The Interstate Oil and Gas Compact Commission reports U.S. production of oil from stripper wells last year dropped to its lowest level since 1947.
An Iogcc study concluded the decline has caused the loss of more than 2,400 jobs, $56 million in employment earnings, and $426 million in economic output.
Iogcc said marginal wells are an important source of U.S. oil and natural gas, providing 14% of the oil and nearly 5% of the gas produced in the U.S.
It said marginal wells account for more than $10 billion in U.S. economic activity, and more than 60,000 jobs are dependent on a healthy marginal-well industry.
Iogcc has documented the slide in the number of stripper wells and their production annually since 1941; economic analysis was added in 1993.
It said the U.S. is the only nation with significant marginal petroleum production. It noted that once a stripper well is plugged, economic access to remaining reserves is often lost, because redrilling a well usually is not cost-effective.
Several of Iogcc's 29 member states have provided tax benefits to keep marginal wells economically viable.
Iogcc said, "As a result, some states countered the downward production trend and showed increased production of marginal oil or gas. Additional incentives could create sizable economic opportunities."
The report said each dollar of marginal oil and gas production creates 58¢ in additional economic activity, and every $1 million worth of stripper production creates more than 9 jobs.
It said nearly 75,000 stripper wells were plugged and abandoned the last 4 years, representing the loss of $1.6 billion in economic activity and nearly 10,000 jobs.
The report defines marginal wells as those that produce 10 b/d of oil or less or 60 Mcfd of gas or less.
The numbers
In 1995, there were 434,283 marginal oil wells, down from 442,500 the previous year and 449,446 ten years ago. Average production was 2.1 b/d/well. With an average wellhead price of $15.61/bbl, the average stripper oil well grossed $32.78/day.
There were 161,626 stripper gas wells last year, up from 159,369 in 1994. Production fell from 16.2 Mcfd to 15.9 Mcfd/well. The average marginal gas well grossed $23.69/day at the average price of 49¢/Mcf.
Steve Layton, president of the National Stripper Well Association, said, "The numbers prove that this industry continues to be a vital segment of America's economy and workforce."
Layton, also executive vice-president of Equinox Oil Co., The Woodlands, Tex., said, "We can't lose sight of the fact that as these wells are plugged and abandoned, we risk losing our ability to access our nation's true strategic petroleum reserve, our 350 billion bbl oil resource base."
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