As a resident of Weld County, I
can tell you that there are sometimes stark contrasts between Weld and Boulder Counties. Although neighbors, the two counties have
very different views – and I do not mean of the mountains.
One of the ramifications of S.B.
181 is increased local control, allowing Colorado cities and counties more
control over drilling operations through local zoning ordinances and land use
regulations. Hence, a line in the sand
is beginning to be drawn between Boulder and Weld Counties…
On May 1, 2019, the Weld County
Board of Commissioners (“Weld County Commissioners”) issued a press release
entitled, “Local Control Focus of Board Action,” which can be found here. During the hearing that same day, the Weld
County Commissioners reportedly
started the process to give the Weld County government control over oil and gas
permitting by “formally designat[ing] all of unincorporated Weld County as
being under the purview of county government as it relates to mineral resources
– particularly oil and gas.”
The press release follows the
“Open Letter from the County Commissioners” from April 16, 2019, the same day
that S.B. 181 was signed by Governor Polis, expressing Weld County’s
understanding of the value of Colorado’s oil and gas industry, which can be
The proposed designation is set
for public hearing on June 10, 2019, during which time the Weld County
Commissioners will act on the same. Per
release, public comment and participation is encouraged at the
It is clear that lines are being
drawn…stay tuned as more develops!
It is no secret that Wyoming’s economy is heavily reliant on the energy and natural resources sector. In fact, the primary forces behind the economy of the Cowboy State are mineral extraction, in the form of coal, oil, natural gas and trona, and agriculture.
Wyoming is an attractive place to do business due to state incentives like no income tax and low sales and property taxes; however, Wyoming may become even more of a hot opportunity state in light of the passage of Senate Bill 181 by its neighbor to the south, Colorado.
Colorado has recently taken
serious steps to increase oil and gas regulation and revamp the make-up of the Colorado
Oil and Gas Conservation Commission. As
Governor Jared Polis signed SB 181 into law yesterday, April 16, 2019, many are
trying to anticipate the impact that the bill will have on the oil and gas
industry in Colorado. The future of oil
and gas is uncertain, due in part to the significant reforms mandated by SB
181. For a full discussion of the
sweeping impacts of the bill, check out our prior post here.
I have heard several folks referring to Colorado’s SB 181 as “Wyoming’s Economic Stimulus Package.” The comment has been said in jest, but it got me thinking…
Will the oil and gas industry shift more of its focus to the Cowboy State in the wake of SB 181?
There are several factors that support the theory that Wyoming will greatly benefit from Colorado passing SB 181, including:
Rural Nature of Wyoming – Wyoming is one of the least populated states in the country. In addition, the population of the state is spread out – meaning the population density is very opposite to that of Colorado. As a result, the friction that Colorado has faced with the oil and gas industry as its towns and communities have rapidly expanded into producing areas will be practically a non-issue for rural Wyoming. In fact, the New York Times wrote an article last summer commenting on this issue of the increase of production in Weld County coupled with Colorado’s population boom entitled, “In Colorado, A Fracking Boom and a Population Explosion Collide.” Wyoming is a much more attractive environment for operations than Colorado, given Wyoming’s lower population.
Attitude – Wyoming residents are, in general, supportive of responsible oil and gas development in the state. Talk in Wyoming is positive and hopeful of the boom to come, and folks are making what preparations they can in the hopes of a boom in the oil and gas sector again – welcoming it with open arms. Wyoming residents recognize the value of the revenue that oil and gas operations bring to the state.
Workers with Grit – Wyoming is known for its quality of worker; Wyoming folks work hard and with grit, as working outdoors in all weather conditions requires.
Wyoming presents a favorable opportunity for the energy and natural resources sector to grow, but will the oil and gas industry shift its focus to the Cowboy State in the wake of SB 181?
It is likely that Wyoming will benefit from the passage of SB 181 in Colorado, but only time will tell if SB 181 will be Wyoming’s new economic stimulus package…stay tuned!
Watching commodity pricing is a
bit like watching a rollercoaster – it goes up one minute, down the next, then
up again and down. Today’s oil prices
are no different. We started the day up
a bit, and this afternoon we are down a bit – the rollercoaster continues. If you were looking for a lazy river-like
pace, with its predictable turns and steady current, commodity pricing is not
the ride for you.
This morning, Bloomberg Energy reports the
following oil prices, which are up a bit from yesterday:
A number of things have
contributed to pricing’s rollercoaster effect, including:
and Demand – U.S. Inventories are High. According to the U.S. Energy Information
Administration’s (“EIA”) Monthly Crude and Natural Gas Production report
released March 29, 2019, which can be found here, U.S. crude oil
production is increasing. In fact,
according to the EIA’s Today in Energy from April 9, 2019 entitled, “U.S. Crude Oil
Production Grew 17% in 2018, surpassing the previous record in 1970,”
“[a]nnual U.S. crude oil production reached a record level of 10.96 million
barrels per day in 2018.”
Cuts – Plus Global Issues. According
to CNN Business article entitled, “There’s
Trouble in OPEC and Oil Prices are up 50%,” trouble in 3 OPEC nations,
namely, Venezuela, Iran and Libya, have contributed to domestic oil price
and a More Cautious Approach.
According to CNN Business article entitled, “Wall
Street Taught Oil Drillers Restraint. That Could Lift Oil Prices,” some of
the price volatility could be related to the more cautious approach some
companies are taking, with the hopes of keeping higher oil prices
sustained. The article also reports
that the sense of restraint in the oil patch could lead to breaking the
There are of course other factors
that may come into play, including politics, pipeline constraints, whether OPEC
continues supply cuts and global supply and demand impacts.
While it is difficult to predict where the rollercoaster is headed, yesterday’s CNBC article entitled, “Prepare for $80 oil this summer as ‘wounded bulls’ rise, RBC warns,” forecasts that “international oil prices will average $75 a barrel in 2019 and consumers may find themselves contending with bouts of $80 crude this summer, RBC Capital markets said.” One thing is for sure, we are along for the ride!
We are constantly trying to predict the future of oil prices – that is just the nature of the beast in this business. So many things begin, and end, with the price of oil for us. Luckily, the U.S. Energy Information Administration (“EIA”) is literally in the business of analyzing and predicting the future of oil prices. Thank goodness, because there are so many factors that go in to predicting commodity pricing, this is not an easy feat!
The EIA’s Short-Term Energy Outlook (commonly known as “STEO”) was released on March 12, 2019 – the full report can be found here.
Brent crude spot prices reportedly averaged $64 per barrel in February, which marks a $5 per barrel uptick since January.
The EIA forecasts that Brent spot prices will average $63 per barrel in 2019 and $62 per barrel in 2020.
These forecasts are great news because they predict price stability, in general, through 2020.
Moving on to the Crude Oil
Markets Review featured in the STEO, which can be found here, the
takeaways are as follows:
The STEO reports that the U.S. active oil rig count reached a 10-month low of 834 rigs as of March 8, suggesting the rate of U.S. crude oil production growth could slow.
Yet, the EIA forecasts U.S. crude oil production will increase by 1.3 million b/d in 2019 and by 0.7 million b/d in 2020.
In addition, the STEO notes the potential for at least two wildcards – OPEC and U.S. production levels, as well as the pace of global oil demand growth. The STEO forecasts that these factors “present considerable uncertainty to oil market balances and price expectations.”
on the current forecast,
however, the EIA expects global inventory builds and rising OPEC spare capacity
will limit significant upward oil price pressures in 2019 and in 2020.”
While it is difficult to predict
what lies ahead for oil prices, stay tuned – we will have our fingers on the
pulse of oil prices. Many factors
influence oil prices and we will keep you apprised of new developments!
March is Women’s History Month. In 1919, the 19th Amendment gave women the right to vote. While we are celebrating the 100-year anniversary of women’s suffrage in the United States, it gives us a great opportunity to spotlight my home state of Wyoming.
Wyoming is not just known as the “Cowboy State” or home to the Salt Creek Oil Field – once the largest producing oil field in the world that boomed and also busted, yet still produces oil today. Wyoming is also nicknamed, “the Equality State.”
2019 marks the 150th anniversary of women’s suffrage in Wyoming – a truly wonderful anniversary, as women were recognized as having the right to vote in Wyoming a good 50 years before women in the rest of the country were guaranteed the same right.
It allowed women to serve on juries as early as
The first female governor in the United States
Tayloe Ross, elected in Wyoming in 1924.
In addition, the women of Wyoming have always been a different sort – full of grit, tenacity and strength. As part of our spotlight on Wyoming this month, a recent project created by Wyoming native, Lindsay Linton Buk, entitled Women in Wyoming must also be highlighted.
The project features “portraits and interviews of women who shape the West” and brings attention to the contemporary women in my home state who are remarkable role models. The project is broken into 3 amazingly inspiring chapters – trust me, it is worth checking out! Give it a listen:
Chapter 1 – Breaking Boundaries – my favorite feature is on Wyoming’s first female Supreme Court Justice, Marilyn Kite
Chapter 2 – Filling the Void – my favorite feature in this chapter focuses on Dr. Diane Noton
Chapter 3 – Power – my favorite feature in this chapter is on Mickey Thoman, “cowgirl, mentor and ranching matriarch of the Thoman Ranch in Sweetwater County, Wyoming” (which is also my home county)
Each Chapter contains 5 separate stories – each with truly breathtaking photographs taken by Lindsay Linton Buk herself, and each story is recounted in the subject’s voice and displayed in podcast format. You get to actually hear the tales told in the subject’s voice, which is really a once in a lifetime opportunity to listen to true stories told by these amazing Wyoming women. This project is so unique and full of energy – it is an absolutely wonderful and inspiring project created by a Wyoming woman to bring these powerful stories to light – it is a “must see.” Check it out!
As part of the Rocky Mountain
Energy Essentials blog, we typically discuss the energy and natural resources
sector of Wyoming; however, Wyoming has been on the forefront in more ways than
just the oil and gas and other extracted minerals area. Its nickname of the Equality State pays
homage to that!
It is no secret that Colorado is,
and has been in recent years, a hot state in the domestic energy sector.
One of the reasons that the state has been a hotbed for development is due to the potential that the state has for oil and natural gas production. According to the U.S. Energy Information Administration (“EIA”) profile on Colorado, which can be found here:
Crude oil production has quadrupled in Colorado
Colorado hold about 4% of total domestic crude
Colorado is the 5th largest natural
gas producing state
11 of the country’s 100 biggest natural gas
fields are located in Colorado
Colorado has serious potential for future oil and gas production.
As we discussed in our post, Proposition 112 Was Defeated, But That is Not the End, Colorado recently rejected a measure that could have had significant negative impacts on the members of Colorado communities. However, as we discussed, Proposition 112 is not the end to the challenges facing the industry…as highlighted below.
Predicting the future is obviously difficult. We do not have a crystal ball or some special insight that gives us all of the answers. Predicting is, just that – estimating things based upon the data and information we know and taking into account the numerous factors that we cannot anticipate and do not know, but that may make a significant impact.
That being said, despite these
difficulties, many are trying to predict what the future of the energy sector
in Colorado will look like. For example,
these are some recent headlines in Colorado:
In addition to potential future regulations, the state has the Wildgrass case looming – Wildgrass Oil and Gas Committee v. State of Colorado et al., case number 1:19-cv-00190, currently pending in the U.S. District Court for the District of Colorado was filed January 23, 2019. What is at issue is the statutory pooling of nonconsenting mineral owners in the form of a challenge to the constitutionality of C.R.S. § 34-60-116, the statutory/involuntary pooling statute.
Needless to say, these matters will certainly have an impact on Colorado’s future role in the domestic energy sector, the operations of operators in the state and also the interests of mineral interest owners.
It Takes the Right Ingredients: The Recipe for Sustainable Oil Prices and the Perfect Cake Have Common Elements
In baking, much like in many areas of life, all of the ingredients must come together in perfect harmony. Baking is not just about measuring out the right amount of quantities of what you are adding in, baking it at the right temperature and hoping for the best. No, baking also requires patience, finesse and foresight – but above all, it requires planning and the right ingredients.
Achieving sustainable oil prices is much the same – numerous components must all come together in harmony for sustainable growth and stable pricing to be the result. A little patience, finesse, foresight and planning don’t hurt the process either. One or two factors do not, alone, cause a stable price environment – it is the combination of many ingredients, each playing a role.
I recently got my layer cakes
down pretty well; however, then I got a little over-confident and substituted
in eggnog on a whim while baking a Christmas-themed layer cake. I did not think through the role that
room-temperature milk actually played in a cake, nor did I think through the
impact that the substitution may have on the other ingredients. Luckily, my cake still worked out, but it was
just a little off.
Lesson Learned: Sometimes you just cannot substitute one of the crucial ingredients on a whim.
Some, But Not All of, The Crucial Ingredients for Sustainable Oil
When one sits down to think about
what all goes into the recipe for sustainable oil prices, it is easy to see how
opinions on this subject can differ so greatly.
There does seem to be a general consensus on a few of the critical
Supply and Demand
International Relationships and the Global
Infrastructure and Drilling Efficiencies
Supply and Demand
Although some question whether supply and demand have that significant of impact on pricing, most people recognize that this simple and basic economic principal is a foundational component of the sustainable oil prices recipe.
While it is widely accepted that high oil prices leads to more drilling, thereby increasing supply, some question whether OPEC’s supply cuts have a true impact on price. Others feel that production cuts support prices and give momentum to increases in price.
A recent article featured on Investing.com entitled, Oil Prices Gain 2 Percent, Extending Rally From December Lows, reports that the slight recent increases in oil prices are “drawing support from an agreed supply cut by the Organization of the Petroleum Exporting Companies, [as] well as some non-member countries such as Russia and Oman” and discusses in detail that “[t]he aim of the production cut is to rein in a surge in global supply, driven mostly by the United States, where production grew by nearly a fifth to over 11 million bpd in 2018.”
International Relationships and the Global Economy
Now, more than ever, the global economy and the state of international relationships play a critical role in whether oil prices will be volatile. We frequently consider circumstances in Venezuela, Iran, Saudi Arabia, Russia and other far-away countries when we look at predicting the future of oil prices. Forbes discusses the international relationship impact on oil prices in its recent article entitled, Oil Markets Are In For a Wild Ride in 2019.
Infrastructure and Drilling Efficiencies
Planning, from an infrastructure standpoint, such as pipelines, plays an important role on the stability of pricing as well. Advances in technology that promote drilling efficiencies are similarly essential.
The unavailability of pipelines has been an issue for years. In fact, a recent article in Bloomberg entitled, Permian Shale Oil Boom Holds Good News and Bad News for OPEC, discusses current pipeline constraints in the Permian and also limitations in the United States export infrastructure in detail.
Further, advances in drilling technology have resulted in efficiencies that have helped profitability increase. A recent article in Forbes entitled, U.S. Shale Oil and Natural Gas, Underestimated its Whole Life, mentions the benefits of drilling efficiencies in oil price consistency and future production.
Bottom line – both sustainability in commodity prices and baking each require the right ingredients.
One of my favorite pastimes is reading the monthly Director’s Cut from Lynn Helms. It is like those “You Might Be a Redneck If…” jokes, except it goes like this… “You Might Work in The Energy Sector If…you get excited to read the monthly Director’s Cut.”
The Director’s Cut reports go
back to 2010 and are released monthly.
The full archive can be found here. They look back and discuss in detail the
prior months’ production, rig count, completions, etc. In addition, they provide a helpful section
called “Agency Updates” which breaks down all of the goings on in the Bureau of
Indian Affairs (“BIA”), Bureau of Land Management (“BLM”), Environmental
Protection Agency (“EPA”), U.S. Forest Service, etc.
The most recent Director’s Cut
reports provide us with a positive outlook for the oil and gas industry in
North Dakota. North Dakota production levels
are reaching record highs…F
To wet your whistle with North
Dakota stats, according to the U.S. Energy
Information Administration (“EIA”)’s Drilling Productivity Report released
on December 17, 2018, which can be found here, the Bakken region produced 1,443 thousand
barrels of oil/day in December of 2018 and is expected to produce 1,461 thousand barrels of oil/day in
January of 2019.
Now, to the Director’s Cut
November 2018 Director’s Cut
The main takeaway from the November,
2018 Director’s Cut is that production
records were being set. Specifically, record oil and gas production levels
were achieved in September of 2018 – hitting new all-time highs for oil
production, gas production and producing wells.
Over 99% of drilling now targets the Bakken and
Three Forks formations
Drilling permit activity increased significantly
from September to October 2018
Similarly, the December,
2018 Director’s Cut provides that new records were again reached. Record oil and gas production levels were
again hit in October, 2018 – new all-time highs for oil production, gas
production and producing wells were again hit.
2018 Director’s Cut also provides that the November rig count was down
slightly, but that as of the release date of the report on December 14, 2018,
it was back up to October’s level, and that estimated wells waiting on
completion is 959, up 31 from the end of September to the end of October.
The January, 2019 Director’s Cut reflects a slight decline in oil and gas production from October to November; also, the number of producing wells is also down from October to November.
The Takeaway: The Director’s Cuts are a great resource. The December, 2018 Director’s Cut provides some insight into the optimistic outlook for North Dakota production and also details the production records that have been reached. Specifically, the December, 2018 Director’s Cut provides that, “Operators continue to maintain a [drilling] permit inventory that will accommodate varying oil prices for the next 12 months.” Good news!
My Alma matter recently started using a slogan that I absolutely love – “the world needs more cowboys” – check out the University of Wyoming homepage here.
However, the Cowboy State is not
just home to cowboys. Wyoming is also
home to deposits of oil, gas, trona, coal, uranium, bentonite, and other
elements – the Wyoming Mining Association website, which can be found here, and the Wyoming Oil & Gas
Conservation Commission (“WOGCC”) website, which can be found here, are both excellent sources for
information on Wyoming’s resources.
Wyoming is no stranger to cowboys or to the booms and busts of the energy sector. In fact, the foundation of Wyoming is deeply rooted in the hard working men and women who are gritty enough to work through the cyclical nature of the energy industry, not to mention those who can withstand the wind and the weather. However, although Wyoming has struggled in recent years due to downturns in the oil and gas industry and the coal sector, Wyoming is increasingly on the radar for future oil and gas production.
According to an article published
in Oil and Gas 360 in late September of 2018 entitled, Wyoming Has 18,000 Drilling Permits in the
Queue for Approval and 30 Active Rigs, “Wyoming regulators have 18,000
applications for permit to drill in a queue awaiting approval” and the WOGCC is
reportedly moving through up to 150 APDs per month. The article
further points out that, “[m]any of those [APDs] will not be approved, but
the activity speaks to increased interest in either drilling in Wyoming or
securing primacy over a drilling area by being the first to secure a permit.”
In addition, the WOGCC has been
forced to take action since it is being bombarded with applications, further
reflecting the spike in interest in Wyoming oil and gas development:
1. Effective with the July 2018 hearings,
because the WOGCC has been so inundated with applications, an Inactive Docket
(“B” docket) was created to lessen the burden on WOGCC staff. Pursuant to the Protest
Policy for Spacing Related Hearings issued on June 12, 2018, any protested
spacing related application that is continued more than once will be
automatically placed on the “B” Docket for a period of up to one year until it
is either resolved by the parties or set for a hearing at the request of either
party. This is an effort to ease the
workload on WOGCC staff and to get the process more streamlined.
2. More recently, effective December 11,
2018, the WOGCC implemented a new hearing policy regarding amending
applications. The full updated policy
can be found here. The new hearing policy provides
that when a hearing application is amended, it will be continued and assessed a
continuance fee – and the applicant will be required to re-notice the
application and provide a new affidavit of mailing. According to Mark Watson, Oil & Gas
Supervisor, this new policy is reportedly
designed to provide the WOGCC staff adequate time to prepare the docket for
It is clear that interest in
Wyoming oil and gas development is on the rise and the good news is that the
WOGCC is taking steps to accommodate the influx. This news is not only good for those in the
oil and gas industry itself, but for all Wyoming folks working in businesses
that help support energy workers.
Stay tuned – we will continue to
monitor the energy sector in the Cowboy state.
Colorado’s Proposition 112, which
gained national notoriety this fall, the full text of which can be found here,
was a ballot initiative that proposed the nation’s strictest setback – a
blanket 2,500 feet setback for new wells.
Luckily, the highly publicized Proposition 112 was defeated at the polls
this November, as it could have had significant negative impacts on not only
the industry as a whole, but on the lives of many Coloradans. The extreme and controversial measure was
even discussed in The New York Times
article entitled, In Colorado, a Bitter Battle Over Oil, Gas
and the Environment Comes to a Head,
shortly before voters hit the polls.
Residents of Denver saw people
taking to the sidewalks and streets to oppose Proposition 112 and to spread the
word of how detrimental the measure would be if passed – industry workers,
landmen, executives, engineers, lawyers and the like all sported “Vote ‘No’ on
112” signs. As a resident of Weld County,
I personally did not see any “Vote ‘Yes’ on 112” signs until driving
north to Fort Collins or west to Boulder.
By way of a summary, Proposition
112 would have had substantial impacts on the oil and gas industry in Colorado,
including the following:
It would have greatly reduced the available
locations for new oil and gas development
Colorado’s tax revenue, unemployment rate and
overall health of the state economy would have taken a major hit
Most notably, the measure would have had major
negative impacts that would have rippled throughout Colorado communities – our
families would have felt its negative impacts the most.
What many forget is that it is not just those families who work in the oil and gas sector who would have suffered – local restaurants, hotels, gas stations, and many others who serve the industry would have lost a significant flow of income. This also does not include the mineral owners whose asset could have remained undeveloped – they stand to lose the benefit of owning such a resource if it can not be developed. An excellent summary of the potential impacts of Proposition 112 was put together by the Colorado Oil and Gas Association (“COGA”) and can be found here.
Proposition 112 was reportedly
rejected by a margin of 57% to 42%.
Those in favor of restricting oil and gas operations in Colorado will
likely attempt future ballot measures aimed at the same…the takeaway is that the defeat of Proposition 112 will likely not be
The roots of this measure started to grow as early as 2010, with local Colorado communities starting to get interested in pushing fracking moratoria. It is unlikely that this movement toward heavily restricting oil and gas development in Colorado will end any time soon. Many think that the oil and gas industry is currently poised to educate the public now that it has defeated Proposition 112 and use the opportunity to prevent future misinformation and obstruction of the industry. Coloradans for Responsible Energy Development is one such effort.
Stay tuned – we will keep you
informed of any new developments and regulations affecting the industry in