Wyoming’s low rig count worries policymakers

During a 2-day hearing this week, a legislative committee both admonished the perpetual string of administrative challenges in the National Environmental Protection Act process, and it promised to pen a letter asking the U.S. Bureau of Land Management to, well, delay its Bighorn Basin Resource Management Plan revision (which has been under public review for more than 2 years now).

Why? Because the plan didn’t include consideration of new pipeline construction to accommodate carbon dioxide deliveries for future enhanced oil recovery operations.

Richard Garrett, legislative and outreach advocate for the Wyoming Outdoor Council, said his group prefers CO2 injections for EOR as opposed to greenfield development. Yet, said Garrett, the Joint Minerals, Business and Economic Development interim committee’s “eleventh-hour” request for an extension sends the message that delays are OK on behalf of energy development, but not for wild lands, water quality, air quality, wildlife and human health concerns.

“They’re making a mistake that natural resources, wildlife and tourism don’t figure on equal footing with energy development,” said Garrett. “The recreation and tourism resources are a 365-days a year supply, and the oil resource is only a 2-day supply for the country.” (Click here for PDF of oil reserve estimate.)

Wyoming is enjoying a wealth of revenue from minerals, recording a $15.5 billion mineral valuation in 2010 — the state’s second highest mineral valuation ever. Companies are producing Wyoming oil, natural gas, coal and uranium all at near record levels.

Dustin Bleizeffer

 

At the same time, nationwide drilling activity has returned to pre-recession levels — now at 1,860, according to Baker Hughes’ rig report. That compares to a recent low of 875 rigs in June 2009.

But not much of the drilling recovery has occurred in Wyoming. In fact, oil and gas folks say it’s difficult to coax a rig to Wyoming from North Dakota, Pennsylvania or Oklahoma. There are just 44 active rigs in Wyoming right now, despite a supposed oil exploration rush in the Niobrara, and despite the fact that Wyoming remains the nation’s second largest supplier of domestic natural gas.

Oil and gas officials are telling Wyoming leaders it’s because a large portion of Wyoming’s minerals are on public lands, and federal agencies are imposing increasingly stringent regulations, especially in the areas of air quality, water quality and wildlife.

EnCana Oil & Gas USA, the primary operator in the Jonah gas field, conducted its own analysis of some 23 environmental impact statements (EISs) in Colorado, Wyoming and Utah. The company discovered the average cycle time for an EIS has gone from 3.4 years in the 1990s to an average 5.8 years by 2005, according to EnCana government affairs director Paul Ulrich.

“It’s an expensive, time-consuming process,” Ulrich said in his testimony before the minerals committee earlier this week.

Having led the Rockies’ natural gas boom during the past decade, Wyoming policymakers get extremely nervous when rigs are busy drilling outside the Cowboy State.

“Some would say it’s not a big deal if we don’t develop our resources now because they’ll still be there for later,” said committee chairman Sen. Eli Bebout, R-Riverton. “The problem is … once that exodus occurs it’s so hard to get them back.”

Currently, there are some 21,000 natural gas wells in the federal permitting analysis stage in Wyoming, and most of the EISs have been delayed for months — some even for years. Ulrich testified that each year one of these EISs is delayed, it defers about $157 million in tax revenue to the state.

Ulrich admitted one EIS delay was due to the fact that EnCana changed plans after initiating the EIS process, saying, “We quadrupled the size of (drilling) we were looking at.”

But, Ulrich testified, in most cases it’s environmental groups and individuals who are filing administrative appeals and challenges that hold up the permitting process.

To say members of the mineral committee are enthusiastic to unleash those drilling plans is an understatement. But the committee’s response left some of industry’s critics scratching their heads.

A handful of committee members concluded that one strategy to battling seemingly unwarranted oil and gas permit delays might be to teach Wyoming K-12 students the “importance of energy” development to Wyoming. The students would then go home and tell their parents about how royalties and tax revenues help fund Wyoming schools and prevent the state from having to impose an income tax, said one lawmaker.

Others suggested that if state-level agencies spoke with one voice — a doctrine of the Gov. Jim Geringer administration — it should help to speed up federal permitting.

After the hearing, Garrett said the make-up of the minerals committee is notably pro-energy. Chairman Bebout has been involved in several energy-based ventures and is a longtime advocate oil, gas and uranium. Co-chairman Rep. Tom Lockhart, R-Casper, is a former utility executive and is finishing out a term on the board of Arch Coal Inc.

“Members of the minerals committee will tell you their responsibility is to facilitate development in Wyoming, and they don’t really have a lot of responsibility for things that look like impedes development,” said Garrett. “I came away from the meeting with a feeling that we have enormous environmental challenges because there is a rush for development.”

— Contact Dustin Bleizeffer at 307-577-6069 or dustin@wyofile.com.

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Published on June 23, 2011

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