American Oil and Gas Reporter - August 2015 - 154

The emphasis for lifting the ban on exporting U.S. crude oil has shifted from the
Obama administration to the Congress,
IPAA Vice President of Government Relations Lee Fuller advises members during the cooperating associations midyear
meeting session, June 24 in Santa Fe,
N.M.

you get less return, which hurts low-income students."
He said www.divestmentfacts.com
would provide factual information on the
divestment campaign as well as launch
IPAA's own studies and fact sheets "on
how this movement does not impact climate change, but could hurt student scholarship funds, financial aid and academic
programs."

Tax Reform
Federal tax reform is a "fairly dormant
issue," Vice President of Government
Relations Lee Fuller advised sessions of
IPAA's cooperating associations on June
24 and Crude Oil and Tax committees
again on June 26.
Fuller recalled that toward the end of the
113th Congress, then House Ways and
Means Chairman David Camp, R-Mi., presented a tax reform plan that retained the deduction for intangible drilling costs, but repealed percentage depletion while lowering
corporate and individual tax rates. Camp's
proposal didn't address specifically other issues of concern to the oil and gas industry,
"but I think you could assume they largely
were intended for repeal," Fuller surmised.
If and when Congress revisits comprehensive tax reform, Fuller said IPAA
was hopeful Camp's plan would be the
starting point, "which would mean IDCs
wouldn't have to be redebated and we
could focus on percentage depletion and
the passive loss exception."
Regarding percentage depletion, Fuller
said IPAA was working with other extractive industries such as hard rock mining,
for which depletion was even more critical, letting them take the lead to "press its
importance for capital formation and

broaden the base of support so the focus
isn't on oil and gas only."
He did note that industry studies to date
compared the impact of losing depletion
with current law, rather than in the context
of fewer deductions with lower tax rates.
"So our ability to engage in that debate will
require us to have more information on the
impact of losing percentage depletion in
that context," he said.
However, he reiterated, "Tax reform is
a back burner issue (for lawmakers) right
now. I don't think that is likely to change
in this Congress. The administration doesn't have much interest in trying to move
something, either. In the limited time
(President Obama) has left, he wants to
deal with climate and trade issues more
than anything else."

Crude Oil Exports
On crude oil exports, Fuller recalled that
a year ago, the primary focus was trying
to get the Obama administration, which has
the authority to ease or even lift the export
ban, to do so. That resulted, he noted, in
the Department of Commerce creating a
framework by which lightly distilled condensate could be exported as a petroleum
product without an individual permit.
However, "That part of the equation has
closed considerably," Fuller acknowledged. "Within the administration, there
is a tension between the energy, world security and economic advisers and the environmental advisers (who oppose exports
based on the belief it continues to feed the
world's addiction to 'dirty fossil fuels'),"
he observed. "Right now, the environmental advisers have the upper hand."
Following the Republican Party's gains
in last year's elections, Fuller said the focus had shifted to Congress.
One of export proponents' two primary
arguments, he cited, is research by the U.S.
Energy Information Administration and
numerous private analysts that "consistently demonstrates a huge number of economic benefits to the country. And because
gasoline is priced off the world oil
price-i.e., Brent crude-exports would
tend to suppress gasoline prices."
Nevertheless, it is a hard political sell,
Fuller allowed, because of politicians' concerns about higher gasoline prices.
The second argument for exporting
crude, Fuller continued, is that it would
strengthen the United States' position in
world oil markets and weaken its adversaries'-primarily Russia. "Our European
allies need to be more vocal about needing U.S. crude than they have been so far,"
he said.
Dan Naatz, IPAA's vice president of
federal resources and political affairs, assured members crude oil exports were the

154 THE AMERICAN OIL & GAS REPORTER

association's top legislative priority. "But
we have to be strategic," he cautioned. If
you shoot too early, everybody scatters."
The key, most likely, will be the Senate, Fuller suggested, adding it probably
would be necessary to acquire 60 votes to
move legislation.
He said he didn't expect meaningful action until later in the year with Congress
focused on appropriations before then, although he quickly stipulated, "Sometimes these big omnibus bills create lightning strike opportunities that aren't apparent in the beginning."

Regulatory Matters
Turning to a couple regulatory issues,
Fuller noted the Environmental Protection
Agency and the Army Corps of Engineers
had released their expanded definition of
"waters of the United States" in May.
"There have been efforts to stop that
legislatively," he said, pointing to the Energy and Water Development and Related Agencies Appropriations Bill, and a
stand-alone bill, HR 1732, the Regulatory Integrity Protection Act, which both
passed the House in May. However, he
said either bill would be vetoed in the unlikely event it got through the Senate.
He said IPAA had been working with
other industries to formulate a litigation
strategy. "This works best if broad interests are involved to avoid the debate focusing on the oil industry," Fuller surmised.
He added that IPAA was seeking input
from its members on how the rule would affect them, "both for litigation purposes, and
to reach out to EPA for further explanations
so we can better guide compliance, depending on what happens with litigation."
He also brought up EPA's four-year
study on the effects of hydraulic fracturing on drinking water, which was released
in June (see "Agency Finds Scant Impact
To Water," AOGR, July 2015, pg. 40).
"Environmentalists have been trying desperately to find some way to undermine the
bottom line conclusions," Fuller mused.
Naatz urged members not to underestimate the study's significance. "Four
years, guys," he exulted. "EPA can find
anything it wants at some point, but it
couldn't find anything (to incriminate
fracturing). It is important to take a bit of
a victory lap. EPA looked everywhere,
took time extensions, and looked and
looked, and there is nothing. We need to
keep talking about that. It is important."
Pipeline Safety
Also important, according to a discussion that took place June 26 during IPAA's
Natural Gas Committee meeting, is a notice of proposed rule making on pipeline
safety anticipated in August from the

American Oil and Gas Reporter - August 2015

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