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
U.S. DEPARTMENT OF THE INTERIOR
Office of the Secretary
For immediate release -- February 4, 1999
Secretary of the Interior Bruce Babbitt today granted relief to small oil operators producing on public lands by allowing them to suspend operations for up to two years without losing their leases.
Babbitt took the action out of consideration for the livelihood of small federal stripper oil operations while oil prices are low.
Stripper oil properties are those that produce an average of 15 barrels or less per day. In 1997, stripper oil production accounted for about 32 percent, or 37.4 million barrels, of total oil production on public lands.
"This will help to alleviate the economic impact low oil prices may have on small federal stripper oil operations," Babbitt said. "We understand what the small operators are going through, and this is the right decision at the right time."
Senator Jeff Bingaman, ranking member of the Energy and Natural Resources Committee, endorsed the announcement.
"Allowing these wells to be idled without penalty will help alleviate some of the worst pressures on independent producers, especially in New Mexico, where we have the greatest amount of U.S. production from stripper wells."
The suspension of operations announced today will apply to those properties that are
qualified to receive stripper royalty rate reduction. Only those properties where
producible wells on the lease are classified as oil wells qualify for the suspension.
For properties that do not qualify for the stripper royalty rate reduction, upon
submission of an application, suspension will be granted on a case-by-case basis to ensure
conservation of natural resources.
Sylvia Baca, Acting Assistant Secretary for Lands and Mineral Resources, said the suspension will be particularly helpful to small operations. "With oil prices at a historic low, we don't want the current policy to force operators to prematurely abandon producing wells," Baca said. "That wouldn't be good for industry and it wouldn't be in the long-term interests of the country."
The federal stripper oil operations are administered by the Interior Department's Bureau of Land Management (BLM). The Bureau of Land Management's current policy requires operators to promptly plug wells that are not producing in paying quantities. The suspension policy on stripper properties will be in effect for two years, or until the cash price of West Texas Intermediate crude oil, as posted on the Dow Jones Commodities Index chart reaches, or exceed $15 per barrel for 90 consecutive pricing days.
Tom Fry, Acting Director of the BLM noted, "This initiative is a win-win for everyone. Operators will be provided relief in a severe downturn of oil prices, and the public will receive the benefit of higher royalty values when prices rebound."
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