HB0014 • 2020

Drilling units-risk penalties and mandatory royalties.

AN ACT relating to oil and gas; amending the calculation of owners' shares for drilling units as specified; providing for the expiration of pooling orders under specified conditions; providing a royalty during payment of risk penalty; making conforming amendments; and providing for an effective date.

Energy Land

Enacted

This bill passed the Legislature and reached final enactment based on the latest official action.

Sponsor: Minerals
Last action: 2020-03-09
Official status: enrolled
Effective date: 7/1/2020

Plain English Breakdown

The summary provided by the Wyoming Legislature may not cover all aspects of the bill.

Drilling Units - Risk Penalties and Mandatory Royalties

The bill changes how nonconsenting mineral owners pay risk penalties for drilling units without leases or contracts and requires them to receive a royalty payment while the operator recovers costs.

What This Bill Does

Changes the calculation of risk penalties for nonconsenting mineral owners who are not subject to leases or contracts for oil and gas development, setting different percentages for the first well drilled compared to subsequent wells.
Requires nonconsenting owners without a lease or contract to receive a royalty payment while the operator recovers costs from them.

Who It Names or Affects

Nonconsenting mineral owners in drilling units who are not subject to leases or contracts for oil and gas development.
Operators responsible for drilling wells within pooling orders issued by the Wyoming Oil and Gas Conservation Commission.

Terms To Know

Pooling order: An order issued by the Wyoming Oil and Gas Conservation Commission to pool mineral interests located within a drilling unit.
Risk penalty: A payment made by nonconsenting owners to cover costs of drilling and equipment for wells drilled under pooling orders.

Limits and Unknowns

The bill does not specify the exact conditions under which a pooling order expires.
It is unclear how this act will affect existing leases or contracts that are currently in place.

Amendments

These notes stay tied to the official amendment files and metadata from the legislature.

HB0014HS001

Standing Committee • House Minerals, Business and Economic Development

Adopted

Plain English: The amendment changes the term 'operator' to 'producer' in several places within the bill.

Changes 'operator' to 'producer' on page 7, line 1.
Changes 'operator' to 'producer' on page 7, line 3.
Changes 'operator' to 'producer' on page 7, line 12.
Changes 'operator' to 'producer' on page 8, line 4.

The amendment does not provide further context or definitions for the terms 'operator' and 'producer', so it's unclear how this change will affect the bill's implementation.

HB0014S2001

2nd reading • Senator Biteman

Failed

Plain English: The amendment to HB0014 removes several sections of the bill related to penalties, pooling orders, and royalty payments during risk penalty periods.

Removes language about penalties from the bill.
Deletes specific sections dealing with pooling order expiration conditions.
Eliminates provisions for royalty payments during risk penalty periods.
Modifies certain subsections by deleting or altering existing text.

The amendment's text is technical and does not provide clear explanations of the removed sections' impacts, making it hard to fully understand all changes without reviewing original bill details.

HB0014S3001

3rd reading • Senator Biteman

Failed

Plain English: The amendment to HB0014 removes certain provisions related to penalties, royalty payments during penalty periods, and specific sections of the bill text.

Removes language about penalties from the bill.
Deletes detailed instructions for calculating royalties during payment of risk penalties.
Eliminates specific subsections and lines that were added in the original bill.

The amendment's text is technical, making it hard to describe all changes without legal context.
Some deleted sections are not explained, so their exact content and impact cannot be detailed here.

HB0014SW001

Committee of the Whole • Senator Biteman

Filed

Plain English: The amendment changes specific sections of the bill related to oil and gas drilling units, including removing certain penalties and modifying language about owners' shares and royalties.

Removes references to penalty payments in the original bill text.
Modifies how certain subsections are referenced within the bill.
Deletes new language that was added for specific sections of the bill.

The amendment's exact impact on drilling unit calculations and pooling orders is unclear without further context or explanation.

Bill History

2020-03-09 LSO
Assigned Chapter Number 20
2020-03-09 Governor
Governor Signed HEA No. 0014
2020-03-05 Senate
S President Signed HEA No. 0014
2020-03-05 House
H Speaker Signed HEA No. 0014
2020-03-04 LSO
Assigned Number HEA No. 0014
2020-03-04 Senate
S 3rd Reading:Passed 21-9-0-0-0
2020-03-03 Senate
S 2nd Reading:Passed
2020-03-02 Senate
S COW:Passed
2020-02-28 Senate
S Placed on General File
2020-02-28 Senate
S09 - Minerals:Recommend Do Pass 4-1-0-0-0
2020-02-24 Senate
S Introduced and Referred to S09 - Minerals
2020-02-20 Senate
S Received for Introduction
2020-02-19 House
H 3rd Reading:Passed 58-0-2-0-0
2020-02-18 House
H 2nd Reading:Passed
2020-02-17 House
H COW:Passed
2020-02-14 House
H Placed on General File
2020-02-14 House
H09 - Minerals:Recommend Amend and Do Pass 9-0-0-0-0
2020-02-11 House
H Introduced and Referred to H09 - Minerals 58-1-1-0-0
2020-02-07 House
H Received for Introduction
2019-12-10 LSO
Bill Number Assigned

Official Summary Text

Bill Summary - 20LSO-0206
Bill No.:

HB0014

Effective:

7/1/2020 12:00:00 AM

LSO No.:

20LSO-0206

Enrolled Act No.:

HEA No. 0014

Chapter No.:

20

Prime Sponsor:

Joint Minerals, Business & Economic Development Interim Committee

Catch Title:

Drilling units-risk penalties and mandatory royalties.

Subject:

Risk penalties and royalties for drilling units under pooling orders.

Summary/Major Elements:

The Wyoming Oil and Gas Conservation Commission has authority under current statute to issue pooling orders to pool mineral interests located within a drilling and spacing unit. When a nonconsenting mineral owner is included in a pooling order, that owner must pay his share of a risk penalty to the operator of up to three hundred percent (300%) of the costs and expenses of drilling the well and up to two hundred percent (200%) of newly acquired equipment for the well.

The act amends the risk penalty to provide that:

The existing risk penalty applies to nonconsenting owners who have entered into a lease for oil and gas development;
For the first well drilled and when the nonconsenting owner is not subject to a lease, the risk penalty is two hundred percent (200%) of the drilling costs and one hundred twenty-five percent (125%) of the costs of newly acquired equipment for the well;
For every subsequent well when the nonconsenting owner isn't subject to a lease, the risk penalty is one hundred fifty percent (150%) of the drilling costs and one hundred twenty-five percent (125%) of the costs of newly acquired equipment for the well.

The act also provides mandatory royalty payments to nonconsenting owners who are not subject to a lease. The royalty payment is paid during the period that the operator is recovering the risk penalty and is the greater of sixteen percent (16%) or the acreage weighted average royalty interest of the leased tracts within the drilling unit.

After the operator has collected the full amount of the risk penalty, the unleased, nonconsenting owner has the option of electing to participate as a working interest owner in the drilling unit or to continue receiving the royalty.

The above summary is not an official publication of the Wyoming Legislature and is not an official statement of legislative intent. While the Legislative Service Office endeavored to provide accurate information in this summary, it should not be relied upon as a comprehensive abstract of the bill.

Current Bill Text

Read the full stored bill text

20LSO-0206

ORIGINAL House

Bill No
.
HB0014

ENROLLED ACT NO. 14,

HOUSE OF REPRESENTATIVES

SIXTY-FIFTH LEGISLATURE OF THE STATE OF WYOMING
2020 Budget Session

AN ACT relating to oil and gas; amending the calculation of owners' shares for drilling units as specified; providing for the expiration of pooling orders under specified conditions; providing a royalty during payment of risk penalty; making conforming amendments; and providing for an effective date.

Be It Enacted by the Legislature of the State of Wyoming:

Section 1
.

W.S. 30
‑
5
‑
109(f), (g)(intro), (ii) and by creating new subsections (h) and (j) is amended to read:

30
‑
5
‑
109.

Rules and regulations governing drilling units.

(f)

When two (2) or more separately owned tracts are embraced within a drilling unit, or when there are separately owned interests in all or a part of the drilling unit, then persons owning such interests may pool their interests for the development and operation of the drilling unit. In the absence of voluntary pooling, the commission, upon the application of any interested person, may enter an order pooling all interests in the drilling unit for the development and operation thereof. Each such pooling order shall be made after notice and hearing and shall be upon terms and conditions that are just and reasonable. Operations incident to the drilling of a well upon any portion of a unit covered by a pooling order shall be deemed for all purposes to be the conduct of such operations upon each separately owned tract in the unit by the several owners thereof. That portion of the production allocated or applicable to each tract included in a unit covered by a pooling order shall, when produced, be deemed for all purposes to have been produced from such tract by a well drilled thereon.
A pooling order issued under this subsection shall expire twelve (12) months after issuance if the person authorized to drill and operate a well fails
to commence operations within twelve (12) months of issuance of the pooling order.

(g)

Each pooling order shall provide for the drilling and operation of a well on the drilling unit, and for the payment of the cost thereof, as provided in this subsection. The commission is specifically authorized to provide that the owner or owners drilling or paying for the drilling or for the operation of a well for the benefit of all owners shall be entitled to all production from the well which would be received by the owner or owners, for whose benefit the well was drilled or operated, after payment of royalty as provided in the lease, if any, applicable to each tract or interest
or after payment of the royalty if required under subsection (h) of this section
, and obligations payable out of production, until the owner or owners drilling or operating the well or both have been paid the amount due under the terms of the pooling order or order settling the dispute. In the event of any disputed cost, the commission shall determine the proper cost. The order shall determine the interest of each owner in the unit, and may provide that each owner who agrees with the person or persons drilling and operating
the well for the payment by the owner of his share of the costs, unless he has agreed otherwise, shall be entitled to receive, subject to royalty or similar obligations, the share of the production of the well applicable to the tract of the nonconsenting owner. Each owner who does not agree, shall be entitled to receive from the person or persons drilling and operating the well on the unit his share of the production applicable to his interest after the person or persons drilling and operating the well have recovered the following
, subject to the provisions of subsection (h) of this section
:

(ii)

Up to
:

(A)

T
hree hundred percent (300%) of that portion of the costs and expenses of drilling, reworking, deepening or plugging back, testing and completing, after deducting any cash contributions received and up to two hundred percent (200%) of that portion of the cost of newly acquired equipment in the well, to and including the wellhead connections, which would have been chargeable to the nonconsenting owner if he had participated therein
, if
the nonconsenting owner's tract or interest is subject to a lease or other contract for oil and gas development;

(B)

For the first well the person drills and operates in a drilling unit and under a pooling order, two hundred percent (200%) of that portion of the costs and expenses of drilling, reworking, deepening or plugging back, testing and completing, after deducting any cash contributions received and up to one hundred twenty
‑
five percent (125%) of that portion of the cost of newly acquired equipment in the well, to and including the wellhead connections, which would have been chargeable to the nonconsenting owner if he had participated therein, if the nonconsenting owner's tract or interest is not subject to a lease or other contract for oil and gas development;

(C)

For each subsequent well the person drills and operates in a drilling unit and under a pooling order, one hundred fifty percent (150%) of that portion of the costs and expenses of drilling, reworking, deepening or plugging back, testing and completing, after deducting any cash contributions received and up to one hundred twenty
‑
five percent (125%) of that portion of the cost of
newly acquired equipment in the well, to and including the wellhead connections, which would have been chargeable to the nonconsenting owner if he had participated therein, if the nonconsenting owner's tract or interest is not subject to a lease or other contract for oil and gas development
.

(h)

During the time the person or persons drilling and operating a well are recovering costs from a nonconsenting owner as authorized in a pooling order issued pursuant to subsection (g) of this section, a nonconsenting owner of a tract or interest in a drilling unit that is not subject to a lease or other contract for oil and gas development shall be entitled to a cost
‑
free royalty interest equal to the greater of:

(i)

Sixteen percent (16%); or

(ii)

The acreage weighted average royalty interest of the leased tracts within the drilling unit.

(j)

Upon full payment of the recoverable costs as specified in subsection (g) of this section:

(i)

Within thirty (30) days after the producer has fully recovered his costs under subsection (g) of this section, the producer shall send notice to the nonconsenting owner to offer the nonconsenting owner the opportunity to participate under the pooling order as a working interest owner. The notice shall state that the nonconsenting owner may elect to participate in the pooling order or may elect to continue receiving the royalty specified in subsection (h) of this section;

(ii)

Within sixty (60) days after receiving notice, the nonconsenting owner shall inform the producer whether he wishes to make an election to participate under the pooling order as a working interest owner or continue receiving the royalty specified in subsection (h) of this section;

(iii)

If the nonconsenting owner fails to respond to the notice within the time specified in paragraph (ii) of this subsection, the nonconsenting owner shall be deemed to elect to continue receiving the royalty specified in subsection (h) of this section;

(iv)

Within five (5) business days after receiving notice of election from a nonconsenting owner or upon expiration of the time specified in paragraph (ii) of this subsection, the producer shall notify the commission regarding the nonconsenting owner's election or lack thereof.

Section 2
.

This act is effective July 1, 2020
.

(END)

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