An interim committee in the Wyoming legislature is considering drafting a bill that would put a severance tax on producers for the amounts of produced natural gas they flare.

The legislature’s Joint Revenue Committee at a meeting last Tuesday in Cheyenne voted to draft a bill to charge producers for flared gas after the 15th day of a well’s production. Wyoming doesn’t currently charge operators for gas that is flared at the well site. The committee decided to draft a bill at its next meeting in September. In the meantime, landowners and producers are likely to be weighing in on all sides of the issue.

Gov. Matt Mead responded to a question on the proposal at his news conference Friday, saying “everyone is interested in reducing flaring,” citing both environmental and economic incentives for doing so. “I think we’ll continue to strive to reduce flaring while helping assure that the producers can economically fully develop their well sites.”

Under the Wyoming Oil and Gas Conservation Commission (OGCC), producers legally may flare wells freely for 15 days during an initial testing phase, but they must get a state permit for additional flaring.

Mead said flaring is complex in that if operators don’t have takeaway pipeline and processing equipment at a given well site, they cannot fully develop their wells without flaring. Mead’s recently released state energy strategy included an initiative to examine flaring (see Daily GPI, May 14).

Last year, Wyoming’s Board of Land Commissioners voted 4-0 to issue new rules on natural gas flaring that include the option of charging operators royalties on flared gas (see Daily GPI, Feb. 6, 2012). This reverses the past practice of allowing flaring without royalties.

The rules took effect immediately, meaning the state oil and gas supervisor was required to forward all operator applications for flaring to the Office of State Lands and Investments for approval. The rules allow for either the state lands office or the board — consisting of the governor, secretary of state, auditor, treasurer and superintendent of public instruction — to hold public hearings on flaring requests.

Wyoming’s OGCC still holds regulatory authority to permit venting or flaring of natural gas, but the state lands panel holds the responsibility for the royalty part of the state oversight process. Under current rules, OGCC cannot authorize any flaring that constitutes “waste,” and new rules recognize that the oil and gas and the state lands commissions may have different interpretations of what “waste” means under state law.

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