Oil and gas in Washington
Domestic oil and gas industry swimming upstreamThe domestic oil and gas industry knows how difficult it has been to get along with the Secretary of the Interior on many issues. A recent copy of Global Energy Outlook, published by World Energy Group, Inc., said, "The oil and gas industry has a defiant Secretary of Interior who accuses the industry of fraud if it dares to have opinions contrary to his own." It continued that Babbitt is bitter against the petroleum industry, defiant of Congress and continues to push for a Minerals Management Service policy for oil royalties that won’t work. The newsletter said if the industry disagrees with the Secretary’s opinions on climate change he claims that they’re "un-American." The article continues, "He (Babbitt) says, ‘It is his intention to alert the American public to the kind of conniving that’s going on in the oil industry.’ Such open hostility toward the companies that produce the energy in the U.S. is indicative of Babbitt’s tenure in office." It’s a different story with Secretary of Energy Bill Richardson. Finally President Clinton seems to have done something that may help the domestic oil and gas business in these trying times, whether he intended to do so or not. Several terms in the U.S. House of Representatives and a stint as the U.S. Ambassador to the United Nations has prepared Richardson to be a good and understanding supporter of our domestic oil and gas industry. He has already begun to push the Administration to give some tax breaks to the struggling oilmen as federal tax relief for marginal wells. Richardson formed an Energy Emergency Task Force to assess the effects of low oil prices on America’s oil production. He followed up with several helpful actions such as:
Richardson has already presented the results of his Oil Emergency Task Force, in the publication Initiatives for Energy Security. The report highlights four strategies for: enhancing energy security, preserving domestic oil and gas production capacity, lowering the costs of production and improving government decision-making. Independents’ messages are being heard in this town. IPAA came to Washington a few weeks ago to tell the White House, Congress, the media and anyone else who would listen, just how bad things really are in the oil patch. There was a good press briefing in which Senators Frank Murkowski, R-Alaska and Jeff Bingaman, D-New Mexico, and Representatives Kay Granger, R-Texas, Ernest Istook, R-Oklahoma, Frank Lucas, R-Oklahoma, Max Sandin, D-Texas, Joe Skeen, R-New Mexico, Lamar Smith, R-Texas, Bill Thomas, R-California, and Wes Watkins, R-Oklahoma joined them in making short statements. George Yates, IPAA Chairman, called on the Administration to refocus its message around three core themes: 1) the Administration will not let this industry collapse, 2) do something about U.S. policy on Iraq, because the oil-for-food program is skewed, and 3) get legislation passed. Industry representatives met with White House officials. Energy Secretary Bill Richardson, Treasury Secretary Robert Rubin, Deputy Treasury Secretary Larry Summers, National Economic Council Director Gene Sperling and White House Chief of Staff John Podesta met twice with industry representatives to discuss the state of the industry and implications of current low oil price trends. Industry presented several recommendations for Administration action in terms of tax and regulatory relief. An encouraging development for the independents came when Rubin said he would look again at expanded tax credits for marginal wells. The White House also agreed to form a high-level working group chaired by Sperling to seek expanded opportunities for networking with the industry. It’s not clear when the working group will be formed, but Sperling will seek help from Energy and Treasury officials. Oil royalty valuation still hot. MMS may be willing to consider industry’s latest suggestions about how oil produced from federal properties should be valued for royalty purposes. The companies have consistently opined that oil should be valued at the production lease, not downstream where transportation costs, crude quality and other economic factors may not be accurately reflected in the valuation process. MMS, on the other hand, has been favoring a system that would base federal oil royalty payments on spot prices using various government formulas. However, MMS is now indicating that it might consider industry’s lease approach, provided it can be satisfied that the payments mirror fair market value. In its list of recommendations to MMS, industry wants the agency to provide clear guidelines for arm’s-length transactions or deals between non-affiliated parties. Senator Boxer still rocking the boat.
Early in March, the Senate Appropriations Committee approved the FY 2000 Emergency Spending
Bill including a provision extending the current valuation moratorium until October 1999. As
usual, Sen. Barbara Boxer, D-California, immediately opposed any effort to stall the
proposed rule and announced plans to offer an amendment to strip the provision from the bill
when it reaches the Senate floor. The White House has also included the moratorium language
as one of the several objectionable provisions in that bill.
 Charles D. Matthews is president of Charles Matthews & Co., consultants and advocates on government relations, Arlington, Virginia.
Copyright © 1999 World
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