WATCHING WASHINGTON CUTTING ROYALTIES
Next month President Bush is expected to issue an order reducing the 12.5% royalty for marginal wells on federal land by at least half.
Cy Jamison, Bureau of Land Management director, says the action will help keep 20,000 marginal (15 b/d or less) and enhanced recovery wells on production. The order will not include gas wells. Decisions to cut royalties will be made lease by lease rather than well by well.
Jamison predicts the action will increase federal revenues because more wells will stay on production.
He said, "Most of the states have led the way in reducing royalty rates on stripper wells. Some are negotiated, some are zero, but the average seems to be 4-6%."
BLM allows operators to suspend production of marginal wells without abandoning the lease, and Jamison said the royalty cut should bring some of them back on line.
PRELEASE PLANNING
In his 2 years as BLM director, Jamison has worked to improve BLM's prelease environmental planning.
He said, "Most of the real progressive oil industry folks realize we have to go through these environmental hoops and do a good job of it. I think our attitude at the beginning is a lot better, and in the long run that shortens the process.
"What I've been telling our field folks is to put out a good lease. If you need to update your plan to include wildlife mitigation or things like that, do it before you lease it because industry ought not to have to defend our work in court. We ought to be able to give them a lease that will let them go after petroleum products rather than spend 5-6 years in appeals and processes. On the other side of the coin, environmentalists will know their concerns have been addressed."
He said BLM could be more responsive to the oil industry if it can get better information on what hot areas industry is interested in.
The agency is encouraging the U.S. Forest Service to update its leasing policy. Oil companies have complained they are prevented from exploring some areas because they can't get Forest Service leases to fill in blocks.
BLM opposes a congressional proposal that competitive and noncompetitive onshore leases be for 5 year terms vs. the current 5 years for competitive and 1 0 years for off the shelf.
"We wouldn't mind both of them going 10 year. We don't think the mechanics of the market would allow us to go to a shorter time period. It takes too long to put these plays together and there's too much environmental work associated with it."
INDIAN LEASES
BLM has completed an investigation of allegations the Senate select committee on Indian affairs raised about possible underreporting of production on Indian leases BLM manages (OGJ, May 15, 1989, p. 40).
"We've spent thousands of man hours investigating and have found no serious problems. We found some small things in gas where we might have been owed a few dollars, and we've found some areas where we may have overcharged.
"The vast majority of the companies are good, solid citizens and good operators. They know it doesn't pay to ding around with small things, and I think they've done a good job."
Copyright 1991 Oil & Gas Journal. All Rights Reserved.