nothing whatsoever to do with price."
Rep. Jack Brooks (D-Tex.) pointed out the U.S. Supreme Court recently upheld a strict allowable system in Kansas, ruling it was "precisely the sort of scheme Congress intended to leave within a state's authority."
Rep. John Dingell (D-Mich.), energy committee chairman, and Rep. Phil Sharp, (D-Ind.), energy and power subcommittee chairman, have been warning Oklahoma and Texas officials on the prorationing issue but opposed the Markey-Scheuer amendment.
Dingell said, "The probabilities are that behavior of the states will simply be to protect correlative rights. I will be watching this matter with a great deal of care to assure there is no price fixing, to be sure there are no actions that will be detrimental to interests of the consuming public."
Sharp said the amendment blossoms prorationing into a regional war.
Stuntz said DOE "looked at the amendment hard" because it appears to benignly allow states to prorate when necessary. But she said the commerce clause of the Constitution prohibits such restraint of trade, and the amendment was too vague and would result in court appeals that would add to uncertainty in the gas business.
Stuntz is "very optimistic" the conference committee will remove or substantially change the provision.
Sen. Bennett Johnston (D-La.), who will lead the Senate conferees, called the provision "an overreaction that only fans the flames of regional divisiveness."
AMT RELIEF
The rules committee allowed an AMT relief package for independent oilmen to be included in the House energy bill, so it did not have to be offered as a floor amendment.
The ways and means committee approved AMT relief earlier (OGJ, May 11, p. 33).
The amendment would permit AMT relief in 1993-97, expiring then. It specifically does not apply to major oil companies.
It would eliminate the AMT adjusted current earnings adjustment for intangible drilling costs and percentage depletion and end the AMT preference item for percentage depletion.
It will require independents to compute a "hypothetical AMT income" (AMTI) using present rules for determining the AMT preference for IDCs.
It would end the AMT preference for excess IDCS. But independents could not reduce their overall AMTI by more than 30% of their hypothetical AMTI in 1993, and 40% in 1994-97.
Rep. Bill Archer (D-Tex.), author of the AMT provision, estimated it will reduce independents' tax payments $900 million during the 5 year period.
Energy Sec. James Watkins said President Bush "strongly supports" the AMT provision.
SPR SETASIDE
Rep. Dan Rostenkowski (D-Ill.) called the SPR setaside provision bill a tax by another name. His ways and means committee voted 23-8 against the SPR measure (OGJ, May 4, p. 52), and the full House agreed.
Sharp championed the provision, saving "we will not fill the SPR" without it. The reserve holds 579 million bbl but has capacity for 750 million.
Under the proposal, refiners and importers would have continued to own the oil they placed in the SPR and would have been repaid when their oil was drawn down. Sharp said, "There has always been strong bipartisan support in Congress for the SPR, but money is getting harder and harder to come by. The administration pays hp service to the SPR, but actions speak louder than words."
ETHANOL PROGRAM
The House narrowly defeated, 211198, an amendment by Rep. Jim Jontz (D-Ind.) that would have required greater use of ethanol in gasoline.
Under his amendment, ethanol would have made up 2% of all U.S. automotive fuel in 1994, or about 2.2 billion gal/year, and 8%, or about 9 billion gal/year by 2006. The U.S. currently uses about 1 billion gal/year of ethanol as fuel.
jontz said the measure would back out 80 million bbl/year of imported oil, rising to 300 million bbl in 2006.
OFFSHORE LEASING BANS
The House energy committee included in the omnibus bill offshore lease sale moratoriums proposed by interior and merchant marine committees. They would ban offshore leasing through 2001 except in the central and western Gulf of Mexico and off Alaska. No leasing would be allowed in Alaska's Bristol Bay, however.
The bill requires Interior to buy back from oil companies after Oct. 1, 1995, 23 leases in Bristol Bay, 73 leases off Southwest Florida, and 21 leases off North Carolina.
It makes it easier for the Interior Department to cancel leases and allows Interior to give holders of canceled leases credits against royalties or delay rentals owed for future or existing Outer Continental Shelf production. The bill would give coastal and Great Lakes states 4% of all federal revenues from offshore leases.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
