Onshore Oil & Gas Order #1

BLM/Forest Service Final Rule

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Onshore Oil & Gas Order #1

Ken McMurrough

NRS BLM, Colorado State Office

303-239-3642 (x3799 fax)

hugh_mcmurrough@blm.gov

Hank Szymanski – 303-239-3797

Hank_Szymanski@blm.gov

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OverviewOnshore Oil & Gas Order No. 1

Authority

This rule, effective April 6, 2007, revised the existing OO#1 which supplemented primarily the federal regulations at 43 CFR 3162.3 and 3162.5.

Purpose - Approval of Operations of Federal and Indian Oil and Gas Leases

The purpose of OO#1 is to state the application requirements for the approval of all proposed oil and gas and service wells, certain subsequent well operations, and abandonment.

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OverviewOnshore Oil & Gas Order No. 1

Defines terms Components of APD Time line Approval requirements Split estate Indian leases Reclamation/Abandonment Appeals

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BackgroundReasons for Revision of Previous Order

Leasing Reform Act of 1987 Energy Policy Act of 2005 Update for Current Practices

– Split estate policy– Cultural & wildlife inventory– Right of Way coordination– Master development plans, directional drilling– Best Management Practices

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BackgroundStatus

Proposed rule – Published July 2005 Energy Policy Act – Signed August 2005 Further proposed rule – Published March 2006 Public comments – Received nearly 90 from

industry, interest groups and the public at large Final rule – March 7, 2007

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BackgroundMajor Revisions

Process time line– Section 366, Energy Policy Act of 2005

Requires compliance with applicable law

Define terms– Complete APD

Onsite inspection included Cultural & wildlife Inventories not included Geo-referenced well plat

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BackgroundMajor Revisions (continued)

Split estate– Operator provides SUPO & COAs to surface owner– Bond compensation for loss or damages for access based

on statutory requirements on patented lands (min $1000)

Onsite inspection– 15 day requirement eliminated– Onsite required for complete APD

Valid period for APD– Changed to 2 years with 2 year extension

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BackgroundControversial Issues

Time line– Onsite inspection required

Required for complete APD

– NEPA, NHPA, ESA compliance Potential delays – no definite time to process

– APD may be deferred or denied within 30 day after complete APD submittal

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BackgroundControversial Issues (continued)

Valid period for APD– 2 years with 2 year extension

Split estate– SUPO & COAs provided to surface owner– Good Faith Effort vs mandatory notification What is a “good faith effort”– Bonding for access Compensation based on loss or damages or

as required by specific statutory authority

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SpecificsDefinitions, New or Revised

Best Management Practices Casual Use COA Complete APD Days Emergency Repairs Geospatial Database Master Development Plan Onsite Inspection Private Surface Owner Reclamation Surface Managing Agency

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SpecificsGeneral

Read the preamble first if you have questions Early notification is new (initial planning

conference) & is voluntary, precede NOS Best Management Practices, something we

have been doing for decades, are strongly recommended

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SpecificsNotice Of Staking Option

Provides operator opportunity to gather information to address site-specific resource concerns while preparing the APD package.

10 days after receiving NOS, an onsite inspection will be scheduled to take place as soon as weather & conditions permit.

Minimum staking required: 1) center stake for proposed well, 2) 2 reference stakes, 3) flagged access centerline.

BLM will invite surface managing agency (SMA) and surface owner, if applicable.

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SpecificsGeneral

Geospatial database, required for well plat Operator must make a “Good Faith Effort” :

1) notify the private surface owner for access, 2) provide operator with SUPO & COA, 3) obtain surface access agreement

Casual Use further explained, includes surveying and staking

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Specifics9-point Drilling Plan

More complete casing and cementing information

Added language for directional drilling

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Specifics12-point Surface Use Plan

Geospatial data optional Additional staking required over that used for

an NOS Certify or Good Faith Effort made to get the

SUPO to the private surface owner (#11) Moved “Certification” out of SUPO, it now

stands alone as a required APD component

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SpecificsBonding

Bond increase and phased release (lease bond only) are now in the Order

BLM requires sufficient bond to restore surface adversely affected by lease operations after abandonment

Authority to require additional bond to be applied to off-lease facilities required to develop a lease

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SpecificsNOS Processing Time Line

Onsite scheduled within 10 days “List of Concerns” provided at onsite or within

7 days Submit APD within 60 days or NOS may be

returned

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SpecificsAPD Processing Time Line

10-Day letter for APD completeness notification Onsite scheduled within 10 days (unless NOS

onsite conducted) “Additional Deficiencies” provided at onsite 45 days to submit additional information 30 days for BLM decision after complete APD

submitted Decision to Approve, Defer, or Deny APD

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SpecificsAPD Permit Deferral

BLM will provide the operator a list of pending actions and a schedule for completion before final APD approval can be granted

BLM will inform the operator of the actions they could take to assist

The operator has 2 years to take the specified actions

BLM will approve the APD within 10 days after all actions are complete

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SpecificsAPD Approval

FS has NEPA responsibility on the Forest On the Forest, BLM should be a cooperating

agency (Co-lead) and adopt the NEPA analysis as a basis for its decision

On Indian lands, BLM may be a cooperating agency (Co-lead) OR may adopt the NEPA analysis prepared by the BIA

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SpecificsMaster Development Plans

Eliminated Master “Drilling” Plans Master development plan (MDP) for 2 or

more APDs with common drilling plan, SUPO and POD.

Subsequent APDs can reference the MDP for NEPA analysis

Each subsequent proposed well must have a survey plat and an APD Form (3160-3)

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SpecificsOperator Responsibilities

Section IV, General Operating Requirements Operator responsibilities discussed - includes requirements for :

• NEPA• General operations• Protecting cultural & historic resources• Protecting endangered species & their habitat• Surface protection• Safety• Completion reports

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SpecificsCompletion Reports

Well logs submitted in electronic format For directional wells be sure to report the

bottom hole lat/long locations (at top of production interval and at total depth)

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SpecificsPrivate Surface

Certify to BLM that a Good Faith Effort has been made to notify the private surface owner before entry

Certify to BLM that a surface use or access agreement has been reached or a Good Faith Effort made

Certify copy of SUPO & COA provided to private surface owner or a Good Faith Effort made

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SpecificsSubsequent Operations

NOI required for new construction, re-construction, or alterations that result in new disturbance.

If no existing approved plan exists, an NOI must be filed & approved by the BLM. New field inspection may be required & additional cultural or biological inventories may be required.

Split Estate - Operator must “certify” that “good faith effort” made to provide private surface owner a copy of any proposal for new surface disturbance.

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SpecificsWell Conversions

Order includes a more complete explanation of well conversions

Added a section on conversion to an injection well

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SpecificsWaivers, Exceptions, Modifications

Waiver – Permanent removal of lease stipulation. Exception – Case-by-case exemption from lease

stipulation. Modify – Permanent change to lease stipulation

Request should also include information to support that the stipulation no longer justified or the proposed operation would not cause unacceptable impacts.

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SpecificsAbandonment

6 months to complete earthwork (weather permitting) after well completion/plugging

May be difficult on multi-well pad An agreement between the SMA or private

surface owner and the operator necessary before assuming improvements (roads, pads, other)

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SpecificsAppeals

FS SUPO subject to FS appeal requirements BIA decisions subject to BIA appeal

requirements

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Thoughts, Comments?

Onshore Oil and Gas Order Number 1, Approval of Operations

Federal Register, Volume 72, Page 10308-10338 (72FR10308), Wednesday, March 7, 2007

Effective May 7, 2007