Marginal Wells Presentation Presented by a member of the Marginal Well Commission

1. Marginal Wells PresentationPresented by a member of the Marginal Well Commission

2. 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.

3. 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.

4. 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

5. What is the Marginal Well Commission? (Cont.) • The current Commissioners are as follows: Charles “Chuck” Davis Represents: Oklahoma Mineral Owners Association Attorney-at-Law Bill Gifford Represents: Mid-Continent Oil and Gas Association DCP Midstream, LP Hearne Williford II, Secretary Represents: Oklahoma Independent Petroleum Association Williford Resources, LLC Stan Noble Represents: Oklahoma Corporation Commission District #1 Noble Resources, Inc. James Beyl Represents: Oklahoma Corporation Commission District #2 Perkins Energy Company David K. Moore, Chairman Represents: Oklahoma Corporation Commission District #3 Latigo Drilling Corp. Thomas F. Dunlap Represents: Oklahoma Corporation Commission District #4 Tripledee Drilling Paul Bruce Represents: Osage County Amvest Osage, Inc. David Guest, Vice Chairman Represents: National Association of Royalty Owners Guest Petroleum, Inc.

6. What is the Marginal Well Commission? (Cont.) • Marginal Well Commission Staff: James M. Revard, Executive Director Zhonda Viney, Director of Operations Rick Torix, Education Coordinator Crystal Townsend, Public Information Officer Whitney Smith, Administrative Assistant Contact Information: 421 N. W. 13th, Ste 180 Oklahoma City, OK 73103 Phone: (405) 604-0460 (OKC Metro) 1-800-390-0460 Fax: (405) 604-0461

7. 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.

8. 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

9. Website www.marginalwells.com History Workbooks & Videos Purpose Surveys & Reports Quick Facts Feedback Opportunities & Involvement Library Commissioners Contractor’s Page Contact Staff Lease Sales Events Pumper’s Manual Regulations & Environment Equipment Sales Speaker’s Bureau Stolen Equipment Newsletters Links Online Store

10. Technology Trade Expos Oklahoma City November 1996 Tulsa May 1997 Enid December 1997 Ardmore May 1998 Norman October 1998 Ponca City May 1999 Tulsa May 2000 Oklahoma City June 2001 Tulsa June 2002 Oklahoma City May 2003 Oklahoma City October 2004 Oklahoma City October 2005 Oklahoma City October 2006 Oklahoma City October 2007 Oklahoma City October 2008 Oklahoma City October 2009

11. 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

12. 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

13. Studies FY1994 Survey of Marginal Oil Wells State of Oklahoma FY1996 Survey of Oklahoma Oil & Gas Leases FY1996 Well Cost Analysis FY1996 Impact of Oil & Gas Production & Drilling on the Oklahoma Economy FY1996 Localized Impacts of Oil & Gas Production & Drilling Activity in Oklahoma FY1999 The Osage Environmental Audit FY2000 Electricity Usage among Oklahoma Oil and Gas Producers FY2002 The Local Impact of Oil & Gas Production and Drilling in Oklahoma FY2002 The Economic Impact of Oil & Gas Production & Drilling on the Oklahoma Economy FY2005 Impact of Refineries on Crude Oil Production & Pricing in Oklahoma FY2007 The Local Impact of Oil & Gas Production and Drilling in Oklahoma FY2007 The Economic Impact of Oil & Gas Production & Drilling on the Oklahoma Economy FY2007 A Demographic and Economic Profile of Oklahoma’s Marginal Oil and Gas Well Operators FY2009 Breakeven Analysis

14. Why is the industry important to Oklahoma? • Gross Production Tax Revenues • $ 1.07 billion in fiscal year 2007 for oil and natural gas

15. GPT – Oil Revenues

16. GPT – Gas Revenues

17. 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

18. Petroleum Products Why is the industry important to America?

19. 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

20. 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

21. Why should we care? • ALL wells become marginal at some point • ALL domestic production benefits national security • ALL domestic production benefits national and local economies • We are dependent on petroleum products • More production means less expensive petroleum products

22. 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.

23. Crude Oil & Natural Gas Sources for the U.S. • Data is from the Monthly Energy Review, Energy Information Administration and American Petroleum Institute