Oil and gas operators flaring more gas, paying no taxes or royalties

Mar 29, 2013

Credit Willow Belden

Oil development in the state is bringing up natural gas along with the oil, but some of the gas is getting burned off in flares and the state is missing out on taxes and royalty payments. The reason the gas is getting flared is that there are not enough pipelines in place to connect new wells to markets.

The President of the Wyoming Petroleum Association, Bruce Hinchey, says it doesn’t always make sense to build new pipelines for the relatively small quantities of gas coming up.

“Let’s say the pipeline needs to be put in to go to a pipeline where they can sell it and be able to sell it to market. It could be 5 miles, it could 10 miles, it could be 20 miles, it could be 50 miles away from the pipeline where they can sell it and be able to sell it to market. So you have to look at the economics of how much does it cost to build that pipeline so that you can sell the product,” says Hinchey.

The practice affects state, federal, and private lands. Hinchey says producers would need many  more wells in place to make new gas pipelines worthwhile. But the person responsible for maximizing state profits, Director of the Office of State Lands and Investments, Ryan Lance, says that as energy development moves from the exploration to the production phase, the issue needs to be addressed more aggressively. The Legislative Revenue Committee will be looking at the question of tax exemptions for flared gas in the interim.