IPAA survey: Regulation becoming more burdensome for oil, gas independents

Regulations over the past 5 years have made operations more complex for independent oil and gas producers, according to a recent survey, Profile of Independent Producers 2012-13, released by the Independent Petroleum Association of America.

A vast majority of respondents indicated that regulations have resulted in increased administrative costs, with 48% reporting slight increases and 43% reporting significant increases.

Air pollution standards represented the most pressing concern for independents, as 33% said it has the largest impact on operations while 35% said it had the second-largest impact on operations.

The survey follows a recent analysis of regulation published in April by the Competitive Enterprise Institute indicating that the estimated cost of regulation nation-wide in 2013 totaled $1.863 trillion, 11.1% of estimated gross domestic product (OGJ Online, May 2, 2014).

Meanwhile, independents named the deductibility of intangible drilling costs (IDCs) as their most important tax consideration for business operations. Fifty-seven percent of respondents said that IDCs were the most important tax issue for their business and 24% said IDCs were their second or third most important tax issue.

Independents’ heavy reliance on IDCs was illustrated by two thirds reporting that their capital budgets would decrease by 20% or more if IDCs were repealed. Median capital annual capital expenditures for independents reached $30 million in 2012, with plans to spend $32 million in 2013 and $25 million in 2014.

Defining ‘independents’

An independent producer, according to Internal Revenue Code section 613A(d), does not exceed $5 million in retail oil and gas sales in a year or does not refine more than an average of 75,000 b/d of crude oil during a year.

A survey conducted by IHS in 2010 shows that independents develop 95% of US oil and gas wells, produce 54% of US oil, and produce 85% of US natural gas.

The average firm for responding independents in 2012 was comprised of 246 full-time employees and 15 part-time employees. However, IPAA notes that these figures were skewed by several very large firms, as the median-size firm consisted of 12 full-time and two part-time employees.

The notion that smaller oil and gas companies are rugged upstarts is somewhat diminished by the fact that just one third of respondents have been in business for 10 years or fewer. The average respondent has been in business for 23 years.

A fourth of respondents were publicly traded firms, and 31.3% of respondents were structured as LLCs, 27.3% as S corporations, and 12.9% as limited partnerships. The amount of independents structured as LLCs has more than tripled since 2009.

Domestic operations

Typical with an overall national trend, independent respondents made heavy use of hydraulic fracturing and horizontal drilling in 2012. Fifty-five percent of wells drilled during the year were fraced and 41% were drilled horizontally.

However, 52.6% of production still came from conventional oil, while just 21.9% came from conventional gas. Just 11.5% of independents’ production came from unconventional oil and 14% from unconventional gas.

That compares with 67.2% of overall gas production and 34.7% of overall oil production from unconventional resources across the entire US, regardless of producer profile.

Independents have mostly shied away from using public resources, citing government regulations as significant obstruction. An average of 9.9% of total US production for respondents occurred on federal lands, with just 5.9% operated in federal waters, and 10.6% operated in state waters.

In comparison, 26.2% of total crude oil and lease condensate production and 17.8% of natural gas production occurred on federal lands in 2012.

A total of just 7.3% of responding firms reported participating in international operations, compared with 10.8% in 2008-09 and 11.6% in 2000, primarily due to capital constraints and a lack of expertise.

Related Articles

Inhofe, Lankford say new BIA rules threaten Osage oil operations

07/10/2015 New US Bureau of Indian Affairs regulations that increase production expenses on tribal lands could put the Osage Nation out of business, Oklahoma’...

House panel’s crude export ban hearing weighs urgency against caution

07/10/2015 A US House Energy and Commerce subcommittee hearing on legislation to repeal the ban on exporting US-produced crude oil quickly broke along party l...

Chevron Phillips Chemical makes executive appointments


Chevron Phillips Chemical Co. LLC has made several executive appointments, all effective Aug. 1.

Twelve workers killed in Nigeria pipeline explosion

07/10/2015 Eni SPA reported that an explosion occurred July 9 at the repair site for the Tebidaba-Clough Creek oil pipeline in Nigeria’s onshore Niger Delta.

Gov. Tomblin forms West Virginia oil, gas safety commission

07/10/2015 West Virginia Gov. Earl Ray Tomblin (D) established the oil and gas safety commission he announced in his 2015 State of the State address. The grou...

MARKET WATCH: NYMEX, Brent crude oil prices rebound more than $1/bbl

07/10/2015 Prices for US light, sweet crude oil and Brent crude each rebounded by more than $1/bbl on their respective markets July 9, and analysts attributed...

Transco seeks FERC approval for New York Bay Expansion project

07/09/2015 Transcontinental Gas Pipe Line Co. LLC (Transco), a wholly owned subsidiary of Williams Partners LP, has filed an application with the US Federal E...

House Oversight panel subpoenas Kerry for Keystone XL documents

07/09/2015 The US House Oversight and Government Reform Committee issued a subpoena to US Sec. of State John F. Kerry for reports, recommendations, letters, a...

MARKET WATCH: NYMEX crude oil prices drop for fifth consecutive trading session

07/09/2015 US light, sweet crude oil prices settled slightly lower on the New York market July 8 for the fifth consecutive trading session, and analysts attri...
White Papers

Definitive Guide to Cybersecurity for the Oil & Gas Industry

In the Oil and Gas industry, there is no single adversary and no single threat to the information tech...

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by
Available Webcasts

Better Data, Better Analytics, Better Decisions

When Tue, Oct 27, 2015

The Oil & Gas industry has large amounts of data stored in multiple systems which are purpose built for certain tasks. However, good decisions require insights based upon the data in all of these systems. These systems in turn do not talk to each other. So the process of analyzing data, gaining insights, and making decisions is a slow one and often a flawed one. Good decisions require accurate analytics and accurate analytics require superior/sustainable data quality and governance. This webinar focuses on:

  • The importance of data quality and governance
  • How technological advances are making data quality and governance sustainable in order to get the accurate analytics to make solid decisions.

Please join us for this webcast sponsored by Seven Lakes Technologies and Noah Consulting.


Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected