Letter to David Bernhardt, Department of the Interior Secretary - Letter: Wyoming Delegation Requests Extending Exploratory Unit Deadlines For Oil And Gas Operators Impacted By COVID-19

Letter

Dear Secretary Bernhardt:

Thank you for the recent actions you have taken to provide guidance to BLM field offices for
processing oil and gas Royalty Rate Reduction (RRR) Requests and Lease Suspension
Applications due to COVID-19, and for helping to ensure those applications are processed in a
timely manner. Your efforts are greatly appreciated.

As you know, the oil and gas industry continues to experience significant impacts from the
global drop in demand that resulted in unprecedented low commodity prices. Current prices
make it difficult for operators to afford the large capital investments required for drilling. This is
made evident through the nationwide rig count which is at the lowest point ever on record. In
just a matter of months, the rig count in Wyoming has dropped from 21 in early March to only
one today.

With this in mind, additional relief in the form of extending the deadlines associated with
exploratory units for one year would prove exceedingly beneficial. Companies need capital to
not only remain viable during this downturn, but also as they work to rebuild in the future. Such
unit deadlines include those for commencement of obligation wells, paying well determinations
and continuous drilling obligations. We request that BLM exercise its authority provided in the
model unit agreement to modify the rate of prospecting, development and production in order to
attain the conservation objectives of the units (Section 21). The Department of the Interior must
manage federal production to maximize the conservation of oil and gas resources. These
extensions will serve this end.

Forcing operators to fulfill exploratory unit requirements, such as having to drill two wells per
year, will not only contribute to the oversupply of oil, but it will also place the additional burden
on operators to cover the cost of hiring rigs. Under the current market conditions, this burden
will be significant, particularly in states like Wyoming where it is comparatively more expensive
to drill. In short, current conditions make it impossible to meet the conservation objectives in
Section 16 of the model unit agreement to "provide for the most economical and efficient
recovery".

As the economic landscape of the oil and gas industry continues to be altered by the COVID-19
pandemic, we respectfully request a response to our request no later than June 24. Our hope is
that we can emerge with an oil and gas industry that can continue to develop and provide much
needed jobs and tax revenue in the future. Your leadership and direction in moving this request
forward is of great importance.

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