US Gas Industry Hopes to Hone Stalled Energy Bill

Article excerpt

WHEN it comes to energy legislation crawling through Congress, the natural gas industry is in a tantalizing position. The industry hopes the legislation will get moving again in time to be passed this year, but slow enough that some objectionable provisions can be removed.

Last week the Senate's version failed to come to a vote because President Bush and senators from Western states objected to a tax on all coal to pay for the health benefits of 84,000 retired union coal miners in Eastern states.

"Completely stalled" is how Denise Bode, president of the Independent Petroleum Association of America, assessed the Senate bill's status.

"It's kind of scary," adds Urban O'Brien, who deals with government issues for Apache Corporation, a Houston-based company that is the nation's fourth-largest independent oil and gas producer.

Mr. O'Brien and Ms. Bode note that once the coal-tax issue is resolved, the bill still must be reconciled with the House version in a conference committee. The impasse in the Senate leaves little time, in view of other Senate business, an August recess, and elections in the fall.

However, Michael Baly III, president of the American Gas Association, remains confident that Congress will pass an energy bill. "Too much hard work has gone into this," he says.

The bill would likely contain a number of provisions the gas industry likes.

Most important is partial relief from the alternative minimum tax, which discourages drilling.

This year the number of drilling rigs at work in the US hit 596, the lowest weekly average in 52 years. As a result, the nation will probably replace only 60 percent of the natural gas it consumes, says George Mitchell, chairman of Mitchell Energy and Development Corporation, a large independent gas producer in The Woodlands, Texas. "That's going to be very serious," he warns.

The energy bill is also expected to make it easier for natural gas transmission companies to build pipelines to serve new markets. Federal, state, and private vehicle fleets would be required to convert to alternative fuels, including natural gas. Individuals would be given a tax incentive to convert their vehicles to alternative fuels.

And the electric-power generation market would be opened wider to independent power producers, which are expected to favor natural gas as fuel. Electrical generation is the gas market with the largest potential for growth. …