LETTER TO WILLIAM J. CASEY FROM L. FRANK PITTS

Document Type: 
Collection: 
Document Number (FOIA) /ESDN (CREST): 
CIA-RDP88G01116R000700810007-9
Release Decision: 
RIPPUB
Original Classification: 
K
Document Page Count: 
5
Document Creation Date: 
December 22, 2016
Document Release Date: 
February 18, 2011
Sequence Number: 
7
Case Number: 
Publication Date: 
March 5, 1986
Content Type: 
LETTER
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PDF icon CIA-RDP88G01116R000700810007-9.pdf250.84 KB
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Sanitized Copy Approved for Release 2011/04/05: CIA-RDP88GO1116R000700810007-9 EXECUTIVE SECRETARIAT ROUTING SLIP ACTION INFO DATE INITIAL 1 DCI X 2 DDCI 3 EXDIR 4 D/ICS 5 DDI 6 DDA 7 DDO 8 DDS&T 9 Chm/NIC 10 GC 11 IG 12 Compt 13 D/OLL 14 D/PAO X 15 D/PERS 16 VC/NIC 17 18 9 20 21 22 TO #14: Please handle as appropriate. STAT E cutive Secretory 1 Mar 86 Sanitized Copy Approved for Release 2011/04/05: CIA-RDP88G01116R000700810007-9 Sanitized Copy Approved for Release 2011/04/05: CIA-RDP88GO1116R000700810007-9 PITTS OIL COMPANY 500 MEADOWS BUILDING DALLAS. TEXAS 75206 March 5, 1986 r The Honorable William J. Casey Director Central Intelligence Agency Washington, DC 20505 Dear Mr. Casey: Executive Registry 86" 0993X Being an integral member of the Reagan Administration, I am sure you share the President's conviction regarding the importance of a strong national defense to our country's security. National security is the number one responsibility of the federal government. The current dumping of oil on the world market by Middle East producers is a threat to our national defense and our country's security. If it continues, it will dismantle our domestic oil and natural gas industry, decrease our domestic production and increase, materially, our dependence on imported oil. Why is a material increase in our reliance upon imported oil a threat to our national security? The answer is really quite simple. The only place we can turn to for substantially increased volumes of oil is the Middle East and North Africa. While the rest of the world is producing at near production capacity, this area has over 70% of the free western world's proven reserves. Iran and the Arab States alone control over 80% of the unused production capacity in the free western world. Overdependence on oil from this tinderbox area of the world, in the backdoor of Soviet Russia, will cause our nation and the rest of the free world to be held hostage to the political realities and uncertainties of the Middle East. Enclosed is a brochure prepared by my company which, among other things, describes where our oil must come from in the event our domestic production is decreased. The current dumping of oil is a real and serious problem. Our domestic oil and natural gas industry is already on its back. Left unchecked, Middle East producers have the clout to dismantle, for years to come, our domestic industry. The infrastructure of our industry cannot be rebuilt overnight, and, once it is, it will take 5-15 years to find, develop and produce new reserves. The U.S. will, as a result, not only fail to discover much needed new reserves, but will lose, forever, a substantial amount of existing production and reserves. A recent study completed for the Interstate Oil Compact Commission reveals that, if crude oil remains at the $15 price range, the U.S. could lose approximately 280,000 barrels per day of oil production in the first year because 22.5% of all stripper wells in the U.S. would be prematurely abandoned. The same study reveals abandonment of 40% of all U.S. stripper wells and a loss of approximately 640,000 barrels of oil production per day for the first year should the price of crude oil fall to $10 per barrel. (See enclosed copy of Interstate Oil Compact Commission Release dated March 2). Middle East producers will have won. They can sell us their oil, if they want to and assuming the sea lanes can be kept open, at whatever price they desire. We must, in the name of national security, do everything feasible to quickly end this dumping of oil on the world market. Should we fail in this important matter, history will classify our failure as one of the worst and most unnecessary mistakes of our era. Sanitized Copy Approved for Release 2011/04/05: CIA-RDP88G01116R000700810007-9 0, -1141-1~e Sanitized Copy Approved for Release 2011/04/05: CIA-RDP88GO1116R000700810007-9 INTERSTATE OIL COMPACT COMMISSION HEADQUARTERS OFFICE: 900 N. E. 23RD STREET G P. O. BOX 53127 e - TELEPHONE: (405) 525-3556 EDWIN W. EDWARDS Chairman Governor of Louisiana W. TIMOTHY DOWD Executive Director For Further Information Contact Betsy Fernandez Telephone (405) 525-3556 FOR RELEASE SUNDAY 5:00 PM (March 2) Oklahoma City, OK, February 27, 1986 -- If the cost of crude oil remains in the $15 price range the U.S. could lose over 734 million barrels of oil, says a study released today by the Interstate Oil Compact Commission (IOCC). Stripper wells produce less than 10 barrels per day and because of their low production rates are very sensitive to changes in the price of crude oil. The study says this projected abandonment of 22.5 percent of all the stripper wells in the United States would result in a loss of oil production during the first year of close to 280,000 barrels per day, valued at $1.5 billion for that year. "Once plugged and abandoned, these wells will not be redrilled due to economic reasons and their resources will be lost forever," said IOCC Executive Director W. Timothy Dowd. The study, which was prepared for the IOCC by the RAM Group, Ltd., a management analysis firm of Oklahoma City, covers the projected impact on stripper wells in 22 oil producing states at various oil prices from $10 to $25. The price refiners pay for oil has dropped since December from $31 per barrel to $18. On the commodities market the price dipped below $14 last week before making a slight comeback. The numbers projected by the study are in addition to normal abando ment. Annually, approximately 11,000 stripper wells are abandoned in the United States because of old age. MEMBER STATES: ALABAMA ? ALASKA - ARIZONA - ARKANSAS ? CALIFORNIA - COLORADO ? FLORIDA ? ILLINOIS . INDIANA ? KANSAS . KENTUCKY LOUISIANA - MARYLAND ? MICHIGAN . MISSISSIPPI ? MONTANA - NEBRASKA . NEVADA ? NEW MEXICO . NEW YORK - NORTH DAKOTA . OHIO OKLAHOMA ? PENNSYLVANIA ? SOUTH DAKOTA - TEXAS ? UTAH - VIRGINIA - WEST VIRGINIA ? WYOMING ASSOCIATES: GEORGIA - IDAHO ? NORTH CAROLINA ? OREGON . SOUTH CAROLINA ? WASHINGTON Sanitized Copy Approved for Release 2011/04/05: CIA-RDP88GO1116R000700810007-9 Sanitized Copy Approved for Release 2011/04/05: CIA-RDP88G01116R000700810007-9 Page Two "The loss of stripper well production at $15 represents a $1.5 billion contribution to the trade deficit because every barrel that is not produced in the U.S. is one that has to be imported," said Dowd. "Our consumption will not change, simply the source of the crude oil," he said. At $15 per barrel, the loss would be greatest in Texas, where an estimated 28,500 stripper wells would be abandoned, resulting in lost production of 92,000 barrels per day during the first year. Oklahoma's loss would be very significant because stripper wells account for nearly 60 percent of the state's production. At $15 per barrel, the state would shut down almost 19,000 stripper wells which collectively produce close to 57,000 barrels per day, or nearly 13 percent of Oklahana's total oil production f ran all wells. At $15 prices, an estimated 10,000 stripper wells would be abandoned in Kansas, costing the state's oil production 30,000 barrels per day. Additionally, the study examines the effect on stripper wells if oil prices fall to $10 per barrel. Over 40 percent of U.S. stripper wells would be aban- doned if prices fall to this level. This would mean a production loss of 640,000 barrels per day in the first year, valued at-$2.3 billion for the year. Close to 185,000 stripper wells would be abandoned. In the first year at $10 per barrel, Texas would lose over 210,000 barrels per day, valued at $767 million. This would mean a loss in reserves of 860 million barrels. Oklahoma would face the abandonment of 34,000 or 40 percent of its stripper wells. The production lost in the first year would amount to almost 130,000 barrels per day and over $470 million. The impact that would take place on stripper wells at oil prices of $20 per barrel amounts to over 100,000 barrels per day lost in the first year nationally, valued at $778 million. In 1984, stripper wells accounted for approximately 15 percent of the nation's total oil production and about 70 percent of the total number of U.S. oil wells. For further information or a copy of the study, call (405) 525-3556. -- 30 -- Sanitized Copy Approved for Release 2011/04/05: CIA-RDP88G01116R000700810007-9 Total Stripper Wells Average Barrels per Day At 110/Bbl: Wells Abandoned Production Loss (first year, BPD) Value of Production Loss (Millions) Total Reserves Lost (Millions of Barrels) At $15/Bbl: Wells Abandoned Production Loss (first year, BPD) Value of Production Loss (Millions) Total Reserves Lost (Millions of Barrels) At 120/Bbl: Wells Abandoned Production Loss (first year, BPD) Value of Production Loss (Millions) Total Reserves Lost (Millions of Barrels) Sanitized Copy Approved for Release 2011/04/05: CIA-RDP88GO1116R000700810007-9 Interstate Oil Compact Commission Impact of Oil Price Reduction on Stripper Wells, Selected States U.S. Arkansas California Illinois Indiana Kansas Louisiana New Mexico Mew York Ohio Oklahoma Penn. Texas W.Virginia Wyoming ----------- --------- ----------- --------- -------- --------- ---------- ----------- --------- -------- --------- -------- --------- ----------- -------- 184,547 1,932 10,868 12,210 2,501 18,656 6,729 6,015 1,848 10,248 33,615 7,968 51,465 6,199 2,047 638,046 7,778 78,637 35,733 6,054 67,036 13,543 20,646 936 14,678 129,503 5,805 210,343 4,516 9,782 12,328.869 f 28.388 f 287.027 1130.424 122.097 1244.692 1 49.431 1 75.359 1 3.415 153.575 1472.686 121.189 1767.753 1 16.482 135.706 2,610.880 31.026 321.184 146.217 24.772 274.311 .55.417 84.484 3.829 60.062 529.925 23.754 860.723 18.478 40.030 101,958 1,067 6,004 6,746 1,382 10,307 3,717 3,323 1,021 5,662 18,572 4,402 28,433 3,425 1,131 277,090 3,378 34,151 15,518 2,629 29,112 5,881 8,966 406 6,374 56,240 2,521 91,347 1,961 4,248 11,517.065 .1 18.493 1 106.974 1 84.96b 114.394 1159.390 1 32.200 $ 49.090 1 2.225 134.900 1307.916 113.803 1500.127 $ 10.737 123.260 733.812 8.945 90.440 41.096 6.963 77.098 15.575 23.745 1.076 16.881 148.940 6.676 241.914 5.194 11.251 45,390 475 2,673 3,003 615 4,589 1,655 1,479 455 2,520 8,268 1,960 12,658 1,525 504 106,586 1,299 13,136 5,969 1,011 11,198 2,262 3,449 156 2,452 21,634 970 35,138 754 1,634 1 778.077 1 9.485 1 95.896 1 43.575 1 7.383 1 81.748 1 16.515 1 25.177 1 1.141 117.899 1157.925 1 7.079 1256.507 1 5.507 111.929 92.783 1.131 11.435 5.196 0.880 9.748 1.969 3.002 0.136 2.134 ? 18.832 0.844 30.588 0.657 1.423 Sanitized Copy Approved for Release 2011/04/05: CIA-RDP88GO1116R000700810007-9