American Oil and Gas Reporter - August 2021 - 32

ConventionSec tion: Petroleum Association of Wyoming
leasing system is broken, but that is categorically
untrue, " Obermueller assures.
" Any bureaucratic system can improve,
but a process that results in billions of
dollars to the federal and state treasuries-while
ensuring environmental protections
that are the envy of the world-is
far from broken. "
" The leasing situation is not broken
so much as misunderstood, " Milczewski
assesses. " It is complicated. "
He cites the example of a false perception
that companies stockpile acreage
beyond what they can reasonably drill.
" Leases impose the obligation on lessees
to evaluate the potential to produce hydrocarbons,
and the lease terminates if a
lessee is not drilling by the end of the
term, " he notes. " I don't think the public
understands that. "
Negative Ruling
Although the industry won a legal
battle in June with the temporary injunction
against EO 14008, it also suffered a
setback one week earlier when a federal
judge halted new oil and gas drilling on
more than 630 square miles in Wyoming
and Montana because of concerns about
greater sage grouse habitat. The ruling
did not vacate existing lease sales, but it
did order the U.S. Bureau of Land Management
to improve its environmental
assessments under the National Environmental
Policy Act (AOGR, July 2021,
pg. 18).
" This gets back to the uncertainty
around federal lands, land management
and wildlife, " Obermueller relates. " Remanding
leases back to the BLM for
NEPA re-evaluation is troubling because
Biden's DOI may not be eager to do that
work. That acreage may be in limbo for
quite some time. "
Moreover, Obermueller says PAW
fully expects oil and gas opponents to renew
their push to see the U.S. Fish &
Wildlife Service classify the greater sage
grouse as threatened or endangered under
the federal Endangered Species Act.
" A listing would make things difficult
for the industry and fly in the face of the
state's work, " he holds. " Wyoming has
done well, all things considered, regarding
sage grouse population and habitat. Our
numbers are a bright spot from a
rangewide standpoint. There will be an
32 THE AMERICAN OIL & GAS REPORTER
effort to throw all that out and seek
rangewide species listings, so we are
preparing for that by making sure data is
out there to support Wyoming's sage
grouse conservation. The data should
prevail eventually, but we have to make
sure it is given due consideration. "
Considering the extent to which federal
lands issues are front-and-center
for Wyoming producers, Obermueller
notes there are other ways in which the
Biden administration seems to be throwing
sand into the gears of the federal
leasing system. " We want the government
to leave well enough alone, but it
is not going to do that, so the question
becomes how far it will go on policies
that will do nothing with respect to oil
and gas demand and do not reduce
emissions or impact climate change but
simply move production elsewhere, " he
reflects. " To whatever extent policies
change, we hope the administration will
work with us. "
" The more facts the public learns
about production on federal lands, the
more people support it, " Milczewski maintains.
" Federal production is some of the
safest, environmentally-cleanest onshore
production possible, and people want
those hydrocarbons. "
Structural Imbalance
Oil and gas bills did not figure prominently
in Wyoming's 66th Legislature,
which ended in February, Obermueller
notes. Even so, he adds, the state's significant
budget shortfall made the state's
lopsided reliance on fossil fuel revenue a
notable session subtext.
The fact the state's fiscal fortunes
swing wildly alongside the fortunes of
its oil, gas and coal industries prompts
PAW to advise lawmakers that diversifying
its income is in everyone's interest, he
indicates. " We continually remind legislators
and the public that Wyoming's system
of taxation is so unbalanced as to be
bad for the state, no matter what anyone
thinks about oil and gas, " Obermueller
says. " Wyoming's other businesses do
not pay any appreciable taxes. "
" Everyone understands that Wyoming
needs to diversify its revenue base, " Milczewski
assesses. " We have been talking
about it since at least the 1970s, but it is
easier said than done. We have to figure
that out and PAW has to be a partner in
that process. It is going to take time and
folks will have to come together. Fortunately,
Wyoming is probably one of the
last places where that can happen. "
Meanwhile, Obermueller muses, the
association must continue to pound that
drum, even as the industry's recovery
seems to rob the task of some urgency.
" To the extent oil and gas come back in
Wyoming-which is something for which
I work and hope every single day-it lets
Wyoming off the hook, " he muses. " That
does not mean our tax policy is any
sounder than before. "
" That is always a risk, " Milczewski
agrees. " To their credit, the governor and
the legislative leadership have seen that
and are working to make it different this
time. People in Wyoming are using what
we hope is the next commodity price recovery
and what we have learned to set
the state up for the future. "
One way Wyoming policymakers
demonstrated exceptional far-sightedness
and efficiency deals with the state's move
to use $42 million of funds it received
from Congress' 2020 Coronavirus Aid,
Relief and Economic Security Act to
create the Energy Rebound Program (ERP).
" It is a wildly successful oil and gas jobs
program, " Obermueller characterizes.
" Through it, operators receive funds for
workovers, completions or plugging and
abandonment projects. Many oil field
service firms have told me the program
basically saved their businesses. "
According to Milczewski, the ERP
constitutes one of the industry's great
success stories. In addition to helping
Wyoming plug and abandon about 1,000
wells, he says the activity will boost
future state and local revenues.
" In Wyoming, the lag time from when
production comes on line and when tax
revenues reach state and local governments
can be more than 18 months, which means
that every month in which the state accelerated
investment, it lessened the crunch
down the road, " he explains. " There was
a focus on completing drilled uncompleted
wells, which is a huge revenue driver for
the state. Eighteen months from now,
when revenues from those wells flow
back to public schools, people will realize
what a big deal the ERP was. "
Milczewski credits the governor and
American Oil and Gas Reporter - August 2021

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