Oil and gas development

A True Drilling rig operates Feb. 14 near Wright.

Christine Peterson, Star-Tribune

Revenue from leasing land to oil and gas companies in Wyoming jumped by more than 800 percent from 2016 to 2017.

It’s no secret that the industry stalled when crude prices fell into the $30 range. The number of oil rigs operating in the state dropped to single digits and companies big and small laid off workers.

Lease buying, when operators stake land claims for future development, also slowed.

But the price of oil now hovers around $60 a barrel, a generally low price, but better than the bottom of the downturn. A new presidential administration has embraced energy development and loosened environmental regulations. The combination has resulted in an online bidding war for state and federal leasing agencies.

“I’m hopeful that we are looking at a trend: that the market is stabilizing in the state of Wyoming,” said Jason Crowder, assistant director for the Office of State Lands and Investments, Trust Land Management Division.

Even though Wyoming has had its boom years, this year’s lease sales stand out, officials say.

During the downturn of 2016, revenue from the Bureau of Land Management lease sales and the Office of State Lands auctions combined added up to about $16 million. This year, Wyoming netted a combined $146 million, leasing about a half million acres of federal and state land.

Crowder said it’s unclear what exactly made the revenue shoot up so dramatically, other than the state’s decision to switch to an online auctioning system which allows out of state companies to easily bid on Wyoming land.

“That’s the only thing we can point to,” he said. The state was accustomed to bringing in between $5 million and $7 million from leasing state land, even in the boom years. In 2017, the State Lands brought in $60 million.

A spokeswoman for the Bureau of Land Management said there have been a combination of factors, from the location of the land parcels nominated for leases to the BLM’s “planning efforts” that could contribute to the increase.

A lease sale in 2016 was deferred, with those parcels offered at a later auction.

Operators in Wyoming report that the regulatory environment may have improved with a new presidential administration, one more favorable to energy development on public lands.

“Certainly that helps people want to go out and drill again,” said Bruce Hinchey, president of the Petroleum Association of Wyoming.

Wyoming also represents a good deal for operators compared to some other regions of the country. In the Permian Basin of West Texas, prices for oil field services have risen throughout the year. Wyoming is still a bargain.

“They see this as a known area for oil and gas,” said Hinchey, referencing the Powder River Basin, where the highest bids per acre came in this year.

How many of the parcels leased this year will be drilled isn’t clear.

The bottom line for industry activity in Wyoming will be led by the price of oil, Hinchey said, and crude pricing is both volatile and unpredictable.

Wyoming state lands brought in a total of $61 million in 2017, leasing about 182,000 acres. Federal land lease sales contributed an additional $85 million for nearly 391,000 acres.

The final lease sale of the year, from the Bureau of Land Management, brought in $1.25 million for the state, much less than spring and fall auctions that stoked excitement in the oil and gas community and pushed up the year’s total income.

A number of the land parcels were contested by environmental groups that argued the leases overlapped with designated sage grouse habitat contradicting BLM policy regarding development in habitat. The agency denied the protests, arguing that the sage grouse areas were open for development according to its management plans.

The December leases were located in four southern counties, including the oil fields of the Denver Basin in Laramie County and the gas region of the southern end of the Greater Green River Basin in Sweetwater County.

The highest bid to close out the year went to Southland Royalty, a Fort Worth, Texas-based company that has been positioning itself in Sweetwater County throughout the year after taking over some Anadarko leases. In June alone, Southland put in 277 applications to drill in the county, more than the total applications submitted in Sweetwater in 2015 and 2016 combined.

Wyoming is currently facing a more than $700 million budget gap due to the retreat of coal, oil and gas revenue over the last few years.

State income from the year’s oil and gas leasing largely goes to school funding, the farm loan fund and public buildings.

Follow energy reporter Heather Richards on Twitter @hroxaner

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Energy Reporter

Heather Richards writes about energy and the environment. A native of the Blue Ridge Mountains in Virginia, she moved to Wyoming in 2015 to cover natural resources and government in Buffalo. Heather joined the Star Tribune later that year.

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