Extension Vote Delayed: Oil and Gas Relief Uncertain Amid Congressional Debates

Strategic Insights -

Congress has moved to provide $500 million in loans to US oil and gas companies, amid intense debates and opposition since the bill's introduction in March. The loan program, expected to be approved by President Clinton, would establish $500 million in loans for US oil and gas producers and service companies, with 85% guaranteed and 15% left to borrowers in case of default. The program, set to expire in five years, would allow loans of up to $10 million to extend until 2011. Simultaneously, the Senate began debating a massive tax bill, which includes provisions to aid oil and gas companies, such as reduction of US tax liability for companies paying foreign taxes and substantial relief from alternative minimum tax. However, a vote on the tax bill came at the expense of a proposed extension of the moratorium on the Mineral Management Service's (MMS) new oil royalty valuation rule until July 2001.

Key Takeaways:

  • The $500 million loan program for US oil and gas companies has been passed by the House, with expected approval by President Clinton.
  • The program would provide loans of up to $10 million to 400 oil and gas companies, with 15% responsibility for borrowers in case of default.
  • The loan program would be managed by a board consisting of the secretaries of commerce, labor, and treasury, the chairman of the Federal Reserve, and the head of the Securities and Exchange Commission.
  • The tax bill includes provisions to aid oil and gas companies, such as reduction of US tax liability for companies paying foreign taxes and substantial relief from alternative minimum tax.
  • However, a proposed extension of the moratorium on the MMS's new oil royalty valuation rule until July 2001 was removed from the Interior spending bill.
  • The loan program would be set to expire in five years, with the option of extending loans until 2011.
  • Sen. Pete Domenici (R-N.M.) is the author of the oil loan provision, citing the need for relief for the oil patch, which was embattled by low oil prices.

Statistics:

  • $500 million in loans allocated for US oil and gas companies.
  • 85% of loans guaranteed, leaving borrowers responsible for 15% in case of default.
  • Up to $10 million in loan amounts available.
  • 400 oil and gas companies expected to benefit from the program.
  • Five-year sunset provision for the loan program, with option to extend loans until 2011.
  • 65% limitation on taxable income for percentage depletion suspended for six years.
  • Provision to aid oil and gas companies in the tax bill expected to pass quickly today.

Sources:

  • "TOD, 6-21-99, p.5"
  • "TOD, 7-29-99, p.1"