Category Archives: Wyoming

Wyoming’s Oil and Gas Resources Summarized as we Start the New Decade

This month, the Wyoming State Geological Survey issued the Oil and Natural Gas Resources in Wyoming January 2020 Summary Report.  A free copy may be downloaded here.  The report assesses where the Cowboy State is, and forecasts where it is headed, when it comes to one of the state’s most valuable resources – oil and natural gas. 

In short, the outlook for the Cowboy State is positive and the oil and gas sector appears poised for growth

HIGHLIGHTS OF THE REPORT

By way of a quick summary, the report provides as follows:

  • “Wyoming oil production is forecast to reach levels not seen since 1993 for the second consecutive year.” 
  • “With substantial reserves of oil and natural gas (the EIA estimates Wyoming reserves are enough to supply the U.S. with 46 days of oil and 262 days of gas), a favorable regulatory environment, and operators’ increased ability to lower production costs in unconventional reservoir development, Wyoming will remain a significant contributor to the national energy portfolio.”
  • Natural Gas Leader:  “The Greater Green River Basin is the top gas-producing basin in Wyoming, accounting for 60 percent of the state’s 2018 natural gas production.”
    • Projects in this basin are progressing more slowly than anticipated and hoped; however, “[t]hese long-term projects will significantly increase the basin’s total natural gas production if and when they come online.”
  • Oil Production Leader:  “The Powder River Basin has traditionally been, and continues to be, Wyoming’s top oil-producing basin, consistently accounting for at least one-third—and since 2014, more than half—of the state’s oil annually.”
    • The future of Powder River Basin oil production in general will be largely dependent on market conditions and will be “susceptible to crude oil prices, surpluses, and the international market.”
  • Wildcatter:  Wildcat wells, defined by the Commission as, “wells outside known fields or new wells which are determined by the Commission to have discovered oil or gas in a pool not previously proven productive,” accounted for 40 percent of the state’s total 2018 oil production.  “This percent-contribution from wildcat wells is expected to continue its upward trend in the future.”

TAKEAWAY:  While Wyoming continues efforts to diversify its economy, the report has provided good news for the anticipated growth of the oil and gas sector in the Cowboy State as we start 2020.  We all hope that the upward trends seen in the report continues!

Did I Miss Something? What Happened in the Energy Sector in the Rockies Around the Holidays

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 operatorship. 

Here is a quick summary of what you need to know about the new APD Rules – for more detail, check out the rules here:

  1. Wyoming remains a “first-to-file” state when determining operatorship – the race is still on.
  2. 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 8(m)(i).   

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 accessed here 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!

Hidden Value: Finding New Ways to Capture Resources in Produced Water

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! 

Time for a Check-Up: Taking the Pulse of Wyoming’s Energy Sector

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.

In summary, the October 2019 Supervisor’s Report provides as follows –

The following numbers are down:

  • APDs:  The number of APDS received in the month of September by the WOGCC decreased about 20% from the previous month.
  • Rig Count:  The rig count is down from last month.
  • Monthly gas production in Wyoming as of July 2019 was down approximately 17% from July 2018.
  • Good news:  Monthly oil production in Wyoming as of July 2019 was up approximately 17% from July 2018.
  • 75 wells were removed from the Orphan Well Program list for the month of September, with 71 wells plugged and abandoned and 4 converted to water wells for landowners.

In addition, earlier this week, the Casper Star Tribune published its Energy Journal entitled, Energy Journal: What to Expect this Winter in Energy.  This article reports on the many aspects of the energy sector in the Cowboy State, including, but not limited to, the following:

  • 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 well.

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.

Stay tuned for more on Wyoming wind…   

Navajo Transitional Energy Company to Purchase Wyoming Coal Mines

Navajo Transitional Energy Company, a wholly-owned limited liability company of the Navajo Nation, is about to close a big deal that will substantially impact Wyoming, and potentially the country as a whole. 

According to the Casper Star Tribune article entitled, Navajo Nation Coal Company Receives Approval to Purchase Cloud Peak Mines, Navajo Transitional Energy Company was the successful bidder and has received court approval to purchase Wyoming’s Antelope and Cordero Rojo mines, located in the Powder River Basin, out of bankruptcy.  The Spring Creek mine located in Montana was also reportedly included in the sale to the Navajo Transitional Energy Company.

Why is this important?

  1. This is a BIG deal. These coal mines are large – Wyoming’s Antelope and Cordero Rojo mines are the third and fifth largest coal mines in the country.  According to the press release dated August 19, 2019 issued by the Navajo Transitional Energy Company entitled, NTEC Expands its Conscientious Energy Development Efforts by Acquiring Three Coal Mines in the Powder River Basin, which can be found here, the properties acquired include surface and mineral rights to approximately 90,000 acres of land.
  • The coal produced from these mines located in the Powder River Basin has a low sulfur content and is therefore considered cleaner.
  • These coal mines currently employ roughly 800 Wyoming miners.
  • Navajo Transitional Energy Company is already in the coal business – according to its website, which can be found here, the company purchased the Navajo Mine in 2013, which is located on the Navajo Nation, south of Farmington, New Mexico. The Navajo Mine is operated on behalf of Navajo Transitional Energy Company by Bisti Fuels Company, LLC, a subsidiary of North American Coal Corporation. 
  • According to Navajo Transitional Energy Company’s press release, the assets were acquired free and clear of the debt burdens since they were purchased through the bankruptcy process.
  • This sale is historic – it not only involves large coal mines but, according to Navajo Transitional Energy Company’s press release, “Indian tribes have long had a deep connection to the earth, and for the first time, a tribal company will now lead thoughtful and diligent energy development on a national level.”
  • Further,  according to Navajo Transitional Energy Company’s press release, “[w]ith this purchase, NTEC [Navajo Transitional Energy Company] becomes the third largest coal producer in the United States.

This historic sale is the high note of the week, as the economic benefits not only to Wyoming, but to the Navajo Nation and the United States as a whole, will be significant. 

Business Friendly: Wyoming Establishes Chancery Court

Wyoming is business friendly and has been taking efforts to streamline conflicts related to companies doing business in the Cowboy State. 

On March 15, 2019, Governor Gordon signed into law an act of the 2019 Wyoming legislature, Senate File 104, which created a Chancery Court – check out the press release issued by the Wyoming Judicial Branch here.  

What is the purpose of the Chancery Court?

The Chancery Court is a specialty court of limited jurisdiction which is intended to be a business court, where business-related conflicts are expedited through the judicial process. According to the Wyoming Judicial Branch’s press release, its “purpose is to provide a forum for streamlined resolution of commercial, business, and trust cases.”

What types of cases would go before the Chancery Court?

According to the Wyoming Judicial Branch’s press release, the court would have “jurisdiction to decide actions seeking declaratory or injunctive relief and actions seeking money recovery over $50,000 that arise from claims including breach of contract, breach of fiduciary duty, fraud, derivative actions, the Uniform Commercial Code, and the Uniform Trust Code.”

When will the Chancery Court be established?

Short answer – the ball is starting to roll pretty quickly. The Wyoming Supreme Court has reportedly been charged with establishing the Chancery Court rules and regulations by January 1, 2020 and beginning March 1, 2022, the Chancery Court judge position is to be filled through Wyoming’s constitutional judicial selection process.

What does this mean for your Wyoming business?

TAKEWAY: Among the other favorable aspects of doing business in the Cowboy State, Wyoming has established a specialty business court for commercial/business disputes in excess of $50,000 that will have the expertise to streamline disputes that occur in Wyoming involving business entities. 

For more information, check out the following articles:

Revision to Wyoming’s APD Rules: Proposal for Wyoming’s First to File Rule to Expire in 2 Years

At yesterday’s hearings, the Wyoming Oil and Gas Conservation Commission (“WOGCC”) released a proposed rule aimed at addressing the increased volume of drilling permits filed in the Cowboy State. The formal bulletin entitled, “WOGCC Proposes Rule to Address Volume of Drilling Permits,” can be found here.

If approved, the proposed rule, released in accordance with Wyoming’s rulemaking guidelines, will change several aspects concerning the filing of Applications for Permits to Drill (“APDs”), according to the bulletin:

  • Going forward, Wyoming will remain a “first to file state” for a two-year period
  • After the expiration of the initial two-year period, other working interest owners within a drilling and spacing unit (“DSU”) will be able to file APDs with a time limit placed on the operator to drill the well
  • A new checklist will be provided for information to be included in and submitted with an APD from (i) the operator who is not the current operator of the DSU and (ii) the operator of the DSU who holds the oldest pending APD or producing well

To review the proposed rule, click here.  Prior to the comment period, a public meeting will be held to explain the rule and answer any questions. Written public comments will be collected and reviewed during the 45-day comment period.

Stay tuned as we will be monitoring how this proposed rule develops! This is a big proposed change that could have many potential consequences for operators. 

Wyoming’s Increases in the Energy Sector are Visually Apparent

As I drove from Denver to Sheridan, Wyoming this weekend, two things caught my eye from the highway:

1. Coal: I passed not one, but two trains pulling railcars filled to the brim with coal. It has been awhile since I have seen a full coal train on the move, let alone two within hours of each other!

2. Oil: More derricks are springing up.

Actually, I should say three things caught my eye – the third is that Wyoming is greener than I have seen in many years. The grasses are lush and vibrant, transforming the prairies and hills.

COAL

Many may not be aware that Wyoming has been the nation’s leading coal producer since 1986. For more excellent information about Wyoming’s coal production, check out the Wyoming Mining Association’s website, which can be found here.

The coal in the Powder is truly a one of a kind commodity. Wyoming’s Powder River Basin, located in the northeast corner of the state, is known not only for the large size of its mines, but the unique features of its primary commodity. Because thick coal seams lay relatively close to the surface, the Powder lends to cost effective coal recovery operations, keeping costs lower. Further, the coal from the geologic formation there is lower in sulfur, making it cleaner when burned.

Of the roughly 5,500 employees reportedly working in the coal industry across Wyoming, more than 4,500 of them work in the Powder. Coal has always been a big part of Wyoming’ economy, and the commodity’s future is very volatile at this point.

OIL

Oil production is on the rise in the Cowboy state. In fact, according to a recent article published by Wyoming Public Media, which can be found here, oil production in Wyoming has risen to its highest level in 25 years.

In short, increases in the energy sector are visually apparent in Wyoming – only time can tell what the future is for Powder River coal and what lies ahead for the oil produced in the Cowboy State. Stay tuned!

Wyoming: A Place for Energy and Persistence

“Energy and persistence conquer all things.” – Benjamin Franklin

Discussing topics in the energy sector gives one a certain, well, energy. A charge or *spark* – a bolt of anticipatory excitement and the promise of potential comes from being “in the know.”  I just received such a spark

The U.S. Energy Information Administration (“EIA”) released a new portal this week that will change the way that we analyze state-level energy data in the United States.  To be honest, I am very excited about it, in the only way that a true nerd in the energy sector who writes an energy-focused blog can be. 

It is called the State Energy Portal and can be found here

I was instantly pulled to focus on the Rockies, and one clear conclusion was apparent – states in the Rockies, namely, North Dakota, Wyoming and Colorado, produce more energy than they consume.  The Rockies are producers.  Check out the EIA states overview map here.  

Yes, there are obviously other states in the same boat that are producing more energy than they consume (check out Texas, Pennsylvania, New Mexico, Oklahoma and Alaska, for example).  However, there is not an entire producing region like the Rockies anywhere else in the United States.  States in the Rockies are synonymous with energy production – the Rockies are giants in energy production.

Benjamin Franklin said, “Energy and persistence conquer all things.”  That could not be more true for the Rockies, an area of the country built by persistence, grit and tenacity – and also by the energy sector.   

The Cowboy State via the State Energy Portal

The state-by-state analysis in the State Energy Portal is amazingly instructive.  As a native of the Cowboy State, I was first drawn to the analysis on Wyoming, which can be found here

The first sentence of the State Energy Portal analysis on Wyoming says it all:

“Wyoming produces 15 times more energy than it consumes, which makes it the biggest net energy supplier among the states.” 

Folks from Wyoming are taught from a very young age the importance of producing. Work hard, imagine big, create, labor and focus your effort – produce something valuable with your time.  It makes sense that Wyoming is THE giant in energy production. 

What is also important, though, is that the State has a variety of sources to tap for energy production.  According to the State Energy Portal Wyoming analysis, and the internal sources cited within the same:

  • Coal: 7 of the 10 largest U.S. coal mines are located in Wyoming’s Powder River Basin.
  • Petroleum:  Wyoming is the 6th largest crude oil producer in the U.S.
  • Oil Production: Wyoming’s monthly oil production is on the rise and in August 2018 reached its highest level in more than 25 years. Most of the state’s oil production increase has come from two primary regions in eastern Wyoming: the Niobrara Shale (due north of the Colorado border) and the Powder River Basin (due south of the Montana border).
  • Natural Gas: Wyoming ranks among the top 5 states with the most natural gas reserves.
  • Natural Gas Production: Most of Wyoming’s natural gas has come from fields in the Green River Basin located in the southwest corner of the Cowboy State.  Notably, more than half of the state’s natural gas is produced on leased federal land – recently in 2018, the federal government approved a large natural gas project in the basin, which calls for the drilling of 3,500 wells over 10 years.
  • Uranium:  Wyoming has significant uranium reserves and is home to the largest uranium mining operations in the U.S.
  • Wind:  Wyoming has some of the largest wind reserves in the nation and big wind-generating electricity projects are in the works in the State.
  • Hydroelectric Power:  Many people may not know that Wyoming is home to 21 hydropower dams and hydroelectric power is the 3rd largest source of Wyoming’s power generation.

TAKEAWAY:  Wyoming is an energy production giant.  It provides a variety of sources for energy production, which clearly causes energy-related industries to dominate the Cowboy State.  While Wyoming is my personal place to refuel and recharge, it also is a major energy producer for the nation. 

Colorado’s SB 181: Wyoming’s New Economic Stimulus Package?

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!