Wyoming officials who make up the state’s Board of Land Commissioners on Thursday unanimously (4-0) issued new rules on natural gas flaring that include the option of charging operators royalties on flared gas. This reverses the past practice of allowing flaring without royalties.

The rules are effective immediately, meaning the state oil and gas supervisor must 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 Oil and Gas Conservation Commission (WOGCC) 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, WOGCC 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.

The lands board “reserves the authority to determine whether a royalty should be assessed, and if it should, the appropriate royalty rate on gas being vented or flared,” the rules state. They also say that “deference” will be given to WOGCC’s determination that waste is not occurring in a particular case.

“Venting or flaring authorizations are only granted when applicants are able to demonstrate the need through WOGCC’s robust, quasi-judicial process” as provided in the state conservation act, the rules state.

Finally, the lands board will consider “mitigation circumstances” when making a determination about royalty payments. The board will only consider assessing a royalty on vented or flared gas that exceeds minimum thresholds provided by WOGCC.

Wyoming currently has six to eight wells being vented and it expects the volume to rise in the months ahead as a result of the heightened drilling activity in state’s portion of the Niobrara oil shale play. The currently flared gas has been estimated to represent about $250,000 in lost royalty revenues during a two-year period.

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