Oil and gas industry criticizes proposed Wyoming royalty fee hike, first in some 30 years

Energy industry critical of Wyo. royalty fee hike

CHEYENNE, Wyo. — Oil and gas representatives are voicing criticism about the first proposed changes to Wyoming’s oil and gas leasing contract in nearly three decades, including a provision increasing royalties paid to the state.

The Office of State Lands and Investments has proposed rewriting almost the entire standard oil and gas leasing contract. The most controversial proposal would raise the maximum amount for state royalties from 16 2/3 percent to 18 3/4 percent.

The royalty hike will bring Wyoming in line with royalty rates in other states, State Lands and Investments assistant director Harold Kemp told the Casper Star-Tribune.

Other proposed contract changes would require the operator to return to the state any land not included in a drilling unit at the end of the primary term of the lease.

Kemp said the changes are needed to bring contracts up to date and reflect existing state regulations or commonly used interpretations of ambiguous language in the current leasing form.

Oil and gas contracts have become larger and more complicated since the early 1980s when the current contract was written, he said.

“I do think (the lease) is definitely not contemporary with the times,” he said.

But oil and gas industry representatives Wednesday questioned the wisdom of a royalty hike, saying it would actually lead to a decrease in state revenues because energy companies would choose cheaper leases on federal and private land.

Maurice Brown, an investor in oil and gas leases, said that that if the royalty increase goes through, he would cut his investments by at least 50 percent.

“The goose is running across here, and that goose is laying eggs, and now you’re going to put a choke on it,” Brown said.

Others said the new contract would require the state to hire more staff, an assertion Kemp denied.

Kemp said his office will submit a proposal to the State Board of Land Commissioners during their next meeting Oct. 7.

Information from: Casper Star-Tribune - Casper, www.trib.com