The Interior Department has suspended production requirements for low-volume oil wells on federal lands in an effort to keep the wells from being sealed permanently because of sinking oil prices.
"We are acting at this time because such losses of producing capability no doubt will increase U.S. dependence on imported oil -- which is contrary to the nation's interests," Interior Secretary Donald Hodel said yesterday.
Hodel said the action is aimed at preventing the abandonment of "stripper" wells, which produce less than 10 barrels a day. Many of the small wells cannot produce oil at a profit at current prices, and Interior officials fear that thousands of them will be abandoned in the face of federal requirements that at least one well in a lease area be capable of production in paying quantities.
For environmental reasons, abandoned wells generally are sealed with concrete, making it difficult and costly to resume production.
"Once a stripper well has been plugged, that well may never be brought back into production," Hodel said. "It simply may be cost-prohibitive to do so."
The suspension means that oil producers on land administered by the Bureau of Land Management or Indian tribes will be able to stop pumping temporarily without endangering their federal leases.
According to Interior officials, there are 21,000 stripper wells on federal and Indian lands, producing between 20 million and 25 million barrels of oil a year. That is 15 percent of federal onshore production, although it is the equivalent of less than a week's worth of oil imports.
"This is not an enormous amount of oil," Hodel said, but he said the administration wants to "preserve the availability of those supplies when the price goes back up."
According to industry estimates, there are about 400,000 stripper wells nationwide, the vast majority of which are on private or state lands. A number of states already have eased regulations in hopes of keeping as many of these producers as possible in business.
Industry sources estimate that, at current price levels -- $10 to $15 a barrel -- roughly 100,000 stripper wells will be shut down this year. This would eliminate about 300,000 barrels a day in domestic production.