A bitter war between oil and gas companies over drilling permits is being waged in Wyoming. Since 2016, the Wyoming’s Oil and Gas Conservation Commission has received a record 57,242 drilling permit applications from operators.
But relief might come soon to the overburdened commission.
Commissioners moved forward with a rule at the July 9 hearing to “level the playing field” for operators who seek the right to drill on Wyoming’s land, while also addressing the high volume in applications. Commissioners voted to move the rule forward in a 33-step process.
Oil companies have made a habit of obtaining permits to drill in order to lay claim to land, even if they have no intention to drill anytime soon. And the acquisition of a permit usually translates into higher value for the associated land.
Even with 11,809 permits approved by the commission in the past three years, only a fraction contain active wells in the state’s oil fields. According to the proposed rule change, Wyoming will remain a “first to file state, meaning the first operator to apply for a permit and receive approval has the right to drill. But that first-to-file status will only last two years.
“After the initial two year period, other working interest owners within a drilling and spacing unit (DSU) will be able to file applications for permits to drill (APDs) with a time limit placed on the operator to drill the well,” the commission said in a statement.
The race to secure coveted APDs started ramping up when oil prices improved in 2017 and drilling projects in east Wyoming heralded successful returns.
Companies who win a permit over a drilling and spacing unit first become the “operator.” The title comes with more authority over the land, and often a higher profit margin.
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“The current process has forced operators to protest and scramble to protect their interests by filling permits,” said Pete Obermueller, president of the Petroleum Association of Wyoming.
He called the proposed rule “better for Wyoming,” and considered it a step in the right direction.
“(The proposed rule) asks the Oil and Gas Conservation Commission to start carefully evaluating who is ready to drill, who intends to drill and how can we facilitate that. It also shifts the value away from permitting and toward drilling,” he said.
What’s more, the changes could solve the permit backlog and reduce the time spent by the commission “refereeing” competing companies, he said.
In a statement Tuesday, Gov. Mark Gordon also expressed supported for the proposed rule. “The oil and gas industry is essential to Wyoming, and over the years it has adapted to evolving challenges,” Gordon said. “As that happens our regulatory framework must also evolve to protect the interests of our state, our citizens, and the producers’ ability to efficiently develop these resources.”
A public meeting will be held in the near future to answer questions about the rule change, followed by a 45-day comment period.
The commission began drafting the rule change in January and hopes to have it completed in one year’s time.
“This has been a long process, to get to this point, just to get to language that we think will work,” said Mark Watson, the commission’s director. “This wasn’t done in a vacuum.”