Oil Industry Amendments Meeting, April 15, 1986
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- 12 Pages
- File Name (Dublin Core)
- lead_390_015_all
- Title (Dublin Core)
- Oil Industry Amendments Meeting, April 15, 1986
- Date (Dublin Core)
- 1986-04-15
- Date Created (Dublin Core)
- 1986-04-15
- Congress (Dublin Core)
- 99th (1985-1987)
- Topics (Dublin Core)
- See all items with this valuePetroleum law and legislation--United States
- See all items with this valueExcess profits tax
- Policy Area (Curation)
- Energy
- Record Type (Dublin Core)
- notes (documents)
- Rights (Dublin Core)
- http://rightsstatements.org/vocab/CNE/1.0/
- Language (Dublin Core)
- eng
- Collection Finding Aid (Dublin Core)
- https://dolearchivecollections.ku.edu/index.php?p=collections/findingaid&id=26&q=
- Physical Location (Dublin Core)
- Collection 007, Box 390, Folder 15
- Institution (Dublin Core)
- Robert J. Dole Institute of Politics, University of Kansas, Lawrence, KS
- Archival Collection (Dublin Core)
- Robert J. Dole Republican Leadership Collection, 1985-1996
- Full Text (Extract Text)
-
(page 1)
(this page's fields are filled-out with pencil)
(two markings in the following line are shorthand)
(markings) given out
MEMORANDUM OF CALL
TO:
summary
☐ YOU WERE CALLED BY_
☐ YOU WERE VISITED BY_
Bill Thorm
OF (Organization)
(this field is left blank)
("40722" in the following line is hand-written)
☐ PLEASE CALL→ PHONE NO. CODE/EXT. 40722
☐ WILL CALL AGAIN
☐ RETURNED YOUR CALL
☐ IS WAITING TO SEE YOU
☐ WISHES AN APPOINTMENT
MESSAGE
energy relief
hands out given
(three markings in the following line are shorthand)
out (markings)
42934
RECEIVED BY
(this field is left blank)
DATE
(this field is left blank)
TIME
(this field is left blank)
(end of page 1)
(page 2)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(the following line is underlined)
POSSIBLE LEGISLATIVE INITIATIVE
(the following line is underlined)
NON-TAX ITEMS
("Fuel Use Act" in the following line is underlined)
1. Fuel Use Act
Eliminate fuel use restrictions in Fuel Use Act. This would allow private parties to select fuel of choice. There are four bills in the Energy Committee. The issue may be put on the Committee markup agenda shortly.
(Would this provide perceptible short- to mid-term benefit to gas producers?)
("Strategic Petroleum Reserve" in the following line is underlined)
2. Strategic Petroleum Reserve
Fund strategic petroleum reserve at prior rates.
(Is it administratively possible to target purchases from independent producers and from outer continental shelf and frontier areas of Alaska?)
(Should the oil be purchased at a premium?)
(Should the cost be recouped by, e.g., a tax increase on motor fuels?)
(the following line is underlined)
TAX ITEMS
("Repeal the 50 Percent of Net Income Limitation" in the following line is underlined)
1. Repeal the 50 Percent of Net Income Limitation
This would allow percentage depletion deductions to offset more than 50 percent of the net income of eligible producing property. The change can be justified since net income has decreased, reducing the value of the deduction.
(Should the limitation trigger on or off based on oil prices?
("Repeal Proven Property Transfer Rule" in the following line is underlined)
2. Repeal Proven Property Transfer Rule
This would allow independent producers to use the percentage depletion method for proven producing property purchased from an integrated major producer. It would also allow such property to be eligible for exemption from the Windfall Profit Tax.
(end of page 2)
(page 3)
(this page is watermarked with the Great Seal of the United States above the text "1986")
-2-
("Permit Expensing of Geological and Geophysical Costs" in the following line is underlined)
3. Permit Expensing of Geological and Geophysical Costs
These costs of searching and testing for oil are capitalized under present law. However, they are ordinary and necessary costs of doing business which arguably should be deducted when incurred. If these costs were deductible, the cost of exploration would be reduced and paperwork would be reduced.
("Repeal Windfall Profit Tax" in the following line is underlined)
4. Repeal Windfall Profit Tax
Under realistic projections, the Windfall Profit Tax will raise no revenue over the next 5 years. Nevertheless, recordkeeping will cost oil producers substantial revenues. We could provide real economic relief to producers without reducing Federal revenues by repeal.
(the following line is underlined)
Additional Tax Items
("Repeal IDC Recapture Rule" in the following line is underlined)
1. Repeal IDC Recapture Rule
Gain on sale of a producing property is characterized as ordinary income to the extent of any intangible drilling costs previously taken.
("Marginal Production Tax Credit" in the following line is underlined)
2. Marginal Production Tax Credit
A tax credit could be provided for stripper and tertiary production when there is a net operating loss from a property.
(This could provide immediate relief. However, it might be difficult to gain sufficient support for the proposal, especially if relief is provided on a property-by-property basis.)
(end of page 3)
(page 4)
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("5:15p.m." in the following line is struck-through with pencil)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
(the following list of names is bulleted and marked "D" with pencil)
DOLE •
ARMSTRONG •
NICKLES •
KASSEBAUM •
WALLOP •
BAUCUS D
BENTSEN D
BOREN D
LONG D
PRYOR D
JOHNSTON D
(end of page 4)
(page 5)
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("5:15p.m." in the following line is struck-through with pencil)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
DOLE
ARMSTRONG
NICKLES
KASSEBAUM
WALLOP
BAUCUS
BENTSEN
BOREN
LONG
PRYOR
JOHNSTON
(end of page 5)
(page 6)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(this page is marked up with pencil)
(the following line is hand-written)
Wednesday
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TUESDAY, APRIL 15, 1986
(the following line is hand-written and struck-through)
5:45 p.m.
("5:15" in the following line is struck-through)
5:15 p.m. S-230 re: oil industry amendments
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1:15
5:15 -
(the following list of names is marked up with pencil)
DOLE ✓
ARMSTRONG - wcb
OK NICKLES
OK KASSEBAUM 44774
OK WALLOP - wcb
OK BAUCUS -
OK BENTSEN -
OK BOREN - ✓
OK LONG - wcb
OK PRYOR -
(the following line is hand-written)
OK JOHNSTON - 40085
(the remainder of this page is hand-written with pencil)
Boren would like to add
(the following five lines are bracketed together)
Byrd
Ford
Riegle
Domenici
Cranston
(end of page 6)
(page 7)
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(this page's fields are filled-out with red ink pen and with pencil)
Subject: oil industry amendment
Date: April 15, 1986
Time: 5:15
Location: S-230
(the following line is underlined)
REPUBLICAN LEADERSHIP
("•" in the following line is hand-written)
Senator: • ARMSTRONG
Position: Policy-Chairman
Invited: ✓
Yes: ✓
No: (this field is left blank)
Senator: CHAFEE
Position: Conference-Chairman
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: COCHRAN
Position: Conference-Secretary
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
("•" in the following line is hand-written)
Senator: • DOLE
Position: Majority Leader
Invited: ✓
Yes: ✓
No: (this field is left blank)
Senator: HEINZ
Position: Senatorial Comm.-Chairman
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: SIMPSON
Position: Asst. Majority Leader
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: THURMOND
Position: President Pro Tempore
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
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COMMITTEE CHAIRMEN
Senator: ABDNOR
Committee: Joint Economic
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: ANDREWS
Committee: Select--Indian Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DANFORTH
Committee: Commerce
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DOMENICI
Committee: Budget
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DURENBERGER
Committee: Intelligence
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: GARN
Committee: Banking
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: GOLDWATER
Committee: Armed Services
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HATCH
Committee: Labor
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HATFIELD
Committee: Appropriations
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HEINZ
Committee: Special--Aging
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HELMS
Committee: Agriculture
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: LUGAR
Committee: Foreign Relations
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: MATHIAS
Committee: Rules & Administration
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: McCLURE
Committee: Energy
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: MURKOWSKI
Committee: Veterans Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: PACKWOOD
Committee: Finance
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: ROTH
Committee: Governmental Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: RUDMAN
Committee: Select--Ethics
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: STAFFORD
Committee: Environment
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: THURMOND
Committee: Judiciary
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: WEICKER
Committee: Small Business
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
(the following line is underlined)
Republicans
BOSCHWITZ
COHEN
D'AMATO
DENTON
EAST
EVANS
GORTON
GRAMM
GRASSLEY
HAWKINS
HECHT
HUMPHREY
("•" and "44774) in the following line is hand-written)
• KASSEBAUM 44774
KASTEN
LAXALT
MATTINGLY
McCONNELL
("OK •" and "45754" in the following line are hand-written)
OK • NICKLES 45754
PRESSLER
QUAYLE
SPECTER
STEVENS
SYMMS
TRIBLE
("OK •" and "Kathy 46441" in the following line are hand-written)
OK • WALLOP Kathy 46441
WARNER
("w.c.b." in the following line is hand-written)
w.c.b. WILSON
(the following line is underlined)
Democrats
("✓ •" and "44735 MAUREEN x2651" in the following line are hand-written; "44735" in the following line is struck-through)
✓ • BAUCUS 44375 MAUREEN x2651
("✓ •" and "45922" in the following line are hand-written; illegible text following "BENTSEN" and preceding "45922" is hand-written and struck-through repeatedly)
✓ • BENTSEN 45922
BIDEN
BINGAMAN
("✓ •" and "CAROLYN" in the following line are hand-written)
✓ • BOREN CAROLYN
BRADLEY
BUMPERS
BURDICK
BYRD
CHILES
CRANSTON
DeCONCINI
DIXON
DODD
EAGLETON
EXON
FORD
GLENN
GORE
HARKIN
HART
HEFLIN
HOLLINGS
INOUYE
("OK" in the following line is hand-written)
OK JOHNSTON
KENNEDY
KERRY
LAUTENBERG
("OK" in the following line is hand-written)
OK LEAHY
LEVIN
("w.c.b. •" and "0302 DOT 4623" in the following line are hand-written; "0302" in the following line is struck-through repeatedly)
w.c.b. • LONG 0302 DOT 4623
MATSUNAGA
MELCHER
METZENBAUM
MITCHELL
MOYNIHAN
NUNN
PELL
("2353" in the following line is hand-written)
PROXMIRE 2353
("OK •" and "7822 - LESLIE" in the following line are hand-written; "7822" in the following line is struck-through)
OK • PRYOR 7822 - LESLIE
RIEGLE
ROCKEFELLER
SARBANES
SASSER
SIMON
STENNIS
ZORINSKY
(the following line is underlined)
Administration:
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(end of page 7)
(page 8)
(this page is watermarked with the Great Seal of the United States above the text "1985")
("5:15p.m." in the following line is highlighted with yellow highlighter marker)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
DOLE
ARMSTRONG
NICKLES
KASSEBAUM
WALLOP
BAUCUS
BENTSEN
BOREN
LONG
PRYOR
JOHNSTON
(end of page 8)
(page 9)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(this page is a photocopy of a newspaper clipping)
Many Oil Producers Could Escape Tax Under Packwood Plan, Studies Indicate
By ALAN MURRAY
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON—Many successful independent oil producers would be able to escape all federal income tax under the tax plan pending in the Senate Finance Committee, according to government and private analyses.
Committee Chairman Bob Packwood (R., Ore.) has said the minimum tax in the overhaul plan he drafted is designed to be so stiff that "the General Electrics and the General Dynamics won't be able to escape taxes." But a large hole in that tax proposal would let many unincorporated independent oil producers with big incomes slip through easily, according to studies by the Treasury, the congressional Joint Tax Committee and private tax experts.
Oil producers have been given favorable treatment throughout the tax overhaul debate, in part because Treasury Secretary James Baker and influential members of the House Ways and Means Committee and the Senate Finance Committee come from oil-producing states. Falling oil prices also have increased congressional sympathy for oil producers.
The minimum tax, however, is being promoted as a device to ensure that no one with income escapes taxes altogether. "It's against our intention for anybody who has income to be able to zero out," says Finance Committee staff director William Diefenderfer.
But the Packwood plan retains an unusual feature of current law that Treasury and Joint Tax Committee experts have known for some time allows oil producers to escape the minimum tax as well as the regular income tax.
'Make Sure It Works'
"We don't do this sort of thing anyplace else in the minimum tax." said Ronald Pearlman, former assistant Treasury secretary for tax policy. "If we are going to tell the American people that we have a minimum tax that will make everyone pay a tax, we've got to make sure it works. Independent oil producers should be paying their fair share."
"It seems as though the oil guys are getting a free shot." agreed Joseph Minarik, a tax expert at the Urban Institute here.
Under the Packwood plan, as under current law, oil producers are allowed immediate write-offs for their so-called intangible drilling costs—costs associated with drilling new wells. In calculating whether a producer falls under the minimum tax, those write-offs would have to be stretched out over 10 years—but only to the extent that they exceeded the producer's net income from other oil and gas operations. Thus, an oil producer with a large amount of oil income but an equally large amount of intangible drilling costs wouldn't owe taxes under the regular tax system or under the alternative minimum tax.
Oil producers argue that the intangible drilling cost deduction is needed to provide an incentive for drilling new oil wells. And if Congress is going to provide that incentive, they say, there is no reason to turn around and take it away under the minimum tax.
An official for the American Petroleum Institute also notes that falling oil prices have cut back drilling severely and therefore will cut back intangible drilling deductions. "In the climate we're in, I don't think there are that many who will zero out," he says. And those that do zero out, he adds, "are probably losing money."
But the Packwood plan makes no such exceptions from the minimum tax for other industries that benefit from tax incentives. And while drilling may be depressed now, sooner or later it is almost certain to revive.
The tax plan proposed by President Reagan would subject 8% of a producer's intangible drilling costs to the minimum tax, regardless of the producer's income. The minimum tax plan in the tax bill passed by the House would require intangible drilling costs to be stretched out over 10 years to the extent they exceeded 65% of net oil and gas income. In either case, it would have been more difficult for oil and gas producers to escape tax altogether.
Provision for Corporations
The Packwood plan includes a provision that would tax corporations that reported book profits to their shareholders, even if they didn't owe any tax under either the regular tax system or the minimum tax. That provision would probably prevent oil-producing corporations from escaping taxes altogether. But unincorporated oil producers, which do the vast majority of the oil and gas drilling in the U.S., wouldn't be affected by that provision.
With oil prices dropping, and drilling for new wells coming to a near standstill. the intangible drilling costs provision of the Packwood plan would have little immediate significance. But once drilling resumes, it would allow many independent oil producers to continue to escape taxation.
(end of page 9)
(page 10)
(black and white portrait photograph of Senator David L. Boren)
NEWS
From U.S. Senator David L. Boren of Oklahoma
453 Russell Senate Office Building
Washington, D.C. 20510
Press Secretary: Barbara Webb
Assistant Press Secretary: Brett Wesner
(202) 224-4721
FOR IMMEDIATE RELEASE
THURSDAY, APRIL 10, 1986
Proposals offered by Senator David Boren (D-OK) in meeting today with Majority Leader Robert Dole and Finance Committee members Senators Malcolm Wallop (R-WY), Russell Long (D-LA), Lloyd Bentsen (D-TX), Max Baucus, (D-MT), William Armstrong, R-CO), and David Pryor, (D-AR).
MARGINAL PRODUCTION MAINTENANCE PROGRAM
1. Repeal "Transfer" Rule --- Current law provides that when an independent producer buys "proven" producing property from an integrated major that property is not eligible for the Windfall Profits Tax exemption or percentage depletion. Repeal of the transfer rule would allow independents to benefit from percentage depletion and any WPT exemption that may exist (assuming existence of a WPT). This would benefit both the integrated companies by encouraging them to sell uneconomic properties, rather than abandoning them, and provide additional incentives to independents to purchase and continue to produce these properties.
2. Repeal the 50 per cent of net income limitation --- Current law provides that the percentage depletion deduction is limited to not more than 50 per cent of the net income of an eligible producing property. Repeal of this section would stimulate additional cash flow to those producers who still have income producing properties.
3. Change the rate of percentage depletion --- Current law provides for a 15 per cent rate for percentage depletion. Increasing the rate would serve to increase cash flow to eligible independent producers, again assuming that the property is producing a net income. To spread the benefit of such a change, the definition of eligible producer should be expanded to include all producers and mineral owners of "marginal properties " (i.e., stripper and tertiary). This change would encourage the integrated producers to maintain their stripper production and not abandon these marginal wells.
One suggestion has been to relate the rate of percentage depletion to the price of crude oil. Thus, as the price of oil falls, the rate of percentage depletion increases up to a
(end of page 10)
(page 11)
-2-
maximum, and conversely, as the price rises the rate of percentage depletion falls to a minimum rate, say current law.
4. Marginal production tax credit --- This mechanism is intended to provide immediate and relatively substantial price support for "marginal" production (stripper and tertiary oil (as defined in Section 4991 (d) & (e) of the IRS Code). This is the production that is most vulnerable to volatile price swings. This proposal would establish a dollar for dollar tax credit for any net operating loss incurred in the above defined production. This net operating loss would be determined by the following formula:
Gross Revenues
Less:
Lease Operating Expenses
State Severance and Property Taxes
Dry hole costs
Depreciation
Allocation Overhead
NET INCOME FROM PROPERTY
It is expected that this dollar amount will average $1 to $2 per barrel and not exceed more than $2 to $3 per barrel. However, it might be necessary to set a maximum per barrel amount. In order to have maximum impact, the taxpayer must be allowed to carry back this credit for 10 years and forward for five years. This provision is expected to impact on only 10 to 15 per cent of total U.S. production. In 1985 there were approximately 452,000 stripper wells producing 2.8 b/d on the average.
Other options include a direct cash payment to the producer or some sort of credit against WPT paid. Either way, this credit mechanism or cash payment must count against regular income tax and any alternative minimum tax.
Effective Date: January 1, 1986
(end of page 11)
(page 12)
Marginal Production
-3-
State: Alabama
Number of Wells: 98
Annual Production (in barrels): 171,757
State: Arizona
Number of Wells: 14
Annual Production (in barrels): 29,034
State: Arkansas
Number of Wells: 4738
Annual Production (in barrels): 5,653,341
State: California
Number of Wells: 26,650
Annual Production (in barrels): 57,124,547
State: Colorado
Number of Wells: 1,690
Annual Production (in barrels): 3,329,600
State: Illinois
Number of Wells: 29,942
Annual Production (in barrels): 25,983,900
State: Indiana
Number of Wells: 6,134
Annual Production (in barrels): 4,401,175
State: Kansas
Number of Wells: 45,749
Annual Production (in barrels): 46,664,820
State: Kentucky
Number of Wells: 16,433
Annual Production (in barrels): 6,630,134
State: Louisiana
Number of Wells: 16,500
Annual Production (in barrels): 9,844,000
State: Michigan
Number of Wells: 3,500
Annual Production (in barrels): 3,228,120
State: Mississippi
Number of Wells: 837
Annual Production (in barrels): 1,330,150
State: Missouri
Number of Wells: 548
Annual Production (in barrels): 270,395
State: Montana
Number of Wells: 3,085
Annual Production (in barrels): 2,577,082
State: Nebraska
Number of Wells: 1,707
Annual Production (in barrels): 2,974,420
State: New Mexico
Number of Wells: 14,749
Annual Production (in barrels): 15,016,044
State: New York
Number of Wells: 4,532
Annual Production (in barrels): 7,679,909
State: North Dakota
Number of Wells: 1,016
Annual Production (in barrels): 1,755,663
State: Ohio
Number of Wells: 25,129
Annual Production (in barrels): 10,639,770
State: Oklahoma
Number of Wells: 82,431
Annual Production (in barrels): 94,045,552
State: Pennsylvania
Number of Wells: 19,540
Annual Production (in barrels): 4,241,673
State: South Dakota
Number of Wells: 30
Annual Production (in barrels): 82,100
State: Tennessee
Number of Wells: 689
Annual Production (in barrels): 510,312
State: Texas
Number of Wells: 126,202
Annual Production (in barrels): 152,719,767
State: Utah
Number of Wells: 348
Annual Production (in barrels): 1,088,805
State: Virginia
Number of Wells: 32
Annual Production (in barrels): 27,239
State: West Virginia
Number of Wells: 15,200
Annual Production (in barrels): 3,270,000
State: Wyoming
Number of Wells: 5,020
Annual Production (in barrels): 7,118,844
(end of page 12) -
(page 1)
(this page's fields are filled-out with pencil)
(two markings in the following line are shorthand)
(markings) given out
MEMORANDUM OF CALL
TO:
summary
☐ YOU WERE CALLED BY_
☐ YOU WERE VISITED BY_
Bill Thorm
OF (Organization)
(this field is left blank)
("40722" in the following line is hand-written)
☐ PLEASE CALL→ PHONE NO. CODE/EXT. 40722
☐ WILL CALL AGAIN
☐ RETURNED YOUR CALL
☐ IS WAITING TO SEE YOU
☐ WISHES AN APPOINTMENT
MESSAGE
energy relief
hands out given
(three markings in the following line are shorthand)
out (markings)
42934
RECEIVED BY
(this field is left blank)
DATE
(this field is left blank)
TIME
(this field is left blank)
(end of page 1)
(page 2)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(the following line is underlined)
POSSIBLE LEGISLATIVE INITIATIVE
(the following line is underlined)
NON-TAX ITEMS
("Fuel Use Act" in the following line is underlined)
1. Fuel Use Act
Eliminate fuel use restrictions in Fuel Use Act. This would allow private parties to select fuel of choice. There are four bills in the Energy Committee. The issue may be put on the Committee markup agenda shortly.
(Would this provide perceptible short- to mid-term benefit to gas producers?)
("Strategic Petroleum Reserve" in the following line is underlined)
2. Strategic Petroleum Reserve
Fund strategic petroleum reserve at prior rates.
(Is it administratively possible to target purchases from independent producers and from outer continental shelf and frontier areas of Alaska?)
(Should the oil be purchased at a premium?)
(Should the cost be recouped by, e.g., a tax increase on motor fuels?)
(the following line is underlined)
TAX ITEMS
("Repeal the 50 Percent of Net Income Limitation" in the following line is underlined)
1. Repeal the 50 Percent of Net Income Limitation
This would allow percentage depletion deductions to offset more than 50 percent of the net income of eligible producing property. The change can be justified since net income has decreased, reducing the value of the deduction.
(Should the limitation trigger on or off based on oil prices?
("Repeal Proven Property Transfer Rule" in the following line is underlined)
2. Repeal Proven Property Transfer Rule
This would allow independent producers to use the percentage depletion method for proven producing property purchased from an integrated major producer. It would also allow such property to be eligible for exemption from the Windfall Profit Tax.
(end of page 2)
(page 3)
(this page is watermarked with the Great Seal of the United States above the text "1986")
-2-
("Permit Expensing of Geological and Geophysical Costs" in the following line is underlined)
3. Permit Expensing of Geological and Geophysical Costs
These costs of searching and testing for oil are capitalized under present law. However, they are ordinary and necessary costs of doing business which arguably should be deducted when incurred. If these costs were deductible, the cost of exploration would be reduced and paperwork would be reduced.
("Repeal Windfall Profit Tax" in the following line is underlined)
4. Repeal Windfall Profit Tax
Under realistic projections, the Windfall Profit Tax will raise no revenue over the next 5 years. Nevertheless, recordkeeping will cost oil producers substantial revenues. We could provide real economic relief to producers without reducing Federal revenues by repeal.
(the following line is underlined)
Additional Tax Items
("Repeal IDC Recapture Rule" in the following line is underlined)
1. Repeal IDC Recapture Rule
Gain on sale of a producing property is characterized as ordinary income to the extent of any intangible drilling costs previously taken.
("Marginal Production Tax Credit" in the following line is underlined)
2. Marginal Production Tax Credit
A tax credit could be provided for stripper and tertiary production when there is a net operating loss from a property.
(This could provide immediate relief. However, it might be difficult to gain sufficient support for the proposal, especially if relief is provided on a property-by-property basis.)
(end of page 3)
(page 4)
(this page is watermarked with the Great Seal of the United States above the text "1986")
("5:15p.m." in the following line is struck-through with pencil)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
(the following list of names is bulleted and marked "D" with pencil)
DOLE •
ARMSTRONG •
NICKLES •
KASSEBAUM •
WALLOP •
BAUCUS D
BENTSEN D
BOREN D
LONG D
PRYOR D
JOHNSTON D
(end of page 4)
(page 5)
(this page is watermarked with the Great Seal of the United States above the text "1986")
("5:15p.m." in the following line is struck-through with pencil)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
DOLE
ARMSTRONG
NICKLES
KASSEBAUM
WALLOP
BAUCUS
BENTSEN
BOREN
LONG
PRYOR
JOHNSTON
(end of page 5)
(page 6)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(this page is marked up with pencil)
(the following line is hand-written)
Wednesday
(the following line is struck-through)
TUESDAY, APRIL 15, 1986
(the following line is hand-written and struck-through)
5:45 p.m.
("5:15" in the following line is struck-through)
5:15 p.m. S-230 re: oil industry amendments
(the following two lines are hand-written to the right of the succeeding list; the following line is struck-through twice)
1:15
5:15 -
(the following list of names is marked up with pencil)
DOLE ✓
ARMSTRONG - wcb
OK NICKLES
OK KASSEBAUM 44774
OK WALLOP - wcb
OK BAUCUS -
OK BENTSEN -
OK BOREN - ✓
OK LONG - wcb
OK PRYOR -
(the following line is hand-written)
OK JOHNSTON - 40085
(the remainder of this page is hand-written with pencil)
Boren would like to add
(the following five lines are bracketed together)
Byrd
Ford
Riegle
Domenici
Cranston
(end of page 6)
(page 7)
(this page is watermarked with the Great Seal of the United States above illegible text)
(this page's fields are filled-out with red ink pen and with pencil)
Subject: oil industry amendment
Date: April 15, 1986
Time: 5:15
Location: S-230
(the following line is underlined)
REPUBLICAN LEADERSHIP
("•" in the following line is hand-written)
Senator: • ARMSTRONG
Position: Policy-Chairman
Invited: ✓
Yes: ✓
No: (this field is left blank)
Senator: CHAFEE
Position: Conference-Chairman
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: COCHRAN
Position: Conference-Secretary
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
("•" in the following line is hand-written)
Senator: • DOLE
Position: Majority Leader
Invited: ✓
Yes: ✓
No: (this field is left blank)
Senator: HEINZ
Position: Senatorial Comm.-Chairman
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: SIMPSON
Position: Asst. Majority Leader
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: THURMOND
Position: President Pro Tempore
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
(the following line is underlined)
COMMITTEE CHAIRMEN
Senator: ABDNOR
Committee: Joint Economic
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: ANDREWS
Committee: Select--Indian Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DANFORTH
Committee: Commerce
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DOMENICI
Committee: Budget
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DURENBERGER
Committee: Intelligence
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: GARN
Committee: Banking
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: GOLDWATER
Committee: Armed Services
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HATCH
Committee: Labor
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HATFIELD
Committee: Appropriations
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HEINZ
Committee: Special--Aging
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HELMS
Committee: Agriculture
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: LUGAR
Committee: Foreign Relations
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: MATHIAS
Committee: Rules & Administration
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: McCLURE
Committee: Energy
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: MURKOWSKI
Committee: Veterans Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: PACKWOOD
Committee: Finance
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: ROTH
Committee: Governmental Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: RUDMAN
Committee: Select--Ethics
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: STAFFORD
Committee: Environment
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: THURMOND
Committee: Judiciary
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: WEICKER
Committee: Small Business
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
(the following line is underlined)
Republicans
BOSCHWITZ
COHEN
D'AMATO
DENTON
EAST
EVANS
GORTON
GRAMM
GRASSLEY
HAWKINS
HECHT
HUMPHREY
("•" and "44774) in the following line is hand-written)
• KASSEBAUM 44774
KASTEN
LAXALT
MATTINGLY
McCONNELL
("OK •" and "45754" in the following line are hand-written)
OK • NICKLES 45754
PRESSLER
QUAYLE
SPECTER
STEVENS
SYMMS
TRIBLE
("OK •" and "Kathy 46441" in the following line are hand-written)
OK • WALLOP Kathy 46441
WARNER
("w.c.b." in the following line is hand-written)
w.c.b. WILSON
(the following line is underlined)
Democrats
("✓ •" and "44735 MAUREEN x2651" in the following line are hand-written; "44735" in the following line is struck-through)
✓ • BAUCUS 44375 MAUREEN x2651
("✓ •" and "45922" in the following line are hand-written; illegible text following "BENTSEN" and preceding "45922" is hand-written and struck-through repeatedly)
✓ • BENTSEN 45922
BIDEN
BINGAMAN
("✓ •" and "CAROLYN" in the following line are hand-written)
✓ • BOREN CAROLYN
BRADLEY
BUMPERS
BURDICK
BYRD
CHILES
CRANSTON
DeCONCINI
DIXON
DODD
EAGLETON
EXON
FORD
GLENN
GORE
HARKIN
HART
HEFLIN
HOLLINGS
INOUYE
("OK" in the following line is hand-written)
OK JOHNSTON
KENNEDY
KERRY
LAUTENBERG
("OK" in the following line is hand-written)
OK LEAHY
LEVIN
("w.c.b. •" and "0302 DOT 4623" in the following line are hand-written; "0302" in the following line is struck-through repeatedly)
w.c.b. • LONG 0302 DOT 4623
MATSUNAGA
MELCHER
METZENBAUM
MITCHELL
MOYNIHAN
NUNN
PELL
("2353" in the following line is hand-written)
PROXMIRE 2353
("OK •" and "7822 - LESLIE" in the following line are hand-written; "7822" in the following line is struck-through)
OK • PRYOR 7822 - LESLIE
RIEGLE
ROCKEFELLER
SARBANES
SASSER
SIMON
STENNIS
ZORINSKY
(the following line is underlined)
Administration:
(this field is left blank)
(end of page 7)
(page 8)
(this page is watermarked with the Great Seal of the United States above the text "1985")
("5:15p.m." in the following line is highlighted with yellow highlighter marker)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
DOLE
ARMSTRONG
NICKLES
KASSEBAUM
WALLOP
BAUCUS
BENTSEN
BOREN
LONG
PRYOR
JOHNSTON
(end of page 8)
(page 9)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(this page is a photocopy of a newspaper clipping)
Many Oil Producers Could Escape Tax Under Packwood Plan, Studies Indicate
By ALAN MURRAY
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON—Many successful independent oil producers would be able to escape all federal income tax under the tax plan pending in the Senate Finance Committee, according to government and private analyses.
Committee Chairman Bob Packwood (R., Ore.) has said the minimum tax in the overhaul plan he drafted is designed to be so stiff that "the General Electrics and the General Dynamics won't be able to escape taxes." But a large hole in that tax proposal would let many unincorporated independent oil producers with big incomes slip through easily, according to studies by the Treasury, the congressional Joint Tax Committee and private tax experts.
Oil producers have been given favorable treatment throughout the tax overhaul debate, in part because Treasury Secretary James Baker and influential members of the House Ways and Means Committee and the Senate Finance Committee come from oil-producing states. Falling oil prices also have increased congressional sympathy for oil producers.
The minimum tax, however, is being promoted as a device to ensure that no one with income escapes taxes altogether. "It's against our intention for anybody who has income to be able to zero out," says Finance Committee staff director William Diefenderfer.
But the Packwood plan retains an unusual feature of current law that Treasury and Joint Tax Committee experts have known for some time allows oil producers to escape the minimum tax as well as the regular income tax.
'Make Sure It Works'
"We don't do this sort of thing anyplace else in the minimum tax." said Ronald Pearlman, former assistant Treasury secretary for tax policy. "If we are going to tell the American people that we have a minimum tax that will make everyone pay a tax, we've got to make sure it works. Independent oil producers should be paying their fair share."
"It seems as though the oil guys are getting a free shot." agreed Joseph Minarik, a tax expert at the Urban Institute here.
Under the Packwood plan, as under current law, oil producers are allowed immediate write-offs for their so-called intangible drilling costs—costs associated with drilling new wells. In calculating whether a producer falls under the minimum tax, those write-offs would have to be stretched out over 10 years—but only to the extent that they exceeded the producer's net income from other oil and gas operations. Thus, an oil producer with a large amount of oil income but an equally large amount of intangible drilling costs wouldn't owe taxes under the regular tax system or under the alternative minimum tax.
Oil producers argue that the intangible drilling cost deduction is needed to provide an incentive for drilling new oil wells. And if Congress is going to provide that incentive, they say, there is no reason to turn around and take it away under the minimum tax.
An official for the American Petroleum Institute also notes that falling oil prices have cut back drilling severely and therefore will cut back intangible drilling deductions. "In the climate we're in, I don't think there are that many who will zero out," he says. And those that do zero out, he adds, "are probably losing money."
But the Packwood plan makes no such exceptions from the minimum tax for other industries that benefit from tax incentives. And while drilling may be depressed now, sooner or later it is almost certain to revive.
The tax plan proposed by President Reagan would subject 8% of a producer's intangible drilling costs to the minimum tax, regardless of the producer's income. The minimum tax plan in the tax bill passed by the House would require intangible drilling costs to be stretched out over 10 years to the extent they exceeded 65% of net oil and gas income. In either case, it would have been more difficult for oil and gas producers to escape tax altogether.
Provision for Corporations
The Packwood plan includes a provision that would tax corporations that reported book profits to their shareholders, even if they didn't owe any tax under either the regular tax system or the minimum tax. That provision would probably prevent oil-producing corporations from escaping taxes altogether. But unincorporated oil producers, which do the vast majority of the oil and gas drilling in the U.S., wouldn't be affected by that provision.
With oil prices dropping, and drilling for new wells coming to a near standstill. the intangible drilling costs provision of the Packwood plan would have little immediate significance. But once drilling resumes, it would allow many independent oil producers to continue to escape taxation.
(end of page 9)
(page 10)
(black and white portrait photograph of Senator David L. Boren)
NEWS
From U.S. Senator David L. Boren of Oklahoma
453 Russell Senate Office Building
Washington, D.C. 20510
Press Secretary: Barbara Webb
Assistant Press Secretary: Brett Wesner
(202) 224-4721
FOR IMMEDIATE RELEASE
THURSDAY, APRIL 10, 1986
Proposals offered by Senator David Boren (D-OK) in meeting today with Majority Leader Robert Dole and Finance Committee members Senators Malcolm Wallop (R-WY), Russell Long (D-LA), Lloyd Bentsen (D-TX), Max Baucus, (D-MT), William Armstrong, R-CO), and David Pryor, (D-AR).
MARGINAL PRODUCTION MAINTENANCE PROGRAM
1. Repeal "Transfer" Rule --- Current law provides that when an independent producer buys "proven" producing property from an integrated major that property is not eligible for the Windfall Profits Tax exemption or percentage depletion. Repeal of the transfer rule would allow independents to benefit from percentage depletion and any WPT exemption that may exist (assuming existence of a WPT). This would benefit both the integrated companies by encouraging them to sell uneconomic properties, rather than abandoning them, and provide additional incentives to independents to purchase and continue to produce these properties.
2. Repeal the 50 per cent of net income limitation --- Current law provides that the percentage depletion deduction is limited to not more than 50 per cent of the net income of an eligible producing property. Repeal of this section would stimulate additional cash flow to those producers who still have income producing properties.
3. Change the rate of percentage depletion --- Current law provides for a 15 per cent rate for percentage depletion. Increasing the rate would serve to increase cash flow to eligible independent producers, again assuming that the property is producing a net income. To spread the benefit of such a change, the definition of eligible producer should be expanded to include all producers and mineral owners of "marginal properties " (i.e., stripper and tertiary). This change would encourage the integrated producers to maintain their stripper production and not abandon these marginal wells.
One suggestion has been to relate the rate of percentage depletion to the price of crude oil. Thus, as the price of oil falls, the rate of percentage depletion increases up to a
(end of page 10)
(page 11)
-2-
maximum, and conversely, as the price rises the rate of percentage depletion falls to a minimum rate, say current law.
4. Marginal production tax credit --- This mechanism is intended to provide immediate and relatively substantial price support for "marginal" production (stripper and tertiary oil (as defined in Section 4991 (d) & (e) of the IRS Code). This is the production that is most vulnerable to volatile price swings. This proposal would establish a dollar for dollar tax credit for any net operating loss incurred in the above defined production. This net operating loss would be determined by the following formula:
Gross Revenues
Less:
Lease Operating Expenses
State Severance and Property Taxes
Dry hole costs
Depreciation
Allocation Overhead
NET INCOME FROM PROPERTY
It is expected that this dollar amount will average $1 to $2 per barrel and not exceed more than $2 to $3 per barrel. However, it might be necessary to set a maximum per barrel amount. In order to have maximum impact, the taxpayer must be allowed to carry back this credit for 10 years and forward for five years. This provision is expected to impact on only 10 to 15 per cent of total U.S. production. In 1985 there were approximately 452,000 stripper wells producing 2.8 b/d on the average.
Other options include a direct cash payment to the producer or some sort of credit against WPT paid. Either way, this credit mechanism or cash payment must count against regular income tax and any alternative minimum tax.
Effective Date: January 1, 1986
(end of page 11)
(page 12)
Marginal Production
-3-
State: Alabama
Number of Wells: 98
Annual Production (in barrels): 171,757
State: Arizona
Number of Wells: 14
Annual Production (in barrels): 29,034
State: Arkansas
Number of Wells: 4738
Annual Production (in barrels): 5,653,341
State: California
Number of Wells: 26,650
Annual Production (in barrels): 57,124,547
State: Colorado
Number of Wells: 1,690
Annual Production (in barrels): 3,329,600
State: Illinois
Number of Wells: 29,942
Annual Production (in barrels): 25,983,900
State: Indiana
Number of Wells: 6,134
Annual Production (in barrels): 4,401,175
State: Kansas
Number of Wells: 45,749
Annual Production (in barrels): 46,664,820
State: Kentucky
Number of Wells: 16,433
Annual Production (in barrels): 6,630,134
State: Louisiana
Number of Wells: 16,500
Annual Production (in barrels): 9,844,000
State: Michigan
Number of Wells: 3,500
Annual Production (in barrels): 3,228,120
State: Mississippi
Number of Wells: 837
Annual Production (in barrels): 1,330,150
State: Missouri
Number of Wells: 548
Annual Production (in barrels): 270,395
State: Montana
Number of Wells: 3,085
Annual Production (in barrels): 2,577,082
State: Nebraska
Number of Wells: 1,707
Annual Production (in barrels): 2,974,420
State: New Mexico
Number of Wells: 14,749
Annual Production (in barrels): 15,016,044
State: New York
Number of Wells: 4,532
Annual Production (in barrels): 7,679,909
State: North Dakota
Number of Wells: 1,016
Annual Production (in barrels): 1,755,663
State: Ohio
Number of Wells: 25,129
Annual Production (in barrels): 10,639,770
State: Oklahoma
Number of Wells: 82,431
Annual Production (in barrels): 94,045,552
State: Pennsylvania
Number of Wells: 19,540
Annual Production (in barrels): 4,241,673
State: South Dakota
Number of Wells: 30
Annual Production (in barrels): 82,100
State: Tennessee
Number of Wells: 689
Annual Production (in barrels): 510,312
State: Texas
Number of Wells: 126,202
Annual Production (in barrels): 152,719,767
State: Utah
Number of Wells: 348
Annual Production (in barrels): 1,088,805
State: Virginia
Number of Wells: 32
Annual Production (in barrels): 27,239
State: West Virginia
Number of Wells: 15,200
Annual Production (in barrels): 3,270,000
State: Wyoming
Number of Wells: 5,020
Annual Production (in barrels): 7,118,844
(end of page 12) -
(page 1)
(this page's fields are filled-out with pencil)
(two markings in the following line are shorthand)
(markings) given out
MEMORANDUM OF CALL
TO:
summary
☐ YOU WERE CALLED BY_
☐ YOU WERE VISITED BY_
Bill Thorm
OF (Organization)
(this field is left blank)
("40722" in the following line is hand-written)
☐ PLEASE CALL→ PHONE NO. CODE/EXT. 40722
☐ WILL CALL AGAIN
☐ RETURNED YOUR CALL
☐ IS WAITING TO SEE YOU
☐ WISHES AN APPOINTMENT
MESSAGE
energy relief
hands out given
(three markings in the following line are shorthand)
out (markings)
42934
RECEIVED BY
(this field is left blank)
DATE
(this field is left blank)
TIME
(this field is left blank)
(end of page 1)
(page 2)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(the following line is underlined)
POSSIBLE LEGISLATIVE INITIATIVE
(the following line is underlined)
NON-TAX ITEMS
("Fuel Use Act" in the following line is underlined)
1. Fuel Use Act
Eliminate fuel use restrictions in Fuel Use Act. This would allow private parties to select fuel of choice. There are four bills in the Energy Committee. The issue may be put on the Committee markup agenda shortly.
(Would this provide perceptible short- to mid-term benefit to gas producers?)
("Strategic Petroleum Reserve" in the following line is underlined)
2. Strategic Petroleum Reserve
Fund strategic petroleum reserve at prior rates.
(Is it administratively possible to target purchases from independent producers and from outer continental shelf and frontier areas of Alaska?)
(Should the oil be purchased at a premium?)
(Should the cost be recouped by, e.g., a tax increase on motor fuels?)
(the following line is underlined)
TAX ITEMS
("Repeal the 50 Percent of Net Income Limitation" in the following line is underlined)
1. Repeal the 50 Percent of Net Income Limitation
This would allow percentage depletion deductions to offset more than 50 percent of the net income of eligible producing property. The change can be justified since net income has decreased, reducing the value of the deduction.
(Should the limitation trigger on or off based on oil prices?
("Repeal Proven Property Transfer Rule" in the following line is underlined)
2. Repeal Proven Property Transfer Rule
This would allow independent producers to use the percentage depletion method for proven producing property purchased from an integrated major producer. It would also allow such property to be eligible for exemption from the Windfall Profit Tax.
(end of page 2)
(page 3)
(this page is watermarked with the Great Seal of the United States above the text "1986")
-2-
("Permit Expensing of Geological and Geophysical Costs" in the following line is underlined)
3. Permit Expensing of Geological and Geophysical Costs
These costs of searching and testing for oil are capitalized under present law. However, they are ordinary and necessary costs of doing business which arguably should be deducted when incurred. If these costs were deductible, the cost of exploration would be reduced and paperwork would be reduced.
("Repeal Windfall Profit Tax" in the following line is underlined)
4. Repeal Windfall Profit Tax
Under realistic projections, the Windfall Profit Tax will raise no revenue over the next 5 years. Nevertheless, recordkeeping will cost oil producers substantial revenues. We could provide real economic relief to producers without reducing Federal revenues by repeal.
(the following line is underlined)
Additional Tax Items
("Repeal IDC Recapture Rule" in the following line is underlined)
1. Repeal IDC Recapture Rule
Gain on sale of a producing property is characterized as ordinary income to the extent of any intangible drilling costs previously taken.
("Marginal Production Tax Credit" in the following line is underlined)
2. Marginal Production Tax Credit
A tax credit could be provided for stripper and tertiary production when there is a net operating loss from a property.
(This could provide immediate relief. However, it might be difficult to gain sufficient support for the proposal, especially if relief is provided on a property-by-property basis.)
(end of page 3)
(page 4)
(this page is watermarked with the Great Seal of the United States above the text "1986")
("5:15p.m." in the following line is struck-through with pencil)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
(the following list of names is bulleted and marked "D" with pencil)
DOLE •
ARMSTRONG •
NICKLES •
KASSEBAUM •
WALLOP •
BAUCUS D
BENTSEN D
BOREN D
LONG D
PRYOR D
JOHNSTON D
(end of page 4)
(page 5)
(this page is watermarked with the Great Seal of the United States above the text "1986")
("5:15p.m." in the following line is struck-through with pencil)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
DOLE
ARMSTRONG
NICKLES
KASSEBAUM
WALLOP
BAUCUS
BENTSEN
BOREN
LONG
PRYOR
JOHNSTON
(end of page 5)
(page 6)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(this page is marked up with pencil)
(the following line is hand-written)
Wednesday
(the following line is struck-through)
TUESDAY, APRIL 15, 1986
(the following line is hand-written and struck-through)
5:45 p.m.
("5:15" in the following line is struck-through)
5:15 p.m. S-230 re: oil industry amendments
(the following two lines are hand-written to the right of the succeeding list; the following line is struck-through twice)
1:15
5:15 -
(the following list of names is marked up with pencil)
DOLE ✓
ARMSTRONG - wcb
OK NICKLES
OK KASSEBAUM 44774
OK WALLOP - wcb
OK BAUCUS -
OK BENTSEN -
OK BOREN - ✓
OK LONG - wcb
OK PRYOR -
(the following line is hand-written)
OK JOHNSTON - 40085
(the remainder of this page is hand-written with pencil)
Boren would like to add
(the following five lines are bracketed together)
Byrd
Ford
Riegle
Domenici
Cranston
(end of page 6)
(page 7)
(this page is watermarked with the Great Seal of the United States above illegible text)
(this page's fields are filled-out with red ink pen and with pencil)
Subject: oil industry amendment
Date: April 15, 1986
Time: 5:15
Location: S-230
(the following line is underlined)
REPUBLICAN LEADERSHIP
("•" in the following line is hand-written)
Senator: • ARMSTRONG
Position: Policy-Chairman
Invited: ✓
Yes: ✓
No: (this field is left blank)
Senator: CHAFEE
Position: Conference-Chairman
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: COCHRAN
Position: Conference-Secretary
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
("•" in the following line is hand-written)
Senator: • DOLE
Position: Majority Leader
Invited: ✓
Yes: ✓
No: (this field is left blank)
Senator: HEINZ
Position: Senatorial Comm.-Chairman
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: SIMPSON
Position: Asst. Majority Leader
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: THURMOND
Position: President Pro Tempore
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
(the following line is underlined)
COMMITTEE CHAIRMEN
Senator: ABDNOR
Committee: Joint Economic
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: ANDREWS
Committee: Select--Indian Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DANFORTH
Committee: Commerce
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DOMENICI
Committee: Budget
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DURENBERGER
Committee: Intelligence
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: GARN
Committee: Banking
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: GOLDWATER
Committee: Armed Services
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HATCH
Committee: Labor
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HATFIELD
Committee: Appropriations
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HEINZ
Committee: Special--Aging
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HELMS
Committee: Agriculture
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: LUGAR
Committee: Foreign Relations
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: MATHIAS
Committee: Rules & Administration
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: McCLURE
Committee: Energy
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: MURKOWSKI
Committee: Veterans Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: PACKWOOD
Committee: Finance
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: ROTH
Committee: Governmental Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: RUDMAN
Committee: Select--Ethics
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: STAFFORD
Committee: Environment
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: THURMOND
Committee: Judiciary
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: WEICKER
Committee: Small Business
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
(the following line is underlined)
Republicans
BOSCHWITZ
COHEN
D'AMATO
DENTON
EAST
EVANS
GORTON
GRAMM
GRASSLEY
HAWKINS
HECHT
HUMPHREY
("•" and "44774) in the following line is hand-written)
• KASSEBAUM 44774
KASTEN
LAXALT
MATTINGLY
McCONNELL
("OK •" and "45754" in the following line are hand-written)
OK • NICKLES 45754
PRESSLER
QUAYLE
SPECTER
STEVENS
SYMMS
TRIBLE
("OK •" and "Kathy 46441" in the following line are hand-written)
OK • WALLOP Kathy 46441
WARNER
("w.c.b." in the following line is hand-written)
w.c.b. WILSON
(the following line is underlined)
Democrats
("✓ •" and "44735 MAUREEN x2651" in the following line are hand-written; "44735" in the following line is struck-through)
✓ • BAUCUS 44375 MAUREEN x2651
("✓ •" and "45922" in the following line are hand-written; illegible text following "BENTSEN" and preceding "45922" is hand-written and struck-through repeatedly)
✓ • BENTSEN 45922
BIDEN
BINGAMAN
("✓ •" and "CAROLYN" in the following line are hand-written)
✓ • BOREN CAROLYN
BRADLEY
BUMPERS
BURDICK
BYRD
CHILES
CRANSTON
DeCONCINI
DIXON
DODD
EAGLETON
EXON
FORD
GLENN
GORE
HARKIN
HART
HEFLIN
HOLLINGS
INOUYE
("OK" in the following line is hand-written)
OK JOHNSTON
KENNEDY
KERRY
LAUTENBERG
("OK" in the following line is hand-written)
OK LEAHY
LEVIN
("w.c.b. •" and "0302 DOT 4623" in the following line are hand-written; "0302" in the following line is struck-through repeatedly)
w.c.b. • LONG 0302 DOT 4623
MATSUNAGA
MELCHER
METZENBAUM
MITCHELL
MOYNIHAN
NUNN
PELL
("2353" in the following line is hand-written)
PROXMIRE 2353
("OK •" and "7822 - LESLIE" in the following line are hand-written; "7822" in the following line is struck-through)
OK • PRYOR 7822 - LESLIE
RIEGLE
ROCKEFELLER
SARBANES
SASSER
SIMON
STENNIS
ZORINSKY
(the following line is underlined)
Administration:
(this field is left blank)
(end of page 7)
(page 8)
(this page is watermarked with the Great Seal of the United States above the text "1985")
("5:15p.m." in the following line is highlighted with yellow highlighter marker)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
DOLE
ARMSTRONG
NICKLES
KASSEBAUM
WALLOP
BAUCUS
BENTSEN
BOREN
LONG
PRYOR
JOHNSTON
(end of page 8)
(page 9)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(this page is a photocopy of a newspaper clipping)
Many Oil Producers Could Escape Tax Under Packwood Plan, Studies Indicate
By ALAN MURRAY
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON—Many successful independent oil producers would be able to escape all federal income tax under the tax plan pending in the Senate Finance Committee, according to government and private analyses.
Committee Chairman Bob Packwood (R., Ore.) has said the minimum tax in the overhaul plan he drafted is designed to be so stiff that "the General Electrics and the General Dynamics won't be able to escape taxes." But a large hole in that tax proposal would let many unincorporated independent oil producers with big incomes slip through easily, according to studies by the Treasury, the congressional Joint Tax Committee and private tax experts.
Oil producers have been given favorable treatment throughout the tax overhaul debate, in part because Treasury Secretary James Baker and influential members of the House Ways and Means Committee and the Senate Finance Committee come from oil-producing states. Falling oil prices also have increased congressional sympathy for oil producers.
The minimum tax, however, is being promoted as a device to ensure that no one with income escapes taxes altogether. "It's against our intention for anybody who has income to be able to zero out," says Finance Committee staff director William Diefenderfer.
But the Packwood plan retains an unusual feature of current law that Treasury and Joint Tax Committee experts have known for some time allows oil producers to escape the minimum tax as well as the regular income tax.
'Make Sure It Works'
"We don't do this sort of thing anyplace else in the minimum tax." said Ronald Pearlman, former assistant Treasury secretary for tax policy. "If we are going to tell the American people that we have a minimum tax that will make everyone pay a tax, we've got to make sure it works. Independent oil producers should be paying their fair share."
"It seems as though the oil guys are getting a free shot." agreed Joseph Minarik, a tax expert at the Urban Institute here.
Under the Packwood plan, as under current law, oil producers are allowed immediate write-offs for their so-called intangible drilling costs—costs associated with drilling new wells. In calculating whether a producer falls under the minimum tax, those write-offs would have to be stretched out over 10 years—but only to the extent that they exceeded the producer's net income from other oil and gas operations. Thus, an oil producer with a large amount of oil income but an equally large amount of intangible drilling costs wouldn't owe taxes under the regular tax system or under the alternative minimum tax.
Oil producers argue that the intangible drilling cost deduction is needed to provide an incentive for drilling new oil wells. And if Congress is going to provide that incentive, they say, there is no reason to turn around and take it away under the minimum tax.
An official for the American Petroleum Institute also notes that falling oil prices have cut back drilling severely and therefore will cut back intangible drilling deductions. "In the climate we're in, I don't think there are that many who will zero out," he says. And those that do zero out, he adds, "are probably losing money."
But the Packwood plan makes no such exceptions from the minimum tax for other industries that benefit from tax incentives. And while drilling may be depressed now, sooner or later it is almost certain to revive.
The tax plan proposed by President Reagan would subject 8% of a producer's intangible drilling costs to the minimum tax, regardless of the producer's income. The minimum tax plan in the tax bill passed by the House would require intangible drilling costs to be stretched out over 10 years to the extent they exceeded 65% of net oil and gas income. In either case, it would have been more difficult for oil and gas producers to escape tax altogether.
Provision for Corporations
The Packwood plan includes a provision that would tax corporations that reported book profits to their shareholders, even if they didn't owe any tax under either the regular tax system or the minimum tax. That provision would probably prevent oil-producing corporations from escaping taxes altogether. But unincorporated oil producers, which do the vast majority of the oil and gas drilling in the U.S., wouldn't be affected by that provision.
With oil prices dropping, and drilling for new wells coming to a near standstill. the intangible drilling costs provision of the Packwood plan would have little immediate significance. But once drilling resumes, it would allow many independent oil producers to continue to escape taxation.
(end of page 9)
(page 10)
(black and white portrait photograph of Senator David L. Boren)
NEWS
From U.S. Senator David L. Boren of Oklahoma
453 Russell Senate Office Building
Washington, D.C. 20510
Press Secretary: Barbara Webb
Assistant Press Secretary: Brett Wesner
(202) 224-4721
FOR IMMEDIATE RELEASE
THURSDAY, APRIL 10, 1986
Proposals offered by Senator David Boren (D-OK) in meeting today with Majority Leader Robert Dole and Finance Committee members Senators Malcolm Wallop (R-WY), Russell Long (D-LA), Lloyd Bentsen (D-TX), Max Baucus, (D-MT), William Armstrong, R-CO), and David Pryor, (D-AR).
MARGINAL PRODUCTION MAINTENANCE PROGRAM
1. Repeal "Transfer" Rule --- Current law provides that when an independent producer buys "proven" producing property from an integrated major that property is not eligible for the Windfall Profits Tax exemption or percentage depletion. Repeal of the transfer rule would allow independents to benefit from percentage depletion and any WPT exemption that may exist (assuming existence of a WPT). This would benefit both the integrated companies by encouraging them to sell uneconomic properties, rather than abandoning them, and provide additional incentives to independents to purchase and continue to produce these properties.
2. Repeal the 50 per cent of net income limitation --- Current law provides that the percentage depletion deduction is limited to not more than 50 per cent of the net income of an eligible producing property. Repeal of this section would stimulate additional cash flow to those producers who still have income producing properties.
3. Change the rate of percentage depletion --- Current law provides for a 15 per cent rate for percentage depletion. Increasing the rate would serve to increase cash flow to eligible independent producers, again assuming that the property is producing a net income. To spread the benefit of such a change, the definition of eligible producer should be expanded to include all producers and mineral owners of "marginal properties " (i.e., stripper and tertiary). This change would encourage the integrated producers to maintain their stripper production and not abandon these marginal wells.
One suggestion has been to relate the rate of percentage depletion to the price of crude oil. Thus, as the price of oil falls, the rate of percentage depletion increases up to a
(end of page 10)
(page 11)
-2-
maximum, and conversely, as the price rises the rate of percentage depletion falls to a minimum rate, say current law.
4. Marginal production tax credit --- This mechanism is intended to provide immediate and relatively substantial price support for "marginal" production (stripper and tertiary oil (as defined in Section 4991 (d) & (e) of the IRS Code). This is the production that is most vulnerable to volatile price swings. This proposal would establish a dollar for dollar tax credit for any net operating loss incurred in the above defined production. This net operating loss would be determined by the following formula:
Gross Revenues
Less:
Lease Operating Expenses
State Severance and Property Taxes
Dry hole costs
Depreciation
Allocation Overhead
NET INCOME FROM PROPERTY
It is expected that this dollar amount will average $1 to $2 per barrel and not exceed more than $2 to $3 per barrel. However, it might be necessary to set a maximum per barrel amount. In order to have maximum impact, the taxpayer must be allowed to carry back this credit for 10 years and forward for five years. This provision is expected to impact on only 10 to 15 per cent of total U.S. production. In 1985 there were approximately 452,000 stripper wells producing 2.8 b/d on the average.
Other options include a direct cash payment to the producer or some sort of credit against WPT paid. Either way, this credit mechanism or cash payment must count against regular income tax and any alternative minimum tax.
Effective Date: January 1, 1986
(end of page 11)
(page 12)
Marginal Production
-3-
State: Alabama
Number of Wells: 98
Annual Production (in barrels): 171,757
State: Arizona
Number of Wells: 14
Annual Production (in barrels): 29,034
State: Arkansas
Number of Wells: 4738
Annual Production (in barrels): 5,653,341
State: California
Number of Wells: 26,650
Annual Production (in barrels): 57,124,547
State: Colorado
Number of Wells: 1,690
Annual Production (in barrels): 3,329,600
State: Illinois
Number of Wells: 29,942
Annual Production (in barrels): 25,983,900
State: Indiana
Number of Wells: 6,134
Annual Production (in barrels): 4,401,175
State: Kansas
Number of Wells: 45,749
Annual Production (in barrels): 46,664,820
State: Kentucky
Number of Wells: 16,433
Annual Production (in barrels): 6,630,134
State: Louisiana
Number of Wells: 16,500
Annual Production (in barrels): 9,844,000
State: Michigan
Number of Wells: 3,500
Annual Production (in barrels): 3,228,120
State: Mississippi
Number of Wells: 837
Annual Production (in barrels): 1,330,150
State: Missouri
Number of Wells: 548
Annual Production (in barrels): 270,395
State: Montana
Number of Wells: 3,085
Annual Production (in barrels): 2,577,082
State: Nebraska
Number of Wells: 1,707
Annual Production (in barrels): 2,974,420
State: New Mexico
Number of Wells: 14,749
Annual Production (in barrels): 15,016,044
State: New York
Number of Wells: 4,532
Annual Production (in barrels): 7,679,909
State: North Dakota
Number of Wells: 1,016
Annual Production (in barrels): 1,755,663
State: Ohio
Number of Wells: 25,129
Annual Production (in barrels): 10,639,770
State: Oklahoma
Number of Wells: 82,431
Annual Production (in barrels): 94,045,552
State: Pennsylvania
Number of Wells: 19,540
Annual Production (in barrels): 4,241,673
State: South Dakota
Number of Wells: 30
Annual Production (in barrels): 82,100
State: Tennessee
Number of Wells: 689
Annual Production (in barrels): 510,312
State: Texas
Number of Wells: 126,202
Annual Production (in barrels): 152,719,767
State: Utah
Number of Wells: 348
Annual Production (in barrels): 1,088,805
State: Virginia
Number of Wells: 32
Annual Production (in barrels): 27,239
State: West Virginia
Number of Wells: 15,200
Annual Production (in barrels): 3,270,000
State: Wyoming
Number of Wells: 5,020
Annual Production (in barrels): 7,118,844
(end of page 12) -
(page 1)
(this page's fields are filled-out with pencil)
(two markings in the following line are shorthand)
(markings) given out
MEMORANDUM OF CALL
TO:
summary
☐ YOU WERE CALLED BY_
☐ YOU WERE VISITED BY_
Bill Thorm
OF (Organization)
(this field is left blank)
("40722" in the following line is hand-written)
☐ PLEASE CALL→ PHONE NO. CODE/EXT. 40722
☐ WILL CALL AGAIN
☐ RETURNED YOUR CALL
☐ IS WAITING TO SEE YOU
☐ WISHES AN APPOINTMENT
MESSAGE
energy relief
hands out given
(three markings in the following line are shorthand)
out (markings)
42934
RECEIVED BY
(this field is left blank)
DATE
(this field is left blank)
TIME
(this field is left blank)
(end of page 1)
(page 2)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(the following line is underlined)
POSSIBLE LEGISLATIVE INITIATIVE
(the following line is underlined)
NON-TAX ITEMS
("Fuel Use Act" in the following line is underlined)
1. Fuel Use Act
Eliminate fuel use restrictions in Fuel Use Act. This would allow private parties to select fuel of choice. There are four bills in the Energy Committee. The issue may be put on the Committee markup agenda shortly.
(Would this provide perceptible short- to mid-term benefit to gas producers?)
("Strategic Petroleum Reserve" in the following line is underlined)
2. Strategic Petroleum Reserve
Fund strategic petroleum reserve at prior rates.
(Is it administratively possible to target purchases from independent producers and from outer continental shelf and frontier areas of Alaska?)
(Should the oil be purchased at a premium?)
(Should the cost be recouped by, e.g., a tax increase on motor fuels?)
(the following line is underlined)
TAX ITEMS
("Repeal the 50 Percent of Net Income Limitation" in the following line is underlined)
1. Repeal the 50 Percent of Net Income Limitation
This would allow percentage depletion deductions to offset more than 50 percent of the net income of eligible producing property. The change can be justified since net income has decreased, reducing the value of the deduction.
(Should the limitation trigger on or off based on oil prices?
("Repeal Proven Property Transfer Rule" in the following line is underlined)
2. Repeal Proven Property Transfer Rule
This would allow independent producers to use the percentage depletion method for proven producing property purchased from an integrated major producer. It would also allow such property to be eligible for exemption from the Windfall Profit Tax.
(end of page 2)
(page 3)
(this page is watermarked with the Great Seal of the United States above the text "1986")
-2-
("Permit Expensing of Geological and Geophysical Costs" in the following line is underlined)
3. Permit Expensing of Geological and Geophysical Costs
These costs of searching and testing for oil are capitalized under present law. However, they are ordinary and necessary costs of doing business which arguably should be deducted when incurred. If these costs were deductible, the cost of exploration would be reduced and paperwork would be reduced.
("Repeal Windfall Profit Tax" in the following line is underlined)
4. Repeal Windfall Profit Tax
Under realistic projections, the Windfall Profit Tax will raise no revenue over the next 5 years. Nevertheless, recordkeeping will cost oil producers substantial revenues. We could provide real economic relief to producers without reducing Federal revenues by repeal.
(the following line is underlined)
Additional Tax Items
("Repeal IDC Recapture Rule" in the following line is underlined)
1. Repeal IDC Recapture Rule
Gain on sale of a producing property is characterized as ordinary income to the extent of any intangible drilling costs previously taken.
("Marginal Production Tax Credit" in the following line is underlined)
2. Marginal Production Tax Credit
A tax credit could be provided for stripper and tertiary production when there is a net operating loss from a property.
(This could provide immediate relief. However, it might be difficult to gain sufficient support for the proposal, especially if relief is provided on a property-by-property basis.)
(end of page 3)
(page 4)
(this page is watermarked with the Great Seal of the United States above the text "1986")
("5:15p.m." in the following line is struck-through with pencil)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
(the following list of names is bulleted and marked "D" with pencil)
DOLE •
ARMSTRONG •
NICKLES •
KASSEBAUM •
WALLOP •
BAUCUS D
BENTSEN D
BOREN D
LONG D
PRYOR D
JOHNSTON D
(end of page 4)
(page 5)
(this page is watermarked with the Great Seal of the United States above the text "1986")
("5:15p.m." in the following line is struck-through with pencil)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
DOLE
ARMSTRONG
NICKLES
KASSEBAUM
WALLOP
BAUCUS
BENTSEN
BOREN
LONG
PRYOR
JOHNSTON
(end of page 5)
(page 6)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(this page is marked up with pencil)
(the following line is hand-written)
Wednesday
(the following line is struck-through)
TUESDAY, APRIL 15, 1986
(the following line is hand-written and struck-through)
5:45 p.m.
("5:15" in the following line is struck-through)
5:15 p.m. S-230 re: oil industry amendments
(the following two lines are hand-written to the right of the succeeding list; the following line is struck-through twice)
1:15
5:15 -
(the following list of names is marked up with pencil)
DOLE ✓
ARMSTRONG - wcb
OK NICKLES
OK KASSEBAUM 44774
OK WALLOP - wcb
OK BAUCUS -
OK BENTSEN -
OK BOREN - ✓
OK LONG - wcb
OK PRYOR -
(the following line is hand-written)
OK JOHNSTON - 40085
(the remainder of this page is hand-written with pencil)
Boren would like to add
(the following five lines are bracketed together)
Byrd
Ford
Riegle
Domenici
Cranston
(end of page 6)
(page 7)
(this page is watermarked with the Great Seal of the United States above illegible text)
(this page's fields are filled-out with red ink pen and with pencil)
Subject: oil industry amendment
Date: April 15, 1986
Time: 5:15
Location: S-230
(the following line is underlined)
REPUBLICAN LEADERSHIP
("•" in the following line is hand-written)
Senator: • ARMSTRONG
Position: Policy-Chairman
Invited: ✓
Yes: ✓
No: (this field is left blank)
Senator: CHAFEE
Position: Conference-Chairman
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: COCHRAN
Position: Conference-Secretary
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
("•" in the following line is hand-written)
Senator: • DOLE
Position: Majority Leader
Invited: ✓
Yes: ✓
No: (this field is left blank)
Senator: HEINZ
Position: Senatorial Comm.-Chairman
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: SIMPSON
Position: Asst. Majority Leader
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: THURMOND
Position: President Pro Tempore
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
(the following line is underlined)
COMMITTEE CHAIRMEN
Senator: ABDNOR
Committee: Joint Economic
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: ANDREWS
Committee: Select--Indian Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DANFORTH
Committee: Commerce
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DOMENICI
Committee: Budget
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: DURENBERGER
Committee: Intelligence
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: GARN
Committee: Banking
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: GOLDWATER
Committee: Armed Services
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HATCH
Committee: Labor
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HATFIELD
Committee: Appropriations
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HEINZ
Committee: Special--Aging
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: HELMS
Committee: Agriculture
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: LUGAR
Committee: Foreign Relations
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: MATHIAS
Committee: Rules & Administration
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: McCLURE
Committee: Energy
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: MURKOWSKI
Committee: Veterans Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: PACKWOOD
Committee: Finance
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: ROTH
Committee: Governmental Affairs
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: RUDMAN
Committee: Select--Ethics
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: STAFFORD
Committee: Environment
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: THURMOND
Committee: Judiciary
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
Senator: WEICKER
Committee: Small Business
Invited: (this field is left blank)
Yes: (this field is left blank)
No: (this field is left blank)
(the following line is underlined)
Republicans
BOSCHWITZ
COHEN
D'AMATO
DENTON
EAST
EVANS
GORTON
GRAMM
GRASSLEY
HAWKINS
HECHT
HUMPHREY
("•" and "44774) in the following line is hand-written)
• KASSEBAUM 44774
KASTEN
LAXALT
MATTINGLY
McCONNELL
("OK •" and "45754" in the following line are hand-written)
OK • NICKLES 45754
PRESSLER
QUAYLE
SPECTER
STEVENS
SYMMS
TRIBLE
("OK •" and "Kathy 46441" in the following line are hand-written)
OK • WALLOP Kathy 46441
WARNER
("w.c.b." in the following line is hand-written)
w.c.b. WILSON
(the following line is underlined)
Democrats
("✓ •" and "44735 MAUREEN x2651" in the following line are hand-written; "44735" in the following line is struck-through)
✓ • BAUCUS 44375 MAUREEN x2651
("✓ •" and "45922" in the following line are hand-written; illegible text following "BENTSEN" and preceding "45922" is hand-written and struck-through repeatedly)
✓ • BENTSEN 45922
BIDEN
BINGAMAN
("✓ •" and "CAROLYN" in the following line are hand-written)
✓ • BOREN CAROLYN
BRADLEY
BUMPERS
BURDICK
BYRD
CHILES
CRANSTON
DeCONCINI
DIXON
DODD
EAGLETON
EXON
FORD
GLENN
GORE
HARKIN
HART
HEFLIN
HOLLINGS
INOUYE
("OK" in the following line is hand-written)
OK JOHNSTON
KENNEDY
KERRY
LAUTENBERG
("OK" in the following line is hand-written)
OK LEAHY
LEVIN
("w.c.b. •" and "0302 DOT 4623" in the following line are hand-written; "0302" in the following line is struck-through repeatedly)
w.c.b. • LONG 0302 DOT 4623
MATSUNAGA
MELCHER
METZENBAUM
MITCHELL
MOYNIHAN
NUNN
PELL
("2353" in the following line is hand-written)
PROXMIRE 2353
("OK •" and "7822 - LESLIE" in the following line are hand-written; "7822" in the following line is struck-through)
OK • PRYOR 7822 - LESLIE
RIEGLE
ROCKEFELLER
SARBANES
SASSER
SIMON
STENNIS
ZORINSKY
(the following line is underlined)
Administration:
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(page 8)
(this page is watermarked with the Great Seal of the United States above the text "1985")
("5:15p.m." in the following line is highlighted with yellow highlighter marker)
WEDNESDAY, APRIL 16, 1986 S-230 5:15p.m.
re: oil industry
DOLE
ARMSTRONG
NICKLES
KASSEBAUM
WALLOP
BAUCUS
BENTSEN
BOREN
LONG
PRYOR
JOHNSTON
(end of page 8)
(page 9)
(this page is watermarked with the Great Seal of the United States above the text "1986")
(this page is a photocopy of a newspaper clipping)
Many Oil Producers Could Escape Tax Under Packwood Plan, Studies Indicate
By ALAN MURRAY
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON—Many successful independent oil producers would be able to escape all federal income tax under the tax plan pending in the Senate Finance Committee, according to government and private analyses.
Committee Chairman Bob Packwood (R., Ore.) has said the minimum tax in the overhaul plan he drafted is designed to be so stiff that "the General Electrics and the General Dynamics won't be able to escape taxes." But a large hole in that tax proposal would let many unincorporated independent oil producers with big incomes slip through easily, according to studies by the Treasury, the congressional Joint Tax Committee and private tax experts.
Oil producers have been given favorable treatment throughout the tax overhaul debate, in part because Treasury Secretary James Baker and influential members of the House Ways and Means Committee and the Senate Finance Committee come from oil-producing states. Falling oil prices also have increased congressional sympathy for oil producers.
The minimum tax, however, is being promoted as a device to ensure that no one with income escapes taxes altogether. "It's against our intention for anybody who has income to be able to zero out," says Finance Committee staff director William Diefenderfer.
But the Packwood plan retains an unusual feature of current law that Treasury and Joint Tax Committee experts have known for some time allows oil producers to escape the minimum tax as well as the regular income tax.
'Make Sure It Works'
"We don't do this sort of thing anyplace else in the minimum tax." said Ronald Pearlman, former assistant Treasury secretary for tax policy. "If we are going to tell the American people that we have a minimum tax that will make everyone pay a tax, we've got to make sure it works. Independent oil producers should be paying their fair share."
"It seems as though the oil guys are getting a free shot." agreed Joseph Minarik, a tax expert at the Urban Institute here.
Under the Packwood plan, as under current law, oil producers are allowed immediate write-offs for their so-called intangible drilling costs—costs associated with drilling new wells. In calculating whether a producer falls under the minimum tax, those write-offs would have to be stretched out over 10 years—but only to the extent that they exceeded the producer's net income from other oil and gas operations. Thus, an oil producer with a large amount of oil income but an equally large amount of intangible drilling costs wouldn't owe taxes under the regular tax system or under the alternative minimum tax.
Oil producers argue that the intangible drilling cost deduction is needed to provide an incentive for drilling new oil wells. And if Congress is going to provide that incentive, they say, there is no reason to turn around and take it away under the minimum tax.
An official for the American Petroleum Institute also notes that falling oil prices have cut back drilling severely and therefore will cut back intangible drilling deductions. "In the climate we're in, I don't think there are that many who will zero out," he says. And those that do zero out, he adds, "are probably losing money."
But the Packwood plan makes no such exceptions from the minimum tax for other industries that benefit from tax incentives. And while drilling may be depressed now, sooner or later it is almost certain to revive.
The tax plan proposed by President Reagan would subject 8% of a producer's intangible drilling costs to the minimum tax, regardless of the producer's income. The minimum tax plan in the tax bill passed by the House would require intangible drilling costs to be stretched out over 10 years to the extent they exceeded 65% of net oil and gas income. In either case, it would have been more difficult for oil and gas producers to escape tax altogether.
Provision for Corporations
The Packwood plan includes a provision that would tax corporations that reported book profits to their shareholders, even if they didn't owe any tax under either the regular tax system or the minimum tax. That provision would probably prevent oil-producing corporations from escaping taxes altogether. But unincorporated oil producers, which do the vast majority of the oil and gas drilling in the U.S., wouldn't be affected by that provision.
With oil prices dropping, and drilling for new wells coming to a near standstill. the intangible drilling costs provision of the Packwood plan would have little immediate significance. But once drilling resumes, it would allow many independent oil producers to continue to escape taxation.
(end of page 9)
(page 10)
(black and white portrait photograph of Senator David L. Boren)
NEWS
From U.S. Senator David L. Boren of Oklahoma
453 Russell Senate Office Building
Washington, D.C. 20510
Press Secretary: Barbara Webb
Assistant Press Secretary: Brett Wesner
(202) 224-4721
FOR IMMEDIATE RELEASE
THURSDAY, APRIL 10, 1986
Proposals offered by Senator David Boren (D-OK) in meeting today with Majority Leader Robert Dole and Finance Committee members Senators Malcolm Wallop (R-WY), Russell Long (D-LA), Lloyd Bentsen (D-TX), Max Baucus, (D-MT), William Armstrong, R-CO), and David Pryor, (D-AR).
MARGINAL PRODUCTION MAINTENANCE PROGRAM
1. Repeal "Transfer" Rule --- Current law provides that when an independent producer buys "proven" producing property from an integrated major that property is not eligible for the Windfall Profits Tax exemption or percentage depletion. Repeal of the transfer rule would allow independents to benefit from percentage depletion and any WPT exemption that may exist (assuming existence of a WPT). This would benefit both the integrated companies by encouraging them to sell uneconomic properties, rather than abandoning them, and provide additional incentives to independents to purchase and continue to produce these properties.
2. Repeal the 50 per cent of net income limitation --- Current law provides that the percentage depletion deduction is limited to not more than 50 per cent of the net income of an eligible producing property. Repeal of this section would stimulate additional cash flow to those producers who still have income producing properties.
3. Change the rate of percentage depletion --- Current law provides for a 15 per cent rate for percentage depletion. Increasing the rate would serve to increase cash flow to eligible independent producers, again assuming that the property is producing a net income. To spread the benefit of such a change, the definition of eligible producer should be expanded to include all producers and mineral owners of "marginal properties " (i.e., stripper and tertiary). This change would encourage the integrated producers to maintain their stripper production and not abandon these marginal wells.
One suggestion has been to relate the rate of percentage depletion to the price of crude oil. Thus, as the price of oil falls, the rate of percentage depletion increases up to a
(end of page 10)
(page 11)
-2-
maximum, and conversely, as the price rises the rate of percentage depletion falls to a minimum rate, say current law.
4. Marginal production tax credit --- This mechanism is intended to provide immediate and relatively substantial price support for "marginal" production (stripper and tertiary oil (as defined in Section 4991 (d) & (e) of the IRS Code). This is the production that is most vulnerable to volatile price swings. This proposal would establish a dollar for dollar tax credit for any net operating loss incurred in the above defined production. This net operating loss would be determined by the following formula:
Gross Revenues
Less:
Lease Operating Expenses
State Severance and Property Taxes
Dry hole costs
Depreciation
Allocation Overhead
NET INCOME FROM PROPERTY
It is expected that this dollar amount will average $1 to $2 per barrel and not exceed more than $2 to $3 per barrel. However, it might be necessary to set a maximum per barrel amount. In order to have maximum impact, the taxpayer must be allowed to carry back this credit for 10 years and forward for five years. This provision is expected to impact on only 10 to 15 per cent of total U.S. production. In 1985 there were approximately 452,000 stripper wells producing 2.8 b/d on the average.
Other options include a direct cash payment to the producer or some sort of credit against WPT paid. Either way, this credit mechanism or cash payment must count against regular income tax and any alternative minimum tax.
Effective Date: January 1, 1986
(end of page 11)
(page 12)
Marginal Production
-3-
State: Alabama
Number of Wells: 98
Annual Production (in barrels): 171,757
State: Arizona
Number of Wells: 14
Annual Production (in barrels): 29,034
State: Arkansas
Number of Wells: 4738
Annual Production (in barrels): 5,653,341
State: California
Number of Wells: 26,650
Annual Production (in barrels): 57,124,547
State: Colorado
Number of Wells: 1,690
Annual Production (in barrels): 3,329,600
State: Illinois
Number of Wells: 29,942
Annual Production (in barrels): 25,983,900
State: Indiana
Number of Wells: 6,134
Annual Production (in barrels): 4,401,175
State: Kansas
Number of Wells: 45,749
Annual Production (in barrels): 46,664,820
State: Kentucky
Number of Wells: 16,433
Annual Production (in barrels): 6,630,134
State: Louisiana
Number of Wells: 16,500
Annual Production (in barrels): 9,844,000
State: Michigan
Number of Wells: 3,500
Annual Production (in barrels): 3,228,120
State: Mississippi
Number of Wells: 837
Annual Production (in barrels): 1,330,150
State: Missouri
Number of Wells: 548
Annual Production (in barrels): 270,395
State: Montana
Number of Wells: 3,085
Annual Production (in barrels): 2,577,082
State: Nebraska
Number of Wells: 1,707
Annual Production (in barrels): 2,974,420
State: New Mexico
Number of Wells: 14,749
Annual Production (in barrels): 15,016,044
State: New York
Number of Wells: 4,532
Annual Production (in barrels): 7,679,909
State: North Dakota
Number of Wells: 1,016
Annual Production (in barrels): 1,755,663
State: Ohio
Number of Wells: 25,129
Annual Production (in barrels): 10,639,770
State: Oklahoma
Number of Wells: 82,431
Annual Production (in barrels): 94,045,552
State: Pennsylvania
Number of Wells: 19,540
Annual Production (in barrels): 4,241,673
State: South Dakota
Number of Wells: 30
Annual Production (in barrels): 82,100
State: Tennessee
Number of Wells: 689
Annual Production (in barrels): 510,312
State: Texas
Number of Wells: 126,202
Annual Production (in barrels): 152,719,767
State: Utah
Number of Wells: 348
Annual Production (in barrels): 1,088,805
State: Virginia
Number of Wells: 32
Annual Production (in barrels): 27,239
State: West Virginia
Number of Wells: 15,200
Annual Production (in barrels): 3,270,000
State: Wyoming
Number of Wells: 5,020
Annual Production (in barrels): 7,118,844
(end of page 12)
Position: 1916 (8 views)