[Congressional Record Volume 149, Number 47 (Monday, March 24, 2003)]
[Senate]
[Page S4329]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. HUTCHISON (for herself, Mr. Breaux, Ms. Collins, Mr. 
        Domenici, Mr. Baucus, Ms. Landrieu, Mr. Chaffe, Mr. Allard, Mr. 
        Inhofe, Mr. Lott, and Mr. Thomas):
  S. 696. 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. Hutchinson. Mr. President, I am introducing today legislation to 
provide tax incentives for marginal wells. As we look to long-term 
solutions to meet our needs for gasoline, electricity and home heating 
oil, marginal well tax incentives are critical to increasing supply and 
retaining our energy independence.
  Senators representing all regions of the country, including the 
Northeast and Midwest, have a common interest: to make the United 
States less susceptible 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's constituents. They understand when the price of oil falls 
below $10 a barrel--as it did several 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: a growing U.S. dependence 
on foreign oil.
  In fact, at the heart of the marginal well tax credits is the goal of 
reducing our imports of foreign oil to less than 50 percent by the year 
2012. It is incredible to me that America is sliding toward 60 percent 
dependence on foreign oil. 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.
  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 we stand at over 56 percent imports. If the major oil 
producing countries of the world were ever to collectively sabotage 
U.S. interests as we have seen in the past with Iraq, they could wreak 
havoc with the American economy.
  We simply must take steps today to increase the amount of oil and 
natural gas we produce right here at home. While shutting-off foreign 
oil completely may not be realistic, it is realistic to utilize our 
reserves much more than we do today. Marginal wells--those wells that 
produce less than 15 barrels of oil and less than 90 thousand cubic 
feet of natural gas per day--have the capacity to produce 20 percent of 
America's oil. This is roughly the same amount of the oil the U.S. 
imports from Saudi Arabia.
  Much of this oil and gas could be produce 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.

  There are close to 400,000 such wells across the United States. Many 
of these wells are so small that, once they close, they never reopen. 
If we had had the marginal well tax provision in place several years 
ago before the oil price plummet, we would not have lost over 400,000 
barrels per day of production due to small wells shutting down.
  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 
sensible energy independence policy is to offer tax relief to producers 
of these small 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.
  The marginal well provision in the energy bill 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 well credit would be phased in-and-out in equal increments as 
prices for oil and natural gas fall and rise. For oil, in would phase 
in between $18 and $15 per barrel. In addition to the marginal well 
provisions, the bill includes tax incentives for delay rental payments 
and geological and geothermal expensing. These provisions will help 
producers locate and develop potential oil and gas properties.
  We do not have to be at the whim of foreign countries or market 
forces beyond our control. Therefore, we've got to increase our 
domestic supply and I believe these energy tax incentives will do that.

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