ENERGY/U.S. OIL OUTPUT

  Energy Secretary John Herrington has
  proposed several ways to boost U.S. oil production, but he said
  all would cost the Treasury money and will come under close
  White House scrutiny before action is taken.
      One measure he said he favored would raise the depletion
  allowance to 27.5 pct on new oil and gas production as well as
  production using enhanced extraction methods.
      Herrington said such a plan would cost 200 mln dlrs a year.
  The White House, reacting, said it did not favor amending the
  tax code, but would look at the proposal.
      Herrington's proposals to spur production were made along
  with the release last week of the energy department's report on
  energy and the national security.
      The report said U.S. oil imports, rapidly rising, could hit
  50 pct by the mid 1990s and have potentially damaging
  implications for national security.
      He has said since in speeches and at news conferences that
  any plan he would back to spur lagging domestic oil production
  would have to meet three criteria--increase production, not
  cause economic dislocation, and be low cost to the taxpayer.
      Herrington said an import fee would meet the first test,
  spurring production but fail the second and third.
      He said it would raise production and return 120,000 oil 
  workers to their jobs, but at the same time it lifted oil
  prices, the higher prices would cost 400,000 jobs nationwide
  and cut the gross national product by 32 billion dlrs.
      A tax on gasoline, he said, would fail the first criteria
  by not increasing domestic production.
      In any case, U.S. officials say, President Reagan remains
  firmly opposed to an import fee and a gasoline tax.
      Options which meet Herrington's criteria include:
      - Loan-price guarantees to shield banks from defaults by
  borrowers because of lower oil prices. It was estimated that if
  oil fell to five dlrs a barrel it could trigger defaults that
  could cost the government an estimated 15 billion dlrs.
      - A five pct tax credit for exploration and development. It
  would raise oil and gas production the equivalent of 325,000
  barrels a day, at a cost of 740 mln dlrs a year.
      - A five pct credit only for geological and geophysical
  expenditures. It would increase production by 80,000 barrels a
  day, at a cost of 65 mln dlrs.
      - Lower bid minimums on outer continental shelf acreage to
  spur exploration. A drop from the present 150 dlrs per acre for
  the typical 5,760 acre tract to 25 dlrs per acre would lower
  the cost of the standard tract lease to 144,000 dlrs.
      Herrington also pressed anew for existing Administration
  proposals to deregulate natural gas, which he said would cut
  the need for imported oil by 300,000 barrels daily.
      He also called again for Congressional approval to explore
  off the continental shelf, which may hold more than 12 billion
  barrels of oil, and the Arctic National Wildlife Refuge, which
  may hold nine billion barrels.
      Herrington said he understood the Reagan's reluctance to 
  amend the newly enacted tax code to fund some of these
  proposals, but added he hoped his department's energy/security
  study would make a strong case for the need to help the
  struggling domestic oil industry.
      Another move Herrington said he will press anew, even
  though it had been rejected earlier by the White House, is to
  raise the fill-rate for the Strategic Petroleum Reserve to
  100,000 barrels a day from its planned 1988 rate of 35,000.
      This, he said, would further bolster national security in
  case of an oil-supply disruption.
  

