[Congressional Record Volume 142, Number 117 (Friday, August 2, 1996)]
[Senate]
[Pages S9606-S9607]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROCKEFELLER:
  S. 2046. A bill to amend section 29 of the Internal Revenue Code of 
1986 to allow a credit for qualified fuels produced from wells drilled 
during 1997, and for other purposes; to the Committee on Finance.


            the marginal well drilling incentive act of 1996

  Mr. ROCKEFELLER. Mr. President, today I offer a bill that is very 
important to my State of West Virginia, and can benefit the entire 
Nation. This very small bill will have a very big impact on the ability 
of small oil and gas producers in my State and across the Nation to 
compete. The bill creates a new tax incentive, modeled on the old 
section 29 tax credit, to help small marginal well drillers.
  I offer this with a measure of frustration, based on the fact that 
while Congress managed to incorporate a great number of narrowly 
targeted amendments into the small business tax bill passed today, the 
final bill did not include this provision that I propose today. I am 
pleased that the tax package includes an extension of the part of 
section 29 dealing with facilities that manufacture gas from biomass 
and coal. That is helpful to a variety of States, including West 
Virginia. But for less than one tenth the cost of that provision, we 
could and should have done something to help drillers get gas from 
devonian shale and other nonconventional sources.
  The original section 29 credit for drilling expired in 1992 after 
some of the larger gas companies in this country put emphasis on 
getting relief from the alternative minimum tax instead of renewing 
section 29. They got that, but it didn't help a lot of the smaller 
drillers, which happen to include most of the gas producers in West 
Virginia.
  Mr. President, I'd like the record to show that since the credit 
expired, drilling for margin gas wells in West Virginia has dropped off 
by more than 30 percent. In 1992, the last year of the credit, 760 
wells were drilled in West Virginia. By 1995, that number had fallen to 
530 wells. In that same timeframe, the number of rigs actively drilling 
wells in the Appalachian basin declined from 73 to 45--a 48-percent 
decline. That translates directly into jobs, as the average rig employs 
about 25 people. When you add to that all the jobs associated with a 
well (from transportation to bookkeeping), you have a job loss of more 
than 1,500 in the Appalachian Basin, which stretches from New York to 
Kentucky, and from Ohio to Virginia.
  Mr. President, this is about more than jobs. I have spoken in the 
past of the great problem our Nation has with oil dependency. Following 
the oil shocks of the 1970's, Congress made a concerted effort to help 
ease our dependency on foreign energy sources. That effort showed much 
success in the 1980's when imports fell by more than 40 percent from 
1970's highs. However, the 1990's have seen import totals steadily 
rise, to today when more than 50 percent of our oil is imported. In 
fact, Mr. President, the biggest 1-year rise in imports since 1986 came 
in the year following the expiration of section 29, in 1993.
  The Senate knows well the problem raised by energy dependency. The 
Gulf war was fought largely to protect our foreign oil sources in the 
Middle East, and 19 brave American soldiers died in June for that very 
same cause. Our energy dependency, in addition to years of cheap oil 
and an exceptionally harsh winter, also led to the outrage earlier this 
spring when gas prices at the pump rose steeply.
  For all these reasons, Mr. President, it is important that we foster 
the development of new sources of domestic energy. Gas in my State, and 
many others, is hard to get at. It is locked in rock formations that 
yield their fuel much more slowly, and at lower profits, than wells in 
the oil patch out West.
  This bill is specifically designed to offer a very modest incentive 
to those producers, when the price of natural gas gets so low that they 
can't make a profit from their wells. Unlike the original section 29, 
the credit will be available only for the first 10 million cubic feet 
of gas produced each year by each well. Additionally, the credit will 
only be available to wells that produce less than 100 million cubic 
feet of gas per year.
  Mr. President, I have intentionally limited the scope of this bill so 
that it is only available to smaller wells, and only there, for a 
limited amount of gas. The idea behind this bill is not to have a big 
giveaway for big oil and gas producers. But instead, it is designed to 
give a little bit of insurance to risk-taking drillers who make their 
living tilling nonconventional sources for fuel.

[[Page S9607]]

  This is a modest bill, but one that can make a big difference in 
certain places that have the potential for more prosperity, more job 
growth, and more economic growth like West Virginia. Reviving and 
revising section 29 will put an incentive in place to seize more of 
this potential while reducing the entire country's dependence in 
foreign oil. I urge the Senate to find a way to make this bill a 
reality--the sooner, the better.
                                 ______