The Bureau of Land Management NEWS |
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The Bureau of Land Management NEWS |
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Last updated: 04/04/03
For release: Thursday, February 19, 1998
The Interior Department's Bureau of Land Management will extend its royalty rate reduction for Federal "stripper" oil properties, Assistant Secretary for Land and Minerals Management Bob Armstrong announced at a press conference today in Roswell, New Mexico. Armstrong said the royalty rate reduction would continue to generate benefits for the U.S. economy while protecting the environment.
"The BLM's royalty rate reduction has proven itself since 1992, when the agency put its stripper property rule into effect," Armstrong said. "And that's why we are going to continue it. Given the recent dramatic downturn in oil prices, continuing this royalty rate reduction will keep many stripper oil wells producing that might otherwise be shut in." The rule that the BLM is extending establishes the conditions under which an operator or owner of a Federal stripper oil property can obtain a reduction from the normal royalty rate of 12.5 percent. (A stripper well produces an average of less than 15 barrels of oil a day.) The regulations provide an incentive for operators to maintain or restart production of marginal or uneconomic wells. The goal is to increase recoverable reserves.
BLM Director Pat Shea noted that the stripper oil property rule, which is aimed at stimulating oil production on Federal land, called for the Department of the Interior to review the rule's effectiveness at any time after September 10, 1997. "After conducting a review of the rule's impact," Shea said, "the Department and the BLM have concluded that the lower royalty rate for stripper properties is working as intended."
Shea added, "This financial incentive maximizes production from existing wells, which not only helps the economy, but also advances this administration's efforts to reduce U.S. dependence on imported oil from foreign sources by fostering the responsible development of our domestic oil reserves." Shea said the BLM and Minerals Management Service (MMS) would continue to monitor the rule's effectiveness and make any recommendations for change, if needed.
The BLM concluded that the rule is reaching its goal of promoting additional production from stripper properties based on a Department of Energy (DOE) analysis of the rule's impact in New Mexico, public comments on the rule, and stripper property data of the BLM and MMS. "Based on the DOE analysis of 603 stripper oil properties in New Mexico, wells existing before 1993 had additional production of 4.27 million barrels of oil, attributable in large part to the royalty rate reduction, during the period of October 1992 through December 1996," Shea said. "This represents a 23.7 percent increase over estimated cumulative production had royalty reductions not been granted."
Shea also pointed out that the BLM's findings did not take into account significant "down stream" economic benefits. The BLM Director cited a 1996 report by the Interstate Oil and Gas Compact Commission, titled "Marginal Oil and Gas: Fuel for Economic Growth," which estimated that 9.3 jobs are dependent on every $1 million dollars of stripper oil and gas produced.
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