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A study by oil interests estimates more than 10,000 acres in one oil rich section of Laramie County would be off-limits to energy companies if state regulators increase the minimum distance between drilling rigs and homes to a quarter-mile.

A separate analysis by environmentalists suggests nine percent of Laramie County would be off-limits to energy development with a quarter-mile setback.

Oil fields and residential areas in Wyoming have intersected with increasing frequency in recent years, but the conflict has been most acute in Laramie County. Wyoming's most populous region has seen oil production spike in recent years. 

The competing studies illustrate the attempts of interest groups to shape the state's proposal to increase the buffer between homes and drilling rigs. Both analyses were focal points at a recent public hearing in Casper, where industry groups and environmentalists used the respective conclusions to bolster their arguments. 

The studies also underline the stakes' of regulators decision. How much land is off-limits to drilling could have important legal implications and determine whether the rule stands up in court, experts say. 

Environmentalists and energy interests each said the opposing sides' study is skewed to support its authors' conclusions.

The Petroleum Association of Wyoming's examination of a 14,308 acre area southeast of Cheyenne is not necessarily reflective of a greater setbacks' impact in other areas of the state, environmentalists contend. Environmental groups and some landowners have pushed for a larger buffer, saying it is necessary to protect public health. 

The area studied by the Petroleum Association Wyoming is more thickly settled than other parts of the state and therefore not a good barometer of an enhanced buffers' effect on oil and gas development, the Wyoming Outdoor Council wrote in public comments filed with the state Oil and Gas Conservation Commission.   

"Statewide rules should be drafted to address the problem and not to address possible outlying circumstances, which can be addressed through stakeholder collaboration and negotiated variances," the group wrote. 

Energy interests dispute that claim. They argue the section selected by Goolsby, Finley and Associates, a Casper geology firm hired to conduct the analysis, is representative of oil producing areas in the county. It boasts active drilling permits and multiple land uses, ranging from agriculture to residential subdivisions. 

And they maintain the Wyoming Outdoor Council's own analysis is deeply flawed, Approximately 80 percent of Laramie County has no potential for oil development, meaning there is little prospect much of the county will ever be drilled, said Melanie Peterson, a geologist at Goolsby, Finley and Associates. 

"That is the point of restricting your study versus using a nonproductive area," Peterson said. 

The Petroleum Association of Wyoming has argued a 350 setback is adequate to protect public health, but has backed 500 feet as a compromise distance. 

A quarter-mile setback is larger than what the Wyoming Oil and Gas Conservation Commission has proposed. 

Wyoming's current setback is 350 feet. Regulators have proposed boosting that to 500 feet, a slight reduction from the 750 feet they initially recommended for the horizontal rigs frequently used to drill oil and gas wells today. 

Still the greater distance examined in the competing reports highlighted the interests at play in the debate. 

Much of the oil development in Wyoming today occurs on split estate, where one party owns the surface and another owns the minerals beneath it. 

Oil companies and mineral owners have argued a greater setback could constitute a "taking,' a legal term meaning they are stripped of the right to develop the mineral estate without receiving compensation in return.

Legal experts said it would be difficult to apply the taking argument to a statewide rule. The question of what constitutes a taking would largely be decided on the basis of an individual property, they said. 

But they offered competing views of whether regulators should consider takings into account when developing the new setback standard. 

Tara Righetti, an assistant professor of law at the University of Wyoming, said the courts generally use three criteria for determining whether a regulation amounts to a taking: the loss in a property's economic value, whether the government can achieve its goal without posing a great burden on private industry and if the rule goes beyond the scope of what an investor could reasonably predict when they invested in a property.

If a large portion of land was deemed off-limits to development because of a larger setback, as suggested by the Petroleum Association of Wyoming analysis,  the regulation could meet the criteria for a taking, Righetti said. 

"I’m not sure where that line would be drawn, but I think there is a place where that line would be crossed," she said. 

Speaking of the setback proposal, she added, "It requires a mindfulness of all the property rights in question, mineral owners, lessees, as well as the surface owners."

Others were more skeptical. Development of a property would have to be effectively prohibited for a setback to amount to a taking, said Mark Squillace, director of the Natural Resources Law Center at the University of Colorado. 

An enhanced setback would rarely bar total development of a property, given the ability of companies to drill up to two miles horizontally, he said. 

Oil companies and mineral owners contend pushing rigs further from their optimal location on the surface could reduce a property's production potential. 

But producing less than what a mineral owner or oil company would prefer does not mean a greater setback qualifies as a taking, Squillace said. 

"I am just skeptical the line will be crossed in many situations, he said. "To the extent the government is taking action to protect public health and welfare, the court is going to be more supportive of the government."

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Reach energy reporter Benjamin Storrow at 307-335-5344 or Follow him on Twitter @bstorrow


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