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New Wyoming Legislation Affects Involuntary Pooling

April 16, 2020

Amidst the ongoing coronavirus crisis, Wyoming has enacted House Bill 14, which amends Wyoming’s involuntary pooling provisions under Wyo. Stat. Ann. § 30-5-109. We have prepared a summary of this new legislation, which will become effective on July 1, 2020.

House Bill 14 amends Wyoming’s involuntary pooling procedure under Wyo. Stat. Ann. § 30-5-109 in four ways by: (1) limiting the time period that any issued pooling order is effective under certain circumstances; (2) providing for a royalty interest to be paid to non-consenting unleased mineral owners; (3) reducing the risk-penalty applicable to unleased non-consenting owners; and (4) allowing a non-consenting mineral owner to elect to participate as a working interest owner under the order upon payout of the applicable risk-penalty.

1. Expiration of Issued Pooling Orders – House Bill 14 amends Wyo. Stat. Ann. § 30-5-109 by adding a new subsection (f) that provides that “[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.” Under this new provision, any pooling order issued by the Wyoming Oil and Gas Conservation Commission (“WOGCC”) will expire one year after being issued if an oil and gas operator fails to commence operations to drill a well within the pooled unit. This addition encourages oil and gas operators to commence operations within a pooled unit in a timely manner.

2. Royalty Interest for Unleased Owners During Penalty Period – House Bill 14 amends Wyo. Stat. Ann. § 30-5-109 by adding a new subsection (h) that provides that while the operator is recovering its costs to drill the well(s), the unleased, non-consenting mineral owner will be entitled to a cost-free royalty interest that is equal to the greater of (i) 16% or (ii) the acreage weighted average royalty interest of the leased tracts within the drilling unit. Previously, unleased mineral interest owners who were forced pooled did not receive any royalty interest while the operator was recovering its costs and expenses of drilling and completing a well.

3. Penalty Calculations for Leased versus Unleased Mineral Owners – House Bill 14 amends Wyo. Stat. Ann. § 30-5-109 by adding a new subsection (g)(ii) that reduces the risk penalty for unleased non-consenting mineral owners. Prior to House Bill 14 being enacted, Wyo. Stat. Ann. § 30-5-109 subjected all non-consenting parties to a risk penalty of up to 300%. The amended statute reduces the amount of risk penalty imposed on non-consenting mineral owners who are not subject to a lease or other contract for oil and gas development as follows: (i) for the first well drilled under a pooling order a 200% risk penalty, and (ii) for each subsequent well drilled under the pooling order a 150% risk penalty.

4. Election to Become a Working Interest Owner – House Bill 14 amends Wyo. Stat. Ann. § 30-5-109 by adding a new subsection (j) that, after payout of the applicable risk penalty, allows a non-consenting mineral interest owner who initially chooses to receive a royalty interest to elect to participate under the pooling order as a working interest owner. Within 30 days after recovering its costs and expenses of drilling, the operator is required to send notice to the non-consenting mineral owner offering the owner the opportunity to elect to either i) participate as a working interest owner under the order, or ii) continue to receive the royalty interest outlined above. If the non-consenting owner elects to become a working interest owner under the order, then that party’s share of costs and expenses would be deducted from its share of revenue and the balance paid to the non-consenting owner.

For more information on these changes or House Bill 14 generally, please contact Greg Danielson or Jessica Fredrickson.