Tax Provisions Detrimental to Stripper Wells, Group Warns

Tax provisions introduced by President Barack Obama – if passed as proposed – would ultimately kill the nation’s stripper oil and natural gas industry.
Known as the “Mom and Pops” of the oil and natural gas industry, stripper well producers are average-American, small business owners, who are very different than the “big oil” companies. If passed, the new provisions would do serious harm to domestic drilling for oil and natural gas and enhanced oil recovery efforts, leading to the inevitable abandonment of the nation’s 420,000 domestic, stripper oil wells.
“The NSWA adamantly opposes these tax provisions, which would dramatically alter the stripper well industry as a whole,” said Dewey Bartlett Jr., chairman of the National Stripper Well Association and president of Keener Oil Co. “It is critical that U.S. stripper wells are exempt from this legislation. Without revision, these provisions would result in well abandonment and reduced oil and natural gas production, serving only to further harm America’s fragile economy.”
“Every marginal well operator in the country should be gravely concerned that President Obama’s proposals to significantly increase taxes on oil and gas production will force the premature plugging of low-production marginal wells,” says Senator James M. Inhofe, Ranking Member of the Senate Environment and Public Works Committee. “These counterintuitive taxes will undoubtedly make our nation more dependent on foreign oil, not less. As an Oklahoma Senator, and through my leadership position on the Senate Environment and Public Works Committee, I am committed to working to get the facts out about the true costs of such a devastating blow to energy producers and consumers alike.”
Stripper or marginal oil wells – wells which produce 15 barrels or less of oil per day – reduce America’s dependence on foreign oil, generate both state and federal taxes, pay royalties to land and mineral owners and keep jobs and dollars here in the United States. A shut down or “plugged” well contributes nothing to the nation’s economy. According to the latest Interstate Oil and Gas Compact Commission (IOGCC) report, plugged and abandoned stripper wells resulted in the loss of $1.77 billion in economic output, $469.2 million in reduced earnings and 8,223 lost jobs in 2006.
Today, more than 50,000 jobs are directly or indirectly dependent upon stripper oil and gas wells. In fact, U.S. marginal wells collectively produce 20 percent of our nation’s oil production or 1.2 million barrels per day, which is as much oil and gas as America imports from Saudi Arabia. In 2007 every $1 million generated by marginal production resulted in more than $2 million of activity elsewhere in the economy, and the 2007 state tax dollars contributed by stripper well producers amounted to nearly $1.3 billion that was available for reinvestment in states, helping local communities thrive and prosper.

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