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DOI Relaxes Stripper Well Rules
The Independent Petroleum Association of America (IPAA) praisedthe action of Interior Secretary Bruce Babbit in allowing marginaloil well operators producing on public lands to suspend operationsfor up to two years without losing their leases. The announcementcame Thursday on the heels of the release of an IPAA survey showinghistorically low oil prices have increased the number of shut-insand the industry unemployment rate.
“This will help alleviate the economic impact low oil prices mayhave on small federal stripper (less than 15 b/d) oil operations,”Babbit said. The suspension of operations waiver will apply tothose properties that are qualified to receive stripper royaltyrate reduction. Only those properties where producible wells on thelease are classified as oil wells qualify for the suspension. Otherwell operators may apply for the relief on a case-by-case basis.
IPAA’s survey showed 16,147 crude oil producing wells were shutin in 1997 with 72 million barrels of production lost and 8,226natural gas wells were shut in with 13.1 Bcf of production lost.Also, 3,093 jobs were lost. The IPAA membership survey turned up720 responses from companies accounting for 11.9% of U.S. crude oilwells and 14.2% of natural gas wells. Extrapolating the response tothe full universe, the producers group estimated 136,132 crudewells and 57,958 natural gas wells have been shut in sinceNovember, 1997 when crude prices tanked. It projects additionalshut-ins as long as oil prices remain at an average $14 a barrel.The average price in 1998 was about $11.25 a barrel, IPAAcalculated.
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