The U.S. oil and gas industry is ailing and needs federal help to curb the glut of foreign oil that is driving down prices, according to a national energy coalition.
A report prepared by the Interstate Oil and Gas Compact Commission said 48,702 wells in 23 states were taken out of production during the first six months of 1998, a 142 percent increase over 1997."The report paints a picture of an industry in trouble, as well as in transition," said Wyoming Gov. Jim Geringer, chairman of the IOGCC, at the open of the commission's annual meeting on Monday.
Geringer called on the federal government to work with state leaders to develop a comprehensive national energy is formulated with input from states and advocacy groups.
"We do have a national energy policy of sorts," in the sense that decisions affecting the industry are made in Washington.
"But I couldn't tell you its purpose, its mission or its long-term benefits, and I can't tell you who is responsible for making it work," the governor said.
Vice Chairman Michael Smith, Oklahoma's secretary of energy, said that, at the request of U.S. Energy Secretary Bill Richardson, an IOGCC committee is preparing recommendations of ways the federal government can help oil producers. The report is due to Richardson in two weeks.
Smith said oil producers are collecting just $8.50 for a barrel of oil that costs between $12 and $15 to produce.
"We all enjoy these current low gasoline prices, but we have to understand . . . it could cost America much more dearly in the long run," said Smith.
Smith's state has been hit especially hard, according to the report, with between 25 percent and 35 percent of wells being idled. It has cost Oklahoma as many as 5,000 jobs.
Most of the closed wells are what are called "stripper wells," which produce 10 or fewer barrels of oil per day.
"The challenge in the oil patch is as great as the challenge this year that confronted American agriculture," said Kansas Gov. Bill Graves, chairman-elect of IOGCC.
Graves said at last year's IOGCC meeting, everyone assumed oil prices had bottomed out. Since then, prices have dipped even lower.
"I think everyone is a little bit stunned right now," he said.
The IOGCC is made up of voting representatives from 29 oil and gas producing states. It was created in 1935 to control petroleum overproduction.
Over the last decade, U.S. crude oil production has fallen steadily, and the number of rigs drilling for gas and oil have fallen from their high of 3,969 in 1981 to just 686 in 1998.
"Every key indicator of the health of the domestic oil and gas industry . . . is down," the report said. "If crude oil prices remain at continued low levels, there will likely be further contraction in the industry, a negative effect on the economies of the states and nation due to loss of tax revenues and jobs, the further loss of skilled labor and increasing imports of crude oil."
Despite all of this, members are not clear about what should be done. Smith said only that IOGCC's committee preparing the report for the Department of Energy is "exploring all avenues."
A 1996 report by the group recommended four steps to help the oil industry, including educating consumers about the dangers or relying on imported oil, expand the search for recoverable domestic oil and gas, consider state or federal incentives for exploration and production and encourage conservation by consumers.