The U.S. Energy Information
Administration (“EIA”) released its latest Short-Term Energy Outlook (“STEO”)
on January 14, 2020, which can be found here. This STEO is the first to include
energy forecasts into 2021.
Among the interesting forecasts contained in the STEO is the prediction surrounding the rise in renewable energy for 2020 and into 2021. Specifically, the forecasts surrounding the increases in wind generation caught my eye.
Wind and solar generation expected to
grow 15% in 2020
the EIA reportedly
“expects a 32% increase of new wind capacity – or nearly 30 GW [gigawatts] – to
be installed in 2019 and 2020.”
Wind and solar generation expected to
grow 17% in 2021
is more, the EIA expects its forecasted changes in electric power generation to
continue into 2021. According to Today in Energy, the “EIA forecasts U.S. generation from nonhydropower renewable energy
sources will grow by 17% next year as the electric power sector continues
expanding solar and wind capacity.”
many were expecting to see forecasts predicting electricity generation from
renewable energy sources to rise, many were not expecting to see such
significant increases forecasted in the area of wind generation specifically. Only time will tell if wind will truly expand
at these high rates in 2020 and into 2021.
Returning to work after the holiday season may have left many of you wondering if you missed anything important while you were in a cookie-induced holiday slumber.
Here is a short summary of some key items that happened in the energy sector in the Rocky Mountain region around the holidays to keep you in the loop:
Wyoming Amended APD Rules
Effective December 20, 2019, the
Application for Permit to Drill (“APD”) rules have been amended for the State
of Wyoming. The revisions to the APD
rules can be found here.
It is no secret that the number
of challenges to oil and gas operatorship have increased recently in Wyoming
and that those challenges frequently result in a costly and time-consuming
process that ultimately ends up delaying development.
Wyoming’s APD rules were amended
in response to the increased volume of drilling permits filed in the Cowboy
State and are an effort by the Wyoming Oil and Gas Conservation Commission
(“WOGCC”) to reduce not only the backlog of permits, but costly battles for
Here is a quick summary of what you need to know about the new APD Rules – for more detail, check out the rules here:
Wyoming remains a “first-to-file” state when determining operatorship – the race is still on.
BUT there are now time limits (2-year anniversary of the most recent spud well in the DSU) and the opportunity/procedure for a challenging operator to seek operatorship.
The new WOGCC Rules – Chapter
3, Section 8, are worth a read for the details; specifically, subsections
8(l) and 8(m), the latter of which articulates the process that a challenging
operator will utilize, within the two-year window. The Notice of Intent to File an 8(m)
Application and the 8(m) Hearing Application under Section
8(m) are going to be the new meat and potatoes. Note that there are ten (10) criteria for the
8(m) Application that must be included when challenging operatorship and these
criteria are contained in Section
TAKEAWAY: The takeaway is truly that Wyoming’s rule changes are an effort to articulate not only a clear and streamlined operatorship process in Wyoming, but a procedure for challenges to operatorship as well. Here’s hoping the changes will address the operatorship issues.
Colorado Provides Draft Wellbore Integrity Rules
On New Year’s Eve, the Colorado
Oil and Gas Conservation Commission (“COGCC”)
made the draft wellbore integrity rules available. The draft wellbore integrity rulemaking was
shared on the COGCC website on December 31, 2019 via Google Drive, which can be
or directly from the COGCC website here. The revisions to the draft form are provided
in clean and also redline form to easily see the new changes, which are far too
numerous to describe. The revisions
include new definitions, changes in bradenhead testing, isolation of coal seams
and protected water, and changes to the requirements for the well location
plat, casing and cement plan and requirements for stimulation at depths of
2,000 feet or less provided with a Form 2 A – Application for Permit to Drill,
just to name a few.
TAKEAWAY: The draft wellbore integrity rules were made public at a time when many of us may have missed it, yet they contain significant revisions to the rules. The deadline to submit a Request for Party Status in connection with the wellbore integrity rulemaking is Monday, January 13, 2020.
North Dakota Rule Changes in Process
The North Dakota Industrial
Commission (“NDIC”) has been in the process of adopting changes to the oil and
gas rules in the state since last spring/summer. The amended rules were approved by the NDIC
on or about November 25, 2019 and can be found here. On December 20, 2019, the final rules were
submitted to the Attorney General for a legal opinion on the same, which will
be provided on or about January 24, 2020, according to the Timetable
for Adopting Oil and Gas Rules.
TAKEAWAY: The North Dakota rule changes are in process and will be effective April 1, 2020, reportedly after the Attorney General confirms their legality and after approval of the Administrative Rules Committee.
Some key things certainly took place in the energy sector in the Rocky Mountain region around the holidays!
Many of us have the end of the yearandthe end of the decade on our minds: wrapping up projects, working to close deals and matters, and striving to end the year on as high of a note as we possibly can. It is hard to believe but there are only 15 days left in 2019.
With the end of the year at the
forefront, it puts many things into perspective. The U.S. Energy Information Administration
(“EIA”) recently released its December 2019 Short-Term Energy Outlook (“STEO”)
which can be found here. With 2019 coming to a close, we look to
Slower Increase in Oil Production: The EIA is expecting slowing crude oil production growth in 2020, but growth in U.S. crude oil production is expected to increase over 2019 production. The EIA is predicting the following: “Slowing crude oil production growth results from a decline in drilling rigs over the past year that EIA expects to continue into 2020. Despite the decline in rigs, EIA forecasts production will continue to grow as rig efficiency and well-level productivity rises, offsetting the decline in the number of rigs.”
Lower Oil Prices: The EIA is expecting that “crude prices will be lower on average in 2020 than in 2019 because of forecast rising global oil inventories, particularly in the first half of the year.”
Continuing OPEC Production Limits:The “EIA assumes that OPEC will limit production through all of 2020. . . .” The new production target is reportedly “1.7 million barrels per day (b/d) lower than in October 2018, compared with the former target reduction of 1.2 million b/d.”
By way of a reminder, the Organization of the Petroleum Exporting Countries (“OPEC”) met last week and approved additional adjustments to the previous production cuts – more on this can be found here.
Increase in Crude Oil and Petroleum Exports: The “EIA expects total crude oil and petroleum net exports to average 570,000 b/d in 2020 compared with average net imports of 490,000 b/d in 2019.”
These new outlooks for 2020 leave
us with a hopeful anticipation overall as we close out the year. Only time will tell if they are accurate forecasts!
Produced water in the oil and gas
sector can be a very costly and complex matter, and largely dependent on
location due to the variables in the reservoir, the age of the well, the
drilling technologies employed, etc.
Produced water is an area where many lawyers have been spending a lot of time in recent years. We draft agreements for the injection of produced water, the transportation of it via truck and pipeline, and we advise companies on its general management as production waste. We answer a lot of questions about produced water in not only our professional lives, but also in our personal lives – what is in it, where does it go, where does it come from, why does produced water exist, who’s responsibility is it, what can it be used for? An excellent resource for background on produced water is at the Office of Fossil Energy, which can be found here.
Does produced water actually contain a hidden treasure trove?
There is a percentage of residual hydrocarbon typically present in produced water, which some operators currently skim prior to injection if the amount of the resources present is large enough to make the skim operation economical. Uncaptured natural resources are often present in the produced water.
Finding the hidden value:
According to the Casper Star
Tribune article entitled, University
of Wyoming Scientist Awarded $1 Million from Federal Government for Wastewater
Research, environmental engineer, Dr. Jonathan Brant, recently received a
$1 million grant from the U.S. Department of Energy to research ways to limit
the loss of uncaptured natural resources in produced water and to reuse the
treated water for industrial purposes.
The project will reportedly
launch in January 2020 and “an important goal of the research will be producing a
cost-effective and simple product that operators can easily incorporate into
current water management systems.”
Addressing other compounds present in the produced water is also part of the goal – the grant project will develop a process for cleaning the water to recover not only the uncaptured resources but also to recover these compounds, according to the Wyoming Tribune Eagle article entitled, UW Center for Excellence in Produced Water Receives Grant. More information on the technology being developed can be found here and also on the homepage for the University of Wyoming Center for Excellence in Produced Water Management, which can be found here.
Congratulations to Dr. Brant and to the
Cowboy State on the award of this important grant!
Whether we have a strong winter
impacts many things. From our road
conditions driving to work, the extent of demand for home heating fuels, how
our livestock will fair, and our ski season (including vital tourist revenue
that results from ski season), predicting the degree of the intensity of the
winter season can be important.
But this year it looks like it
could be anyone’s guess…some degree of certainty would be nice, as it can have
a major impact on energy forecasts as well.
For example, natural gas and propane demand.
The U.S. Energy Information
Administration (“EIA”) released its Short-Term Energy Outlook (“STEO”) earlier
this month, which can be found here. The October STEO contains a lot of
interesting information, including, but not limited to, that the “EIA expects
downward oil price pressure to emerge in the coming months as global oil
inventories rise during the first half of 2020.”
However, what really caught my
eye in the October STEO was
the EIA’s prediction as to the upcoming winter.
In my neck of the woods, cattle
ranchers are bracing for a big winter – folks are beefing up (pun intended)
winter structures in their pastures to give their cows some protection from
intense snow storms, and old timers are warning to push calving season later
this year to avoid calves being born during the worst of the early spring snow
storms. Many people in my home state of
Wyoming have already buttoned up their summer homes in the mountains and have
had snowfall since the beginning of the month.
According to The Weather Channel article entitled, It’s
a Record-Snowy Start For the Northern Rockies and Plains and Winter Is Still
Over 2 Months Away, some areas have already been pounded by record-dumping
In fact, The Old Farmer’s Almanac similarly predicts in its winter 2019-2020 forecast, which can be found here, “below-normal winter temperatures” through most of the U.S. coupled with significant snowfall. The 2020 Old Farmer’s Almanac predicts a “snow-verload” of “frequent snow events – from flurries to no fewer than seven big snowstorms coast to coast, including two in April for the Intermountain region west of the Rockies.”
The October STEO takes a different stance – The EIA forecast as to the winter fuels outlook is based upon a mild winter. Indeed, the October STEO provides the following winter fuels outlook:
“The [EIA] forecasts that average household expenditures for all major home heating fuels will decrease this winter compared with the last. This forecast largely reflects warmer expected winter temperatures compared with last winter.”
Last month, we discussed the increase in oil and gas
bankruptcy filings since May of 2019 – the full blog post can be found here. Haynes and Boone, LLP released a new Oil
Patch Bankruptcy Monitor as of September 30, 2019, which can be found here,
showing that even more have been added to the list.
Since our last post on the subject, which reflected the August 2019 data, seven more companies have filed for bankruptcy in the last month or so, according to the September Oil Patch Bankruptcy Monitor.
In addition to the fact that seven
more companies have been added to the list, the map of 2015-2019 E&P
Bankruptcy Filings By Location found in the September
Oil Patch Bankruptcy Monitor is similarly concerning; Texas is reportedly
leading the charge with 89 filings, followed by Delaware with 31 filings,
Canada with 18 filings, and Colorado and Louisiana with 11 filings each.
The September Oil Patch Bankruptcy Monitor also shows that the third quarter of 2019 has been the highest quarter of cumulative North American E&P Bankruptcy Filings since 2015…the upward trend of this graphical depiction is startling. As of the publication of this blog, according to Bloomberg Energy, WTI Crude is at $54.01 per barrel and Brent Crude is at $59.92 per barrel, which is a general decline from this time last month. As always, it is difficult to try to discern what this means.
Stay tuned and we will keep you posted on oil and gas industry insights in light of the recent increase in bankruptcies.
It is time for a check-up, or
more appropriately, a check-in, on the Wyoming energy sector. I have spent quite a bit of time in Wyoming
recently, and one troubling comment that I heard in a gas station has resonated
with me – “Wyoming is still in a recession.”
It got me thinking…is this true? It
is time to take the pulse of Wyoming’s Energy Sector…
Last week, I attended the Wyoming
Oil and Gas Conservation Commission’s (“WOGCC”) hearings and was present for
the Supervisor’s Report to the Commission, which can also be found here. In the Supervisor’s Report, Mark Watson gives
a status update on the oil and gas sector in the Cowboy State. It is a sort of monthly physical, a check-up
of sorts, on the goings on in the oil and gas industry.
Natural gas output may be starting to taper off, and the consequences of low natural gas prices are already starting to emerge in Wyoming.
Layoffs are starting to creep upwards.
Halliburton reportedly cut 650 jobs in the Rocky Mountain region.
Good news: Wind energy development is expected to expand.
The article’s perspective on the
future of natural gas is troubling as, according to the U.S. Energy Information
Administration’s Wyoming State Profile and Energy Estimates, which can be found
here, Wyoming is among the top
10 natural gas producing states and has natural gas reserves among the top 5
states. The Supervisor’s
Report reported that monthly gas production was down 17% from July 2018 as
Layoffs in the coal sector and in
the oil and gas sector are similarly troubling…
Thank goodness that the Casper Star Tribune’s recent article entitled, Wyoming Utility Leading Drive to Expand Wind and Solar, provides a light at the end of the tunnel. Wyoming has been struggling to diversify its economy in recent years, and this check-up seems to reflect a generally bleak prognosis. However, the good news comes in the form of one of Wyoming’s ever-present assets – the wind. As the Cowboy State is ripe for wind development, it appears wind infrastructure will be the booster shot that the state needs.
According to Haynes and Boone, LLP’s August 2019 Oil Patch Bankruptcy Monitor, there has been an increase in the number of oil and gas bankruptcy filings, especially since May of 2019 – 26 exploration and production (E&P) firms have reportedly filed for bankruptcy through mid-August this year, with debts reportedly totaling $10.96 billion.
A number of factors are
contributing to the increase in oil and gas bankruptcies – oil price is chief
among them. Further, according to the Oil
& Gas 360 article, one of the reasons behind the bankruptcies is, “a
displeased Wall Street cutting off the access to capital for most companies.”
Many are waiting with bated breath to receive updated data on the number of bankruptcies – as of the date of the August Oil Patch Bankruptcy Monitor, there had already been 4 bankruptcies in the month of August, according to the report’s 2019 bankruptcy list.
While not an issue isolated to
the Rocky Mountain region but impacting all producing states, many in Colorado
are concerned that the recent legislation in the state may become yet another
contributing factor to increasing bankruptcies in the energy sector.
Will oil and gas bankruptcies
continue to rise for the rest of the third and fourth quarter? Will Colorado be next to see a wave of
bankruptcies? Only time will tell…
The Montana Supreme Court has accepted a certified question from the Ninth Circuit Court of Appeals concerning whether, under Montana law, dinosaur fossils constitute “minerals” for the purpose of a mineral reservation.
The landmark case is Murray v. BEJ Minerals, LLC, 924 F.3d 1070, 1074 (9th Cir. 2019), certified question accepted, No. OP 19-0304, 2019 WL 2383604 (Mont. June 4, 2019). The fossil discovery at issue is reportedly the “mother lode of fossils” – the “Dueling Dinosaurs,” triceratops fossils and a complete T. rex named the “Murray T. rex.” The Dueling Dinosaurs are reportedly two complete fossils of two dinosaurs “locked in combat” and the Murray T. rex is reportedly considered one of only a dozen ever found in such condition.
Traditionally, fossils are not considered minerals and belong to the surface, not the mineral, estate. However, the matter was not clear under Montana law and litigation ensued.
The Ninth Circuit Court of Appeals had previously determined that fossils were “minerals” that belong to the owners of the mineral estate – this controversial decision is what sparked the certified question to the Montana Supreme Court.
Recognizing that a gap existed in Montana law as to whether fossils constitute minerals in light of the Murray case, the legislature addressed the skeleton in the closet.
HB 229 was signed into law by the Governor of Montana on April 16, 2019. The full legislative history of HB 229 can be found here. The full text of the enrolled bill of HB 229 can be found here.
In short, HB 229 declared that dinosaur fossils are not minerals and that fossils belong to the surface estate.
Despite the Montana legislation, however, resolution of the Murray case is not extinct. The effective date of HB 229 was immediate, but its retroactive application has yet to be confirmed. We will continue to monitor the case and how the Montana Supreme Court responds to the certified dino question. Stay tuned!
Last night, I made salmon
patties. We have this amazing canned
Alaskan wild salmon and it makes some extremely delicious salmon patties, let
me tell you. As I was making them last
night, one thought kept crossing my mind: I was not in the mood for a basic,
plain, old salmon patty. You know what a
regular salmon patty is? It is boring,
You know what else can feel a little monotonous? Reviewing energy statistics! The U.S. Energy Information Administration (“EIA”) released its Monthly Energy Review, which can be found here. As interesting as this data is, it can still taste a little bland.
Sometimes you need to spice it
up! In salmon patties and in reviewing
data, a little flavor goes a long way.
I added a little Siracha to my
salmon patties last night, whipped up a Siracha aioli sauce, diced up scallions
and celery to add in to my patties and also topped them with dill and sea
salt. Just like that, the flavor profile
was no longer boring. It was totally new
To add a little spice to reviewing energy statistics, one must change the flavor profile by looking at the data with fresh eyes.
The EIA’s Monthly
Energy Review may look like just a bunch of charts and graphs, but a close
review reveals patterns and trends. I
specifically like to look at production, consumption and energy prices.
For example, in the Crude Oil
Price Summary, which can be found here, a
comparison of the yearly average prices tends to show an overall upward
On a more micro-level, oil prices today are also moving upward. According to Bloomberg Energy, WTI Crude Oil is at $55.95 per barrel at the time of the posting of this blog and Brent Crude is at $60.61 per barrel. Both of these prices are on the rise!
What is the spice to add when thinking about energy prices? Projections and forecasts, of course. Both of these considerations add the flavor.
Brent spot prices will average $64/b in the second half of 2019 and $65/b in
2020. The forecast of stable crude oil prices is the result of EIA’s
expectations of a relatively balanced global oil market.
This spice is clearly forecasting that Brent is on the rise from where we sit today.
EIA expects WTI
crude oil prices will average $5.50/b less than Brent prices during the fourth
quarter of 2019 and in 2020, narrowing from the $6.60/b spread during July. The
narrowing spread reflects EIA’s assumption that crude oil pipeline transportation
constraints from the Permian Basin to refineries and export terminals on the
U.S. Gulf Coast will ease in the coming months. In the July STEO, EIA forecast
the Brent-WTI spread to average $4.00/b in 2020.
This spice forecasts that WTI will also raise and the spread will start to shrink up even more.
Thus, the flavor profile on oil
prices is starting to heat up and is projected to get spicier.
TAKEAWAY: Don’t be afraid to spice things up or look at things with fresh eyes to see a new flavor profile!