Published May 1st, 2019 by Budd-Falen Law Offices, L.L.C.
Since the old territory days of Wyoming, the people of Wyoming have embodied the ideals of the West. We are rugged individualists who are the first to help our neighbors, but are the last to ask for help or join a group. The local mineral owners in Wyoming also embody this spirit. For years mineral owners in the state have been divided, allowing oil and gas operators to use a divide and conquer approach when dealing with mineral and landowners. This comes both with how landmen negotiate with land and mineral owners for a lease, and also politically. Without a united front from the mineral owners of Wyoming, we will once again be left behind by a powerful and united industry. No other recent issue has made the need for unity more clear than the loophole in the permitting system that allows oil and gas operators to artificially steal value away from mineral owners.
There is an artificial race in Wyoming being run by large oil producers to gain a competitive advantage in producing oil and gas. The race is not a race to find oil or to purchase or lease minerals from a landowner. Instead, companies are racing to be the only company allowed to drill in an area. This race, which is being artificially created by the rules of the Wyoming Oil and Gas Conservation Commission harms the land and mineral owners who get some of their mineral value expropriated by these companies.
Due to the rules and regulations of the Commission, it has incentivized oil and gas companies to essentially race to the Commission to get drilling permits for spacing units in an area (APD). In order to get an APD an operator need only show that he has a mineral interest in place in part of the unit, and that the rest of the area should be pooled. Controversially, the operator does not need to show an intent to drill in order to get a permit.
Once they are granted a permit, they are the only company allowed to drill in that spacing unit. Currently, the spacing units are 1280 acres, making them one mile wide and two miles long. Further, the company can request an extension prior to the expiration date of the permit without any current term limit on how many times an operator can renew their permit. So without any term limits as to how many times an operator can request an extension, owning the APD permit essentially gives these companies permanent priority in that area.
This is an issue because the current system incentivizes big operators to get APDs everywhere in Wyoming, basically holding a monopoly on the right to drill. They use this monopoly to then either force mineral owners to lease out their minerals to the company for well below market value, or to quash mineral development in the region until they decide they want to drill. So, when a company controls an APD, but never intends to drill, or allow any other company to drill, they are in fact harming a mineral owner’s right to produce their minerals and artificially takes value from the mineral owner for their own gain.
The situation has become so extreme that a group of mineral owners throughout eastern Wyoming have formed the Wyoming Mineral Owners Association. The objective of the organization is to educate mineral owners, represent mineral owner interests, and protect mineral owner rights throughout the state of Wyoming. The first issue that the group is going to work on is this APD issue. Its approach to the APD issue is threefold plan.
First, inform and educate mineral owners and the general public throughout the state regarding the APD issue. This will be accomplished by the public meetings the Wyoming Mineral Owners Associations will be conducting throughout the state. The group will also continue to produce publications teaching the public.
Second, the group is finding allies throughout the state that are affected by the issue in order to form a strong partnership to combat the big oil special interest that is against any meaningful reform. The group is currently allied with both the Wyoming Stock Growers Association and the Wyoming Farm Bureau. However, there are other affected parties as well; counties and schools lose tax revenue under the current system because development is put to a standstill. Also, understanding that a solution to this problem must work for both the mineral owner and the industry, we are in contact with operators who are equally affected by the policy as the mineral owners are and are forming a partnership with these affected operators to ensure that we reach a solution that is fair for everyone.
Finally, the group intends to work politically as well. The group intends to testify before the Wyoming State Legislature Joint Interim Committee on minerals when they take up the APD issue. The group also intends to continue to communicate with the Wyoming Oil and Gas Conservation Commission. Doing so will help ensure that the Wyoming mineral owners, and not just industry, have a seat at the table in any discussions surrounding the APD issue.
In the end, we mineral owners must unite. For too long we have been divided while the oil and gas industry have had a powerful and united voice in the state, often to the detriment of the mineral owner. The Wyoming Mineral Owners Association will be having public meetings throughout the state to discuss the APD issue, as well as how a mineral owner can best understand what his minerals are worth, and how to lease or sell your minerals for the best price. The public meetings will be held in Pinebluffs at the Pinebluffs Community Center at 7 pm on May 8th, in Cheyenne at the Archer Center at 7 pm on May 9th, in Yoder at the South East High School Gymnasium at 6:30 pm on May 13th, and in Wright at the Wright Hotel and Conference Center at 7:00 pm on May 15th. We hope that you will join us.
Contact information: Conner Nicklas firstname.lastname@example.org; 307-632-5105
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