Wyoming Administrative Code › Agency 060 - Lands and Investments, Office of › Sub-Agency 0002 - Land Commissioners, Board of › Chapter 18 - LEASING OF OIL AND GAS › Section 18-7 - Royalties

Current through July 13, 2024
(a) Royalties for oil and gas and other
				kindred hydrocarbons, natural gasoline, sulfur, and non-hydrocarbon gases and
				any by-products recovered from such gases shall be based on the terms of the
				particular lease agreement, subject to all state royalty statutes and rules,
				and shall be based on the total consideration received for state production.
				The following royalty rates shall apply, unless a different rate is
				specifically authorized by the Board:
(i)
				Sixteen and two-thirds percent (16 2/3%), except that in cases where
				competitive bidding results in no offer to lease, a tract may be re-offered at
				the discretion of the Director at a subsequent competitive sale at a twelve and
				one-half percent (121/2%) royalty rate;
(ii) Further, from a list established by the
				Director containing leases unleased after offerings at both sixteen and
				two-thirds percent (16 2/3%) and twelve and one-half percent (121/2%) royalty
				rates, and located further than one mile from existing production, tracts may
				be leased non-competitively at a royalty of twelve and one-half percent
				(121/2%) by applications personally delivered to the Office under the
				procedures described in Section
				5 of this chapter;
(iii) At the Board's discretion, when deemed
				favorable in stimulating exploration on non-producing, primary term oil and gas
				leases, a specified "drilling window" of no greater than two (2) years may be
				requested and set for specific leases, allowing a lease royalty rate often
				percent (10%) where production in paying quantities is established during a
				"window" from a wildcat well as defined by the Rules of the Wyoming Oil and Gas
				Conservation Commission. Announcement of a "drilling window" will be made no
				less than thirty (30) days prior to commencement. Leases establishing paying
				quantity production within a "drilling window" shall receive the royalty rate
				reduction to ten percent (10%) for so long as paying quantity production exists
				for any well on the lease thereafter, except that in the event the producer
				receives an average price equal to or above twenty dollars ($20) per barrel of
				oil from a well classified as an oil well or one dollar and fifty cents ($1.50)
				per mmbtu of gas from a well classified as a gas well for six (6) consecutive
				months from lease production, the ten percent (10%) royalty rate shall cease,
				and the original lease royalty rate shall be effective for the remaining term
				of the lease;
(iv) After an oil and
				gas lease becomes an operating lease, the Board may reduce the royalty payable
				to the state, as to all or any of the lands or formations covered by the lease,
				if it determines that such a reduction is necessary to allow the lessee to
				undertake additional operations or to continue to operate with a reasonable
				expectation that the operations will be profitable. Royalty rate reduction to
				the statutory minimum of five percent (5%) may be granted for a limited time,
				specific to new well production, to allow for the recovery of drilling costs
				for deep zone exploration completions in excess of twelve thousand feet
				(12,000'). Royalty rate reductions may also be granted when lease basis income
				statements reflect that reasonable actual operations costs, when combined with
				the royalty rate, create a loss situation under arms-length sales. Such a
				reduction in the royalty payable to the state shall in all cases be conditioned
				upon the cancellation of all cost-free interests in excess of five percent (5%)
				and the reduction of all other cost-free interests in the same proportion as
				the state's royalty is reduced. The Board may also impose other conditions to
				the reduction in royalty.