Energy Secretary John Herrington hasproposed 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.
   
 Reuter
