U.S. Relaxes Regulations on Oil Wells : Extends Protection Against Low Prices to All Federal Leases

The Reagan Administration told oil producaers today that it will no longer force them to meet production requirements for larger oil and gas wells on federal land if they can’t make a profit because of depressed prices.

The White House announced that the Interior Department is extending to all wells an April 17 rule letting well operators escape the requirement that they plug with concrete wells producing fewer than 10 barrels a day if production stops for 60 days.

J. Steven Griles, assistant secretary of Interior for land and minerals management, told reporters he had no idea how much production would be saved by extending the rule to all wells, but believed it would be less than 1% of the amount produced from federal leases.

Those leases account for about 12% of the nation’s production.

New Regulations

The White House also said Interior Secretary Donald P. Hodel will examine forthcoming regulations on royalty management and preservation of historically important sites to make sure they did not unduly burden industry.

Also, it promised to extend lease terms for up to six months if any federal actions beyond the control of the leaseholder prevents activity on the lease.

The Environmental Protection Agency and the Commerce Department will review their regulations too, the White House said.

Griles said the April 17 rule had been applied to 210 leaseholders covering about 1,680 wells, each producing about three barrels a day. No one who asked exemption from the production requirements has been denied it, he said.

Those wells would produce about 5,000 barrels a day or substantially less than 0.1% of U.S. production.

Uneconomic Wells

Under the rule, a well operator simply has to certify that the well is uneconomic at current prices.

The White House statement said President Reagan was reaffirming his support for repeal of the windfall profits tax on oil--which does not apply at current low prices--and for repeal of price controls on natural gas and restrictions on use of gas as a boiler fuel.

It also said the President will seek to preserve the current tax treatment of the depletion allowance and intangible drilling costs, as contained in the tax revision bill being debated in the Senate.

Energy Secretary John S. Herrington is considering whether to back proposals for continued purchases of oil for the strategic petroleum reserve when current purchase contracts expire next month.

“The President believes the recent decline in oil prices will improve economic growth, reduce the cost of energy to consumers, and contribute to maintaining the current low rate of inflation,” Reagan spokesman Larry Speakes said.

“At the same time, the President is intent upon maintaining our national energy security and ensuring that the U.S. does not become unduly dependent upon unreliable sources of oil.”