GLENROCK — The operations center at the Rolling Hills rig site looks like a surveillance trailer and smells of diesel. Guys in heavy boots clomp in for a word with the ops team before moving out again. A pot of coffee cools on the counter and a half dozen computer screens show what’s going on downhole. It’s Nov. 7, and the well is just 800 feet shy of its goal.
Sixty miles away, Ron Auflick, woke in the dark to the sound of his phone ringing.
The drill bit was taking on too much vibration. Auflick’s team had it taken care of, but they wanted to check in with the chief roughneck at Wold Energy Partners. Sleep wouldn’t come after the call, so Auflick headed to work.
At dawn the well cracked 22,000 feet.
Wold is a small firm, based in Casper. It’s currently attacking all 11 of the Powder River Basin’s crude-saturated layers despite a modest $50 a barrel oil price. The company has a drilling strategy with a laser focus on the Powder River Basin.
Two years ago, the number of trailers like Wold’s was few and far between. The PRB, as it is often called, was the next big play that failed to tip before prices fell in 2014.
Rig counts hit single digits. Jobs waned like a tide pulling out from Wyoming, and the revenue that provides about three-quarters of the state’s income declined rapidly.
The state’s income projections don’t predict any surprises from the oil and gas side, just modest improvements. But out in the PRB the attitude has shifted.
Those that can are lining up like a host of roughnecks with paychecks in their pockets to play the latest hand in one of the oldest games in Wyoming. The only thing standing in their way are federal regulations.
The PRB is poised for a boom Wyoming desperately needs, but it could be messy. Industry says the feds are slowing down opportunities and hampering development, while environmentalists say Wyoming needs federal regulations to avoid disaster when a bust inevitably strikes. No matter what, as oil prices stabilize, changes are likely coming to Wyoming’s northeast corner.
A complex basin
Drilling has changed in recent years, but despite the technological revolution advancing drilling in the PRB, there’s nothing new about a boom there.
The PRB is 120 miles wide and some 200 miles long. It’s the center of the nation’s coal sector and has been an oil play for more than 100 years.
Coal bed methane blew up in the early 2000s, but crumbled in under a decade when gas prices fell. In the run up of the price of oil in 2014, operators were expecting the PRB to be the next big oil play, then the value of crude plummeted and activities stopped.
It’s a complex basin for energy, and the rules that govern activities there have changed with the times.
The PRB has federally owned minerals and state-owned resources, public land and private. At the center of this basin poised to do big things are two oil and gas regulators, the Bureau of Land Management and the Wyoming Oil and Gas Conservation Commission with overlapping responsibilities.
The latter has to process permits for drilling within 90 days. The feds don’t come close to that timeline. At worst, they can take up to 3 years.
Wold is already preparing to drill its next well at a site a few miles from the one in Rolling Hills. They’ve sketched out the pad that will eventually hold more than a dozen horizontal wells, with a shaded area on the corner of the diagram. That’s federal land, and operators have come to avoid it when possible.
Simply put, anytime oil and gas activities hit either federal land or federal minerals, it opens up the possibility for federal regulations. And that’s frustrated operators in the PRB.
A company drilling millions of dollars into the basin is looking for a return, and federal complications slow down otherwise improving economics in the PRB, operators say.
It can be a real downside for Wyoming, said Jarred Kubat, vice president of land, legal and regulatory for Wold.
“Ultimately people are going to go where there is really good rock and regulatory certainty helps add investment certainty,” he said. “What’s going to be (the question) for the state is how quickly that can be recovered.”
The Casper Field Office, part of the district overseeing the Powder River Basin, had more than 600 applications to drill on backlog earlier this year.
And more than rules, it’s the inconsistency applying them that bothers oil men like Kubat.
Policies overlap with no real deadline to get permits through and no clear direction, he said.
Communication and policy
In a way, industry is dealing with the fallout from their own skill.
Much of the trouble in the PRB is coming from advanced drilling techniques that can send a well long distances, said Duane Spencer deputy state director of minerals and lands for the BLM in Wyoming.
If you send a well out for two miles beneath surface of the PRB, there’s a good chance you’ll hit federal minerals. And although the BLM doesn’t have as much authority on the surface when the well starts on private land, it does have some obligations like protecting historical sites and endangered species, Spencer said.
It’s a workable balance and high time the state and the feds updated their MOU on permitting, he said.
The best thing the agency can do, and what is says it is working on now, is better communication, Spencer said.
The agency has increased internal training and its specialists are sitting down with industry and landowners alike.
Kubat, from Wold, affirmed that operators have seen an improvement in the last few months since the issue boiled over.
But some hurdles are beyond a communication fix and come down to policy.
When 90 percent of a project is on state or private land, it doesn’t make sense that the 10 percent that is federal can slow down the whole operation, Kubat said.
Congresswoman Liz Cheney has floated a number of bills that establish the right for states to take over more of the oil and gas permitting process on federal land, or with federal minerals. She’s also proposed an exemption for private landowners if a well is drilled on private surface but hits federal minerals below.
The idea has been met with mixed reviews in Wyoming. Industry likes the idea that states should have more say, as do many landowners. State regulators want more details on how that would work before they wade in. But environmental groups are nervous. They could lose key protections if the federal rules are winnowed by Congress.
Slow and steady
Jill Morrison witnessed the rise and fall of the coal bed methane industry. She’s an organizer for the Powder River Basin Resource Council and is watching interest in the Powder warily.
The state went through a period of reform after that bust, she said. It increased the rules on industry, put in more mitigation for development, but the deep drilling of today and the sheer size of the PRB offers unique risks if there is a boom, and others if there is a bust, she said.
CBM left thousands of orphan wells behind. The state has been working for years to plug those wells using a tax on operators, but it’s not halfway through.
Earlier this year nearly 1,000 more orphan wells were added to their list from bankrupt CBM operators.
If horizontal wells reaching two miles away from their starting point are abandoned, the state will face more challenges, she said.
“Plugging these deep oil wells is going to make the coal bed methane orphan well situation look like a picnic,” she said.
And busts are part of the business of oil and gas. A flurry of activity brings in people. Small communities face housing shortages and increased crime during a boom. Then, as soon as they’ve adapted, the boom is over and the communities absorb the impact, she said.
“It’s drill baby drill, and they drill themselves right into a bust,” she said.
Federal regulations play an important role in slowing down development and taking a bird’s-eye view of the landscape, she said.
Though Wyoming does a good job with a host of regulations, they don’t look at some of those wider concerns when permitting a well, Morrison said.
Landowners in the PRB are aware that another boom could come to their backyard and aware that they need to broker strong surface agreements with developers. They’ve seen this before.
For Morrison, the state needs to learn from past mistakes, and develop the PRB carefully.
The learning process
Back at the Rolling Hills, Auflick drives his truck on the curved roads that lead to Casper. He’s tall, with a square, handsome face. His career in drilling for oil and gas has carried him and his family to Russia, Venezuela and the gas fields of western Wyoming.
Tapping the PRB for Wold may be Auflick’s last rodeo, he said.
He expects it to be a good one.
Last year, Wold drilled a difficult well that went through 20 diamond-encrusted bits. The Rolling Hills well just a few miles away went through two.
That’s the learning process that’s rapidly happening in the PRB today, he said.
The PRB could use some planning to balance environmental concerns, Auflick added, steering his truck alongside a wind farm south of the well site. In the shadow of the turbines, rusty pump jacks bobbed, relics of a different era for oil and gas.
Different sides could sit down together and come up with a compromise, he said.
As Wyoming contemplates the future of the PRB and politicians wrangle with state and federal control, one thing is certain: The draw of the Powder River Basin is growing in industry. And operators are eager to play.