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DOI Secretary Babbit Relaxes Stripper Well Rules

DOI Secretary Babbit Relaxes Stripper Well Rules

The Independent Petroleum Association of America (IPAA) praised the action of Interior Secretary Bruce Babbit in allowing marginal oil well operators producing on public lands to suspend operations for up to two years without losing their leases. The announcement came Thursday on the heels of the release of an IPAA survey showing historically low oil prices have increased the number of shut-ins and the industry unemployment rate.

"This will help alleviate the economic impact low oil prices may have on small federal stripper (less than 15 b/d) oil operations," Babbit said. The suspension of operations waiver will apply to those properties that are qualified to receive stripper royalty rate reduction. Only those properties where producible wells on the lease are classified as oil wells qualify for the suspension. Other well operators may apply for the relief on a case-by-case basis.

IPAA's survey showed 16,147 crude oil producing wells were shut in in 1997 with 72 million barrels of production lost and 8,226 natural gas wells were shut in with 13.1 Bcf of production lost. Also, 3,093 jobs were lost. The IPAA membership survey turned up 720 responses from companies accounting for 11.9% of U.S. crude oil wells and 14.2% of natural gas wells. Extrapolating the response to the full universe, the producers group estimated 136,132 crude wells and 57,958 natural gas wells have been shut in since November, 1997 when crude prices tanked. It projects additional shut-ins as long as oil prices remain at an average $14 a barrel. The average price in 1998 was about $11.25 a barrel, IPAA calculated. Ellen Beswick

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