Jones bill would help small oil producers

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Llew Jones, R-Conrad | Choteau Acantha

Most of the Golden Triangle’s oil production comes from “stripper” wells. A single stripper well produces less than three barrels of oil daily. By comparison, an eastern Montana hydraulically fractured oil well can produce hundreds of barrels daily. Local oil producers create great benefit by keeping our area’s very old oil fields viable. These oil producers, their families and their crew members shop in our stores, volunteer in our communities, and have children in our schools.

In 2005, one of the first bills (House Bill 535) I passed was on behalf of our stripper oil producers. This bill provided that the stripper producers would not pay the state 9 percent oil tax when the price of oil was below $35 per barrel indexed to posted West Texas Crude. Later the trigger was updated to $54. The West Texas Index was selected because it was consistently posted for reference by the Department of Revenue.

Area producers and I met again before this session. The shale oil play (fracking) changed the industry such that the West Texas Index no longer reflects area oil prices. Effectively, the stripper wells produce a thicker, lower gravity sour crude oil. This sour crude oil is receiving discounts of up to $35 per barrel off the posted West Texas price. As such, when West Texas was $54, area producers were receiving $20 or less. The tax incentive link no longer functions correctly.

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