Experts agree oil and gas exploration needs fix; no consensus on how

CASPER — Oil and gas exploration could look different in Wyoming after the next legislative session. How it should change is still up for debate. 

Even though many of Wyoming’s oil and gas reserves remain untapped, the planning, permitting and other upfront investments required to drill somewhere new can make those sites inaccessible to producers. 

The federal government — which manages nearly half of the state’s surface lands and closer to 70 percent of its minerals — oversees a program intended to make such lands reachable. 

In Wyoming, the Oil and Gas Conservation Commission typically safeguards the rights of both leaseholders and property owners by grouping lands into 640- and 1,280-acre drilling and spacing units. Companies must, for the most part, hold the rights to drill across the entire unit before they can begin producing. 

Steve Degenfelder, land manager for Casper-based company Kirkwood Oil and Gas, on Monday walked the Legislature’s Joint Minerals, Business and Economic Development Committee through the distinction between Wyoming’s drilling and spacing units and federal exploratory units, a different type of drilling arrangement authorized by the Bureau of Land Management (BLM).

Federal exploratory units are much bigger than the average drilling and spacing unit — though they may eventually contain one or more — and often span tens of thousands of acres. They can be established in areas containing at least 10 percent federal minerals and are negotiated by the BLM, companies pursuing exploration and voluntarily participating property owners. 

“You form it into one lease,” Pete Obermueller, president of the Petroleum Association of Wyoming, told the committee, “and it helps operators to be able to explore for and develop in areas they may not otherwise do it.” 

The units come with time-sensitive drilling requirements meant to prevent companies from locking public resources, or resources owned by private individuals, into long, unprofitable contracts when exploration doesn’t go well. 

But many in Wyoming — especially property owners — don’t think the program is working as it should. Complicated contracts have left some feeling frustrated and trapped. Profits from the wells that are productive don’t necessarily reach everyone. The arrangements’ built-in deadlines don’t always work to give participants a timely way out. 

“There were an awful lot of mineral owners out there that did not get the bargain that they thought that they bargained for,” Heather Jacobson, an attorney from Douglas who represents many of the area’s surface and mineral owners, told the committee. 

Despite general agreement that federal exploratory units need fixing, there’s not much consensus on what the state should, or can, do about it. 

“This is a federal issue,” Jacobson said, “but we can try helping as much as we can.” According to Monday’s testimony, limiting the units’ acreage could reduce harm to property owners, potentially at the cost of producers’ willingness to go through the steps required to drill there. 

Meanwhile, doing away with federal exploratory units entirely would mean fewer headaches for all parties — and fewer opportunities for new drilling in undeveloped parts of the state. More specifics and alternative ideas are still to come.