April 28, 2015

Idaho prepares for future as an oil and gas producer

BOISE — Idaho is just weeks away from getting a new title: oil- and gas-producing state.

Lawmakers and regulators for the last four years have been trying to prepare and keep up with the nascent industry that's being propelled by new technologies that have pinpointed what companies believe are profitable reserves.

At the recently concluded legislative session, lawmakers approved a bevy of laws and rules, and none too soon. More than a dozen wells have been drilled and are awaiting a pipeline in southwest Idaho that's expected to be finished in May.

“This session, what stands out to me, is continued updating to bring our rules and regulations into compliance with kind of national norms,” said Tom Schultz, director of the Idaho Department of Lands. “That really stands out across the board when it comes to fees, when it comes to process, when it comes to operational regulations. I feel like the state of Idaho is not as dissimilar as it once was with other oil and gas states.”

Laws passed in 2015 requested by the state agency include making oil and gas production records public, setting rules for cooperation among companies developing the same pool of oil and gas reserves, and setting application fees to cover the state's costs.

“Oil and gas is very complicated from beginning to end, from acquiring leases to development to final abandonment,” said Ken Smith, a member of the Idaho Oil and Gas Conservation Commission. “These set guidelines for us to operate under.”

Five other laws, three of them proposed by the oil and gas industry, also passed.

Of the three proposed by the industry, one gives state officials the option to exclude federals lands from a drilling unit. A Texas oil company, Houston-based Alta Mesa, has said it has been frustrated with the slow process of the U.S. Bureau of Land Management to offer lease sales, blocking development.

Federal officials say environmental analysis is needed for drilling on federal lands, but the agency has proposed leasing some areas.

Another new law exempts the Idaho Oil and Gas Conservation Commission from an existing law intended to give residents an avenue to contest government decisions. That law drew the attention of the Idaho Conservation League, which said the old law limits the rights of residents.

Justin Hayes, the conservation league's program director, said the group petitioned the Conservation Commission to start a negotiated rulemaking process, which could end up before lawmakers next year. Commissioners voted 5-0 last week to go ahead with the process.

“It was very important because there is a gap now in the rights of citizens to express their concern and seek redress,” Hayes said. “The industry has been frustrated with how long it can take for a contested case to play out.”

John Foster, a spokesman for Alta Mesa, said the company appreciated having guidelines.

“The oil and gas industry is a lot of engineers and scientists, and they don't mind having a lane to swim in as long as they know exactly where that lane is,” he said. “I think it benefits us just as much as it benefits the regulators to have clear regulations.”

The law making oil and gas production public requires companies to turn over records to the state six months after production starts, and then the state makes those public six months later.

So by next summer, Schultz said, the public could get its first glimpse of what Idaho has in the way of oil and gas production.

Natural gas could be processed at a facility in Idaho or sent by pipeline to the West Coast, Schultz said. Oil and condensate, a type of light oil that doesn't need a lot of refining, would be shipped to Salt Lake City for sale, he said.

“I don't think it's going to have a significant economic impact (on Idaho) in the first couple years,” Schultz said. “But anytime you can add a new industry and all the new services that come out of that, I think it's going to grow.”