State regulators face an unheard of 10,000 applications for permits to drill for oil and gas in Wyoming, creating a backlog that would take five years to address.
Agency Supervisor Mark Watson said the Wyoming Oil and Gas Conservation Commission staff was introducing a new policy to address the long queue, prioritizing applications that are ready to be drilled and changing the amount of time a permit to drill is valid.
“We just can’t process 10,000 permits,” Watson said at a Tuesday commission meeting in Casper. “I figure it would take about five years if no new permits come in. We just don’t have the staff, and it doesn’t make sense to me to hire 50 more people.”
Wyoming oil and gas production has fallen in the last few years. Older wells, drilled in the days of $100 per barrel crude, are declining rapidly and new drilling has failed to pick up the slack due to low prices from 2015 to mid-2017. That failure of new drilling to replace the old has resulted in lower volumes of oil produced in the Cowboy State, where lawmakers are looking at an $850 deficit due to declining mineral revenue.
The price of oil now hovers around $60 a barrel, and the number of drilling rigs in the state is sticking around 30, healthy improvements compared to two years ago when the rig count plunged into the single digits.
But the amount of new applications waiting to be approved is one area where Wyoming is experiencing impressive numbers, even compared to years when “drill-baby-drill” was a shared ethos.
“I do not believe, based on my 36 years with the WOGCC, that we have had (approximately) 10,000 permits waiting to be processed,” Watson said in an email Tuesday.
Bruce Hinchey, president of the Petroleum Association of Wyoming, said the state was finally picking up interest as larger plays in other parts of the country have become increasingly expensive to lease.
He had not seen the new policy proposed at the Wyoming Oil and Gas Conservation Commission, but said on first blush it made sense.
“If a rig’s scheduled, you might as well put them to work,” Hinchey said. “It certainly helps the state if they are doing that, not to mention the counties where they are drilling. That’s just more revenue for everyone.”
Today’s wait list is largely a result of how complex drilling has become. New technology and drilling practices have led to incredibly deep wells that may be drilled horizontally up to 2 miles. Wyoming’s coal bed methane boom brought nearly 25,000 new wells online in the early 2000s. But even then, the rush of applications for the shallow gas wells didn’t clog the Wyoming Oil and Gas Conservation Commission, Watson said in an email.
“(Coal bed methane) wells were easy, from an engineering standpoint, to review and approve so no comparison to today’s issues with horizontal (applications for permits to drill),” he said.
Some of the most extreme pulses in applications come from Powder River Basin counties. The state received 2,326 applications to drill in Campbell County in the last six months of 2017 compared to 644 over the same time period in 2015.
In the county to the south, Converse’s applications to drill in the second half of last year jumped by 137 percent compared to two years before. Converse is also anticipating a 5,000-well project that could take place over the next 10 years, a joint venture from five major players in the state.
Watson said commission staff has discussed the proposed policy change with a number of larger operators who were amenable to the new policy.
“By changing that, if you are not going to drill in the next two years… we may not get to them,” he told the room full of operators and industry lawyers Tuesday. “If you have a well you want to drill, we’ll get to it.”