Draft Only Approval Pending of SUMMARY P ROCEEDINGS JOINT MINERALS, BUSINESS AND ECONOMIC DEVELOPMENT COMMITTEE C OMMITTEE MEETING INFORMATION September 26 and 27, 2013 Room 302, Capitol Building Cheyenne, Wyoming C OMMITTEE MEMBERS PRESENT Senator John J. Hines, Cochairman Representative Thomas Lockhart, Cochairman Senator Jim D. Anderson (SD 02) Senator Henry H.R. “Hank” Coe Senator Stan Cooper Senator Chris Rothfuss Representative James Byrd Representative Richard Cannady Representative Mike Greear Representative Norine Kasperik Representative Lloyd Larsen Representative Tom Reeder Representative Nathan Winters C OMMITTEE MEMBERS N OT PRESENT Representative Albert Sommers OTHER LEGISLATORS PRESENT Representative Stan Blake Representative Donald Burkhart (September 27, 2013) Representative Bob Nicholas (September 27, 2013) LEGISLATIVE SERVICE OFFICE STAFF Matt Obrecht, Staff Attorney Tania Hytrek, Staff Attorney Kelley Shepp, Research Associate The Committee Meeting Summary of Proceedings (meeting minutes) is prepared by the Legislative Service Office (LSO) and is the official record of the proceedings of a legislative committee meeting. This document does not represent a transcript of the meeting; it is a digest of the meeting and provides a record of official actions taken by the Committee. All meeting materials and handouts provided to the Committee by the Legislative Service Office, public officials, lobbyists, and the public are on file at the Legislative Service Office and are part of the official record of the meeting. An index of these materials is provided at the end of this document and these materials are on file at the Legislative Service Office. For more information or to review meeting materials, please contact the Legislative Service Office at (307) 777-7881 or by e-mail at [email protected] . The Summary of Proceedings for each legislative committee meeting can be found on the Wyoming Legislature’s website at www.wyoleg.gov. PAGE 2 OF 22 OTHERS PRESENT AT MEETING Please refer to Appendix 1 to review the Committee Sign-in Sheet for a list of other individuals who attended the meeting. EXECUTIVE SUMMARY. The Joint Minerals, Business and Economic Development Interim Committee met for two days in Cheyenne. The Committee heard testimony concerning abandoned and orphaned wells, flaring, groundwater baseline monitoring. The Department of Environmental Quality spoke to the Committee about the Atomic Energy Act Agreement State Feasibility Study, regional haze and landfill remediation and closure/transfer programs. The Wyoming Business Councils spoke to the Committee about several programs, including the Wyoming Energy Conservations Improvement Program, the Natural Gas Fueling Infrastructure Challenge Loan Program, Wyoming Rail Plan, the Community Facilities Program and the Wyoming Main Street Program. The School of Energy Resources and the University of Wyoming provided an update regarding its activities. Rocky Mountain Power, Source Gas and Ur-Energy spoke to the Committee about the various activities of the companies in the energy production and research fields. CALL TO ORDER (SEPTEMBER 26, 2013). Chairman Hines called the meeting to order at 8:00 a.m. The following sections summarize the Committee proceedings by topic. Please refer to Appendix 2 to review the Committee meeting agenda. ABANDONED AND ORPHANED WELLS UPDATE, RECLAMATION AND BONDING ISSUES, INCLUDING BUDGET INFORMATION. Wyoming Oil and Gas Commission Supervisor Grant Black, Wyoming Oil and Gas Conservation Commission (OGCC or Commission), spoke to the Committee about abandoned and orphaned wells, updating the Committee on the status of the wells on a statewide basis and outlining the plan to remedy the wells as anticipated by the Commission. See Appendix 3. Representative Kasperik inquired about the length of time that a well can be abandoned or orphaned prior to the Commission taking action to plug the well. Supervisor Black responded that the bonding of the wells has a direct impact on the determination and timing of the plugging of the well. He stated that if the well is appropriately bonded, plugging the well is less of an immediate concern for remediation. Senator Rothfuss inquired about the long-term plan for plugging wells on a comprehensive basis, questioning the timing for remedying this issue in a more expedited fashion. Supervisor Black responded that several factors come into play in response to this issue. He indicated that a goal for the maximum number of wells to plug must be established with a proposed timeframe. He stated the market has a capacity to plug approximately a hundred wells in one year and that currently and that approximately 1200 abandoned wells exist currently, with an additional 1300 on the horizon. He further stated he anticipated the capacity of the market to grow over the course of the next year, allowing approximately 300 wells to be plugged annually. Supervisor Black stated the issue is one of financial resources, but a work force issue and that there are currently not enough companies to plug and remediate more than 300 a year. Senator Rothfuss commented that he would like to see a more expedited schedule for remediation of this issue and alternative solutions should be considered to ensure the problem is solved in the most expedited fashion with the least financial impact possible. Supervisor Black indicated that a variety of factors play into this issue and that even with a hundred million dollars allocated to remedy the issue; it would not be a prudent expenditure of resources for the state and would not have a significant impact on JOINT MINERALS, BUSINESS AND ECONOMIC DEVELOPMENT COMMITTEE Summary of Proceedings WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 3 OF 22 the remediation schedule. Representative Byrd inquired about the future use of these wells and the possibility of using the abandoned and orphaned wells for other purposes. Supervisor Black responded that this is a significant possibility with the coal-bed methane (CBM) wells and utilization for agriculture and livestock purposes. He indicated that he has been working with Pat Tyrrell to finalize a plan for a cooperative effort with regard to some of the CBM wells and that a letter outlining this plan will be forthcoming from his office. Chairman Hines commented that the State of Wyoming currently prohibits the ability of landowners to convert the coal-bed methane wells for livestock and agricultural use and that the cost for conversion makes the effort boarder-line prohibitive. Chairman Hines inquired about the market capacity to plug wells. He stated members of industry have approached him, stating that industry has the capacity to plug between six to ten wells a day, depending on the industry representative. Supervisor Black responded, outlining the regulatory issues and preliminary work necessary to plug the orphaned or abandoned wells and noted in his opinion, it is not simply an issue of the manual labor necessary to plug the wells, but the paper work required prior to commencement of the labor also. Representative Larson inquired about the determination of the 1200 wells that are currently abandoned and the determination of the Commission in classification of “abandoned or orphaned.” Supervisor Black responded that he is unfamiliar with the individual circumstances and facts associated with each of the 1200 wells, but that in the vast majority of instances, the operator has simply walked away and there is insufficient bonding capacity. Representative Greear requested Supervisor Black provide the Committee a list of the abandoned or orphaned well along the township and ranges of the location. Wyoming Office of State Lands and Investments Director Ryan Lance, Wyoming Office of State Lands and Investments (OSLI), spoke to the Committee about the abandoned and orphaned wells issue from the perspective of the OSLI. See Appendices 4 and 5. Director Lance indicated that the bulk of the abandoned or orphaned wells is due to the actions of five or six operators. He stated that the OSLI and the State Land and Investments Board (SLIB) is moving forward with terminating the leases these entities hold in Wyoming. Director Lance stated that he is proceeding with bonding up wells upon request of transfer or assignment to ensure the State’s interest is protected. He also stated that he is proceeding to require bonding for $10 a foot for wells that are producing or will produce in certain instances. Director Lance stated that over the course of the next year, he anticipates verifying and updating all bonding data for the transfer into the LARCS systems and will be requesting status update and a plan for idle wells from all companies. Representative Greear inquired about the possibility of exploring deep rights of the wells that have been abandoned. Director Lance responded to the Representative’s questions, stating this is certainly a possibility. He encouraged the Committee to consider creating a process to foreclose operators that abandon wells from continuing to operate in the State or incur new leases or wells. Director Lance noted currently policies for the OSLI are on the Agency’s website for industry comment and questions. He noted that a comprehensive review of rules and regulations and policies are currently under way with the OSLI. Powder River Basin Resource Council. Jill Morrison, Powder River Basin Resource Council, provided several recommendations to the Committee to advance the issue of plugging and reclaiming orphaned and abandoned wells. See Appendix 6. She recommended revision of W.S. 30-5-116(b) to increase the cents on the dollar; revision of W.S. 30-5-104(d) to require site specific bonds to cover the true costs of reclamation and plugging; and a mandate to require appropriate bonding upon the transfer of oil and gas leases and requiring prior owners remain liable for the cost associated for plugging and reclamation in the event that any of the operators walk away.