New air quality permitting requirements in Wyoming, adopted to meet federal standards, have raised concerns in the oil/natural gas industry about rising regulatory compliance costs at a time of falling commodity prices.
Wyoming's Department of Environmental Quality (DEQ) on Wednesday released the state's updated ozone strategy for the Upper Green River Basin to comply with the latest federal requirements, and it also updated its permitting guidance, which raised concerns in the industry. Until now, air quality permitting has concentrated on the state's western gas fields without significantly impacting oil production in the eastern part of the state.
That all changes under the new guidance, and it has the Petroleum Association of Wyoming (PAW) concerned about various safety, operating and economic impacts on mature producing oil wells, some of which date back almost 100 years.
"They have put a little more stringent air quality control requirements on wells throughout the state," PAW's Vice President John Robitaille told NGI on Thursday. The DEQ's action would be effective Jan. 1.
The new requirements by themselves are not that troublesome, but taken in context with other state-proposed rules regarding bonding and flaring of wells, PAW is concerned about the cumulative impact rendering many wells uneconomic considering depressed crude oil prices, Robitaille said.
Robitaille outlined several areas of the new permitting guidance that raise concerns:
● Requiring emission controls on offloading trucks more than six tons in size at tank loading facilities;
● Safety aspects of these requirements raising the risks of explosive situations being created;
● Surface disturbance requirements that would cause well pads to be expanded at a time when other requirements call for smaller pads; and
● A new definition for "modifications" on stripper wells that could threaten the economics of those wells.
"There are oil wells out here from the teens, the ‘20s and ‘30s," Robitaille said, adding that historically, the air quality permitting has been focused on the southwest, gas-producing portion of the state, but the changes expand that statewide, affecting oil wells that are new or modified.
"If we start looking at all the [requirements] that are being piled on these wells -- bonds increasing, air emission control fees, etc. -- we start adding all these things up and then we throw in the requirements for controls that we never had before, pretty soon the existing wells become uneconomic," he said, adding that the best price for Wyoming sweet crude last week was $38/bbl.
The increased requirements prior to and after drilling are making it more difficult to do business in the state, Robitaille said.