Marginal Wells Presentation

Presented by a member of the Marginal Well Commission

What is the Marginal Well Commission?

In the 1980’s, a group of oil and natural gas industry producers formed an association called “Save Our Strippers.”

In 1992, the Oklahoma Legislature created the Commission on Marginally Producing Oil and Gas Wells. Senate Bill 684, now Title 52 O.S. Section 700.

Marginal oil or gas is produced from low-volume “stripper” wells – defined by the IOGCC as producing less than 10 barrels of oil or 60,000 cubic feet of gas per day.

The Marginal Well Commission is the only organization of its kind in the nation.

Funded by a voluntary fee of $.0035 on each barrel of crude oil produced in the state and $.00015 of every 10,000 cubic feet of natural gas produced. Requests for refunds can be made during the first 3 months of the calendar year. Last year, less than 1% of the budget was refunded.

What is the Marginal Well Commission? (Cont.)

Mission Statement:The mission of the Commission on Marginally Producing Oil and Gas Wells is to serve the Governor, Legislators, oil and gas industry and public by defining, identifying, and evaluating the economic and operational factors that affect marginally producing oil and gas wells, and to assure that appropriate efforts are made to extend the life of these wells so energy can be economically provided to all citizens of the State of Oklahoma.

What is the Marginal Well Commission? (Cont.)

Nine commissioners appointed by the Governor Represent large and small producers, royalty owners and the

Osage Indian Nation. 3 year terms that begin January 1 of the 1st year of appointment

and end December 31 of the 3rd year No limit to the number of consecutive terms that can be served

What is the Marginal Well Commission? (Cont.)

The current Commissioners are as follows:

Charles “Chuck” Davis Represents: Oklahoma Mineral Owners AssociationAttorney-at-Law

Bill Gifford Represents: Mid-Continent Oil and Gas AssociationDCP Midstream, LP

Hearne Williford II, Secretary Represents: Oklahoma Independent Petroleum AssociationWilliford Resources, LLC

Stan Noble Represents: Oklahoma Corporation Commission District #1Noble Resources, Inc.

James Beyl Represents: Oklahoma Corporation Commission District #2Perkins Energy Company

David K. Moore, Chairman Represents: Oklahoma Corporation Commission District #3Latigo Drilling Corp.

Thomas F. Dunlap Represents: Oklahoma Corporation Commission District #4Tripledee Drilling

Paul Bruce Represents: Osage CountyAmvest Osage, Inc.

David Guest, Vice Chairman Represents: National Association of Royalty OwnersGuest Petroleum, Inc.

What is the Marginal Well Commission? (Cont.)

Marginal Well Commission Staff:

James M. Revard, Executive Director Zhonda Viney, Director of OperationsRick Torix, Education Coordinator

Crystal Townsend, Public Information Officer

Whitney Smith, Administrative Assistant

Contact Information: 421 N. W. 13th, Ste 180Oklahoma City, OK 73103Phone: (405) 604-0460 (OKC Metro) 1-800-390-0460Fax: (405) 604-0461

What does the Marginal Well Commission do to help?

Research and collect information on the number, location and operational conditions of marginally producing oil and gas wells in the state

Propose legislation, regulatory and operational remedies that will extend the life of the marginally producing well

Advisory Council – members from many different areas of the industry and community come together to offer expertise, issues and strategies to the Commission. They meet 3 times a year.

What does the Marginal Well Commission do to help? (Cont.)

Provides information: Workshops – held throughout the state to provide

operators with information on new technology and other issues that affect them

Education Coordinator – full time staff member to help operators with technical problems.

Library – Over 1,000 items of reference materials related to the industry

Trade Expo – brings the operator and service sectors face to face

Website

www.marginalwells.com

History Workbooks & Videos Purpose Surveys & ReportsQuick Facts FeedbackOpportunities & Involvement LibraryCommissioners Contractor’s PageContact Staff Lease SalesEvents Pumper’s ManualRegulations & Environment Equipment Sales

Speaker’s Bureau Stolen EquipmentNewsletters LinksOnline Store

Technology Trade Expos

Oklahoma City November 1996

Tulsa May 1997Enid December 1997Ardmore May 1998Norman October 1998Ponca City May 1999Tulsa May 2000Oklahoma City June 2001Tulsa June 2002Oklahoma City May 2003Oklahoma City October 2004Oklahoma City October 2005Oklahoma City October 2006Oklahoma City October 2007Oklahoma City October 2008Oklahoma City October 2009

Workshops

# of Workshops 279

# of Attendees 9450

Cities Utilized Ada, Ardmore, Burns Flat, Drumright, Duncan, Elk City,Enid, McAlester, Moore/Norman, OKC, Okmulgee,Pawhuska, Ponca City,Shawnee, Stillwater, Tulsa, Velma,Watonga, Wetumka, Wichita KS,

Wichita Falls TX, Wilburton, and Woodward

Newsletters

Quarterly Newsletters

Circulation of 10,500

Includes: Technology Updates, Legislative & Regulatory Updates, Workshop News, Historical Data, You and the Environment, News on Current Issues and Events

Studies

FY1994 Survey of Marginal Oil Wells State of Oklahoma

FY1996 Survey of Oklahoma Oil & Gas LeasesFY1996 Well Cost AnalysisFY1996 Impact of Oil & Gas Production & Drilling on the

Oklahoma EconomyFY1996 Localized Impacts of Oil & Gas Production &

Drilling Activity in OklahomaFY1999 The Osage Environmental AuditFY2000 Electricity Usage among Oklahoma Oil and Gas

ProducersFY2002 The Local Impact of Oil & Gas Production and

Drilling in OklahomaFY2002 The Economic Impact of Oil & Gas Production &

Drilling on the Oklahoma EconomyFY2005 Impact of Refineries on Crude Oil Production &

Pricing in OklahomaFY2007 The Local Impact of Oil & Gas Production and

Drilling in OklahomaFY2007 The Economic Impact of Oil & Gas Production &

Drilling on the Oklahoma EconomyFY2007 A Demographic and Economic Profile of Oklahoma’s

Marginal Oil and Gas Well OperatorsFY2009 Breakeven Analysis

Why is the industry important to Oklahoma?

Gross Production Tax Revenues $ 1.07 billion in fiscal year 2007 for oil and

natural gas

GPT – Oil Revenues

Apportionment of Gross Production Oil Revenues forFiscal year 2006 (Estimated)

$65,344,736

$65,344,736$65,344,736

$18,140,024

$18,140,024$10,873,852 $10,873,852

Common Ed Technical Fund Higher Ed Capital Fund Okla. Tuition Scholarship Fund To School Districts

Returned to Counties for Highways Oklahoma Water Resources Board County Bridge and Road Fund

GPT – Gas Revenues

Apportionment of Gross Production Gas Revenues for Fiscal Year 2006 (Estimated)

$696,141,245

$57,984,700$57,984,700

General Revenue Fund Returned to Counties for Highways To School Districts

Why is the industry important to Oklahoma? (Cont.)

Jobs 76,000 direct jobs 245,800 impacted or supported

Economic Impact $23.8 billion into economy 7% of Gross State Product

Why is the industry important to America?

Petroleum ProductsAntihistaminesAntisepticsArtificial HeartsAspirinAudiocassettesBaby StrollersBalloonsBandagesBlendersCamerasCandlesCD PlayersCDsClothingComputersContainersCrayons

Credit CardsDenturesDeodorantDiapersDigital ClocksDinnerwareDVDsDyesEyeglass FramesFertilizersFood PreservativesFood Storage BagsFootballsFoul Weather GearFurnitureGarbage BagsGlue

Golf BallsHair DryersHand GlidersHeart Valve ReplacementsHouse PaintInfant SeatsInkInsecticidesLife JacketsLipstickLuggageMedical EquipmentNylon RopePacemakersPantyhosePatio Screens

PerfumesPhotographic FilmPhotographsRoller BladesRoofingSafety GlassShampooShaving CreamShower CurtainsSoft Contact LensesSunglassesSurfboardsSurgical EquipmentSyringesTelephonesToothpasteAnd Many More

Why is the industry important to America?

85% of energy use comes from fossil fuels (includes, coal, oil and natural gas)

Each American consumes 3 ½ gallons of oil and 250 cubic feet of gas per day

70% of nation’s oil comes from foreign sources

During peacetime, it costs the U.S. Military approximately $33 billion a year to protect shipments of oil exported from the middle east

$53

Why are marginal wells important?

Marginal or “stripper” wells produce 17% of the U.S. domestic oil and 65% of the production in Oklahoma

Marginal gas wells produce 9% of the U.S. domestic gas and 10% of the production in Oklahoma

There were 65,504 marginally producing wells in the state out of a total of 119,255 wells in Oklahoma for fiscal year 2006

Why should we care?

1. ALL wells become marginal at some point2. ALL domestic production benefits national

security3. ALL domestic production benefits national

and local economies4. We are dependent on petroleum products5. More production means less expensive

petroleum products

Summary

Promoting production even from our low-producing wells is smart for Oklahoma and for America and that is why the Commission on Marginally Producing Oil and Gas Wells was created.

Crude Oil & Natural Gas Sources for the U.S.

•Data is from the Monthly Energy Review, Energy Information Administration and American Petroleum Institute