Small oil well operators may suspend operations for 2 years

CHEYENNE, Wyo. (AP) — Operators of small oil wells may suspend operations for two years without losing their federal land leases, according to the U.S. Department of the Interior.

“This will help to alleviate the economic impact low oil prices may have on small federal stripper oil operations,” Interior Secretary Bruce Babbitt said. “We understand what the small operators are going through, and this is the right decision at the right time.”

Current policy requires operators to promptly plug wells that are not producing. The policy will be suspended for two years or until the price of crude oil hits $15 per barrel for 90 consecutive pricing days, federal officials said.

Small oil producers generate up to 15 barrels daily on average and accounted for about a third of all oil drilled on federal land in 1997, officials said.

“With oil prices at a historic low, we don’t want the current policy to force operators to prematurely abandon producing wells,” said Sylvia Baca, Acting Assistant Secretary for Lands and Mineral Resources. “That wouldn’t be good for industry and it wouldn’t be in the long term interests of the country.”

Producers who qualify for reductions in federal royalty rates may apply for a suspension. Those ineligible may be granted a suspension on a case-by-case basis.