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Marginal Wells: Fuel For Economic Growth

any operating cost reductions that can be achieved, have a disproportionate impact on marginal wells, greatly extending their productive life. While the per-well volumes are small, the shear number of marginal wells existing – 719,000 wells in this year’s report – means that any effort that maintains or prolongs their life has a significant impact.

requirements for small producers. e federal government could also directly promote marginal production through some realistic royalty reduc- tion scenarios, income tax credits or appropriate regulatory or compliance relief. Research and technology aimed at marginal producers has been an ongoing effort and should be strengthened.

Many states have en- acted incentive programs to encourage marginal production. Since there are no production taxes at the federal level, the reduction in royalty rates on federal acreage is a valid way to provide incentives for producers to maintain these wells. However, prices are not likely to reach the low thresholds set in EPAct 2005 unless we see a major worldwide recession. erefore, these proposed incentives have little chance of promoting more marginal production – they are a very small safety net in a worst case scenario. Any measure that increases an extra barrel of oil per well per month would result in more than 5 million barrels of extra oil each year, the equivalent of two super-tankers of imports. Research and technology aimed at marginal producers has been an ongoing effort and should be strengthened. Any measure that increases an extra barrel of oil per well per month would result in more than 5 million barrels of extra oil each year, the equivalent of two super-tankers of imports. e United States imported 72.6 percent of its crude oil needs in 2006 – more than 13.6 million barrels per day. Domestic production is about 5.1 million barrels per day. Of that, pro- duction from marginal or “stripper” wells is more than 918,000 barrels per day. So production from stripper wells accounts for more than 17.8 percent of domestic oil production. Using 2006’s average wellhead oil price of $59.69 per barrel, $20 billion dollars were not spent on additional imports. States can further promote marginal production through additional production or ad valorem tax incentives or appropriate relaxation of regulatory

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