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WexPro 2 production, costs and monitoring reviewed at Utah Public Service Commission technical conference
Summary
Company and Enbridge representatives described equipment, measurement points, state tax differences, BTU ranges and monitoring procedures for WexPro 2 properties and said there is no contractual opt‑out when market prices exceed cost of service; presenters said wells will be plugged if ongoing cash costs exceed market value.
At a Utah Public Service Commission technical conference, company and Enbridge officials reviewed equipment, pricing, royalty measurement and monitoring practices for properties included in the WexPro 2 program and described how those factors affect customer cost of service.
The discussion covered how production taxes differ by state, how royalties are measured at a pad-level meter, what equipment is installed on new pads, how WexPro and its partners track BTU (not the WAVI interchangeability index), and the contractual role of a hydrocarbon monitor under the WEXPRO stipulation.
Kelly Menenhall, with Enbridge Gas Utah, and a company representative involved with the WexPro 2 filings presented the technical and financial summaries. Menenhall noted that measurement for royalties and taxes is taken at the pad meter, saying, “It’s at that meter… any fuel use up until that point is we don’t have to pay royalties and taxes on.”
Why it matters: WexPro production and acquisition decisions influence utility cost-of-service calculations that can affect customer bills. Panelists said the company’s accounting, tax treatment by state and liquid-credit forecasts change year to year and that there is no contractual option for WexPro working interest owners to “opt out” if market prices rise above cost-of-service projections.
Key facts and technical details
- Equipment and measurement: Presenters described standard pad-level facilities: separators that split produced gas, water and condensate; tanks (with burners to prevent freezing); methanol and chemical tanks; pad-level metering; and dehydration to meet pipeline specifications. The company said most of this equipment is installed on a per-pad basis and that a meter at that point is used to determine royalties and taxes.
- Royalties and pricing point: Royalties and tax obligations are calculated at the pad meter. Company presenters emphasized that fuel used to move gas to that meter is not subject to royalties or taxes; volumes and BTU content measured there are used to calculate price and royalties.
- State tax differences: The company explained production taxes vary by state and gave Wyoming as having a higher rate than Utah, and Utah higher than Colorado. That geographic tax variance was cited as a material driver of per‑decatherm production tax differences between properties.
- BTU vs. WAVI: The presenters said producers track BTU at the wellhead and report it to the state; they do not routinely track the WAVI interchangeability index. Across the WexPro footprint they reported BTU values generally between about 1,000 and 1,200 (minimum and maximum) with a standard deviation near 50 BTU; in one area (Vermillion) they cited an average BTU of about 1,132 (standard deviation ~36 BTU).
- Hydrocarbon monitor and oversight: The company noted that “section 8.2 of the WEXPRO stipulation” allows the division to retain monitors (including a hydrocarbon monitor and accounting monitors) to review and advise on drilling plans and acquisitions. The company described the monitor’s role as reviewing proposed plans and engaging in meaningful technical and financial discussions.
- Financial and operational thresholds: Presenters said WexPro working-interest owners do not have an opt-out tied to short-term market movements; instead, the company expects to cease production (plug and abandon) where ongoing cash costs exceed the gas price. The group also discussed how permitted rates of return, depreciation accounting and liquids credit forecasts change per unit returns over a well’s life.
- Current operations snapshot: The presenters said the first Cascade Creek pad (identified in the presentation as pad O6032332) of 14 wells is online, with the oldest well about a month into production. The operator for the acquired property will be Laramie (operator name provided by presenters), and WexPro said it will supply capital expenditures while the operator performs drilling and on‑site work; WexPro does not plan to increase headcount for this acquisition.
- Data and follow-up: Presenters said they will provide supporting spreadsheets and Excel files used to justify CapEx and cost assumptions; one presenter said those spreadsheets would be distributed “this afternoon.”
Context and background
Panelists referenced the WEXPRO stipulation and the commission’s IRP variance reports when discussing historical volumes and the cost-of-service comparisons. Company presenters cited the recent rise in market prices (and the five‑year forward curve) as a factor that has increased the inventory of economically viable wells relative to earlier years when fewer wells were drilled. They also noted the company’s accounting treatment (units-of-production basis for depreciation) affects per-unit returns across a well’s life.
No formal decisions were made during the session. Presenters provided technical explanations, identified follow-up data they will provide to the commission and answered commissioners’ questions about measurement points, taxes, monitoring and operator arrangements.
(Ending) The technical conference moved into a confidential session after the nonconfidential briefing and the presenters committed to send Excel spreadsheets and underlying cost workpapers to the commission staff for further review.
