The price of crude is set to end the year about $20 lower than it began, undermining what had been a consistent comeback streak for the business that pays Wyoming’s bills.
The turnaround in oil prices really began in 2017, but the resulting dollars, jobs and environmental conflicts were the subject of this year’s stories.
From an unbridled rush to secure drilling rights in the Powder River Basin to large federal projects receiving a green light, the 2018 narrative of oil was one of an industry finding solid ground after the bust.
Wyoming rules state that whoever gets the drilling permit first gets the most say in how the drilling goes.
The rules are more complicated than that, but it’s true that the first in gets the greatest authority in a drilling and spacing unit. With that reality in mind, and a strengthening price environment, companies like Anadarko, EOG Resources, Wold Energy Partners and others have filed thousands of applications for permits to drill. The applications came in faster than staff at the Wyoming Oil and Gas Conservation Commission could process them, creating a backlog that hit 10,000 applications for permits in March.
Supervisor Mark Watson announced at the commission hearing that month that the OGCC was going to create a drilling schedule to deal with the flood of applications. Producers ready to go after hydrocarbons would get their applications processed first.
The permitting rush in the Powder hasn’t slowed down. The number of APDs yet to be processed by the commission hit 25,000 in November. Practically, staff is only committing its resources to the permitting apps on the drilling schedule, as it’s likely that many of those further down the priority list will never result in a well in Wyoming. However, the rush to permit is indicative of a change that’s been anticipated for a long time, that the Powder River Basin is reaching a turning point as an attractive play ready for the big investment.
Big project approvals
Two massive oil and gas projects moved forward in 2018. A 5,000-well proposal from multiple oil and gas firms in the Powder River Basin is near approval and a 3,500-well gas project in western Wyoming was given the green light.
In both cases, long-awaited energy plans came closer to fruition, with the promise of jobs and wealth for Wyoming over the long term. Both also introduced a number of challenges that come from the trade-offs that energy development brings in the state, from wildlife to water use.
The Converse County oil and gas project is estimated to generate 8,000 jobs over a 10-year period. The project area is north of Interstate 25 between Douglas and Glenrock, stretching north to the Campbell County line. Five large players proposed the environmental review from the Bureau of Land Management in 2014. Doing a large-scale assessment ahead of time for the project allows for more streamlined permitting on the ground going forward, with issues like drilling near raptors, disposing of produced water and air quality all taken into consideration.
Critics of the bureau’s preliminary analysis noted that there were some serious concerns raised by the project, in part because the federal agency had taken an unusual stance in naming the industry-proposed plan as the preferred method of development.
The gas fields will also see a significant boost with the NPL project from Jonah Energy, which the BLM approved in August.
The NPL would have a 40-year life, generating up to $17 billion in revenue, according to the BLM assessment.
Like the Converse County project, NPL has made waves for its effects on wildlife, like a wintering sage grouse population, and environmental concerns for a region that was already beset for some years with winter ozone from oil and gas development.
Feds change tune
The ambitions of the oil business are often pitted against other values in Wyoming, and conflicts grew with the improvement in industry’s outlook.
The time delays of drilling on federal land have long been a frustration for producers. Over the last year the BLM has tried to cut through some of the red tape that industry argues is superfluous, slimming down public comment periods and increasing the amount of land in the four annual oil and gas lease sales. Other changes have also been floated, though they have yet to be implemented or approved by the feds, such as replacing the application to drill process for some wells to a notification of drilling.
Conservation groups, from hunters to environmentalists, have fought or criticized those changes, arguing that there are more values to Wyoming land than what lies beneath it.
In the case of a mule deer corridor from the Red Desert to Hoback, groups were effective in limiting the land leased in the corridor. The governor’s office and the Wyoming Game and Fish Department compromised by allowing leasing to overlap with the corridor, but attaching a lease notice to those parcels encouraging drilling outside the route taken by mule deer twice a year.
That compromise has not been enough to quell frustration from biologists, hunters and conservation groups, who say the area should be off limits to oil and gas leasing until stronger guidelines have been completed by the federal agency curbing what a developer can do on that land.
Locally, the oil and gas turnaround has been good for a number of industry-rich regions in the state. With the biggest drilling thrust gradually taking place in the Powder River Basin, towns like Douglas were the first to see the change on the horizon.
In January, the Star-Tribune spent time in the boom-bust community rooted in agriculture, where locals were anticipating the uptick. The county was expecting a $500 million increase in its valuation, largely due to the coming energy dollars. But school officials at the time said they were still dealing with the effects of the bust — fewer dollars for education.
To the west, the neighboring school district of Glenrock was also strapped for cash, even as signs of a return in the oil business flickered north of town. The district, Converse County 2, had laid off 17 employees during the bust and offered others workers buyouts. It cut its school week down to four days.
It took much of the year for the good news in the price and the increase in drilling to spill into local economies and rank-and-file workers.
Wyoming had lost 8,000 people from 2016 to 2017. The workforce continued to shrink in 2018, even as jobs were added in the mining sector.
Oil and gas jobs returned but remained lower than the boom times of 2014 when 17,900 workers were employed across the industry in Wyoming. By March of this year that number had climbed to 12,500.
In Casper — a state hub for the oil and gas sector — shops started seeing a certain uptick by the middle of the year. Businesses that service the oilfields reported that they were steady to growing by the time the winter weather set in. Then, the price started its wobble.