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New oil and gas rule showing promising results

By Camille Erickson 

Casper Star-Tribune

Via- Wyoming News Exchange

CASPER – A new rule designed to ease the number of drilling applications received by the state and level the playing field for oil and gas operators appears to be working as intended, recent data collected by the Wyoming Oil and Gas Conservation Commission shows.

In December, the rule change went into effect. Between January and September, the commission received 2,226 applications to drill — an over 99% decrease compared to the same period last year.

Supervisor Mark Watson told lawmakers during a Joint Minerals, Business and Economic Development Committee meeting Thursday that the new rule was making a difference.

“One aspect we tried to accomplish with the rule was to reduce our volume of permits,” Watson said. “Obviously, this worked here.”

He noted the COVID-19 pandemic’s hit to oil markets could have slowed down the application volume too, but numbers from recent months demonstrate operators have already started looking ahead to when oil prices more fully recover.

“I’ve talked to a lot of companies and they’re looking ahead to later this year, maybe next year, when prices start to firm up and they want permits,” he said. “So there’s some good news on the horizon there.”

An oil and gas company has to file a permit application, or APD, with the Oil and Gas Conservation Commission in advance of extracting minerals from land in Wyoming.

Before the commission changed its rules, operators would often attempt to obtain permits for the maximum number of wells allowed under the statute, usually seven or eight, in order to gain as much control over a drilling and spacing unit as possible.

In just three years, the commission received almost 67,800 drilling permit applications from oil and gas operators.

But the rate of drilling activity did not keep up with the number of applications flowing in.

The changes to the commission’s rules aimed to curb the deluge of applications by letting a company file just one permit application for the entire drilling spacing unit (an area of development), as opposed to every possible well within that unit.

Wyoming calls itself a “first-to-file state,” meaning the first developer to apply and receive a permit over authorized spaces in a drilling spacing unit becomes the “operator.”

The new rule, which went into effect in December, gave other working interest groups an opportunity to challenge a reigning operator. They can now do so within 30 days after receiving a horizontal well application notice.

An inactive operator suddenly risks losing its right to drill after the expiration of its permit. Other owners eager to work the land have more opportunity to compete.

Of the 54 protests filed by operators this year, only one case has prompted a contested case hearing before the commission, according to the supervisor.

The new rule hasn’t only saved the Oil and Gas Conservation Commission time and resources, it’s also saved the industry “millions of dollars” in application fees, Watson said.