Fading Hopes for Tax and Royalty Relief in US Petroleum Industry

As crude oil prices have surged from $14 per barrel to almost $20 per barrel in June 1994, prospects for tax and royalty relief in the US petroleum industry have dimmed. When over 100 industry leaders requested a meeting with President Clinton in March 1994, they hoped to discuss relief on several fronts, including per-barrel tax credits, royalty relief, and the expensing of geological costs. However, with oil prices soaring and forecasts being bullish, industry leaders have reduced their expectations, focusing on achieving a positive public image for the industry.

Key Takeaways:

• The petroleum industry lobby prompted over 100 members of Congress to request a meeting with President Clinton in March 1994 to discuss relief on several fronts, including per-barrel tax credits, royalty relief, and the expensing of geological costs.
• Crude oil prices have risen from $14 per barrel in March 1994 to almost $20 per barrel in June 1994, making tax and royalty reductions politically untenable.
• Industry leaders are now focusing on achieving a positive public image for the industry, with Dewey Bartlett Jr., a partner at Kerrey Oil, stating that "our industry has a terrible public image" and needs the administration to educate the public on the importance of the industry to the country.
• Mark Murphy, owner of New Mexico independent Strata Production, acknowledged that it "takes more than words" to help independents, but a presidential announcement praising the industry could aid the entire industry.
• Even IPAA President Denise Bode has downplayed expectations, stating that "the real battle is on Capitol Hill" and that legislative initiatives have not gone through.

Statistics:

• Crude oil prices have risen from $14 per barrel to almost $20 per barrel in June 1994.
• The administration has projected that tax credits would cost at least $3 billion over five years.
• At least 100 industry leaders requested a meeting with President Clinton in March 1994 to discuss relief on several fronts.

Sources:

• "Petroleum leaders optimistic about Clinton meeting," The New York Times, 12 Jun 1994
• "Oil industry considers relief from export ban," The Washington Post, 12 Jun 1994
• Testimony of Dewey Bartlett Jr., Partner at Kerrey Oil, and Mark Murphy, Owner of New Mexico independent Strata Production, before the Subcommittee on Energy and Mineral Resources, 26 May 1994
• Press release from the Independent Petroleum Association of America, 22 Mar 1994