American Oil and Gas Reporter - August 2019 - 137

ConventionSection: Petroleum Association of Wyoming

State Looks To Rework APD Process
CASPER, WY.-Members of the Petroleum Association of Wyoming approach
their annual meeting, Aug. 19-20 at the
Little America Hotel in Cheyenne, Wy.,
eyeing a potential change that could affect
every operator in the state: altering the
Wyoming Oil and Gas Conservation Commission's first-to-file system for obtaining
an application for a permit to drill.
The association is keenly aware of
the need to make sure a final rule affecting
first-to-file is equitable for all operators,
landowners and minority mineral owners,
says Chairman Paul Ulrich.
"We have put a lot of focus into making
sure we really have an equitable recommendation for the commission," says Ulrich, director of government affairs at
Jonah Energy LLC. "I think we are there."
The timing of PAW's convention coincides with what will be the midway
point of a 45-day comment period on the
proposed APD filing changes released
by the WOGCC on July 9, points out
PAW President Pete Obermueller.
"The state is going to move away
from issuing oil and gas drilling permits
based simply on being the first to file to a
system that issues permits based on set
criteria about a company's actual interest
and desire to drill," he outlines.
Obermueller notes more companies
are seeking operatorship so they can control decision making in expensive horizontal drilling projects on the multiwell
pads that are becoming more common in
the state's basins, especially the Powder
River. But, first-to-file effectively has created an artificial market for the permit itself, allowing first filers hold a valuable
commodity, even if their business plans
don't call for drilling, he says.
"No one is operating illegally," Obermueller emphasizes. "Everyone is operating under the current rules, but we are
in a new environment with horizontal
drilling and the first-to-file system doesn't
work to incentivize production. That is
what the state of Wyoming is interested
in for economic and revenue purposes,
as well as job creation.
"The state wants to issue permits to
people who are interested in drilling and
production, not necessarily holding a permit
for a permit's sake," he observes. "We
have been actively engaged in pushing that
along because we also prefer to have a
regulatory system that incentivizes drilling."

Proposed Rule Language
The two-page draft released by the
commission to initiate the rule-making
process includes language in Chapter 1,
Section 2 and Chapter 3, Section 8 of the
state's oil and gas rules. For the purpose
of the proposed rule, a spacing unit,
drilling unit, and drilling and spacing
unit are interchangeable.
The draft states that in a drilling and
spacing unit, only a horizontal well APD
from the owner/operator of an existing
well may be submitted or extended. In the
absence of an existing well in the unit,
only horizontal well permits from the owner/operator of the oldest pending or approved
APD can be submitted or extended.
The draft goes on to say an APD submission or extension from any other owner/operator will be denied, except as provided for in Chapter 3, Section 8 of the
rule. An owner/operator whose APD cannot be submitted or extended under Section
8 can file for a hearing.
The draft states that a hearing application must include specific information
for the WOGCC to consider. Requirements
include:
· A description of the technical ability
and experience of the applicant to drill
and complete similar wells;
· The percentage of working interest
ownership within the unit and any written
support from other working interest owners;
· Information on working interest
ownership in the area;
· The number of wells in the area
operated by the applicant;
· The status of any necessary federal
permitting;
· Contractual obligations, if any;
· Whether the well pad is on fee surface;
· Proof that negotiations have commenced between the owner/operator and
surface owner; and
· Proof of negotiation by delivery of
an authorization for expenditure and a
joint operating agreement to all other
owners/operators and unleased mineral
interest owners in the drilling and spacing
unit.
The proposed rule says an owner/operator of a completed well or the oldest
pending or approved APD in a drilling
and spacing unit who wants to protest an
APD must provide:

· Information on current development
activity and plans in the area;
· A description of the technical ability
and experience of the applicant to drill
and complete similar wells;
· The percentage of working interest
ownership within the unit along with any
written support from other working interest
owners in the drilling and spacing unit;
and
· Information on working interest
ownership in the area.
PAW Input
Ulrich says PAW hopes comments
and discussion help craft a rule that can
gain broad support within the industry.
The WOGCC's existing permitting system
often is not workable, which complicates
matters among the commission, landowners, and both large and small operators,
he adds.
"We feel strongly that we need to address Wyoming's APD system, and have
had multiple discussions and work group
sessions with the WOGCC, the governor's
office, legislators and other stakeholders
to develop what we think is a very comprehensive approach," Ulrich reports.
"Our input over the past several months
has been critical. We will go through our
process of providing due diligence to review the proposed rule, provide additional
comments and, hopefully, by the end of
this year or early next year have a rule in
place that changes first-to-file and allows
operators who want to drill wells the opportunity to do just that."
The WOGCC has pointed to increasing
volumes of permit filings as a chief reason
to consider revising the rule, Ulrich says,
pointing out that and a second quarter
lease sale conducted by the Bureau of
Land Management garnered $22 million
in Wyoming, a sign that the industry's
outlook in the state is sound.
"We are seeing increased activity and
interest in the Powder River Basin " he
reports. "We also are seeing very steady
development and production in the Upper
Green River Basin, and some activity in
South-Central Wyoming that holds promise
as well. It looks solid right now.
"We have a way to go as a state, but
the economic engine that drives Wyoming
puts us in a better position to be competitive," Ulrich allows. "I like what I
am seeing."
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AUGUST 2019 137
American Oil and Gas Reporter - August 2019

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