The Small Independent Producer's Role In The Rapidly Changing Oil And Gas Industry
Authors: Wyman Stanley 
Published: December 2007

The chaotic years since the oil boycott by the Organization of Petroleum Exporting Countries (OPEC) have seen the problems of the U.S. energy industry crystallized problems of the U.S. energy industry crystallized into two major dilemmas:The very real shortage of oil and gas, which necessitates the transition to alternate energy sources in the near future.The negative impact of a "regulatory crisis" on the nation's attempts to establish energy independence.

The independent producer, or more particularly, the small-independent is an particularly, the small-independent is an integral force in this struggle. However, he is functioning in an environment of neglect and adversity. There are more than eighty federal agencies, departments, bureaus, and commissions which oversee the activities of petroleum companies. Every aspect of his business petroleum companies. Every aspect of his business is controlled by regulations, from the very nature of the production and distribution processes, to the business world where he processes, to the business world where he must seek funding. In addition, there are broader areas of what is called "social legisiation" which he must comply with to insure environmental quality, fuel allocation and health and safety. The old breed of independent—who just wanted to sink his drill and sell his oil and let a distributor worry about business-has had to give way to a new breed of independent: men who are familiar enough with the securities business and with legal and accounting methods to present an oil and gas program within the framework of all the program within the framework of all the existing Securities Acts, the Internal Revenue Code, and federal, state, and local regulations to give the investor protection and successful participation. Indeed, some of the new independents are men who have come into oil and gas exploration from the business world, led by the increasing need for their services in finding financing.

It is hoped that a broader understanding of the small independent's position, problems, and potential will be of problems, and potential will be of assistance in enabling him to function more effectively and expand his level of contribution to the solution of the energy crisis.

THE INDEPENDENT: WHO IS HE?

Although the generic terms "independent producer" or "independent operator" are producer" or "independent operator" are widely used to identify a large segment of the oil and natural gas industry, there is no general consensus of what they mean or who is being designated. Inclusion in these categories is determined by who's doing the talking and what the context is. By one definition an independent is "…a person who produces oil and gas and is not engaged in produces oil and gas and is not engaged in transportation, refining, or marketing of such products." (1) *At other times he has been, characterized as an operator whose management and financial sources are substantially the same. Sometimes it is said that an independent is merely a domestic operation not dependent on foreign oil. In another context he is the "independent" or "others" category which refers to those operations not part of the Chase Manhattan Bank's "larger part of the Chase Manhattan Bank's "larger operators." (2) The Internal Revenue Service Code defines "small producer-independent" to read "one who produces, individually or as a family, less than 50,000 barrels per day."

There is even a great deal of uncertainty surrounding the exact number of active independent oil producers.