[Congressional Record Volume 147, Number 101 (Thursday, July 19, 2001)]
[Senate]
[Pages S7958-S7959]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. HUTCHISON (for herself, Mr. Breaux, Ms. Collins, Mr. 
        Baucus, Mr. Chafee, Ms. Landrieu, Mr. Lott, Mr. Conrad, Mr. 
        Murkowski, Mr. Allard, Mr. Brownback, Mr. Cochran, Mr. 
        Domenici, Mr. Gramm, Mr. Enzi, Mr. Helms, Mr. Hutchinson, Mr. 
        Inhofe, Mr. Nickles, Mr. Stevens, and Mr. Thomas):
  S. 1199. A bill to amend the Internal Revenue Code of 1986 to allow a 
tax credit for marginal domestic oil and natural gas well production 
and an election to expense geological and geophysical expenditures and 
delay rental payments; to the Committee on Finance.
  Mrs. HUTCHISON. Mr. President, I rise today to speak about an energy 
bill I am re-introducing this year, marginal well tax credits. I am 
proud to introduce the Hutchison-Breaux-Collins Marginal Well 
Preservation Act of 2001.
  As we look to long-term solutions to the high cost of gasoline, 
electricity and home heating oil, marginal well tax incentives are 
critical to increasing supply and retaining our energy independence. 
Our crisis of volatile fuel prices in the U.S. has led this year to 
historically high gasoline prices, airline ticket surcharges for rising 
jet fuel costs, and expected problems with high home heating oil costs 
this coming winter. This problem is real, it is growing, and it demands 
a response from Congress to join with the Administration to find a 
comprehensive, long-term solution.
  Senators representing all regions of the country, including the 
Northeast and Midwest have a common interest: to make the United States 
less susceptive to the volatility of world oil markets by reducing 
America's dependence on foreign oil. I understand that when the price 
of home heating oil spikes in the Northeast, it hurts those Senators' 
constituents. They understand when the price of oil falls below $10 a 
barrel, as it did just over two years ago, and we lose 18,000 jobs as 
we did in Texas, that hurts my constituents. We understand that these 
are merely two sides of the same coin: growing dependence on foreign 
oil.
  In fact, at the heart of my legislation is the goal of reducing our 
imports of foreign oil to less than 50 percent by the year 2010. While 
it is incredible to me that we have let America slide into greater than 
55 percent dependence today, from the 46 percent dependence we saw in 
1992, nevertheless a goal of producing at least half of our oil needs 
right here in the United States is a laudable and, I believe, an 
achievable one.
  The core problem with our growing dependence on foreign oil is an 
underutilized domestic reserve base of both crude oil and natural gas. 
In 1992, we imported 46 percent of our oil needs from overseas. It is 
equally important to realize that in 1974, when America was brought to 
her knees by the OPEC oil embargo, we imported only 36 percent of our 
oil. Today, as I mentioned, we stand at over 55 percent imports. While 
it is true that OPEC controls less, in percentage terms, of the world 
oil market than it did in 1974, if the major oil producing countries of 
the world were ever to get their collective act together, they cold not 
only wreak havoc with the American economy, they could literally shut 
it down. As the sole remaining superpower in the world, and as the 
country with an economy that is the envy of the industrialized world, 
this threat to our economic as well as our national security is simply 
and totally unacceptable.
  We simply must take steps today to increase the amount of oil and 
natural gas we produce right here at home. It is estimated that, in 
total, the United States possesses as much as 160 billion barrels of 
oil and as many as 1,700 trillion cubic feet of natural gas. This is 
enough to fuel the U.S. economy for at least 60 years without importing 
a single drop of foreign oil. While shutting-off foreign oil completely 
may not be realistic, it is realistic to utilize our reserves much more 
than we do today.
  Believe it or not, much of this oil and gas could be produced in 
areas where it is being produced today and has for decades that is not 
environmentally sensitive. That is why I have advocated for tax 
incentives that would make it economically feasible for production to 
continue and actually increase in areas largely where production takes 
place today. Much of this production is from so-called ``marginal'' 
wells, those wells that produce less than 15 barrels of oil and less 
than 90 thousand cubic feet of natural gas per day.

[[Page S7959]]

  Many of these wells are so small that, once they close, they never 
reopen. There were close to 500,000 such wells across the U.S. 
Together, they have the capacity to produce 20 percent of America's 
oil. This is roughly the same amount of oil the U.S. imports from Saudi 
Arabia. During the oil price plummet over two years ago, more than a 
quarter of these wells closed, many of them for good.

  The overwhelming majority of producing wells in Texas are marginal 
wells. A survey by the Independent Producers Association of America, 
IPAA, found that marginal wells account for 75 percent of all crude 
production for small independent operators; up to 50 percent for mid-
sized independents; and up to 20 percent for large companies.
  A more sensible energy independence policy would be to offer tax 
relief to producers of these smaller wells that would help them stay in 
business when prices fall below a break-even point. When U.S. producers 
can stay in business during periods of low prices, supply will be 
higher and help keep prices from shooting up too high.
  My legislation provides a maximum $3 per barrel tax credit for the 
first 3 barrels of daily production from a marginal oil well, and a 
similar credit for marginal gas wells. The marginal oil well credit 
would be phased in-and-out in equal increments as prices for oil and 
natural gas fall and rise. For oil, it would phase in between $18 and 
$15 per barrel.
  A counter-cyclical system such as this would help keep producers 
alive during the record low prices, so they can be producing during the 
record highs. This would gradually ease our dependence on overseas oil.
  There's another benefit to encouraging marginal well production: it 
has a multiplier effect. In 1997, these low-volume wells generated $314 
million in taxes paid annually to State governments. These revenues are 
sued for State and local schools, highways and other state-funded 
projects and services.
  Another idea in my plan is to offer incentives to restart inactive 
wells by offering producers a tax exemption for the costs of doing so. 
This would ensure greater oil availability and also increase Federal 
and State tax revenues paid by oil producers and energy sector 
employees. Everyone wins. More jobs, more State and Federal revenue, 
and, most importantly, more domestic oil.
  Studies and actual results have borne this out. In Texas, a program 
similar to this has met with considerable success. Over 6,000 wells 
have been returned to production, injecting approximately $1.65 billion 
into the Texas economy each year. We should try this nationwide.
  We do not have to be at the whim of market forces beyond our control. 
The only way out, though, is to be part of the price setting process, 
rather than be price takers. To do that, we've got to increase our 
domestic supply. We have an excellent opportunity to unite around this 
bill, Democrats and Republicans, energy production and energy 
consumption States.
  Marginal well tax incentive legislation is a positive, proactive 
approach that I believe can garner a majority of support in Congress 
and that will begin to reverse the slide toward greater and greater 
dependence on foreign oil.
                                 ______