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1/5/2017 Member News
Oil and gas industry growing; new potential areas eyed

Oil and gas industry growing; new potential areas eyed

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By: AP Staff Writer

Tuesday, January 3, 2017

BOISE (AP)

The amount of severance taxes generated by Idaho's oil and gas industry is getting close to paying what it costs the state to regulate that industry.

Idaho Department of Lands Director Tom Schultz estimates that 2017 severance taxes will come close to the break-even point as natural gas production has been increasing.

Besides that, officials say, the industry is also generating income tax, sales tax, property tax and business tax for the state.
Idaho has a long history of oil and gas exploration starting in the early 1900s. Peaks for well permits occurred in the 1920s, 1950s and 1980s. Twenty-five of Idaho's 44 counties have had oil and gas exploration, Schultz said.

But it's only been in recent years that ground-penetrating radar has given geologists three-dimensional views and narrowed search areas. "There have been lots of exploratory wells drilled, but no production," Schultz said. "The production didn't happen until 2013."

In fiscal year 2016, the state spent $180,000 more than it received in severance taxes regulating the nascent industry. But in the first four months of the current fiscal year, Idaho has collected more in severance taxes than in the previous three years combined.
Continued production in southwest Idaho looks good, and additional production in south-central and southeastern Idaho appears promising, said state geologist Ed Ratchford, director of the Idaho Geological Survey.

In southwest Idaho, Texas-based Alta Mesa has eight producing wells in a basin Ratchford said could extend into Oregon, though the state doesn't have the kind geological information needed to confirm that conclusion.

Alta Mesa, which faces competition from other oil and gas companies, is not required to make public information it has spent millions of dollars to acquire. But the company has built significant infrastructure.
"This is still a very early-stage development and far from a mature play," Atla Mesa spokesman John Foster said.

Ratchford noted that well production records from Alta Mesa, which don't become public until a year after a well starts producing, will likely require additional years of data for geologists to have a better understanding of how long the wells will remain economically productive.

Other areas of the state with potential, Ratchford said, include south-central Idaho where the geology is similar to a producing area across the border in Nevada.
Another company has well permits in Bonneville County in southeastern Idaho, where Ratchford said the geology appears to favor hydraulic fracturing. "That kind of effort is largely still left to be done in Idaho and still poses some upside potential in that part of the state," he said.

Southeastern Idaho is challenging for geologists, said Renee Breedlovestrout, senior petroleum geologist for the Idaho Geological Survey.

"In that basin they're going for 200-million-year-old rocks," she said. "A lot of rocks are folded and faulted. It makes oil and gas exploration very difficult."
As the industry has advanced in Idaho, state officials have moved cautiously in determining regulations that could be in place for decades. At various public hearings, Alta Mesa officials have at times expressed frustration with the process that they have said could move faster.

Schultz and Ratchford noted that part of the reason exploration hasn't advanced faster in Idaho is the current low price of natural gas.
"I think you'll see increased development over time, and I think it will be expedited with increased prices," Schultz said.

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