NM Oil Conservation Division

Shut-in Well Policy and

Temporary Abandonment

2017

2017 IOGCC Annual Business Meeting

5/8/2017

Scott Dawson

Shut-in Relief Program for

Marginally Producing Wells

The OCD has Put in Place a Procedure Whereby Operators Can Request Approval to Temporarily Shut-In Marginal Producing Wells During Times of Low Oil & Gas Prices.

The OCD currently has 13 operators in our Shut-in program: BOPCO -------------------------------74 wells Breitburn Op, LP ------------------76 wells Burlington Resources ----------172 wells Conoco Phillips Company ------55 wells Devon Energy Corporation ---116 wells Enervest Operating, LLC --------38 wells Fasken Oil and Ranch, Ltd. -----12 wells HPOC, LLC ----------------------------4 wells Linn Operating, Inc. --------------92 wells Nearburg Producing Co. ----------9 wells WPX Energy Production, LLC ----9 wells EOGY Resources, Inc. ------------21 wells Mack Energy Corporation ------- 1 well

Total -------------------------- 679 wells

COMPLIANCE: A. An operator is in compliance with

Subsection A of 19.15.5.9 NMAC if the operator:

has no more than the following number of wells out of compliance with

19.15.25.8 NMAC that are not subject to an agreed compliance order

setting a schedule for bringing the wells into compliance with 19.15.25.8

NMAC and imposing sanctions if the schedule is not met:

(a)two wells or 50 percent of the wells the operator operates, whichever

is less, if the operator operates 100 wells or less;

(b) five wells if the operator operates between 101 and 500 wells;

(c) seven wells if the operator operates between 501 and 1000 wells; and

(d) 10 wells if the operator operates more than 1000 wells.

Shut-in Relief Program

Requirements/Parameters

• Operator Must be Currently Compliant • Must Execute an Agreed Compliance Order for Inactive Wells • Must Demonstrate Economic Need • After a Shut-In Period of 15 Months (Currently Allowed by OCD Rules) Wells Can Remain Shut-in for an Additional 3-Year Period • Wells Must Demonstrate Mechanical Integrity by Bradenhead Test or other approved test by the OCD district office at Month 27 (15 Months + 12 Months) and Annually Thereafter

Operator sends OCD’s

Compliance and Enforcement

Manager a list of API numbers

of wells requesting shut-in

relief.

Financial Assurance for Well Plugging:

Amounts.

(1) A blanket financial assurance shall be in the amount of $50,000 covering all oil, gas or service wells drilled.

(2) A one-well financial assurance shall be in the amounts stated below in accordance with the well’s depth and

location.

(a)Chaves, Eddy, Lea, McKinley, Rio Arriba, Roosevelt, Sandoval and San Juan counties, New Mexico: $5000

plus $1 per foot of projected depth of proposed well or measured depth of existing well.

(b) All other counties in the state: $10,000 plus $1 per foot of projected depth of proposed well or measured

depth of existing well.

If an operator elects to cover wells held, or which may be held, in temporary abandonment by a blanket

plugging financial assurance for wells in temporarily abandoned status, the operator shall do so in the amounts

stated below in accordance with the number of wells covered by the blanket plugging financial assurance for

wells in temporarily abandoned status.

(a)A blanket financial assurance for the first five wells shall be in the amount of $150,000.

(b) A blanket financial assurance for the six to 10 wells shall be in the amount of $300,000.

(c) A blanket financial assurance for the 11 to 25 wells shall be in the amount of $500,000.

(d) A blanket financial assurance for more than 25 wells shall be in the amount of $1,000,000.

Operators who have on file with the division a blanket financial assurance that does not cover additional wells

shall file additional single well bond financial assurance for any wells not covered by the existing blanket bond

or, in the alternative, may file a replacement blanket bond.

Additional Financial Assurance for Well Plugging

for Wells in Temporary Abandonment:

Shut-in Well Program

OCD Contact Person

Daniel Sanchez

OCD Compliance & Enforcement Manager 505-476-3493

Daniel.Sanchez@state.nm.us

Thank you for coming.

Scott Dawson Gen 1 Manager, Petroleum Engineering Specialist/Certified Professional Geologist (CPG) Oil Conservation Division Energy, Minerals and Natural Resources Department Scott. Dawson@state.nm.us (505) 476-3480

OCD Website: http://www.emnrd.state.nm.us/ocd

OCD Well Information and Operator Data: https://wwwapps.emnrd.state.nm.us/ocd/ocdpermitting/Data/Wells.aspx