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August 27, 2003
Room 302, Capitol Building
Cheyenne, Wyoming
Senator Bill Hawks, Cochair
Representative Clarene Law, Cochair
Senators John Barrasso, Hank Coe, Ken Decaria and Jayne Mockler
Representatives Pat Childers, Stan Cooper, Pete Illoway, Frank Latta, Saundra Meyer, David Miller and Tom Walsh
Dave Gruver
Please refer to Appendix 1 to review the Committee Sign-in Sheet for a list of other individuals who attended the meeting.
Representative Floyd Esquibel
All meeting materials and handouts provided to the Committee by the Legislative Service Office (LSO), public officials, lobbyists, and the public are referenced in the Meeting Materials Index, attached to the minutes. These materials are on file at the LSO and are part of the official record of the meeting. The agenda for the meeting is attached as appendix 2.
Cochair Hawks called the meeting to order at 8:00 a.m..
Representative Walsh moved approval of the minutes from the May meeting. Representative Latta seconded and the motion passed.
National pollution discharge elimination system permitting process (NPDES)
John Corra, director of the DEQ, and Ron Surdam, chair of the task force on NPDES, addressed the Committee regarding the review of the national pollution discharge elimination system permitting process. They provided a draft report of the task force. They also provided written materials outlining and highlighting their testimony. (Appendices 3 and 4). Key points made were a lack of DEQ field compliance officers and a backlog of test results at the DEQ due to antiquated equipment and other duties of the DEQ office personnel. Increased permitting volume and complexity was another problem identified in the permitting process.
Landowners felt there was insufficient notice of the NPDES discharge permit, especially for downstream landowners. Inconsistent NPDES program policies was also identified as an issue to be addressed. Another issue identified was the lack of flexibility in permits. While outside the purvey of the task force, it was noted that there was concern over post coal bed natural gas reclamation.
Solutions identified included additional personnel for the DEQ and State Engineer's Office, laboratory acquisition needs and capital and maintenance funds for processing, permitting and public information data management. Director Corra noted that the technical personnel were somewhat difficult to retain, given that the Department was competing with the private sector. The goal of faster reporting results is for a 30 day turnaround (currently the process takes as long as 12 to 18 months). Electronic data storage and transmittal was cited as a potential help in a solution to the lengthy delay. A watershed permitting system was another recommended solution. Estimated costs to implement a NPDES fee structure were provided, and it was noted that industry does not oppose a fee program. The estimated costs included $500,000 for one time capital expenditures, biennium personnel costs of between $1.5 million and $2 million, a portion of which could be offset by the fee program.
Mr. Surdam discussed in more detail issues of past inconsistencies in the application of the program and lack of flexibility in permits. Solutions that would require statutory change are the implementation of a fee program; the clean air permitting process was identified as a model to use. Solutions requiring legislative appropriation were discussed in more detail. The full task force has not made a final recommendation for increased personnel and other expenditures. The task force will attempt to provide more details as to the amount of additional appropriations needed.
Cochair Hawks stated that the proposed solutions were helpful and asked that the task force continue to provide more specifics in terms of solutions. Mr. Corra noted that the budget request currently includes two additional personnel for the NPDES program, while the task force currently calls for seven additional positions. Mr. Corra noted that probably could be changed, but he was looking for the Committee's support for such a proposal. Cochair Hawks stated that at this point, that was not for the Committee, but that if the Department supported that decision it should be by an amendment to its budget request. If it appeared in the budget request, the Committee could then make a recommendation to the JAC regarding the request. The Cochairman then addressed items he would like the task force to address in more detail. He asked that the task force make a recommendation for implementing the "one-stop" permitting. He also asked the DEQ to implement through rulemaking those items it could address "in-house"; such as additional flexibility in the permit process. He further requested the task force bring forth the proposed legislation for the fee permit program, for consideration at the next Committee meeting. Regarding electronic data collection, Director Corra noted the project was underway with the $100,000 appropriation from last session. On the communications issues, notifications of permits, etc., the Cochairman suggested that appeared to be something that could be handled through rulemaking. Mr. Corra stated that the DEQ would accept the recommendations of the task force to address those items the Department could without additional legislation. The finite terms of reservoir permits seemed to Cochairman Hawks an issue that should be dealt with by the State Engineer's Office.
The following requests for additional information were made by Committee members:
1. A list of persons involved in the stakeholders meetings;
2. The penalties for non-compliance;
3. The volume of the production subject to the permitting including historic information regarding the volume of production and number of wells along with past manpower used for monitoring, as well as projected production and need for increased manpower;
4. The estimated cost of laboratory space for the additional equipment being requested. Task force representatives noted that; the facility itself would require an different capital investment and that in order to provide an accurate estimate of those costs would require expertise that is not available at this time;
5. Whether the electronic data collection would or could expand to use by other agencies;
6. The types (class) of streams that the discharges enter;
7. The amount of discharged water and the amount of discharged water being permitted;
8. The offset to the increased appropriation by the permitting fee system;
9. The anticipated change in permitting time from existing to the new system with the additional personnel and expenditures.
Cochairman Hawks emphasized the need for the task force to be specific in its recommendations to the Committee, in order for the Committee to act at its next meeting.
Wage and benefit disparity study
Professors John Jackson and Ann Alexander addressed the Committee and summarized the report on the wage disparity study, resulting from 2002 legislation. It was provided at an earlier date to the Committee. A correction to the report was provided. (Appendix 5).
Professor Jackson noted that there were a number of reasons for wage differences. Including the amount of time men work versus the amount of time women work. More women than men work part-time in Wyoming for example. The industry in which men and women work can also account for wage differences. Overall, women make less money and receive fewer benefits than men in Wyoming. When only full-time work is considered the difference in benefits disappears.
Professor Alexander noted that not all differences in wages can be attributed to market conditions. She also addressed estimated lost wages and employer and other costs to the state due to the wage gap. (See appendix 5). Ms. Alexander suggested that the solutions were for the state's policymakers to address. She identified possible, though not suggested, changes such as trying to move the workforce to different industries and the projected economic impact of such changes. The larger effect would result from changing the number of women working full-time from part-time.
Professor Jackson noted that focusing solely on the "wage gap" can be harmful, e.g., Vermont has a lesser gap because all employees overall in Vermont earn less money than the national average. Cochairman Hawks asked if there were any indications of illegal wage discrimination in Wyoming. Professor Jackson stated that the information was not available for the study. Nationally he noted that there probably is some, but it is not a significant factor in the overall wage gap.
Committee members questioned why the market would not adjust to changes that would alleviate the disparity and avoid the suggested losses in productivity. The Committee discussed the positive and negative effects of some of the potential changes. The Committee also discussed other issues that might underlie the wage disparity, including cultural issues. Cochair Law noted that if the report were to have any impact, it needed to be coordinated with other issues that are affected by the disparity, such as TANF benefits and other social programs.
Cochair Hawks questioned whether there were recommendations for changes to the Legislature. Professor Jackson suggested that the first item might be to review state government employment to see if there is wage disparity within state government. Professor Alexander noted the last such state study was conducted in 1986. Tucker Fagan, director of the Wyoming Business Council, stated the Governor is reviewing the issue within the executive branch. Cochair Hawks invited the wage disparity committee to make any recommendations to the Committee prior to its next meeting.
Public comment was taken. Kathy Emmons, Director of Department of Workforce Services, noted that a number of agencies in state government are working on job awareness issues down to the elementary level. She also noted that there is a need to draw the Department of Family Services into the discussion on wage disparity. Ms. Emmons disagreed that there is adequate childcare facilities in the State. Kendra Miller, of the Governor's Office, suggested that the assumption that a number of women wish to work part-time and remain at home with the children should not go unchallenged.
Air service
UW Professors Owen Phillips and Lawrence Weatherford provided a draft report on improving passenger airline services in Wyoming. (Appendix 6). A summary of their oral presentation is attached as appendix 7. The major issues addressed were the number of persons originating trips in Wyoming but enplaning in locations other than Wyoming (leakage) and the price of flying from a Wyoming airport to a hub airport (wedge fare).
Carrier air service since deregulation in Wyoming has been very unstable. The large number of empty seats on Wyoming flights was reviewed. The fares throughout the state were also reviewed. Strategies for increasing enplanements included stopping the "leaks". Doing so would double the enplanements in Wyoming. (Inbound leakage was assumed to be equal to the outbound leakage).
After determining the amount of "leakage" the study attempted to explain the underlying factors. Four factors were considered, fare, aircraft type, distance and layover time. The sensitivity of the leakage to each of the various factors was considered.
Potential solutions and policy recommendations were addressed. Included in the recommendations was the retention of an airline "czar" for Wyoming and guaranteed subsidies for the airlines, for a stated number of years to reduce the wedge fare. The projected effects of various suggested strategies was reviewed. The estimates by city and potential impacts on leakage were reviewed. A guaranteed fare plan applied equally to all Wyoming cities with airports would cost an estimated $24.3 million annually. Using a different subsidy for various cities (since the same subsidy would not have the same effect in various cities), would be a more fine tuned plan costing about $6.8 million per year.
Changes in the type of aircraft and the effect that those changes would have were reviewed. Other suggestions included financial incentives to reduce delays and cancellations. In summary three paths for improved air service in Wyoming were identified, decreased wedge fare rates, increased regional jet service and financial incentives for decreased delays and overall improved reliability.
Committee members queried whether there was any economic analysis of the impact the recommendations would have on the state. Professor Phillips stated that there were rough estimates of some of the economic impacts; but while better increased air service could result in economic development, it was impossible to quantify the effect of those impacts.
Committee members also asked whether there was any study of business leakage or only leisure. Both were studied, but business leakage was not as sensitive to reduced fares as leisure travel. Committee members discussed the wisdom of implementing state subsidies. The professors suggested that the subsidies be monitored and that if they do not have the impact desired, they should be stopped earlier than suggested.
Committee members questioned whether the reliability factor was considered enough in the model. Professor Phillips stated that data might be available for Laramie and Sheridan, but not for the state overall. Committee members asked whether communities and industry reaction to the suggestions had been considered.
Cochair Hawks asked what occurred with the $76,000 appropriated for the airline contact person this session. Mr. Fagan stated that the Governor felt the appropriation was not sufficient to retain an individual and asked the Business Council to review two bills passed last session and use the appropriation to find the expertise to implement the provisions of Senate File 120.
Patrick Pitet, Wyoming Business Council, Sonjia Murray airport consultant from SH&E retained by the Wyoming Business Council, and Shelly Reams, Wyoming DOT, addressed the Committee. Mr. Pitet's comments were directed to the progress the Business Council has made under Senate File 120 and were provided in writing. (Appendix 8). No applications have been received under Senate File 66, RFPs have been prepared by the Business Council and $120,000 has been encumbered for consultant services along with some funds encumbered for administrative expenses.
Meetings have been conducted in all 10 communities in Wyoming which have air services. Mr. Petit explained other actions which are planned and the projected timeframes for those activities. Cochair Hawks asked for a copy of the goals and objectives in the consultant contract.
Sonjia Murray reported that past studies done at the state and community level have been reviewed. Community meetings have been held. She stated that no state has pursued the issue as aggressively as Wyoming as far as studying the issue. She also noted that it was important to study the dynamics of the airline industry and to contact industry in order to determine the feasibility of various solutions. Her personal opinion was that it will be easier to attract additional service than to retain those services once they are in place. She also reiterated the need to have communities back the proposals set forth. They are analyzing the current market and determining the feasibility of providing subsidies based upon each individual market in terms of potential profitability.
Shelly Reams, WYDOT, stated that 4 of the 10 airports in Wyoming are being considered for federal airport subsidies. Three carriers have applied for federal airline subsidies. An airline study is being prepared and will be available shortly. Wyoming enplanements are up in only two cities from one year ago.
Mr. Pitet pointed out that the airline industry requires that information in certain contracts be kept confidential. He noted that those requirements might conflict with the public record requirements of the Business Council. Committee members noted that if subsidies are provided, there must be some type of public disclosure. Mr. Pitet stated that he was not advocating complete nondisclosure, only that portions of the contracts not be made public. Committee members also suggested that there should be contractual performance guarantees and repayment of subsidies if certain standards are not met. Senator Mockler, questioned whether there should be an airport in Worland and asked whether there would be any recommendations along those lines. Mr. Pitet stated that those recommendations were beyond the scope of Senate File 120.
Cochair Hawks suggested that at this time, the only question before the Committee is whether any legislation should be drafted. Representative Walsh moved that two drafts should be prepared, following each of recommendations in the UW report. The motion was seconded by Representative Illoway. The two bills would be to have a sliding scale subsidy by community and a flat subsidy for all ten airports in the state. The motion was amended to be a single bill for sliding subsidies in each city. Committee members suggested that it would be premature to draft legislation until the Business Council work under SF 120 has been done. Representative Walsh withdrew the motion with the consent of Representative Illoway.
Cochair Law noted that UW could work with the LSO at the request of individual sponsors on any legislation in the meantime.
Tourism
Diane Shober, director of the Tourism Division within the Business Council, and Pat Sweeney and Paul Smith, Wyoming Tourism Board members, addressed the Committee. Ms. Shober provided an update regarding recent activities of the Business Council and provided a summary of the tourism budget. (Appendix 9)
Mr. Sweeney reviewed the current status of the Tourism Board and activities undertaken. The Board asked for the Committee to support the current status and continue the Tourism Board. Cochair Law distributed copies of the current budget footnote creating the Tourism Board until June, 2004. Cochair Hawks moved the Committee recommend to the JAC that last session's footnote implementing the Board be continued for the next biennium. The motion was seconded and passed unanimously. Senator Mockler suggested that there be a separate bill for the Committee to sponsor creating a Tourism Board in statute. Cochair Law noted that the reason for supporting the footnote over a bill was because of the potential for future recommendations for changes that might be forthcoming from the Board. Mr. Sweeney stated that the Board might not be ready to recommend permanent changes at this time. There was no motion for an independent bill. Mr. Smith noted the help and support of the Business Council.
Electric transmission
Steve Waddington, Governor's Planning Office, addressed the Committee, regarding the sub regional transmission planning initiative. He updated the Committee on the progress made by Governor Freudenthal and Utah Governor Leavitt and invited interested Committee members to participate in future planning as indicated in the written materials provided. (Appendix 10)
Enhanced Oil Recovery
Dag Nummedal – UW professor summarized a June, 2003 report on enhanced oil recovery provided to the Committee earlier. (Appendix 11) He stated that the normally accepted level of oil production peak and then decline can be altered with enhanced oil recovery and presented information regarding improved recovery over the past two decades. Professor Nummedal provided information regarding the amount of additional production which could result with the use of currently existing technology.
Enhanced oil recovery, including steam, water and CO2 injection were addressed, with data on the use of CO2 recovery in various oil fields in Wyoming provided. In Wyoming, the source of CO2 is large, which can be viewed as a great pollutant or a resource for enhanced production. Professor Nummedal reviewed the impact of CO2 releases, including global temperature increases. Given President Bush's goals of reducing CO2 releases and for CO2 sequestration technology Professor Nummedal predicted that either electric energy producing plants will enter into the sequestration process, increasing the voluntary solutions for CO2 releases, or Congress will mandate CO2 sequestration. In either event, CO2 sequestration will be an economic issue and opportunity for Wyoming.
The University is working with the federal government on a sequestration project at Teapot Dome, the only remaining federally owned oil field. The project is attempting to model the effect of CO2 sequestration and injection.
Overall, Professor Nummedal stated he was convinced enhanced oil recovery will play a dominant role in future oil recovery in Wyoming. He identified current barriers to the use of C02 injected recovery. The major issue is the considerable upfront costs of the investment and the long delayed payoff. His next suggested steps include, the screening of Wyoming's reservoirs for suitability of CO2 recovery, the screening of available CO2 and the value of CO2 sequestration. Representative Illoway noted that CO2 was not classified as a pollutant. Professor Nummedal stated that while the effect of CO2 is debatable, the point for his presentation is that Congress seems to have accepted that it needs to be reduced.
The Committee then heard from a panel of including Jim Barlow, Rick Robitaille, Ambassador Tom Stroock, Steve Waddington, Andy Franklin and Peter Wold.
Mr. Barlow's remarks were also provided in writing. (Appendix 12). He noted the tremendous reserves that could be captured only through enhanced recovery and urged support for the reinvigoration of the Enhanced Oil Recovery Institute at the University.
Ambassador Stroock stated that he did not believe that there was anything more important that the Legislature can do currently than to strategically and thoughtfully plan the future of enhanced oil recovery. The amount of money which will be injected into the economy if the numbers are even one-half of those estimated will be enormous. Allowing the decline of the Enhanced Oil Recovery Institute at the University was a tremendous mistake in his view. The small independent companies in Wyoming cannot afford to provide the necessary upfront costs for enhanced oil recovery efforts; thus the state must become involved in the effort. The Wyoming Geological survey should become involved in determining the CO2 reserves available. Economic studies by the UW and the Business Council should be undertaken. The DEQ should be involved in determining whether CO2 is truly a pollutant. The Business Council should be involved in transferring the application of the technology. The Minerals Committee should form an enhanced oil recovery steering committee. There should be a demonstration project. The enhanced oil recovery institute should be adequately funded, either at the University or at the Community Colleges. The Legislature should involve the Business Council in guaranteeing loans and bonds, rather than making direct expenditures such as in the Charfuels project. Private institutional loans should be used.
Rick Robitaille, Anadarko, addressed the Committee. He provided information as to current Anadarko projects. (Appendix 13) A 125 mile CO2 pipeline is being built and planned for completion in January, 2004. A 33 mile CO2 pipeline is planned for service in September, 2003. He noted the enormous costs of these projects, the pipeline covering 125 miles, costing $400,000 per mile, the other costing $250,000 per mile. Projected costs for getting one field ready for enhanced oil recovery was in the neighborhood of $200 million. The life of the field is expected to be extended by 20 years. Mr. Robitaille recited the numbers and types of jobs that will be created by the undertakings and the direct impact to the state through taxes and royalties. He suggested the State's role should be to facilitate the investments being made, including the treatment of tertiary production to be taxed the same as stripper wells and to make that tax treatment permanent. He suggested that the state should proceed to support the projects as had been earlier suggested. Mr. Robitaille stated that the current projects will have sufficient CO2 capacity, but that CO2 supply might be insufficient.
Mr. Robitaille stated that his company was working with the University to share some of the information being developed. Some of the proprietary information would not be shared. He emphasized the price of oil and the price of CO2 must come together with the logistical circumstances to make a project worthwhile.
Representative Childers asked for an executive summary of investment costs, recovery costs and overall economics of a project on a field that has been done.
Peter Wold, Wold Oil Properties in Casper, an independent producer, testified that his company is reviewing enhanced oil recovery in a small field, with up to 4 million barrels of recovery from the field. But his company is small by many standards, his workers had not undertaken that type of project before and specific expertise is needed to model the field before such a project can be undertaken. The pipelines required are different and more expensive than normal. He suggested an integrated group of technicians housed at the University which companies could access. Economists to assist in financial modeling are needed. A reliable and consistent source of CO2 is needed. He noted that currently there is only one supplier of CO2 in the State. The Oil and Gas conservation commission and the BLM needs to help by amending rules for plugging requirements of old wells. The State should study the concept of CO2 sequestration and the use of exchange credits, which can help a producer to cut the costs of the project.
Andy Franklin, Marathon Oil, agreed with most of the other panelists' suggestions. He reminded the Committee that CO2 is only one of the enhanced recovery efforts and that a number of fields are note amendable to CO2 recovery. Other types of EOR methods can work in those same fields. Remaining oil in the types of fields Marathon is looking at are 1.5 to 2 billion barrels. His point was to not overlook other available EOR methods. Nearly any recovery method used today can be classified as an EOR project. Severance tax reductions in these types of projects (non CO2 EOR) are not enough, standing alone, to undertake the project. Mr. Franklin noted that if EOR is delayed too long in certain fields, the economics will not justify recovery.
Barry Ehrl, President of Derek Oil and Gas, addressed the Committee and provided written materials regarding EOR and a specific project that his company is working on. (Appendices 14 and 15) He asked that the path for environmental and other permitting be smoothed. Cochair Hawks invited Mr. Ehrl to submit any specific recommendations regarding barriers to the LSO in writing.
Steve Waddington, provided a written recommendation to create an enhanced oil recovery steering committee. (Appendix 16) The committee would have a one time appropriation of $175,000, and a charter to address the issues raised today. Committee members questioned why a new entity was needed. Mr. Waddington noted that the new committee would have a focused view, more so than existing entities. The proposal was supported by all panelists. Mr. Franklin noted that there needs to be a sense of urgency, however, in order to take advantage of the current high price of oil. Committee members asked why the Governor could not immediately create the committee. Others commented that this could be accomplished by the Wyoming Energy Committee.
The Committee discussed the components of the recommendation, including membership, goals and life. Committee members debated whether there should be any members of the Legislature on the committee as suggested. Committee members suggested that the timeframe should be shortened.
Ambassador Stroock noted that the proposal should just be one of the items which the Legislature implements or supports. Committee members questioned whether the UW budget was including the proposed expansion and funding of the EOR institute. Bill Gern, UW, stated that the EOR institute is still in existence. The funding request from UW would need to be addressed in conjunction with the University's President.
Cochairman Hawks suggested some of the issues could be addressed immediately by the Governor. Representative Illoway suggested the Governor could create the task force immediately and flex the funding needed. The Committee continued discussion of the formation and implementation of the Committee. A number of Committee members noted that with the urgency issue, there was no need to wait for legislative action.
Mr. Waddington stated that the committee could be started quickly, but the Governor would like a level of support from the Committee. Cochairman Hawks asked whether the Governor wanted a bill drafted for Committee consideration or a letter of support from the Committee regarding his formation of the task force. Mr. Waddington suggested that both could be done. If the Committee supported the concept and funding the Governor would include the recommendation for the appropriation in his budget, according to Mr. Waddington.
Senator Coe moved that the Committee have a letter drafted supporting the concept submitted without legislators on the task force, suggesting that they get started as soon as possible, and deliver a memo to the Minerals Committee by February 1, regarding proposed additional legislation. The Committee discussed the motion. Senator Mockler noted that the Committee felt time was of the essence, the Committee supported the effort and would support the requested budget. The Committee continued to discuss the issue. Representative Childers suggested that one of the three private citizens have experience in the operations of such projects. The main motion passed without amendment.
The Committee set the next meeting for November 19 and 20th in the morning in Casper at the Oil and Gas Commission, if available. LSO staff was directed to prepare a letter to Management Council asking for additional funds if needed to complete the Committee's work at that meeting.
There being no further business, Cochairman Hawks adjourned the meeting at approximately 5:00 p.m.
Respectfully submitted,
Senator Bill Hawks, Cochairman