U.S. Department of Energy SecretaryJohn Herrington said he was "optimistic" about the chances of
providing a more generous depletion allowance for oil and gas
producers, but added that the plan faces strong opposition from
some members of the Reagan administration.
    Herrington, speaking to Houston oil executives at a
breakfast meeting, said administration debate over his plan for
a 27.5 pct annual depletion allowance was "heavy and strong"
largely because of some fears that the U.S. oil industry could
eventually become as dependent on federal subsidies as the
agriculture industry.
    Herrington's proposed tax incentives for the oil industry
were issued last week after the Department of Energy released a
comprehensive report finding U.S. national security could be
jeopardized by rising oil imports.
    In response to a question from Mitchell Energy and
Development Corp &lt;MND> chairman, George Mitchell, Herrington
said the report did not definitively rule out an oil import
tarrif. "We intend to keep that debate open," Herrington said.
    However, following his speech, Herrington told Reuters that
the new report shows an oil import fee "is not economical."
    Herrington said, for example, a 10 dlr per barrel tariff on
oil imports would cause the nation's gross national product to
drop by as much as 32 billion dlrs.
    Herrington also said he believed President Reagan, who
requested the comprehensive national security study, was
committed to some action to help the ailing U.S. oil industry.
    "I'm quite confident he understands the problems and is
prepared to do something about it," Herrington said.
 Reuter
