Texas may ease rules on stripper oil wells

The Texas Railroad Commission (TRC) is forming a plan to relieve low volume oil wells in the state from unnecessary reporting requirements, many of which are decades old.

By adopting the plan, commissioners aim to extend the lives of many marginal wells in Texas, assuring that producers can recover as much remaining oil as possible in mature fields.

Of the 176,000 active oil wells in Texas, almost 90,000 produce less than 3 b/d. Statewide, oil wells produce an average 8 b/d, while the average top allowable in the state is 113 b/d.

TRC estimates marginal oil wells collectively contribute nearly $2 billion/year to the Texas economy, supporting 11,890 jobs in the state, two-thirds of which are outside the oil and gas industry.

TRC Chairman Carole Keeton Rylander said the program, if adopted, could reduce commission administrative costs $300,000/year and save industry an estimated $40 million/year in compliance costs. Part of the commission's savings would be lost by elimination of some producer filing fees.

The details

Under deregulation provisions being discussed, TRC would:

Exempt from state prorationing rules any lease on which no well could produce its top allowable. TRC estimates all but about 600 of the state's 68,000 oil leases would be exempt.
Simplify lease production balancing procedures by recognizing natural production profiles of oil wells. Wells on qualified leases would be allowed to "overproduce" during the first months on line, and operators would be allowed to account for high initial output through natural production decline.
On exempt leases, eliminate well spacing and density exceptions under Rules 37 and 38, respectively. The commission would grant downhole comingling permits automatically as long as production from the fields involved were less than a specified percentage of the top allowable.
Simplify well permitting requirements by allowing producers to recomplete or plug back wells to produce from new zones without filing for a new permit.

TRC would not extend partial deregulation to oil wells and leases able to meet their top allowables. Gas wells would not be eligible for the program.

Rylander said partial deregulation of oil wells would not affect state or federal safety and environmental requirements.

TRC for about the next 90 days will seek comments from industry and others. Implementing proposed changes could take another year.