American Oil and Gas Reporter - August 2016 - 94

Wyoming Backing Oil, Gas Community
DENVER-Wyoming's oil and gas operators are suffering as much as their
counterparts across the country and the
world, but Randy Harris, chairman of
the Petroleum Association of Wyoming,
says at least they can be certain state regulators value what they are doing.
"Wyoming has a better appreciation
for the significance of oil and gas in the
state, the revenue it generates, the jobs it
creates, and its economic impact," Harris
assesses. "That gives people a different
lens through which to view the industry.
They know they have to regulate appropriately and make sure not to overdo it.
They know they have to support the industry because it is so important."
If oil prices continue to climb above
$50 a barrel, Wyoming's oil producers
will respond in some areas, predicts
Harris, director of corporate development
for Denver-based Black Hills Exploration
& Production Inc. "It really is a function
of what depths and geologic conditions
exist to drive those costs. You could be in
a part of the Powder River Basin where
you have a break-even of $45-$50 a
barrel, while in another part of that basin
break-even may be $70. It just depends
on where the project is located," he says.
Wyoming producers are ready to respond to a rebound in prices, Harris
asserts, pointing to the companies preparing for Powder River Basin horizontal
drilling projects. "I truly believe you will
start to see drilling activity come back as
prices settle within break-even-type economics," he says. "Wyoming's infrastructure is ready for a price recovery also.
The state has a remarkable infrastructure,
one to be extended and expanded, while
other states are still in the infancy of developing infrastructure."
The oil and gas industry's dealings
with state regulators remain positive,
Harris continues, adding that while there
has been engagement on a host of issues,
the two sides have strong relationships.
He notes that Wyoming operators also
enjoy close connections with their local
legislators.
According to Wyoming Governor Matt
Mead's office, the state is planning budget
cuts to cover shortfalls incurred by the
downturn in oil and gas prices. In June,
the governor released his budget package,
which included more than $230 million
in cuts to the state's $3.0 billion budget.
His plan does not tap Wyoming's $1.6
billion Rainy Day Fund.
"We all know the budget is going to
be an area of huge concern with com94 THE AMERICAN OIL & GAS REPORTER

modity prices having dropped so hard,"
Harris says. "Who knows what kind of
effect that may have on the legislature.
Wyoming legislators are not used to
having to deal with deficits."
Wyoming's Budget
PAW President Bruce Hinchey says
the state experienced a shortfall this year
and expects a deficit again in 2017, but
still has that $1.6 billion cushion to tide
it over. Legislators on the Joint Revenue
Committee are studying whether to increase taxes to ease the budget shortfall.
The committee's website says imposing
a local tax on groceries and increasing
the state property tax for school expenses
are being considered to make up for declines in energy production tax revenues.
"There was not much appetite at the
last committee meeting to raise taxes,"
Hinchey reveals. "Committee members
took a look at severance taxes, but there
was not much appetite for that. At the
next meeting, members want to look at
sales taxes and see if there are any exemptions they want to do away with."
Looking ahead, Hinchey says one
committee member is considering introducing a bill that would put a lien on
production for ad valorem or severance
taxes at the time the production occurred,
if the operator did not pay then. He says
that is an issue for bankers as well as
companies with loans on their properties.
Hinchey adds the proposal has been discussed in past meetings, but has never
advanced.
"It has been a problem with smaller
companies mostly," he details. "It also
has been seen with companies that file
for bankruptcy protection, but those get
to work out the payments so the taxes
will get paid."
The Revenue Committee also considered requiring producers to pay ad valorem
taxes monthly instead of annually, an
idea that coal companies did not favor,
Hinchey says. With the decline in oil and
gas prices over the past two years, the
proposal also is opposed by PAW members, he notes, so legislators have decided
now is not the time to make that move.
Energy Strategy
Hinchey says Governor Mead continues
efforts to develop a Wyoming energy
strategy. Mead proposed the initiative in
2012 and issued the initial set of proposals
a year later. Earlier this year, he unveiled
the plan's second phase.
"I don't know if you can tell much

difference with the way the economy is,
but I know the governor supports the oil
and gas industry, as well as the coal industry," Hinchey says. "The governor has
been trying hard to keep both industries
vital, but it is pretty tough with these
prices."
The 2013 plan offered 45 initiatives
for collaborative efforts to improve the
state's energy economy while protecting
the environment, and the 2016 edition
reports 28 are fully complete, the governor's office says. Among the goals reached,
the report details, are increasing supply
of and demand for compressed natural
gas, increasing state and local government
involvement in the federal National Environmental Policy Act process, and developing a state reclamation standard and
statewide water strategy.
According to the phase 2 update,
Wyoming will continue to work on a
range of energy issues, including:
* Creating contiguous corridors across
federal lands for pipelines to transport
carbon dioxide and other products;
* Reviewing and updating state and
federal cooperative agreements;
* Reviewing Wyoming's oil and gas
environmental regulations;
* Refining the state's air quality management strategy;
* Reviewing state oversight of natural
gas flaring; and
* Expanding the state's certified oil
and gas operator initiative, which rewards
companies that contribute to Wyoming's
economy.
Planning For Recovery
When commodity prices do recover,
PAW Vice President John Robitaille predicts it will take some time for Wyoming
companies to respond, but "once we get
some production back, I think Wyoming
will be in good shape. The state has
things in place, and it should be able to
move right back into normal operation
mode. However, it will take a considerable
amount of time to get there."
Robitaille points out that when prices
started declining, many Wyoming companies drilled wells but left them uncompleted, giving the state a number of wells
ready to respond quickly to improved
market conditions.
"We are in a holding pattern now. It
will not take a lot to get a bunch of these
wells on line, and hopefully, it will not
take too much time to get some rigs back
into the state," he offers.
Harris adds that one common concern

American Oil and Gas Reporter - August 2016

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