Drillers on pace to continue 500 wells per year in southern Powder River Basin oil play

— January 21, 2014

A federal planning document for the advancing oil play centered in Converse County uses an industry estimate of up to 5,000 new wells over the next 10 years — mostly in Converse County. The current play, which targets multiple formations all known to hold hydrocarbons (the Niobrara, Turner, Frontier and Mowry, among them) spans Converse, Campbell and Johnson counties.

Dustin Bleizeffer

The potential scale of up to 500 wells per year for the next 10 years means residents there can expect about the same level of activity as experienced over the past few years. According to Wyoming Oil and Gas Conservation Commission data, the three-county region saw an annual average of approximately 540 new wells over the past four years.

Local officials, including Converse County Commission Chairman Jim Willox, are hesitant to put too much faith into current estimates for the play, however. When asked about the potential size of the play during a town hall-style meeting in Douglas last week, Willox was aware of the 5,000-wells over 10 years estimate but didn’t share that figure with his constituents during a Q&A session. Instead, Willox said, based on ongoing discussions with state and industry officials, he expects steady growth over the next few years.

Later, Willox told WyoFile that the 5,000-well estimate had already been reported in the media, and he described the estimate as a “theoretical number.”

Casting a wide net

Trends over the past four years do suggest a fair amount of exploration and speculation among operators as they attempt to delineate the most productive fields. And operators are applying for, and receiving, hundreds of permits that they never act on and allow to expire.

This chart of applications for permit to drill (APDs) compared to wells actually drilled shows a large number of permits are allowed to expire without drilling. The fact that operators are still testing large areas to figure out where to focus their drilling can explain the small completion rate. *2013 figures are not final. (click to enlarge)

During the past four years the Wyoming OGCC has issued a total 1,530 applications for permit to drill (APDs) in Converse County alone, while operators completed only 225 wells during the same period — less than 15 percent of what was approved. The completion rates in Campbell and Johnson counties are slightly higher; 3,800 APDs for 982 completed wells and a completion rate of 25 percent in Campbell, and 3,227 APDs for 956 completed wells and a completion rate of 29.6 percent in Johnson. State-issued APDs are valid for one year, and most APDs issued so far in this play are allowed to expire.

“There aren’t nearly as many wells being drilled and completed as there are being permitted,” Wyoming OGCC supervisor Grant Black told WyoFile. “So, going back to the 5,000 wells in 10 years estimate, it isn’t even that high.”

Black added that it’s not uncommon for operators to complete a well then temporarily plug it, giving them the option to return to the well and put it into production at a later date. Black also said that there’s been a rush to collect APDs and drill wells during the past several months, most likely to avoid Wyoming’s new baseline groundwater testing rule, which goes into effect March 1.

Today’s advanced drilling and completion methods have unlocked a trove of domestic oil and natural gas, but the keys don’t necessarily unlock every formation, according to a Casper geologist familiar with the play. The new technology changes the game, but how well it can unlock hydrocarbons in the southern Powder River Basin is still a mystery that operators are trying to figure out.

Those close to the play also say that a 2-year planning lead time for federal minerals accounts for the high number of APDs compared to completed wells. Operators tend to apply for drilling locations, roadways, etc., in advance of their understanding of exactly what they are looking for.

Industry and residential conflicts

Drilling for shale, or “tight-sands,” oil here is a massive industrial endeavor, requiring legions of semi-truck traffic in the construction of each well, which typically span some 2 miles horizontally underground and cost between $5 million and $10 million. So the prospect of a steady 500-wells-per-year pace could spell more conflicts — depending on where operators ultimately decide to focus their activity.

Joints are stacked at a drilling rig in Wyoming. (Dustin Bleizeffer/WyoFile — click to enlarge)

At the current pace, oil companies have come into conflict with some individual landowners, in addition to complications related to drilling activities near rural neighborhoods, and near the towns of Douglas and Rolling Hills. Willox said operators are currently buying up mineral lease rights under the town of Douglas, although there’s been no drilling within the city limits so far.

Several citizens who attended the Douglas town hall last week complained that the state is moving much too slowly to curb flaring (burning natural gas associated with the oil), to step up enforcement of existing rules, to impose stiffer penalties for violations and to review outdated standards such as a 350-feet minimum setback between oil and gas wells and homes, schools and businesses. Citizens noted that the Wyoming OGCC was petitioned last May by the Powder River Basin Resource Council, and at least nine others, to update a host of oil and gas rules they say are outdated and do not provide citizens and the environment with proper protection in the modern oil play.

Kristi Mogen (left) and Janice Switzer, both residents of Clear View Acres subdivision east of Douglas, have lived with drilling and flaring activities since early 2012. (Dustin Bleizeffer/WyoFile — click to enlarge)

Black said the petition did compel his agency to launch a comprehensive review of its oil and gas rules, but admitted any resulting updates likely will not come fast enough to satisfy those already impacted by the development.

In fact, Wyoming Gov. Matt Mead’s office bristled at the citizens’ petition when it was submitted to Wyoming OGCC last spring. Asked in June for his reaction to the citizens’ petition, Gov. Mead told reporters, “My view is changes in rules and regulations should be driven by the commission (Wyoming Oil and Gas Conservation Commission), or by this office.” Mead added that citizens have an opportunity to comment on any rule changes, but stressed that the changes should be driven by state officials.

Wyoming OGCC supervisor Black admits that although his office is cranking out high volumes of APDs, it has a difficult time keeping pace with field inspections throughout all of Wyoming. At the Douglas town hall meeting, Black was asked whether, with only 12 field inspectors statewide, “Do you feel you’re swamped at times?”

“There is no question we could use more inspectors,” Black said, adding that 56 percent of the Wyoming OGCC staff is currently eligible for retirement. “Any future inspectors we hire will be boots on the ground.”

Earth-shaking

A handful of citizens say they have experienced multiple episodes of earth movement — a subtle shaking, yet strong enough to produce ripples in a cup of coffee. Converse County resident Kristi Mogen, and her neighbors who live east of Douglas, inquired with Wyoming OGCC staff about what might have caused the episodes — several of which happened in November.

According to Wyoming OGCC staff, the shaking episodes were likely related to malfunctioning vapor recovery units on oil well locations. When re-igniting a natural gas flare, gas built up in the system ignites all at once, creating a small explosion that can be felt for long distances, according to staff.

Read the citizens’ petition asking the state to update its oil and gas rules and regulations:

— Dustin Bleizeffer is WyoFile editor-in-chief. He has written about Wyoming’s energy industries for 15 years. You can reach him at (307) 577-6069 or (307) 267-3327, or email dustin@wyofile.com. Follow Dustin on Twitter at @DBleizeffer

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Dustin Bleizeffer

Dustin Bleizeffer is a Report for America Corps member covering energy and climate at WyoFile. He has worked as a coal miner, an oilfield mechanic, and for 22 years as a statewide reporter and editor primarily...

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  1. Great article Dustin, I hope you will continue to monitor and follow the developments as the drilling footprint grows on this side of the state. While I support energy development, it has to be done correctly. There are good and bad implications of expanding energy development in Wyoming and I certainly appreciate your unbiased and fact based reporting.

    As far as Governor Mead’s comments, he is truly misguided to think the people of this state should just trust the OGCC and Governor’s office to do what is in the best interest of the people of this state. Government frequently forgets who they work for – the people of this state. The State is unwilling to put forth the resources and does not exactly have a track record I would want to rely on even if they had the resources. Pavillion is a great example of failed government policies. Or Governor Geringer’s drill baby drill directive in the late 1990’s that has left the state holding the bag on plugging abandoned wells……….

  2. I am disheartened to re-hear the Governor’s comments on the citizen rulemaking petition. Although I may be a bit biased here given the hours I spent researching and drafting the document, it speaks for the voices of thousands of citizens in our state that have been impacted by oil and gas development. Those voices are important and should be listened to.

    Also, incidentally, Wyoming law specifically embraces the right of citizens to petition agencies to change their rules — a right to petition that stems from First Amendment rights to address grievances. Check out the Wyoming Administrative Procedures Act:

    16-3-106. Petition for promulgation, amendment or repeal of rules.

    Any interested person may petition an agency requesting the promulgation, amendment or repeal of any rule and may accompany his petition with relevant data, views and arguments. Each agency may prescribe by rule the form of the petition and the procedure for its submission, consideration and disposition. Upon submission of a petition, the agency as soon as practicable either shall deny the petition in writing (stating its reasons for the denials) or initiate rulemaking proceedings in accordance with W.S. 16-3-103. The action of the agency in denying a petition is final and not subject to review.

  3. Is the governor wiser than the citizens immediately concerned with the impact of energy development? Is he in fact an elected dictator who can dismiss what his rural citizens are concerned with?

  4. There is absolutely no reason why the state doesn’t hire a dozen more inspectors and replace retiring people immediately. Inspectors need to be “boots-on-the-ground” people who check drilling activity as it progresses on each and every well, including safety inspections. It is the STATE’s final responsibility, not the oil industry’s, to ensure that seismic exploration, drilling, and production activities conform to best industry principles and practices. Inundating the Oil and Gas Commission with letters and emails telling them to hire more inspectors would be a good place to start “goosing” them into action. I worked in the seismic and drilling businesses for over forty years, much of it in the Rockies, and I know more than a little about what it looks like from the contractor’s end. The O&G Commission has spent the last 100 years whining that it’s the industry’s responsibility to conform, but those people are only interested in “barely getting by”. It’s time for a change, by finally holding the state’s feet to the fire.

  5. Let me get this straight. The commission is “swamped.” They have a hard time dealing with the number of APD’s submitted, and acknowledge that they have too few inspectors. Permitting and (hopefully) inspections are their top priorities. But, the governor insists that “changes in rules and regulations should be driven by the commission.” Given these priorities (ill-conceived though they may be), just who on the commission has all this extra time on her hands to review and change rules or policies?
    The governor seems to believe that no “citizen” not employed by his bureaucracy is capable of making a valid suggestion, even though some involved citizens have much more experience in such things than do his bureaucrats. There’s something wrong with this picture.
    The governor and the commission should be grateful for the help, rather than jealous of their claimed prerogatives. The proposed rule should be considered on its merits and acted upon.

  6. I had an interesting conversation this morning with a local geologist/engineer regarding this oil play. He said it used to be that you could look for X-amount of porosity and X-amount of resistivity and know whether or not you’ll have an economic well before you drill. That’s not necessarily the case in this play, even with all of that information in hand. “We’re not sure what the parameters are to determine if a well is going to be economic or not,” he said. Operators are employing the most sophisticated drilling and fracking technics; “It’s high-tech stuff, but it’s not absolute.” By the way, he added, that $5M to $10M estimated cost to drill one of these long lateral shale oil wells is very low. It’s more like $10M to $20M. The engineer spoke to me off-the-record because speaking with the media can be frowned upon in this highly-competitive play, and even cost somebody their job. — Dustin Bleizeffer, WyoFile editor-in-chief.