Stripper Well Producers to Face Failure if Methane Rule Allowed

Smaller oil and gas producers could be at risk of failing if stripper wells are not exempted from the U.S. Environmental Protection Agency’s (EPA) new methane rules, according to the National Stripper Well Association (NSWA).

NSWA Chairwoman Darlene Wallace said in an Aug. 3 press statement that the EPA should be aware of, and held accountable for, the economic damage done to small producers by forced compliance with regulations that simply shouldn’t apply to stripper well producers.

The original rule had a pure exemption for stripper wells, but the exemption was eliminated in the final rule, an NSWA spokesperson told Rigzone. Wallace said the EPA’s decision to eliminate the exemption was a significant, radical and unannounced change for most producers, who have been struggling to comply since then.

A stripper well, for tax purposes, is any oil well whose maximum daily average oil production does not exceed 15 barrels of oil, or a natural gas well whose maximum daily average production does not exceed 90 thousand cubic feet per day, during any 12-month consecutive time period, the spokesperson said.

The Oklahoma City-based trade group also criticized EPA for not meeting its own deadlines. EPA had promised it would issue a small entity compliance guide to help stripper well producers.

“Yet we are nearly 80 days from the May 12 announcement of the rule and 60 days from the June 3 Federal Register notice and the EPA implementation website contains no compliance guide,” Wallace commented. “As unprepared as small producers were to be included in this rule, the EPA is as equally unprepared to give us guidance.”

Stripper wells accounted for 10 percent of U.S. oil production of nearly 3.5 million barrels in 2015, the U.S. Energy Information Administration (EIA) stated in a June 29 report. EIA estimates the number of stripper oil wells operating at the end of 2015 at around 380,000, compared to approximately 90,000 non-stripper oil wells.

Citing data from the Interstate Oil & Gas Compact Commission, the NSWA spokesperson said that close to 160,000 American jobs are dependent on stripper well activities, or approximately 10 jobs per $1 million of production. Since 2002, stripper wells have contributed $295 billion to overall U.S. production in the form of 2.9 billion barrels of oil and 18.8 billion cubic feet of natural gas. If all stripper wells are plugged and abandoned, the lost output in direct production, and indirect and induced economic effects, would total $52.4 billion, with 241,733 jobs lost.

NSWA, along with other national state and trade associations, is challenging the EPA rule in court. The trade association is also calling on U.S. Congress to stop the rule or at least restore the small producer exemption originally proposed by EPA, Wallace stated.

The American Petroleum Institute (API) reported Wednesday it has also filed suit to challenge the EPA rules. API's petition is separate from other industry groups that are challenging EPA in court, including the Independent Petroleum Association of America..

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com

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