IPA says congressional approval of loan guarantees will aid industry recovery

Congressional approval of a new federal loan-guarantee program will boost producers' ability to keep current and bring new oil and gas resources to the American market, according to George Yates, chairman of the Independent Petroleum Association of America and president, Harvey E. Yates Company.
"The resounding vote for the program acknowledges the key role that domestic oil and gas play in sustaining U.S. economic success," he said. "Independent producers and service companies were devastated by 18 months of historically low oil prices," Yates explained. "Our industry has shrunk by 15 %; production has dropped precipitously; and the capital available to sink new wells has dried up."
"It's important to recognise that even with prices hovering around $ 20 per barrel, the crisis for the independent oil producer is not over by a long shot. We've lost an entire investment cycle."
"With U.S. oil reserves being depleted faster than ever before as consumer demand continues to rise, current production must be maintained, more discoveries are needed and more technology is required to improve existing productivity. This requires money. For eighteen months, the money has not been available for reinvestment."
"These loan guarantees will help us recover from the severe damage we have sustained by making alternative capital sources available to some producers and service companies," he concluded, as he extended thanks to the industry's many congressional supporters including Senators Pete Domenici (R-N.M.) and Robert Byrd (D-W.Va.) and Representatives Ralph Regula (R-Ohio), Robert Aderholt (R-Ala.), Charlie Stenholm (D-Texas) and Jim Turner (D-Texas).

The loan guarantee has enjoyed strong bipartisan support in both the House and Senate. President Clinton is expected to sign it into law.
Under the new program, independent petroleum producers and small business service companies will be able to borrow up to $ 10 mm each until total loans reach $ 500 mm. The bill provides a government-backed repayment guarantee for 85 % of each loan, meaning that commercial lenders will be able to offer more lenient terms than they would otherwise make available.
The loan guarantee program is an important component of a broader relief package IPAA has been advocating since oil prices dropped in November of 1997. The Commerce Secretary, the Federal Reserve Chairman and the Securities and Exchange Commission Chairman will serve on a board to oversee the program.
Federal Reserve Chairman Alan Greenspan will serve as chairman of the loan guarantee board. The bill also provides loan guarantees up to $ 1 bn for steel producers. "We urge President Clinton to sign this important bill. It is imperative that the loan guarantee program created by this legislation be implemented quickly," said Yates.