Oil and gas in Washington
An unforgettable year aheadMost people knew 1998 was going to be an exciting year in Washington. But the sudden accusations of new Presidential misbehavior were unexpected and burst forth like a hydrogen bomb hitting the White House lawn. There was almost instant shock around the world because of the Internet. Defense lawyers and White House political spinners keep repeating almost like a mantra: "In America, everyone's presumed to be innocent until proven guilty." Still, most people have opinions one way or another. Congress, the White House, federal courts and the American people are directly involved in this matter. For what's at stake is the real issue — our national integrity. The 105th Congress started its second session. The long recess between sessions gave members of Congress the opportunity to get rested and do some serious politicking back home. They returned charged up, ready to go, and ran smack into a whole new ball game. That first evening, the atmosphere in the House Chamber was quite different, as President Clinton delivered his sixth State of the Union Address like nothing had happened. Toward the end of his speech, he made his only reference to energy. He called for increased use of renewable fuels to reduce U.S. greenhouse gas emissions. He called for an increase of $6 billion in funding for renewables R&D, for tax incentives to increase renewables use and energy efficiency, a major step in his effort to implement the Kyoto United Nations' global warming treaty. His administration will institute a year-long public relations program now to tell "his side of the story" before he submits the treaty to the Senate for ratification. This will be another major controversial political issue all year. DOE talks about FY '99 appropriations. The House Appropriations Committee got off to a fast start with a January 28 hearing by the DOE subcommittee. Assistant Energy Secretary Patricia Godley told the subcommittee that the national energy strategy is almost ready. With respect to the department's R&D policies, they have not overlooked any domestic energy sources. She said over-reliance on a single form of energy has been "the root of every energy crisis we've had in this country." But, the DOE strategy report and its budget will recognize the crucial role fossil fuels will continue to play for some time. DOE has started taking its national energy strategy on the road for public hearings. Energy Undersecretary Ernest Moniz was enthusiastic about the new E&P technologies currently being demonstrated in Alaska because of their minor effect on surface areas. Unfortunately, he did not say how he thought they might affect future production in the Arctic National Wildlife Refuge (ANWR) or the National Petroleum Reserve Alaska (NPRA). Subcommittee Chairman Ralph Regula, (R-OHIO), was more positive about the influence new drilling techniques could have on future production in ANWR and NPRA. He also said there would be no sale of Strategic Petroleum Reserve (SPR) oil in the FY '99 budget. Senate jump starts Regulatory Improvement Act of 1998. On February 4, Senators Fred Thompson (R-Tennessee) and Carl Levin (D-Michigan) introduced a substantially amended version of their previous bill of the same number, S.981. The new bill retains the same number for recognition's sake by introducing it as "an amendment in the nature of a substitute." The legislation, if passed, would push agencies to come up with better estimates on what rules will cost, disclosure of the options that were considered in the analysis and justify why a particular alternative was chosen. The new bill provides for judicial review to ensure that agencies actually do carry out the cost-benefit analyses, risk assessments and peer reviews of their rules. The bill does stop short of the far-reaching curbs recommended in the House Republican's 1994 Contract with America that was passed by the House early in the 104th Congress. Thompson and Levin claim their bill will give power to the administrations' strategy to "maximize social benefits of regulation while minimizing the costs and burdens of regulation." Valuation and royalty problems. For sometime now, producers have been having ongoing difficulties with the valuation of oil and natural gas for calculating royalties due from offshore and onshore production. Producers have formed a coalition of trade associations that has been working on draft legislation to require the federal government to take royalties in kind (RIK) instead of cash. The federal government would dispose of its royalties through a "qualified marketing agent" as provided in the legislation. The proceeds of such sales would take the place of cash royalties currently being received from producers. The producer's royalty obligation would be fully satisfied when it tenders royalty at or near the lease. A copy of the draft legislation was delivered to MMS in mid-January, as Congress was getting started again. More than 30 House and Senate offices as well as Clinton administration officials were called on by members of the coalition to discuss the concepts of the RIK legislation. The coalition has prepared copies of the proposed bill and a section by section analysis
that describes it. Copies may be obtained by getting in touch with IPAA, Tel: 202 857 4722,
Fax: 202 858 4799, or National Oceans Industries Association, Tel: 202 347 6900, Fax: 202
347 8650.  Charles D. Matthews is president of Charles Matthews & Co., consultants and advocates on government relations, Arlington, Virginia.
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