The Bureau of Land Management last week issued a final rule cutting its royalty rate on stripper well production.
Although stripper wells represent 15,000 of the 22,000 wells on federal land, they are responsible for only one sixth of the 121 million bbl/year of production. And they are rapidly being abandoned because they are uneconomic to operate at today's prices.
Effective Sept. 12, the current 12.5% royalty will be cut to 0.5% for the first 1 b/d of production plus 0.8% for each additional 1 b/d through 15 b/d. The rule does not apply to natural gas production.
BLM expects the final rule, virtually unchanged from one proposed earlier this year (OGJ, Mar. 16, p. 63), to result in 4.7 million bbl/year of additional production.
MORE HELP POSSIBLE
David O'Neal, assistant interior secretary for land and minerals management, said he is considering what his department can do to help heavy oil stripper production in the San Joaquin Valley of California.
Producers there say they need a greater incentive because their oil sells for much less than lighter Rocky Mountain crudes.
Cy Jamison, BLM director, said the stripper well rule is only one of the things the administration is doing for the oil and gas industry.
Within the next few weeks,
BLM may announce steps to make more onshore federal land available for leasing.
BLM also is considering changes in its appeals process to prevent parties from blocking development of leases without just cause. Jamison said current rules allow drilling opponents to tie up a lease for 2 years for only the cost of a 290 stamp.
BLM is considering extending some of its leases until operators can bid on adjacent Forest Service land and assemble blocks they need for plays.
For the offshore oil industry, O'Neal said a package of Minerals Management Service reforms aimed at helping oil operators should be disclosed soon.
That package has been stalled all summer at the Office of Management and Budget, which has to be convinced the changes will not cost the federal government money. Such delays at OMB are not at all unusual.
Earlier this year, O'Neal hinted those reforms might relax royalty rates on deepwater exploration and bonding for offshore platforms (OGJ, May 18, p. 33).
ELECTION YEAR ACTION
Although the stripper well rule has been in the works for some time, some oil lobbyists say the other reforms were inspired by election year politics.
Cynics say even though the industry has been depressed for 5 years, only in the past few months has the Bush administration made an effort to help oilmen. And it seems in a hurry to announce its reforms before the Nov. 3 general elections.
The administration's motives may be suspect, but lobbyists say any results will be appreciated.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
