Nearly lost in the energy issue shuffle as Congress took its August recess was a bill its sponsors say could slow the domestic oil and gas production decline.
US Sen. James M. Inhofe (R-Okla.) and Rep. Dan Boren (D-Okla.) each introduced the Marginal Well Production Preservation and Enhancement Act on their respective sides of the Capitol on July 31. The bill aims to streamline and clarify regulations, prolong economic feasibility and enhance production volumes from US marginal or stripper wells, its sponsors said.
Individually, these wells recover less than 10 b/d of oil or 75 Mcfd of gas, according to the National Stripper Well Association. But there are 400,000 of them in 36 states, producing almost 20% of the nation’s oil and gas, the Tulsa group said.
Inhofe noted that a producing well provides state and federal taxes, pays royalties to land and mineral owners, “and keeps jobs and dollars on American soil and in American pockets. A plugged well provides none of this.”
Smaller independents
“The producers who operate marginal wells are small independents that assist local and state economies. This bill ensures that the nation’s policies recognize the economic importance and energy contribution of marginal well production,” Boren said.
The bill would increase the percentage depletion allowance for marginal wells from 15% to the historical rate of 27.5%, exclusive of daily production levels. This provision would not be available for major oil companies, the sponsors noted.
Another provision, which majors could not use, would permanently eliminate the net income limitation on percentage depletion. Congress temporarily suspended that on a recurring basis beginning in 1998 after recognizing that it discourages investing to maintain marginal wells. The current suspension expired in 2007.
Other provisions
Inhofe and Boren noted that their bill clarifies a Clean Air Act provision that keeps the US Environmental Protection Agency from aggregating emissions from exploration and production equipment, pipeline compressors, and pump stations under the law’s hazardous air pollutants section. It also would make clear congressional intent to not aggregate emissions from small engines and other E&P-related equipment.
The two lawmakers said the bill also would amend the federal Water Pollution Control Act by defining produced water tanks as water treatment facilities in a manner similar to other industries. In addition, it would provide regulatory relief to small facilities with less than 50,000 gal of oil storage capacity and no single tank of more than 21,000 gal capacity.
Associations and state agencies applauded the bill. “It will allow operators to offset the rising cost of operations while making it possible to reinvest in new development of domestic oil and gas,” said James M. Revard, executive director of Oklahoma’s Commission on Marginally Producing Oil and Gas Wells.
