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Nevada Legislature Considers Raising Oil, Gas Permitting Fees

The Natural Resources, Agriculture and Mining Committee in the Nevada legislature heard a proposal (SB 44) Thursday that already has passed the state Senate to authorize state oil/gas regulators to increase permitting fees for drilling.

No action was taken by the Assembly committee, but it will hold a workshop on the measure Tuesday. The proposal has the industry support and no opposition at this point, according to Richard Perry, head of the Nevada Division of Minerals. Perry testified in support of SB 44

Increased E&P activity in the state, which has little oil and no natural gas production, and the prospect of hydraulic fracturing (fracking) kicked off activity in the Minerals Division last year, Perry said. Houston-based Noble Energy, which has forecast spending billions of dollars in the Niobrara and Marcellus shale plays, has been an active participant and booster for Nevada oil possibilities (see Shale Daily, Oct. 12, 2012).

There were seven new wells drilled in Nevada last year, and two have recorded production, said Perry, while noting that the volumes are still small. Nevertheless, with the prospects for more unconventional plays and the use of fracking, the state last year revised its drilling rules to include provisions for fracking.

SB 44 is an extension of this effort, aiming to update state permitting fee structures for both conventional and unconventional wells, Perry said. Under the bill’s provisions, the Commission on Mineral Resources, which governs Perry's division, would establish the eventual increased fees and requirements. Currently there is a flat $200 fee for oil/gas wells; SB 44 would create different fees based on the  type of well, depth, location and the use of wastewater injections for fracking.

Earlier this month, the Minerals Division published an updated analysis of fracking and water use in drilling, concluding that water usage for the drilling process would be in line with irrigation allotments.

The report cited four wells drilled last year (three by Noble) that were at depths of 7,208 to 11,637 feet, and all but one used less than 1 acre-foot of water, compared to a typical irrigation pivot that uses 504 acre-feet annually. A typical single-family residence in Nevada can use up to 2 acre-feet annually, the report said.

"If Nevada experienced a boom in oil drilling, defined as enough wells to maintain a 50,000 b/d production rate, it would require the drilling of 100 to 120 wells/year," the report said. "If these wells had a horizontal or lateral component, water use may increase to 5 acre-feet/well/year -- a use rate typical of hydraulically fractured wells in other states.

"This would require 500 to 600 acre-feet of water/year, about the same amount as one irrigation pivot uses to grow a crop of alfalfa in Nevada."

Perry said Nevada has a 60-year history of oil production, albeit on a small scale, from several fields in the eastern part of the state. Last year 316,326 bbl were produced, while no commercial-scale natural gas was produced. Fracking has been around in the state since 1947, he said.

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