American Oil and Gas Reporter - April 2019 - 30

vided that in the event an operator's bond
was forfeited for failure to plug a well,
priority would be given to plugging any
problem wells on that property, rather than
going to the DEP to determine which wells
were most in need of plugging statewide.
IOGAWV was essentially neutral on
both bills, Burd remarks. "We didn't oppose (the amended bill)," he says. "But
we didn't walk to the podium to speak
for it; it wasn't our bill."

After the two bills were combined,
Burd says, they were rejected 4-30 on
the Senate floor, primarily because of
fears HB 2779 was "taking money away"
from surface owners, even though the
bill had been endorsed by the West
Virginia Surface Rights Organization.
Altogether, Burd assesses the 2019 West
Virginia Legislature a success for the oil
and gas industry. It won some, including
stopping several bills that called for increasing

the current 5 percent severance tax rate,
but also lost a few as described previously.
"It was a happy mix," he submits.
"We got two or three pieces of legislation
that really help producers. There were
two or three others that would have provided even greater assistance that failed.
So it gives us something to build on and
do a better job of educating our delegates
and senators before we attempt to tackle
them again next session."
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Oil And Gas Bills Stymied In Wyoming
By Dan Larson
Special Correspondent
CASPER, WY.-Attempts to revise
state well permitting rules provided a
primary theme for oil and gas issues
during the 2019 Wyoming Legislature,
reports the new head of the Petroleum
Association of Wyoming.
"The idea of operator capture was behind five bills introduced this year, none
of which passed," details PAW President
Pete Obermueller, who was hired for the
position following the January retirement
of his predecessor, Bruce Hinchey.
The 65th Wyoming Legislature was
notable for concerns that peaked at midsession about several oil and gas bills
that ultimately did not pass. The issues
that arose from that experience, however,
opened the door to a busy interim, Obermueller indicates.
Meanwhile, the final bill debated this
session, SF 134, involved a severance
tax exemption and the legislation kept
legislators in the Capitol past midnight
on the final day. SF 134 would have reduced the tax on recompleted, workover
or otherwise shut-in well production to 4
percent from the regular 6 percent state
severance tax.
While some voices raised concern
about lost revenue, the projected production increase would have led to a net tax
revenue gain, Obermueller estimates.
"It certainly was an interesting debate
with plenty of twists and turns," he describes. Different severance tax bills
passed each chamber, he recounts, but
when a conference committee compromise
bill passed the Senate but not the House,
sponsors decided to pull the plug.
Dormant Permits
According to Obermueller, one of the
most controversial oil and gas bills to appear
in 2019 was HB 261, which would have
increased the state's permit application fee
to $10,000 and refunded $9,500 of that
after the well was drilled. HB 261 also set
30 THE AMERICAN OIL & GAS REPORTER

a two-year statutory limit on a permit's validity, with the possibility of a two-year extension, pending approval by the Wyoming
Oil & Gas Conservation Commission.
HB 261 and four others bills aimed at
permitting issues were referred to committee or not read on the floor and died
with the end of the session, Obermueller
observes.
The bills originate in concerns expressed by oil and gas companies, mineral
interest owners and elected officials that
center on claims that long lateral drilling
has rendered the state's well permitting
regulations obsolete, Obermueller notes.
Permitting a well in Wyoming has become
"a race to be first in the door with a
permit application," Obermueller describes.
"The first permit holder becomes the operator of the entire unit. With 1,280-acre
spacing and diverse interests within a
unit, it causes heartburn. There is concern
this secondary market for permits does
nothing for actual production; that was
the driver for these bills."
Current state permitting regulations
were written during the state's coalbed
methane boom 30 years ago, he recounts,
and those rules did not anticipate how
lateral drilling technology would evolve.
According to state rules, "unit spacing is
based only on the area one well will drain"
and limits the number of wells allowed in
a unit. The state commission can approve
increased well density when an operator
"finds a single well in a drilling and
spacing unit will not drain the acreage."
Once a unit has been spaced, the first
operator to file an APD is recognized as
holding ownership of drilling rights for
the entire unit, the regulations state. It is
then up to the other acreage holders to
reach a joint operating agreement or form
a pool. The WOGCC is "sitting on more
than 25,000 permits and of those that are
approved, only a small fraction are being
produced," Obermueller notes.
Commission records show that as of
last summer, more than 18,000 permits
were held by 10 companies. PAW recog-

nizes the frustration behind the legislative
proposals, Obermueller assures, but none
of the bills merited PAW support. "The
controversy also brought forth a number
of surface owner complaints that muddied
the water," he adds.
At the upcoming interim discussions
on operator capture, PAW will offer a set
of discussion points to outline how regulations can incentivize production while
not restraining operator planning and development practices, Obermueller reports.
"With an issue such as this, we are
unlikely to get 100 percent consensus
from our membership," Obermueller acknowledges. "We are looking to reach a
critical mass that gives some breathing
room so we can work on a way forward
with regulators and landowners."
Equipment Exemption Veto
One industry tax bill, HB 120, had
PAW's backing and passed the House
41-18 and the Senate 21-8. Written to
provide an ad valorem tax exemption on
energy production equipment, HB 120
was among the six bills Governor Mark
Gordon vetoed on March 15.
HB 120 initially was written for wind
energy producers in 2018 and it failed,
Obermueller recalls. "They use these big
laydown facilities for equipment and operating them has become an economic
driver," he explains. "This year, the bill
was revised to include equipment used
for production of any energy source as a
way of widening support. For the most
part, the oil and gas industry does not
store new production equipment long
enough to qualify."
Gordon's letter about his veto faults
the bill for not being specific on the
equipment in question, giving unfair preference to counties in which a laydown
facility is located versus where the energy
will be produced, and suggests that oil
and gas producers' tendency to obtain
equipment almost immediately before
they need it means the exemption is of
little value.
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American Oil and Gas Reporter - April 2019

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