Independents push marginal well relief bill

U.S. independent producers are renewing efforts to get Congress to pass a tax credit to help keep marginal oil wells in production. The Independent Petroleum Association of America's oil price emergency team lobbied lawmakers last week. IPAA Chairman George Yates, of Harvey Yates Co., said the nation's 500,000 stripper wells produce 1.3 million b/d, "roughly the same production we import from Saudi Arabia." He said representatives should not be misled by the low New York Mercantile

July 27, 1998

2 min read

U.S. independent producers are renewing efforts to get Congress to pass a tax credit to help keep marginal oil wells in production.

The Independent Petroleum Association of America's oil price emergency team lobbied lawmakers last week.

IPAA Chairman George Yates, of Harvey Yates Co., said the nation's 500,000 stripper wells produce 1.3 million b/d, "roughly the same production we import from Saudi Arabia."

He said representatives should not be misled by the low New York Mercantile Exchange index for West Texas intermediate, "the highest quality oil we produce."

He explained, "Many producers today are selling their oil for less than $10/bbl. In fact, at today's prices, most U.S. production could be called marginal production."

Yates said a marginal well tax credit is not the full answer to the U.S. oil industry's problem. "It will encourage producers not to give up. But only higher prices will solve industry's problem."

Rep. Wes Watkins (R-Okla.) has introduced a marginal well tax credit for existing wells that produce less than 15 b/d, heavy oil wells, or gas wells making less than 90 Mcfd.

It would allow a $3/bbl tax credit for the first 3 b/d of oil production or 50¢/Mcf for the first 18 Mcfd.

The oil tax credit would phase in if prices dropped to $14/bbl and phase out at $18. The gas credit would phase in at $1.40/Mcf and phase out at $1.80/Mcf. Producers could apply the credit against their regular and alternative minimum taxes.

IPAA officials said not enough time remains in the current session of Congress to pass a stand-alone bill, but they hope the measure can be attached to a tax bill this fall.

James Stafford, president of the National Association of Royalty Owners, said that NARO supports the legislation and members are contacting their congressional representatives in support of the marginal well tax credit.

He said, "Our legislators must understand that marginal wells are the most vulnerable part of the energy industry and the most vulnerable to price squeezes.

"In Oklahoma alone, they provide 40,000 jobs and account for more than 200,000 individual royalty checks."