Welcome to the Star-Tribune’s Energy Journal, a play-by-play of the past week in Wyoming’s world of energy. I’m your energy and natural resources reporter, Camille Erickson.
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Last week in numbers
Friday oil prices: West Texas Intermediate (WTI) $53.95, Brent (ICE) $65.53
Friday natural gas: Henry Hub $2.35, Wyoming Pool $1.97, Opal $2.02
Baker Hughes rig count: U.S 942, Wyoming 36
Quote of the week
“(The proposed permitting rule) fundamentally changes the way permitting works in the state of Wyoming. Is it perfect? No. But we will introduce clearer language and get people to a better level of understanding. It’s a thoughtful solution.”
— Pete Obermueller, president of the Petroleum Association of Wyoming
Wyoming moves to curb record volume of oil and gas drilling applications
Fundamental shifts in how Wyoming handles oil and gas development may be around the corner, as sweeping amendments to a new drilling permit rule began to advance July 30 through an extensive rule-making process.
Mark Watson, supervisor of the commission, proposed the new rule at a commission hearing on July 9, saying it would “level the playing field” and create opportunities to challenge idling operators.
Under the current permit rules regulating oil and gas drilling, operators must file a permit application, or APD, with the commission before extracting minerals from leased land.
Under the new rule, Wyoming would remain a “first-to-file state,” meaning a developer that successfully submits a permit application first becomes the operator of a what’s called a drilling spacing unit. It also allows other developers the opportunity to challenge an operator within 15 days after receiving a horizontal well application notice.
If interested developers miss this 15-day window, they have another chance to file a challenge when an operator’s permit comes up for renewal after two years.
Following a rise in oil prices around 2017, oil and gas companies began sweeping up as many permits as possible. The race for permits led some operators to lay claim to acres and acres of land, with no immediate plans to drill. On the sidelines, other companies itching to immediately drill had few avenues to challenge the authority of operators who filed for a permit first.
Meanwhile, an overburdened Oil and Gas Conservation Commission was left thumbing through a swelling stack of permit applications and protests from competing operators.
Cloud Peak delays bankruptcy auction by a week
In another sign of coal country’s hazy future, bankrupt coal operator Cloud Peak Energy requested Wednesday to delay the scheduled auction and sales hearing of two Wyoming coal mines.
Bankrupt coal companies unable to repay outstanding debt can auction off their assets to bidders, often anointing mines with new ownership to keep the facilities pumping out coal. The auction of Cloud Peak’s assets will occur a week later than anticipated on Aug. 8, causing some industry experts to speculate it has yet to receive suitable bids or appease the competing interests of creditors. It is not uncommon for courts or companies to reschedule bankruptcy cases.
Located in the heart of Powder River Basin, the company’s two Wyoming mines are the third- and fifth-highest producing coal mines in the United States, employing over 800 workers. The facilities produced nearly 36 million tons of coal in 2018 and have continued operating at full capacity during bankruptcy proceedings. Cloud Peak also owns Spring Creek mine in Montana.
Miners block train tracks to protest bankrupt coal company
In a sign of the sweeping consequences of the bankruptcy of coal operator Blackjewel, dozens of former coal miners blocked train tracks throughout the week to protest bounced pay checks (via Associated Press).
A skeleton crew of 140 employees were asked to return to the mines at Blackjewels mines in all four states to perform maintenance and ship out coal produced before the closures.
A recent bid on three of the company's mines by Contura Energy did not include Blackjewel’s other 29 mines throughout West Virginia, Virginia and Kentucky, leaving hundreds of workers largely in the dark.
Is Blackjewel's fall just another bankruptcy or a sign of a serious decline in coal’s fortunes?
The Blackjewel mines sit in the Powder River Basin, which has been the setting of repeated disappointments for the coal industry in the past few years. But despite ubiquitous predictions of the basin’s imminent decline, communities of the self-proclaimed Energy Capital of the Nation believe coal is not leaving, at least not yet. To workers and families in the heart of coal country, all has not been lost. Regardless of the inevitable changes down the road, Gillette residents said coal was here to stay.
But University of Wyoming economist Rob Godby said the contraction of the market for coal has caused “cutthroat competition in the basin, as too many coal companies pursue too few customers.”
In Godby’s mind, what’s needed is an orderly transition that acknowledges the reality of the industry, but minimizes disruption for energy-dependent communities like Gillette.
“The focus on getting these workers back to work and preserving jobs really ignores the long-term reality, that given structural changes in the industry, that this can’t go on forever. Really the problem in the Powder River Basin is not putting these miners to work, but how do we navigate an orderly contraction in the industry that is almost certain to happen?"
Blackjewel is the latest of Wyoming’s coal producers to founder financially. Is its fall simply another in a string of bankruptcies or a sign of a more serious decline in coal’s fortunes? That depends on who you ask.
Tribe opposes company's plan to dump oil field wastewater upstream of Wind River
The Northern Arapaho Tribe says it opposes an energy company’s proposal to discharge polluted water upstream of the Wind River because it could degrade water quality and affect tribal business opportunities.
Aethon Energy wants the Wyoming Department of Environmental Quality to allow it to discharge more than 8.25 million gallons a day of waste from its operations in the Moneta Divide oil and gas field into the Alkali and Badwater creeks. Those creeks flow into the Boysen Reservoir and the Wind River, a federally protected Class I waterway.
Read more from Chris Aadland, a Star-Tribune reporter covering the Wind River Reservation and tribal affairs here.
Colstrip ash pond plans still unsettled
A multi-million cleanup plan for coal ash ponds in Montana may be delayed, according to state regulators.
Over the past 30 years, the Colstrip Power Plant, a complex holding nine ponds, has belched about 200 million gallons of contaminated water annually over the past three decades. But the power plant operator Talen Energy said it needs more time before clean-up can begin (via Billings Gazette).
Peabody Energy accelerating highly active share buyback program
The largest operating coal company in Wyoming will accelerate a share buyback program later this year, according to the company.
"In terms of investment, whether that be an investment in our current portfolio of assets, or [mergers and acquisitions], our investment filters remain the centerpiece of our activity," Executive Vice President and CFO Amy Schwetz said on a July 31 earnings call. "Our dollars continue to be spent on investment in the company that we believe represents the best value: BTU."
The company started its buyback program again last month after a blackout period because of its merger with Arch Coal. Both companies are the leading coal companies in the Powder River Basin. In the call on July 31, Peabody executives said the company was taking steps to secure regulatory approval of the merger (via S&P Global).