The Powder River Basin is Wyoming’s busiest oil play right now with about 11 of the state’s 15 operating rigs there. But for the oil and gas industry, that’s barely a blip on the radar screen.
Enverus, an analyst firm that helps oil field service company Baker Hughes track rigs counts in the United States, doesn’t even track the Powder River Basin individually. It’s lumped into the “other” category on their website.
By comparison, the nearby Williston Basin has around 33 rigs operating in North Dakota alone, and about 35 basin wide. The Bakken is a comparable field, Steve Degenfelder, a landman with Kirkwood Oil and Gas, told Cowboy State Daily.
“In fact, I think the Powder River Basin could even have more potential than the Bakken, just because the Bakken seems to be defined as the Bakken and Three Forks formation,” Degenfelder said. “Whereas the Powder River Basin is more like the Permian Basin, which is a stacked pay.”
A stacked pay refers to having multiple layers of recoverable oil and gas reserves in a single basin.
What’s preventing more oil and gas wells in the Powder River Basin?
It’s a combination of things, Degenfelder said, but a big one in his opinion is a recent court decision that has put as many as 5,000 wells in legal limbo in the Powder River Basin.
That decision doesn’t affect existing drilling permits but puts new permits in the 1.5 million-acre area on hold.
“A lot of oil and gas operators, from what I hear, are very concerned that they’re going to be out of drilling permits by the middle of 2025 if this doesn’t get resolved quickly,” Degenfelder said. “You can’t wait until the middle of 2025 and say, ‘OK, I make a ruling here and then just start (drilling).”
It takes months and months of work leading up to the point of drilling a well, Degenfelder said.
That ruling, he added, was particularly disappointing to many in the oil and gas industry, given the amount of work that had already gone into the environmental studies.
“Environmental groups have pushed this to the extent that the EIS is now probably a foot thick — three volumes and a foot thick — and all they have to do is find one item that was, in their opinion, not looked at thoroughly and get a judge to agree. The larger these volumes get, the greater the likelihood of something like that happening.”
Unfriendly Administration, State Tax Rates
If you ask the Petroleum Association of Wyoming, the main thing that’s challenging the PRB right now is the hostility of the previous and current federal administrations.
“I would agree that there’s huge potential in the Powder River Basin, given all of the different stacked plays there,” Vice President Ryan McConnaughey told Cowboy State Daily. “But obviously, we’ve had an administration in DC that has been hostile to the oil and gas industry, specifically on federal lands, of which there are an abundance in the Powder River Basin.”
Navigating the issues of federal landownership and mineral estate ownership with a hostile administration has been a tricky political balancing act, McConnaughey said.
“We’ve been continuing to see advancements in technology that increase the lateral lengths of wells in the basin,” McConnaughey acknowledged. “And I wouldn’t be surprised if we see longer laterals going forward. But those bring their own complications when it comes to land ownership and the regulations there.”
But it’s not just the federal government that is posing challenges to the industry, McConnaughey added.
“At the state level, we have some of the highest tax burden on the oil and gas industry of any body, especially in the Rocky Mountain West,” he said. “I mean, we’re higher than Colorado. We’re higher than New Mexico by magnitudes.”
Those tax burdens are adding to the break-even cost of each barrel of oil, making it more expensive to operate in Wyoming as compared to other states.
“The legislature is always looking at efforts that can make it easier to produce in Wyoming, McConnaughey added. “And so, we appreciate that, and I think they’re trying to make sure we’re putting things in place that allow for secondary and tertiary recovery with carbon capture utilization across the state, and pipelines for that are certainly going to be helpful.”
McConnaughey added that the Petroleum Association of Wyoming does have some bills it hopes will pass in the upcoming legislative session, which could also help.
“There’s a wide variety of things that we can look at, and I think the legislature is going to try to tackle some of those things this year,” he said.
It’s Also Science
But the problems plaguing the Powder River Basin go deeper than just taxes or unfriendly administrations.
It’s the geology itself that’s posing some issues. Companies haven’t cracked the code, Enverus analyst Morgan Howrish, who specializes in Rocky Mountain plays told Cowboy State Daily.
“The Niobrara and the Mowry are kind of the two big unconventional zones that exist in the PRB, and those are the ones that operators are really trying to make like the next zones, because they have the inventory potential,” she said. “But these formations have really struggled to compete for capital.”
There are a couple of reasons for that, Howrish added.
“First of all, they just have poor economics,” she said. “The Nio and the Mowry consistently have break evens over $50 a barrel, which, for operators who have multi-basin portfolios, this makes them not very attractive. If you can drill really economic wells in the Permian, the Williston, or the DJ, why would you sink a bunch of money in the Powder?”
High economic development costs are contributing to that overall cost per barrel, Howrish said, and development in the PRB to date hasn’t led to better economics and logistics yet.
“Some of the other factors that drive these high well costs is like water,” she said. “Water is really expensive in the Powder because it’s owned by the landowners, so it can be quite pricy to acquire and make those deals.”
Depth is another factor, with both the Niobrara and Mowry shales at deeper levels, depending on where in the Powder River Basin an operator is drilling.
“There’s also large completions relative to some of the other oil basis,” she added. “These are on average over 2,000 pounds per foot for proppant intensity. What we see in the Williston, for comparison, is about 1,000.”
The science of cracking the Mowry shale is something that Wyoming is working on. The Wyoming legislature granted $2.5 million to the University of Wyoming School of Energy Resources to study the Mowry shale. That funding was on top of $500,000 granted to Wyoming Energy Authority for some preliminary work on the formation.
“We’ve got 20 faculty researchers across 13 projects from eight different departments (to work on this),” School of Energy Resources Director Scott Quillinan told Cowboy State Daily last year. “So, this isn’t just geologic or petroleum engineering. It’s economics, law, policy — it’s all the different disciplines needed to understand where the uncertainty lies with this play.”
PRB’s Day Will Come
Results for wells drilled in the Niobrara and Mowry shales have also been inconsistent, Howrish said.
“Operators will drill like an amazing delineation well, and then, when they move to pad-style development, the productivity just drops really substantially,” she said. “So, I think uncertainty is just tough for operators to make these kinds of big-scale investments into the basin.”
That said, Howrish believes the data on the PRB does show positive momentum in the basin, and she does expect that the basin’s day is coming.
“There are some operators who are extremely passionate about the Powder,” she said. “And we’ve seen our first 3-mile laterals in the Niobrara in the past, I would say, six months. That has the potential to drop the costs and improve the economics.”
That reflects operators testing out ways to make the play more economical, Howrish said, which could bode well for the future.
Another thing that could bode well for the future, Howrish added, would be more up-to-date figures on the PRB. The latest full assessment of the basin is more than two decades old.
Christopher Schenk, with USGS, told Cowboy State Daily the Powder River Basin could be up as soon as 2026 for an update.
“Everything’s dependent upon personnel and funding, right?” he said. “We just don’t have the people that we used to have to do these things on a regular schedule, like every five or 10 years.”
The focus since 2001 has been the Permian Basin and the southwest Wyoming Basin, he added.
“So we have to finish the priorities up first and move people onto things like the Powder River,” he said. “There is a law that was signed that says we have to assess the basins in the United States, so we have to continue on, but we have to really seriously prioritize the basins we do because of personnel and funding.”
More up-to-date stats, based on new geological knowledge, could be helpful for the Powder River Basin, Howrish said, particularly if the new assessment identifies more layers that are ripe for development.
In either case, Howrish said she does believe the PRB’s day is coming.
“I think it’s gotta come eventually,” she said. “Because there’s inventory scarcity across the entirety of the lower 48, so it will come. It’s just a matter of getting those costs down, and I think operators are trying to figure that out. ”
Renée Jean can be reached at renee@cowboystatedaily.com.
