With Setback Regulation Looming, Wyoming Businesses Take Heed

This article originally appeared in the February 2015 edition of Wyoming Business Report.

Now that the Wyoming legislature in its general session, a pending regulatory issue bears noting as some believe it may soon end up on the legislature’s docket.  The ongoing debate over oil and gas “setback” regulations has created enough stir of late that legislative intervention could be on the horizon.

A setback is the minimum distance which an oil and gas rig must be from an “occupied structure,” as that term is defined in the regulations – think structures like homes, schools and hospitals.  Since around 1980, this distance has been 350 feet statewide, with the Supervisor of the Wyoming Oil and Gas Conservation Commission (WOGCC) having the authority to increase or decrease the distance as he or she may find appropriate.  But with changes in the technology for exploration and production, including hydraulic fracturing, locations in the state that were never thought to be capable of meaningful production are being explored and drilled.  This new development has led to a push by landowners, now joined by environmental interest groups, to increase the setback distance.  Public debate and discussion recently resulted in the WOGCC proposing a new distance for setbacks, extending the distance to 500 feet.  The Supervisor would maintain his authority to authority to increase or decrease the 500 foot distance in either direction.  Landowners and environmental interest groups would prefer to see a setback of 1,000 feet, if not more.

Setbacks are such a fundamental part of drilling that they seldom get much attention.  But as residential or “ranchette” development in northern Laramie County has run headfirst into oil and gas exploration and production, the setback distance has become a critical issue to some.  The fight is between landowners who are disturbed by the lights, sound and traffic associated with drilling, environmental groups with their agenda, and the operators legally producing their interests who want to maximize their recovery of each individual well.

Given the passion and interest behind the decision of the WOGCC to decline the landowner’s recommended 1,000 foot distance and adopt the 500 foot distance, it’s not surprising that some landowners and environmental advocates are quietly attempting to craft and file a bill to set the 1,000 foot distance by statute, trumping any setback rule promulgated by the WOGCC.

Of course, such a move by the legislature would create a ripple effect in our economy at precisely the wrong time, regardless of whether or not the setback issue directly impacts your business.  While the decline in the price of oil may slow or stop this development for a time, the impact of a legislatively – changed setback rule will eventually be felt in the form of lost production, and the message that the state is trending adversely to the industry.  Obviously we need to avoid negative consequences to the state.

Any move to legislatively regulate setback regulations should be met with outreach to our state lawmakers, encouraging them to defer action in favor of the body designed to address all issues oil and gas – the WOGCC.   They are the body closest to the issue, and the one designed by statute to have the expertise necessary to address these questions.  The Commission can also react to changing circumstances quicker than the legislature in times of changing circumstances.

It is important for business leaders to use their collective influence to ensure that balance remains between regulation and economic growth. In this case, there is nothing wrong with the regulatory system, and the legislature should be encouraged to avoid intervention.

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