Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1942-11-14

sistance 10 drilling proven areas.
THIS PROGRAM HAS FAILED AS
PROVED BY THE RECORD OF DIS
COVERES SINCE IT'S INITIATION.
THROUGH NO FAULT OF THE PLAN OR
OF THE TWO BOARDS.
Most of such new oil discoveries as have
been made are the result Of prior contractual
obligations or the nearby termination of
leases in which money has already been
spent on purchases rentals, and seismo-
graph work. Such forced drilling is about
over
1T WAS A GOOD IDEA BUT DID NOT
WORK BECAUSE THE COST OF FINDING
AND PRODUCING OIL rs GREATER
THAN THE PRICE FOR WHICH TT SELLS
mo kind OF legerdemain or cojolery viii
induce practical men to invest capital
where on the average, they cannot expect
to get their capital back
Steps are also necessary to make feasible
the continued operation. with rising costs Of
stripper wells, the rehabilitation Of shutdown
wells and the use of secondary operation
in fields depleted by primary means.
Those people who have considered the
form which these incentives to drilling
should take suggested subsidies Of one nature
adjustments be permitted in the prices of
the crude petroleum and the petroleum
products so as to adjust the various COM
ponents of the industry to a proper econ
omic balance.
"One of the subsidies suggested is to pay
a bonus to any operator drilling a well
which discovers new source of petroleum.
Such an offer would not be a sufficient in
disproportionately large Those who have
observed the operation of bonus systems for
the discovery of oil within particular State
are convinced that it would not bring about
the result desired furthermore. it would
introduce certain practical difficulties of
administration which would be almost in
surmountable
CAS- an example Of this, there are areas
in which exploratory wells could be drilled
and in which the possibility of securing oil
would be reasonably good, but the discovery
would not add materially to the Nations
reserves because, once discovered, unless
the wells were large, the field would not be
developed under the present price Of crude
oil
"a second subsidy which is being sug
gested is a payment, by the Government, OF
a percentage Of the cost Of drilling dry holes.
While this Is the least objectionable in
principle of the subsidies suggested, it is,
nevertheless, payment for failure, bad judg-
ment or incompetency, and subject to the
further objection that an operator would be
encouraged to plug and abandon small wells
to secure the bonus.
mo subsidies have been suggested which
will provide the incentive needed for the
stripper wells, the rehabilitation of the Sec
ondary recovery operations
For subsidies to accomplish all that needs
to be done, it would be necessary for them
to cover the continued production Of the
stripper wells, the rehabilitation Of aban-
doned wells in which there remains some
oil, and the secondary recovery
operations which have proved so successful
in Pennsylvania fields and the fields OF
Oklahoma.
THE petroleum industry has suffered
severe dislocations as a result Of the war.
and diversions of the oil tankers
which normally carried In excess Of mil
lion barrels day from the Gulf coast to
the east coast have not only reduced the
quantity of products sold on the east coast,
but have caused q tremendous increase in
the cost of transporting them from the
producing area to the consuming area. The
shift in demand from motor fuels to other
types Of petroleum products has created
severe dislocation in the petroleum econ
omy. Former crude oil was refined to secure
the motor gasoline. Fuel oil, coke, and
aromatic cuts we're byproducts and were
priced and sold as such.
To-day fuel oil, coke, and aromatics, To-
zether with aviation gasoline and lubes, are
he principal products. and the automobile
motor fuel Is the byproduct. Prices, how
sver. have not been allowed to adjust to
he forced changes and yields Of the crude
Is should be normally expected
en- common with other industries the
petroleum industry has met with increased
abor and material costs. but unlike other
industries both the prices and volumes OF
petroleum handled have remained substan-
tally stationary.
San adjustment in the price Of oil and
collateral adjustment in the price of pro-
iucts is a necessary war measure to insure
he drilling OF wildcats" to continue pro-
iuction of stripper wells, to rehabilitate wells
reproduction of the letter o.