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Economic Analysis

Effects of Abandonment

value of $25 billion for the survey states or $31.3 billion for the total United States in 2006.

Using production and price data from Tables 1 and 2, Tables 3A and 3B show the gross value associated with marginal wells. Assuming the aver- age marginal well producing rates for each state, Table 3A shows the oil and gas wells plugged and abandoned in the survey states during 2006 would have produced oil and gas valued at $793.4 million. ๎•e total value of oil and gas lost due to abandonments during 2006 for all states was $878.3 million. If the marginal oil and gas production represented in Table 3B were indeed lost to the United States, this would represent about 918.7 thousand barrels of oil and 4.7 BCF of gas each day. Using the weighted average wellhead prices for marginal production, the daily amount that would have to be spent on imports would be $85.7 million each day. If the oil production from mar- ginal wells active in 2006 did not exist, imports would have increased 6.74 percent to make up for the shortage. In 2006, American Petroleum Institute (API) statistics show that we imported 4.97 billion barrels of crude oil and products. If the oil produc- tion from stripper wells active in 2006 did not exist, imports would have increased 6.74 percent to make up for the shortage. EIA statistics show that 2006’s total marketed gas production was 19,382 BCF. (Note: this figure includes federal offshore gas production) Marginal gas wells contributed 8.8 percent of the total production. EIA statistics also show the total of 2006 natural gas imports was 4,187 BCF, an amount equal to 21.6 percent of natural gas production. If marginal gas wells did not exist, imports to make up the shortage would bring the level up to 30.4 percent of production. It should be noted that, by attributing the average production rates of existing wells to abandoned wells, the actual productivity of abandoned wells may be slightly overstated. While no data was found to estimate the average production rates at the time of abandonment, the IOGCC and U.S. Department of Energy estimate the range is be- tween one and two BOPD, and the equivalent rate of 10 to 20 MCFD is assumed for gas wells. To illustrate the overall economic impact on the U.S. economy, Table 3B assumes the abandonment of all marginal wells. ๎•is shows a theoretical loss


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