Wyo. Code R. 060-0002-7
Land Commissioners, Board of
Chapter 7: Disposition of State Royalty Oil
Effective Date: 04/28/1993 to 02/06/1998
Rule Type: Superceded Rules & Regulations
Reference Number: 060.0002.7.04281993
Date Filed 04/28/93
Expr Date
Supr Date
Repeal Date
Document Type RULES
Section 1. Principal Reasons for Adoption of Rules. These rules and regulations set forth the procedures whereby the Director, acting for the Board of Land Commissioners may exercise his authority to accept state royalty oil in kind as the royalty payment for leases on Wyoming state lands and sell that royalty oil to an eligible refiner within the State of Wyoming. Eligible refiners shall meet the qualifications set forth herein. The reasons for promulgating these rules are to (1) benefit the state by providing new employment opportunities for citizens of the state; (2) expand refinery efficiency or capacity within the state capable of providing needed environmentally acceptable products to the citizens of the state; (3) provide additional refined petroleum products, which are presently in short supply, to citizens of the state; and (4) increase the state's share of tax revenue derived from the sale of tax revenue derived from the sale of petroleum products.
Section 2. Authority. These rules and regulations, becoming effective on the 21st day of April, 1981, govern the procedures to be followed in the distribution to eligible refiners of royalty oil taken in kind from production on lands under the jurisdiction and control of the Board of Land Commissioners. These rules and regulations are made and established by authority of W.S. 36-2-107 and W.S. 36-6-101.
Section 3. Definitions. In these rules and regulations the following terms shall have the meaning herein given:
(a) Board: The Board of Land Commissioners.
(b) Director: The Director of the State Land and Farm Loan Office.
(c) Eligible Refiner: An 'eligible refiner' is a refiner whose refining operations are conducted entirely within the State of Wyoming and who is unable to purchase sufficient crude oil to operate the refinery at its rated capacity. Neither the refiner nor any of its related companies may be engaged in exporting crude oil from the State of Wyoming. The refiner must be one which produces eligible products as a part of its total output.
(d) Eligible Products: Includes gasoline, kerosene, diesel fuel, and such other refined products and the Board may determine to be in short supply within the State of Wyoming forming a part of the total output of an eligible refinery.
(e) Lessee: The person, firm, association, or corporation in whose name an oil lease appears on record in the office.
(f) Market Price: The market price for royalty oil taken in kind is
(i) The highest price per barrel regularly posted, published, or generally paid or offered by any principal purchaser of crude oil of comparable grade and of equal A.P.I. gravity in the field where produced; or (ii) If there are no postings in the field, the highest price posted in the nearest field where a comparable grade and A.P.I. gravity of crude oil is produced and sold; or
(iii) The true value as determined by the Board when in its judgment such highest price regularly posted, published, or generally paid or offered in the same field is found by it to be less than the true value of the royalty oil. In no event shall the 'market price' be less than the estimated reasonable value which the Board would determine as the value of production if royalties on the production in question were being paid by the lessee rather than being taken in kind.
(g) Office: The State Land and Farm Loan Office.
(h) Royalty Oil: That amount of crude oil and lease condensate from gas wells taken in kind when the state exercises its authority to take its royalty from the lessees of state mineral lands in kind rather than in payment.
(i) State: State of Wyoming.
(j) State Lands: All land under the jurisdiction and control of the Board. These lands shall include, but not be limited to, school lands, institutional lands, university lands, and farm loan lands. Also included as state lands are all lands which may hereafter be acquired by or granted to the State of Wyoming.
Section 4. General Provisions. In distributing royalty oil, the Board may exercise wide powers of discretion. The distribution of such royalty oil shall be at all times in such manner and to such parties as shall, in the judgment of the Board, inure to the greatest benefit of the state.
Section 5. Policy. It shall be the policy of the Board in the distribution of royalty oil to benefit the state. Such distribution shall be undertaken in a manner to provide, whenever possible, new employment opportunities for citizens of the state, a greater supply of needed environmentally acceptable refined oil products to consumers of the state, and expanded and more efficient refinery capacity within the state. The promotion of these objectives is determined by the Board to be in the best interest of the state.
Section 6. Allocation. Oil available for distribution, pursuant to these rules and regulations, will be sold only to 'eligible refiners' as defined herein and all such sales will be made at the 'market price' without premium or bonus.
When applications are filed by two or more 'eligible refiners' for the same oil, the Director will determine how the oil is to be distributed so that the best interest of the state will be served. In making his determination, the Director will consider, among other things, how much crude oil the applicant needs in order to operate its refinery at capacity, the size of the refinery, whether the refinery is able to produce the types of refined products needed in the state and how much of the refinery's product is presently sold in the state. The Director may (or will) if necessary, solicit information for the 'eligible refiners' to facilitate prorata allocations when required. The Director's decision must be presented to the Board for final approval.
During the implementation period of these rules and/or during any interim periods where royalty oil is available for distribution, interim allocation may be made by the Director with approval by the Board.
Section 7. Resale Prohibited. Except in the circumstances defined in Sections 8 and 9, all royalty oil purchased by an eligible refiner must be refined in that refiner's facility within the state and may not be resold in kind.
Section 8. Exchange Agreements. Agreements providing for the exchange of royalty oil purchased under these rules and regulations for other crude oil may be permitted only if these exchange agreements operate to minimize transportation, distribution and handling costs, and do not serve to reduce the amount of refined products for existing available markets within the state. Exchange agreements will not be effective until approved by the Director.
Section 9. Processing Arrangements. Agreements providing for the processing and refining of royalty oil purchased under these rules and regulations may be permitted only if justified by reason of operational interruption or to minimize transportation, distribution and handling costs, and do not serve to reduce the amount of refined products for existing available markets within the state. Processing agreements will not be effective until approved by the Director.
Section 10. Notice of Proposed Sale to Applicants. Any 'eligible refiner' here who is interested in purchasing state royalty oil may file with the office a request to be notified of any state royalty sales. After the Board has determined that state royalty oil will be sold, all eligible refiners who have made this request will receive a notice of the proposed sale. Said notice will be mailed by registered mail within three (3) days after the decision to sell has been made.
Section 11. Application Contents. An 'eligible refiner' may file an application to purchase state royalty oil within thirty (30) days after the Director has, upon the direction of the Board, determined that state royalty oil should be sold to eligible refiners within the state. An application, which shall be filed at the office, shall include the following information:
(a) The full name and address of the applicant; the location of his refinery; a complete disclosure of applicant's affiliation or association with any other refinery, if such relationship exists; and a concise statement outlining the manner in which the award of state royalty oil to applicant will serve to accomplish the policies of the Board as herein outlined.
(b) A certified statement that the applicant meets all of the requirements of the 'eligible refiner' definition herein.
(c) A certified statement with volumetric substantiation that the applicant will make diligent efforts to market the products of the state royalty oil within the state.
(d) The capacity of the refinery to be supplied, the amount of state royalty oil requested by the applicant, the kinds of refined products the applicant presently produces and where such products are being or will be marketed.
(e) The amount of additional crude oil needed to meet either existing refining capacity or the amount needed to meet the additional capacity which is projected to come on stream during the period of the royalty oil sale contract.
Section 12. Applications for the Purchase of Royalty Oil. Applications will be received in the office for thirty (30) days after decision to sell royalty oil has been made by the Board. After this thirty-day period has elapsed, the Director shall have fifteen (15) days to determine which applicant or applicants will receive the state royalty oil. The Director will report his decision to the Board at its next regular meeting for approval.
Section 13. Director's Duties. The Director shall examine each application filed pursuant to these rules and regulations and, where he finds that the showing submitted is inadequate or unsatisfactory, may request additional showing as he deems necessary.
The Director shall allow or disallow, subject to the approval of the Board, each application for royalty oil submitted by an eligible refiner and shall report his decision to the Board for its approval at its next regular meeting or special meeting held for consideration of the sale of royalty oil to an eligible refiner.
The Director shall specify or approve the form of the contract to be used in such sale of royalty oil to an eligible refiner. The Director shall execute the contract, or contracts, of sale of royalty oil on behalf of the state upon approval of the Board.
Section 14. Notices. The office shall notify each lessee or operator under the state oil leases involved of the requirement, at least thirty (30) days in advance of the effective date of that requirement, that is directed to deliver its royalty oil in kind and in what manner the delivery of that royalty oil in kind will take place. This notice requirement will be in full accord with the existing lease contracts for the production of oil and gas on state public lands.
Section 15. Provisions of the Royalty Oil Contracts.
(a) General. The provisions of the royalty oil sale contracts shall be consistent with these rules and regulations.
(b) Duration. Contracts for the sale of royalty oil to the eligible refiner within the state shall be for a term of three (3) years.
(c) Changed Circumstances. The eligible refiner contract holder shall report to the office any changed circumstances from its initial application within ten (10) days of their occurrence. The eligible refiner contract holder shall provide copies to the office of any exchange or processing arrangements within ten (10) days of their execution. A detailed statement on the need for such agreements, in full compliance with Sections 8 and 9 of these rules and regulations, shall be provided to the office.
(d) Termination. If the eligible refiner contract holder fails to comply with the terms of the contract or these rules and regulations, the Board shall notify him of these deficiencies. If the contract holder does not correct these deficiencies within thirty (30) days after being notified, the contract will terminate.
The eligible refiner contract holder may relinquish or surrender the contract by providing notice to the office, the termination to be effective thirty (30) days thereafter.
Section 16. Effective Date. These rules and regulations shall become effective upon compliance with the Wyoming Administrative Procedure Act.
Section 17. Amendment of Rules and Regulations. These rules and regulations may be altered, changed, or modified as provided by the Wyoming Administrative Procedure Act.