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.

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.

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.

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.

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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