Office of State Lands and Investments

Office of State Lands and Investments

WYOMING LEGISLATIVE SERVICE OFFICE

09/19/2011 Denver, CO NLPES Conference 2011

Objective, Scope & Methodology

July 31, 2009: Committee requested an audit of OSLI.

Objective: Is OSLI maximizing revenue for Wyoming's trust beneficiaries, through effective leasing and use of state trust mineral lands?

Scope: Sub-surface activities.

Included surface impact payments as a result of subsurface activities.

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Scope Limitation

Limitation: Unable to directly access primary data on five (5) separate systems.

GIS; Mineral Lease Auction, Mineral Royalty System; Mineral Lease System; and Royalty Accounting System on separate servers.

Transition to integrated system.

Eleven components (agency-wide integrated system hub or AWISH).

Increased audit risk & time to review and verify primary OSLI data.

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Area for Further Consideration

Non-trust lands.

W.S. 36-1-102.

Requires agencies to file information with OSLI related to acquisition of real property; includes non-trust land holdings acquired outside of the federally-granted trust lands of the State.

Statewide Single Audit (FYE June 30, 2009).

State does not have an effective internal control system to track and value non-trust land that it owns.

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Background

Board of Land Commissioners and OSLI constitutionally and statutorily authorized to administer the Wyoming State Land Trust:

State Trust Land; State Trust Minerals; and Permanent Land Fund.

Both entities act as trustees.

Proceeds from the use, sale, and transfer of State land assets.

Intergenerational basis for long-term protection.

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Background (cont.)

The purpose of the granted land is to support public schools, institutions, buildings, etc.

Trust assets have generated over $700 million since FY 2007.

Bids; rentals; royalties; and consideration.

Severance taxes.

Over $430 million from State trust land in CY 2008 and CY 2009 (e.g. oil, gas, coal, and trona).

Emerging Issues.

Movement towards alternative energy and increased inspections & auditing.

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Finding 2.1 (pg. 15): Incentives offered and used, but not tracked consistently.

Incentives:

Royalty rate reductions (no competition)-Chapter 18 Board Rules (oil & gas), Section 7 (a) (i) (ii);

Royalty rate reductions (drilling window)-Chapter 18 Board Rules (oil & gas), Section 7 (a) (iii);

Royalty rate reductions (additional operations)-Chapter 18 Board Rules (oil & gas), Section 7 (a) (iv) and W.S. 36-6-101 (c);

Crediting annual rental payments against royalties-W.S. 36-6-101 (c);

Unit Agreement & Cooperative Agreement-W.S. 36-6-101 (d) (k); Surface & subsurface surveys-Chapter 16 Board Rules (Surface

and Subsurface Activities); and Primary lease extension-Chapter 18 Board Rules (oil & gas),

Section 8 (a) (b).

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Finding 2.1 (cont.)

Industry takes advantage of incentives.

Five (5) of seven (7) or 71% used.

However, OSLI does not consistently track the effectiveness of incentives.

Lack of integration of data systems and GIS capabilities does not allow for routine analysis of incentives.

Do royalty rate reductions increase production; do surface and subsurface surveys lead to State leases; do lease extensions lead to eventual production; and do the use of incentives generally lead to increased leasing of State land?

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