Legislative Committee Seeks To Bolster Oil And Gas Production, Workers

Jun 2, 2020

Pump Jack image included in the PAW's presentation
Credit Petroleum Association of Wyoming

There are currently only two oil and gas rigs operating in the state right now, down from 30 last year. The Joint Minerals, Business & Economic Development Committee approved the drafting of two bills to help the industry, whose downturn will severely hurt the state's revenue picture.

Severance Taxes

Pete Obermueller, president of the Petroleum Association of Wyoming (PAW), gave testimony about how to help the industry in the short- and long-term saying there's no one solution as Wyoming has a variety of companies.

After speaking with companies operating in the state, Obermueller said they're looking for a stable and predictable regulatory environment, competitive cost environment, a nimble and responsive Bureau of Land Management and a state energy office that supports high level policy work.

In the competitive-cost environment, Obermueller pointed to several areas where Wyoming producers pay more than they would in nearby states.

For short-term relief, the PAW president suggested a change to HB 243, a bill from this year's legislative session that would temporarily cut severance taxes on new wells. He said it would be helpful if something like that would include not just new wells, but also idle wells when brought back online.

Minerals Committee co-chairman Mike Greear proposed the Legislative Service Office (LSO) draft a bill to lower severance taxes for oil companies by half for a consecutive six month period. He said it's about competition with other states.

"North Dakota has been very public about some of the actions that they've taken. New Mexico has done the same thing. And so what I want to do is make sure that when the price goes back up that those people deploying their capital know that Wyoming wants them," he said.

Earlier in the debate, Laramie Senator Chris Rothfuss pushed back on the efficacy of a severance tax cut in attracting companies rather than a mechanism to lower costs upfront.

"If you're looking at it from a cash-flow standpoint, by the time that you are receiving the severance tax, you've already got a productive well. We're in a situation right now where we can expect cash flow will be constrained, and initial capital investment and new drilling is really where incentives need to be provided," he said.

Instead, Rothfuss said the state should look into a way for companies to pay sales and use tax over time, at an overall lower cost, rather than right at the beginning. While the idea wasn't picked up in the meeting, he said he plans to bring it up again.

Members voted in favor of drafting the bill.

The proposal comes as requests for relief are going up from Wyoming producers within the Bureau of Land Management and the Office of State Lands and Investments. Oil and gas companies are also seeking relief through those offices through reduction of royalty rates, bonding rates, lease suspensions, and rent deferments.

Plugging Abandoned Wells

The Joint Minerals Committee also dug into how to put oil and gas service workers back to work. Members explored the idea of jumpstarting reclamation work and the plugging of abandoned wells. There are currently 2,800 abandoned wells in Wyoming.

Members asked Wyoming Oil and Gas Conservation Commission (WOGCC) Supervisor Mark Watson what it would take to increase those opportunities. Watson said it's not a matter of money. There are a lot of limiting factors. One is the lack of appropriate contractors.

"I don't believe there are any idle well contractors in the Powder River Basin and, like I said before, we're going to go to the western part of the state," he said. "Your committee, or whatever, the governor's office says, you know, 'We want X amount plugged.' We can wrap it up. But I've already wrapped up adding more packages this year that I've been working on over the past month."

Watson added the commission also plans in advance to plug abandoned wells, that it can take a long time just to plug a few, and that the WOGCC doesn't have enough inspectors to heavily increase its plugging.

Several committee members, including committee co-chairman Mike Greear, pushed further that there must be a way to create new opportunities for these workers.

"I assume we're going to have to do something with your budget for more appropriations, reallocation. You're going to need more help to be able to oversee it. What can we do? What effort can we put behind that to get these folks to work in the state?" he asked

Watson said reclaiming pits would not be as difficult to jumpstart because it would only take construction contractors.

The committee voted in favor of drafting a bill that would authorize the WOGCC to spend an additional $7.5 million, a typical two-year budget for the WOGCC, for plugging and pit reclamation in fiscal year 2021.

The bill was amended to give preference to Wyoming companies. Senator Rothfuss added it doesn't make much sense to pay for the commission to bring in out-of-state contractors.

The Wyoming Department of Environmental Quality's director Todd Parfitt also laid out the department's reclamation work and said there could be additional opportunities within its orphan site program.

Have a question about this story? Contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.