Many of you may not be aware of the happenings in the Cowboy State concerning the future of the energy industry. Wyoming is not just sitting back and allowing market forces to have huge impacts on the state, it is taking steps to be on the forefront instead.  Here are a couple of big things going on in Wyoming.

Carbon Emissions – ITC

A new Wyoming research center is the driving force for change. The Wyoming Integrated Test Center (“ITC”) was dedicated by Governor Mead in Campbell County, Wyoming, last week. Check out the ITC website here.

  • What is the ITC?

Bottom line: It is a big deal – it is a collaborative effort that has the ability to change the future of energy by developing ways we can use power plant emissions.

The specifics: According to the About ITC website, the funding for the ITC came from the Wyoming State Legislature ($15 million), the Tri-State Generation and Transmission Association ($5 million), the National Rural Electric Cooperative Association ($1 million) and Basin Electric Power Cooperative is providing the host site at their Dry Fork Station located in northern Wyoming and additional valuable in-kind contributions (important things like engineers and construction management services). Supporters also include Rocky Mountain Power, Black Hills Power, XPRIZE Foundation and the University of Wyoming School of Energy Resources – the ITC is a true public-private partnership with a shared goal.

The goal is simple yet significant – to develop commercial uses for carbon dioxide emissions. Check out more on the science of this here.

The headline from the Casper Star Tribune says it all, In Unassuming Wyoming, A Quest to Change the National and Global Future of Coal.

Since this project involves coal, obviously it is hotly contested and controversial. Opponents reportedly question the use of taxpayer funds on the ITC and wonder whether the cause is useless because coal is a sinking ship.

Oil and Gas – Secondary Recovery

In addition, secondary recovery in oil and gas operations is a focus of the Cowboy State. The Casper Star Tribune highlighted this focus in its article yesterday entitled, UW Institute Fosters $2 Million of Research into Oil and Gas Recovery in Wyoming. The Enhanced Oil Recovery Institute reportedly, “announced recently that $2.2 million of research is about to roll out in Wyoming.” The plan is to dig deep into figuring out ways to increase secondary recovery and optimize production using new technology in Wyoming’s old wells.

Wyoming is clearly a force for change in the energy industry – there is something to be said for that Cowboy grit and work ethic. Cowboys know when to adapt and when to buckle down to figure out a problem. One thing is true – do not underestimate the Cowboy state.

Flying into the Yellowstone Regional Airport in Cody, Wyoming, last week gave me a much-needed dose of the Cowboy State. Cody, a quiet and welcoming cowboy town named after Colonel “Buffalo Bill” Cody, is an amazing gem of the West.

I had a little free time so I stopped into the Buffalo Bill Center of the West for the first time and toured the Whitney Western Art Museum, the Buffalo Bill Museum, the Plains Indian Museum and the Draper Natural History Museum. If you haven’t already been – trust me, it is worth the trip! It is a truly amazing place to get a one of a kind glimpse into the American West.

I haven’t provided you with an update in a while. The trip got me thinking – what is new in the Cowboy State?

Wyoming Rig Count

WOGCC Creates New APD Approval Policy

  • The Wyoming Oil & Gas Conservation Commission (“WOGCC”) recently came out with a new policy for the approval of Applications for Permits to Drill (“APDs”). The WOGCC press release on the new APD policy can be found here. The official WOGCC Memo on Application for Permit to Drill Processing can be found here.
  • This new policy sparked my interest because we have been dealing with the exact same kind of issues here in Colorado when it comes to competing APDs and determining which is first in line. The commissions are being bombarded with APDs – the WOGCC Memo provides that “an unprecedented number of applications for permit to drill” are being received; “the monthly average for APDs received for 2017 was 1,050, which is an increase of 83% compared to the average for 2015.”
  • The new WOGCC policy provides that a basic completeness check will be conducted in order to prioritize the approval process. Simply put, the WOGCC will make sure submitted APDs are complete and contain all required information prior to processing for final approval. Operators cannot file an incomplete APD and expect to have the effective APD just because it was filed first– completeness of the APD is required for priority.

Demand for Energy Jobs Increasing

Emissions Rule Stayed

In sum, there is a lot going on in the Cowboy State!

The 2018 Wyoming Budget Session of the 64th Legislature began today and there are several key bills relating to energy issues that are up before the Cowboy State’s legislature. I will highlight a few here and track them through the session to see how they end up – stay tuned!

All of the Bills before the Wyoming Legislature, and their statuses as the session progresses, can be found here at the House Bills Index/Senate Files Index.

A Few Key Energy Bills Before the Wyoming Legislature:

  • Senate File No. 14 – “Biennial Energy Strategy,” Sponsored by the Joint Minerals, Business & Economic Development Interim Committee
    • The Introduced Senate File No. 14 can be found here
    • In sum, Senate File No. 14 proposes, among other things:
      • A biennial energy strategy, which means a “coordinated and comprehensive biennial plan that: (A) Includes the activities of agencies, boards and commissions, policy initiatives and other actions aimed at achieving excellence in energy development, production, technological innovation, regulation and stewardship of natural resources for the highest benefit of Wyoming citizens; (B) Includes programs and initiatives intended to increase economic competitiveness, expansion and diversification, to provide for efficient and effective regulation and natural resource conservation, reclamation and mitigation and to develop education, innovation and new technologies; and (C) Identifies appropriate means to complete initiatives and work with agencies, boards, commissions and other interested parties to implement initiatives.”
      • The creation of an energy strategy committee within the governor’s office and assigning duties of the committee
  • House Bill No. 104 – “Wind Energy Production Tax,” Sponsored by Representatives Madden and Blackburn and Senator Case
    • The Introduced HB0104 can be found here
    • In sum, House Bill No. 104 is “an Act relating to the tax on production of energy from wind resources; increasing the tax rate; providing for distribution of the tax; repealing an exemption…”
      • In short…this one will be hotly debated!

The Casper Star Tribune also published an article entitled, “What to Watch for at the Wyoming Legislature this Year,” that discusses some other interesting issues before the Legislature this year.

Stay tuned! I will keep you updated on these key energy-related bills!

Earlier this month, an article on my home state of Wyoming was featured in the New York Times.  As I have said before, it is not often that the Cowboy State is written about in the New York Times; in fact, I think the last time I wrote about it was back in 2015 – see that old blog post here.

The New York Times article was featured on December 14, 2017 and was entitled, Where Wind Farms Meet Coal Country, There’s Enduring Faith in Trump. As I went home to Wyoming to celebrate the holiday with my family for a few days, I was able to reflect more and put together my thoughts on the article.

It is no secret that historically, Wyoming’s health and very survival has been centered on the strength of the energy industry.

The energy sector is and has always been the life blood of the Cowboy State. Revenues from mineral production have been a central part of the Wyoming budget basically since statehood. Wyoming families make their livings either in the extractive industries of oil and gas and mining, or in the service sector that relies heavily on the same. The boom and bust cyclical nature of the energy industry has always had a serious impact on the Wyoming economy. This is still the case today, and for the foreseeable future, unless the state can diversify its economy – check out this economics page from the Wyoming Mining Association.

In fact, that is why Wyoming created the Permanent Mineral Trust Fund back in 1975, to further the goal of extending the depletable nature of Wyoming’s minerals to benefit future generations – the concept had been attempted in the Wyoming legislature since the late 1880s. The fund is funded primarily by severance taxes.

The main premise of the article is that energy-reliant Wyoming, and specifically Converse County, have a lot at stake in President’s Trump promise to make the US a dominant energy force.

The truth is, in Wyoming, none of this is about who is in office or what promises have been made. At its heart, this is not a political issue for my home state.

This is about people being able to make a living in Wyoming. The crux of the issue is not Wyoming’s enduring faith in the President or his promises, it is about the ability to provide for one’s family.  Wyoming people want to work in stable jobs.

Wyoming is in the Emergency Room. Its residents are leaving the state for better opportunities, and they are leaving in mass exodus. In fact, the Casper Star Tribune has reported that the state’s overall population dropped this year for the first time since 1990.

The good news is that Wyoming’s heart is good, so no major organ transplant is necessary, but the state needs critical and intensive care, and politics is no doctor. It is up to the people to breathe life back into Wyoming.

As we look into the coming New Year, that is what Wyomingites are focused on – finding entrepreneurial new ways to make their families prosper.  It was easy to see this as I flew out of the Cowboy State last night.

 

Yesterday, the Wyoming Supreme Court issued its opinion in Lon V. Smith Foundation v. Devon Energy Corp., et al., 2017 WY 121 (Wyo. Oct. 10, 2017), which provided guidance on the application of the Wyoming Royalty Payment Act (“WRPA”). The full case can be found here.

There were 3 issues before the Wyoming Supreme Court, one involving a probate question and two involving the WRPA.

Let’s just focus on the issues concerning the WRPA that the Wyoming Supreme Court gave us guidance on:

What were the WRPA issues?

  • Whether ORRI proceeds held in Devon’s own “suspense account” and not in an interest-bearing account in a Wyoming financial institution violated Wyo. Stat. Ann. § 30-5-302; and
  • Whether either party is entitled to attorneys’ fees in this case under WRPA.

Wait – let’s back up. What is the WRPA?

The WRPA is found at Wyo. Stat. Ann. § 30-5-301, et seq. and it governs the payment of royalties in Wyoming. It has been around for a pretty long time – the WRPA is by no means a “new” statute, although recent case law over the past 20+ years or so has really refined its terms and application.

I usually don’t cite cases in my blogs, but it is worth noting that the Cabot Oil case really explains the policy behind the WRPA: The WRPA is a remedial statute “enacted in 1982 to stop oil producers from retaining other people’s money for their own use.” Cabot Oil & Gas Corp. v. Followill, 2004 WY 80, ¶ 11, 93 P.3d 238, 242 (Wyo. 2004) (Internal citations omitted). The Wyoming Supreme Court in its opinion yesterday further explained the policy behind the WRPA as follows, “[t]he WRPA was designed to level the playing field between royalty interest owners and oil and gas producers.” Lon V. Smith Foundation v. Devon Energy Corp., et al., 2017 WY 121, ¶ 54 (Wyo. Oct. 10, 2017).

I will be honest, cases involving the WRPA might be my favorite cases to read. Insert joke about me being a big nerd here.

So, back to yesterday’s Wyoming Supreme Court opinion in Lon V. Smith Foundation v. Devon Energy Corp

Ok I kind of fibbed, we do have to quickly touch base on the probate issue to fully understand what is happening here.  Actually, it really sets the stage for the whole outcome of the case.  Without going into detail on the probate issues, basically, there was a dispute over who was the proper owner of an overriding royalty interest (“ORRI”) after the death of Mr. Smith. The Wyoming Supreme Court affirmed summary judgment in favor of Devon and determined that the Lon V. Smith Foundation (“Appellant” or “Foundation”) was not the proper owner and that the Marguerite Brown Smith Trust (“Trust”) is the proper owner of the ORRI. Id. at ¶¶ 34-39.

Now on to the WRPA issues…

Ok lets get to the good stuff.  WRPA!! Devon admitted that it held funds in an account that did not comply with the requirements of the WRPA when it just held funds in its own “suspense account” – but it argued that the account requirements for holding funds only applies if the party asserting the claim is “legally entitled to the proceeds.” Id. at ¶ 42. The Wyoming Supreme Court concluded, as you might guess, that because the Foundation is not the owner of the ORRI, it is not the “person legally entitled” to the proceeds and it cannot make a claim under WRPA. Id. at ¶ 45.

The next issue was whether the prevailing party language in the WRPA, specifically, Wyo. Stat. Ann. § 30-5-303, applies to entitle somebody, either the Foundation or Devon, to an award of fees and costs. Again, the Supremes looked to who is “legally entitled” to receive payments as the preliminary step in the analysis. Id. at ¶ 47. Again, as you might guess, because the Foundation was found to not be the owner of the ORRI, the Court concluded that “the Foundation did not have a statutory right to seek relief under the WRPA.” Id. at ¶ 52. “[N]either the Foundation nor Devon is entitled to attorney fees because neither party was the prevailing party in a proceeding brought pursuant to the WRPA.” Id. at ¶ 52.

As you can see, the Wyoming Supreme Court gave us some guidance on the applicability of the WRPA – Being “legally entitled” to the dolla bills is the key.

After reading this weekend’s headlines and checking the stock market, Tom Cruise in the movie Jerry Maguire yelling, “SHOW ME THE MONEY” has been ringing in my head this afternoon.

So here we go, let me give you a quick summary of what has been going on to bring you up to speed and show you the money:

  1. The price of oil is up! As I write this, according to Bloomberg Energy, WTI Crude Oil is at $52.17 per barrel, up 2.98%, and Brent Crude is at $58.99 per barrel, up 3.75%.  According to MarketWatch, WTI is at its highest level in about five months as of today and Brent crude has been lifted to a more than two-year high!!
  2. Also, Forbes put out an article today entitled, The Biggest Global Tax Break Ever Bubbles Up from Texas Oil Industry, which reports that, “According to the Energy Information Administration’s (EIA) most recent report on drilling productivity, total U.S. shale oil output is expected to climb above 6 million barrels a day for the first time in September.”  Production is increasing.
  3. In Cowboy State News:  The State of Wyoming reportedly netted $19 million from a federal oil and gas lease sale on Friday, largely in the Powder River Basin. The full article, Federal Lease Sale Nets $38.7 million from Oil and Gas Developers, can be found here.
  4. Things are looking good in North Dakota too.  The NDIC September Director’s Cut from Lynn Helms shows oil production up in late summer – reporting 32,473,305 barrels for the month of July from a new all-time high of 13,981 producing wells in July.
  5. Lastly, the Baker Hughes Rig Count is reflecting the rig count as of September 22, 2017 as 935 rigs, a 424 increase from September 2016.  That sounds like a monster increase over the course of one year.

This is all good news – it is great for our local economies and the folks who have been forced to tighten their belt while the energy industry saw extreme lows and experienced significant volatility.  Those of you who know me know that I am an eternal optimist and I love good news. And good movies. In the words of Jerry Maguire, you…complete me – well, good news does!  It is the best way to start the week.

 

127 years ago today, on July 10, 1890, Wyoming was entered into the Union as the 44th state. As we celebrate the date of Statehood, here is an update from the Cowboy State:

According to the Casper Star Tribune’s Energy Journal of today’s date, which can be found here, activity in the energy sector is picking up in Wyoming.

The rig count in Wyoming as of July 7, 2017, according to Baker Hughes, is sitting at 25 rigs – this is up 17 rigs from one year ago, when the tally was 8 rigs.

Recent headlines in Wyoming have included the following:

The talk around the Cowboy State has shifted from its normal energy-related focus to the upcoming solar eclipse, The Great American Eclipse – on August 21. The eclipse’s path is expected to make its way through the entire central region of my home state and reportedly spans more than 365 miles of Wyoming. The center of the eclipse path will reportedly pass slightly south of Dubois, Wyoming.

Happy birthday to the Cowboy State!

Wyoming aeral shot 4.14.17

After spending the weekend in Wyoming, I thought I would give you an update from my home state. As you may remember, I come from a long line of coal miners – back when the country was primarily powered by coal, the coal industry also fueled my family.  Today, the update centers on the coal industry.

Help for Coal Miners – U.S. Department of Labor Grant

The big news for the Cowboy State is that, “Wyoming has received up to $2 million to retrain workers affected by layoffs in the coal industry,” as described this morning in the Casper Star Tribune.

You remember…

As coal declined nationwide, Wyoming, the country’s biggest coal-producing state, according to the New York Times, was hit pretty hard about a year ago, when heavy layoffs in the coal industry occurred.  In fact, the New York Times article was entitled, “As Wind Power Lifts Wyoming’s Fortunes, Coal Miners are Left in the Dust” – this grant will help to alleviate that.

For more of a refresher:

More about the Grant

According to the Department of Labor News Brief, which can be found here, “[t]he U.S. Department of Labor approved a National Dislocated Worker Grant for up to $2 million, with $1,080,465 released initially, to the Wyoming Department of Workforce Services to provide reemployment services to dislocated coal workers affected by industry layoffs.”

The funds are reportedly earmarked for northeast Wyoming for the following counties: Campbell, Converse, Crook, Johnson, Niobrara, Sheridan and Weston.

This grant is reportedly “part of a multi-agency effort to invest federal economic and workforce development resources in communities and regions negatively impacted by changes in the coal economy” and “[t]he grants generally provide resources to states and local workforce investment boards to reemploy laid-off workers quickly by offering training to increase occupational skills.”

Takeaway

This is excellent news; however, many folks who were laid off were forced to pursue other options in the past year. By now, many workers have left the state and moved on in order to find work elsewhere. In fact, the New York Times article from last June referred to this as an “exodus.”

Nonetheless, I am sure that many in my home state will benefit greatly from this grant and that the Cowboy State is grateful that coal miners affected by the downturn in the industry are going to benefit from this award.

Yampa River

My dad mentioned something the other day that peaked my interest – he said parts of Wyoming were getting ready for floods.

Floods?!

This got me thinking – is the West ready for the spring runoff?

Parts of the West got dumped on this winter – snow levels were very high in many places and there are high levels of snowpack. Jackson Hole Mountain Resort reports that it has received 548 inches for a season total as of today, on the upper mountain.

In fact, I read an article this morning on East Idaho News.com entitled, “Snow Causes Porch Roof Collapse in Grand Teton National Park,” that reported that area measurements in Grant Teton National Park “show the current snow water equivalent is around 150 percent of median.”

The National Weather Service reports in its 2017 Wyoming Spring Snowmelt Flood Potential Outlook – Updated March 21st that:

  • “Mountain snowpack and associated snow water equivalents (SWEs) across central through western Wyoming continued to be much above average by the middle of March; while SWEs across basins in southeastern Wyoming were generally above average.”
  • “SWEs at the peak snowmelt runoff elevations (8,500’ – 10.000’) were the highest across the Wind and the Upper Green Basins at 170 to 180 percent of median.”

Check out The National Weather Service’s Wyoming Spring Snowmelt Flood Potential Outlook map here.

The Western Governors’ Association also published a story today entitled, “Best of the West: Flooding bedevils states,” reporting flooding challenges in Idaho, Montana and Wyoming.

Similarly, according to an article this week featured in the Missoulian entitled, “Early Snowmelt Damages Bridges, Roads in Montana and Idaho,” “[t]he Salmon [Idaho] area is 130 percent of average precipitation.” The Missoulian reports that “waterlogged ground has produced landslides, mudslides, streambank erosion and damage to roads and railroad lines” in Montana and Idaho.

Steamboat Today.com reports very high flows in the Yampa River and Elk River in Colorado, although they are “well below flood stage, but the acceleration of snowmelt during a time when snowmelt is typically increasing stands out from the norm.”

The West is getting ready for the runoff and bracing for flooding…stay tuned.

Neighboring States

Wyoming and Colorado appear to be recovering from the downturn in the oil and gas industry at different paces.

  • 307 (Wyoming)

Yesterday, the Casper Star Tribune featured an article discussing the “slugglish” and “flat” Wyoming economy entitled, “Wyoming Economy has been ‘Bouncing Along the Bottom’ Since the Summer.” According to the Casper Star Tribune, “[a] Wyoming Insight report released by the state’s Economic Analysis Division in February showed a slight improvement in both energy prices and the statewide rig count, but the economy is still far from recovered.”

Wyoming’s unemployment rate is reportedly “roughly equal” to the nationwide average and “Wyoming is down nearly 8,000 jobs since 2015.” According to the Casper Star Tribune, folks are hopeful that the oil and gas sector will bounce back to help energize the state’s economy, but there is some skepticism as to how long that could take to happen.

  • 303 (Colorado)

Wyoming’s neighbor to the south, Colorado, appears to be recovering from the downturn in the energy sector a little faster than the Cowboy State. This morning, the Denver Business Journal (“DBJ”) featured an article discussing that the energy downturn is over for the state, due in part to increased activity and oil and gas company’s budgets being up, entitled, “Colorado Oil and Gas: Up from the Bust.”

The DBJ article reports that “[a]ctivity in Colorado’s oil and gas fields also is picking up,” and noting the increase in drilling rigs working in Colorado. In addition, the DBJ article reports that “[t]he 2017 budgets for some of the state’s biggest oil and gas companies also are increasing compared to last year.”

The Colorado unemployment rate is also reportedly lower than the national rate – Colorado’s unemployment rate was 3.0% in December of 2016 while the national unemployment rate was 4.7%.

The Rocky Mountain region plays a crucial role in domestic oil production and the energy sector similarly plays a critical role in the economies of Wyoming and Colorado.  One thing is certainly true, both states are in this together and I am confident that this is recovery is something Wyomingites and Coloradans are collectively rooting for.

Only time will tell how the recovery in the oil and gas industry is going to work out…stay tuned!