USE CASE ASD1: Document Processing - New Mexico ... Division/RFP... · Web viewIn step 4, if...

State Land Office

Requirements Definition Project

Use Cases Report

Productive Data Solutions, Inc.

Joel Matek, Sr. Project ManagerPaul Apodaca

October 30, 2003

Table of ContentsMineral Resources – Oil, Gas & Minerals.......................................................................................2

Use Case 1: Create OGRIDs........................................................................................................2Use Case 2: Change OGRID Information...................................................................................5Use Case 3: Lease Sales..............................................................................................................7Use Case 5: Unitization.............................................................................................................10Use Case 6: Industrial Minerals, Salt, & Potash Exploration & Leasing..................................16Use Case 7: Coal, General Mining, & Geothermal Resources Leasing....................................21Use Case 8: Communitization or Consolidation Agreement Termination................................25Use Case 9: Lease Relinquishment (Release)...........................................................................27Use Case 10: Lease Cancellation...............................................................................................29Use Case 11: Lease Expiration..................................................................................................31Use Case 12: Lease Reinstatement............................................................................................33Use Case 13: Lease Stipulations................................................................................................35Use Case 15: Oil & Gas Contamination....................................................................................38Use Case 16: Removal of Unwanted Equipment......................................................................41Use Case 17: Geophysical Permit..............................................................................................43Use Case 18: Lease Sale Nominations......................................................................................47Use Case 19: Reclamation SUA................................................................................................50Use Case 20: Mineral Evaluation & Special Projects...............................................................52Use Case 21: Shut-In Royalties.................................................................................................55Use Case 22: Stripper Well Reduced Royalty Rate...................................................................59Use Case 23: Lease Assignments..............................................................................................63Use Case 24: Lease Sale Notice................................................................................................66Use Case 25: Communitization or Consolidation Agreement...................................................69Use Case 26: Review Correlative Rights Issues or Oil & Gas Production...............................72Use Case 27: Commingling and Off-Lease Storage..................................................................75Use Case 28: Change of Unit Operator.....................................................................................78

Mineral Resources – Royalty Management...................................................................................80Use Case 29: Funds Reconciliation...........................................................................................80Use Case 30: Receive Royalty Returns and distribute royalty..................................................83Use Case 31: Royalty and Gas Plant Audits..............................................................................88Use Case 32: Shut-In Royalties.................................................................................................93Use Case 33: Refund of Erroneous Payments...........................................................................96

Administrative Services.................................................................................................................98Use Case 34: Document Processing..........................................................................................98Use Case 35: Distribution to Beneficiaries..............................................................................102Use Case 36: Budgeting & Expenses......................................................................................105

Use Cases Report 10/30/2003 1

MINERAL RESOURCES – OIL, GAS & MINERALS USE CASE 1: CREATE OGRIDS

OVERVIEW The purpose of this use case is to add an OGRID number for an entity.

PRIMARY ACTOR Designated user from Oil, Gas, and Minerals Division, or backup user if primary is unavailable. May also be designated user/backup from OCD, or TRD.

STARTING POINT Receive correspondence or phone call requesting an OGRID number.

ENDING POINT Request has been completed or cancelled.

MEASURABLE RESULT A new OMID (if necessary) and OGRID numbers and associated information have been added to the database, and the entity was notified of their OGRID number.

FLOW OF EVENTS 1. User enters entity name to determine if they already have a master number assigned. System

displays a list of all entities that contain entered text as part of their name.2. User selects option to create new entity. System displays name that was previously entered

and drop-down list for types of entities.3. User enters type of entity (company, individual, trust, partnership, LLC). System

automatically creates unique master number (OMID) for the entity, updates the information in the database, notifies the user that the data was successfully saved, and moves to the screen for entering OGRID data.

4. User enters name of specific entity (e.g. company name), and primary contact information for entity: address, city, state, zip code, phone number; and optionally contact person name, fax number, and email address. User specifies to save the data and add secondary contact information or save and finish. System automatically assigns an OGRID number, updates the information in the database, notifies the user that the data was successfully saved, and if add another selected then redisplays the required information which may be modified as needed.

5. User enters business function (e.g. O&G, Royalty).6. User enters role type (address type) for given entity (e.g. O&G lease remitter, O&G royalty

remitter, O&G prospective bidder, Lessee of record).7. User specifies previous entity contact information applies or enters new contact data: name

of specific entity (e.g. company name), address, city, state, zip code, phone number; and optionally contact person name, fax number, and email address. User specifies to save the data and add another contact information or save and finish. System updates the information in the database (associated with the OGRID number recently created), automatically sets the status to “Active”, notifies the user that the data was successfully saved, and if add another selected then redisplays the required information which may be modified as needed.

8. Repeat steps 5 - 7, as needed.9. Send letter to entity informing them of their OGRID number, along with Oil & Gas manual

and royalty filing kit.


ALTERNATIVE FLOW OF EVENTS In step 1, if entity name already exists, select appropriate entity and verify that associated information is correct. If data is not correct, follow procedures in Use Case: Change OGRID Information to modify data. Otherwise, skip steps 2-3.

USE CASE EXTENSIONS

RELATED BUSINESS RULES

Primary Subject Matter Expert(s): Anna Villa



USE CASE 2: CHANGE OGRID INFORMATION

OVERVIEW The purpose of this use case is to change OGRID information for an entity.

PRIMARY ACTOR Designated user from Oil, Gas, and Minerals Division, or backup user if primary is unavailable. May also be designated user/backup from OCD, or TRD.

STARTING POINT Receive written correspondence (letter, fax, or email) from an entity requesting an address change for OGRID information. Name change requires miscellaneous instrument to be filed (see Miscellaneous Instruments Use Case).


MEASURABLE RESULT The information associated with the OGRID has been added/modified in the database, and applicable agencies have been notified of the change.

FLOW OF EVENTS 1. User enters entity name in search screen. System displays a list of all entities that contain

entered text in their name.2. User selects given entity from the list, and specifies change information for given OGRID.

System displays list of all business function / role types that were previously entered.3. User selects given business function / role type from the list. System displays all information

for given role type.4. User enters/modifies data from any of the following fields as needed: name of specific entity

(e.g. company name), address, city, state, zip code, phone number, contact person name, fax number, and email address. User specifies to save the data and modify another role type or save and finish. System updates the information in the database, notifies the user that the data was successfully saved, and if modify another selected then redisplays the list per step 2.

5. Repeat steps 3 - 4, as needed.6. System lists all leases for the given OGRID. User requests appropriate number of copies of

changed data, system prints out changed data.7. User adds one copy to each physical lease file in records, and one copy to correspondence

file. If role code attached to OCD or TRD, notify them of change so they can update their records.

ALTERNATIVE FLOW OF EVENTS In step 3, if role type requires approval from OCD or TRD before proceeding, stop processing until their approval has been received.




USE CASE 3: LEASE SALES

OVERVIEW The purpose of this use case is to enact the monthly oil & gas lease sale.

PRIMARY ACTOR Various users from Oil, Gas, and Minerals Division.

STARTING POINT Download the date of the upcoming sale to the Lease Information Management System.

ENDING POINT Lease sale has been completed, and data processing completed.

MEASURABLE RESULT The lease sale has been completed, all applicable information has been added into the database, applicable money has been collected and processed, and applicable entities have been notified.

FLOW OF EVENTS 1. Prior to the day of the sale: download tract nominations, OGRID numbers, PC sale (last sale

number and tracts) onto laptop computer to be used in sale. Laptop computer has Lease Information Management System (LIMS) application loaded, which is a separate software application written in Visual Basic and Crystal Reports.

2. Start LIMS, clear tables to empty old data from previous sale.3. Import files downloaded in step 1 into LIMS.4. On the day of the sale: register bidders from data on registration sheet; user enters: OGRID

number, company name, representative name (one bidder at a time until all bidders have been entered). Set each bidder to active status.

5. Open sealed bids. Sort bids into folders by tract number. Sort bids from lowest to highest bonus amount in each folder.

6. Record sealed bid data on worksheet (as time allows during the sale). Select tract, system shows tract number and starting bid amount (minimum bid). Enter OGRID number and amount bid for successful bidder. System shows company associated with the given OGRID number. Repeat for each tract offered under sealed bid.

7. Verbally announce bid amounts for sealed bids for each tract from lowest to highest amount bid, stating company name and bonus amount ($) bid.

8. For oral bidding, perform bidding by tract. Enter successful bidder’s OGRID number and bid amount. Repeat for each tract in regular and special oral bidding.

9. During sale: User1 (Darlene Vigil) manually records results in worksheet and keeps running total with calculator. User2 (Cecilia Maestas) enters data in Excel spreadsheet (previously prepared by OGM Director and added to shared drive) as unofficial copy used to project results on screen during lease sale. User3 (Anna Villa) enters data into LIMS.

10. After the sale, go to report screen to verify numbers and company names. Print lease sale detail and verify totals, acreage, data entry are correct.

11. Open MS Word document and update automatic links. Use LIMS and Word to create lease documents for all leases from the sale.

12. Use LIMS lease sale details to include lease numbers. Print hardcopy and file in folder for that sale/month.


13. Close LIMS.14. Upload sale data from LIMS on laptop into database (currently on mainframe TSO: upload

sale info). Open LIMS. Select output file (uploads two files. Exit LIMS. Go to database (currently on mainframe TSO: Leaseup) and upload data. Call GSD-ISD to run job to verify if data was uploaded successfully.

15. Print bid summary report from database.16. Review leases and verify legal descriptions are correct, and manually edit if necessary. 17. Print one set of leases (duplex printing). Print oil and gas documents: notification letter per

operator/lease. 18. Print acknowledgement for Yates Petroleum. Replace Yates back pages with printed

acknowledgement.19. Go to printshop for copies. User makes 3 copies of each lease on 25% cotton paper.20. OGM Director signs letters (for Commissioner). Mail letters and leases to lessees. Create

new lease file for each lease. File copy of letter in lease file, and copy in reader file.21. Lessee sign and returns lease. 22. User prepares plat and attaches labels with lease number on files.23. OGM Director signs leases (for Commissioner). Send copy of signed lease to lessee. File

copy in lease folder, and send copy to Records Management for posting and microfilming.24. Copy lease files (MS Word format) onto network drive in directory by month and year.25. Delete all lease documents and notification letters from LIMS to prepare for next lease sale.26. System automatically generates high bid analysis for next lease sale notice, including oral vs.

sealed results, and highest bonus per acreage received; (currently done in MS Word and Excel [Cal2003 spreadsheet]).

ALTERNATIVE FLOW OF EVENTS In step 3 or 14, if upload or download function from/to laptop does not work, can transfer data via floppy or CD instead.

USE CASE EXTENSIONS





USE CASE 5: UNITIZATION

OVERVIEW The purpose of this use case is to approve units and control/monitor exploration and development for hydrocarbons on said units.

PRIMARY ACTOR Petroleum engineer user from Oil, Gas, and Minerals Division

STARTING POINT Receive application from operator recommending proposal to unitize, or receive unitization notification from OCD that statutory unitization order will be issued, or receive notification from BLM that unitization process is planned.


MEASURABLE RESULT The unit has been approved, all unit information has been added/modified into the database, and applicable agencies have been notified.

FLOW OF EVENTS 1. User receives application data, and other information concerning proposed unit. This

information would include initial form of unit agreement, engineering report, geologic data, rough form of Exhibits “A” and “B”, and Letter of Designation by the BLM (if the unit contains Federal lands). Suggested geologic exhibits to include in package are: structure map, isopach map, cross sections, and geological discussion.

2. Review package for completeness and accuracy, for expired/expiring acreage, open acreage, engineering and geologic data, and other SLO requirements.

3. Route package to engineers and geologists; complete “Unit Checklist form”.4. Recommend approval or rejection.5. Prepare preliminary approval letter, with any further requirements, or needed clarifications. 6. Send copy to OCD (and BLM if applicable).7. Set up file folders for correspondence, plans, unit agreement, well records. File in pending

unit file. Send duplicate to Records Center.8. Review application letter from applicant requesting final approval, 2 copies of unit

agreement and operating agreement, ratification from at least 75% of lessees, OCD order, (Certificates of Determination from BLM, if applicable), and filing fee. Review package for completeness and accuracy to determine if all conditions or restrictions have been met.

9. Verify each ratification received matches lessee of record. Post committed ratifications to exhibits.

10. Prepare approval letter with restrictions, approval date, and effective date for Director’s signature. Distribute copies to OCD, TRD, unit agreement file (original), unit correspondence file, Oil & Gas correspondence file, Commissioner’s reader file, (and BLM if applicable). Prepare 7 certificates of approval for Commissioner’s approval and seal.

11. Perform final review of Exhibits “A” and “B”, ratifications, and beneficiary review. Prepare & distribute report to departments: OCD, TRD, Royalty Mgmt., Geologists, Engineers, and Unit file.


12. Post unit name, subdivision description, and dates to oil & gas tract books - excluding leases that were not ratified.

13. Copy ownership plat and put in Unit Agreement.14. User enters unit data (“Utloc file”) including: unit name, operator, OGRID number, county,

date, acreage amounts (total, State, Federal, Indian patented, fee), uncommitted tracts, unit type, segregation, automatic elimination, term (years), year of last plan of development, address, city, state, zip, telephone #, contact name, action date, remarks, pool 1 name and code, pool 2 name and code, pool 3 name and code, pool 4 name and code, pool 5 name and code, section-township-range descriptions.

15. Pull and stamp actual lease with unit data: Unit name, effective date, approval date, acreage committed (subdivision).

16. Make an original and duplicate expansion folders. Also for the original folder, make 5 folders and label for unit agreement, correspondence, plans of development, operating agreement, and well records.All data is filed in original and duplicate expansion folders.

17. User enters unit details information: Unit name, record effective date, OGRID number, operator effective date, unit type, allocation type, segregation clause, unit effective date, SLO-OCD-BLM approval dates, and comments. System verifies that the unit name has not been previously used. Operator current date defaults to current date. After entering the OGRID number the operator name is displayed. System automatically assigns a unit status of “Active”, updates the information in the database, notifies the user that the data was successfully saved. The system also enters the new unit name into the unit listing file (“Utnames”) (currently this is done by the user).

18. User enters unit boundaries data for each tract: section, township, range, legal description, and lot identifier. If adding boundaries to an existing unit the user may specify the revision number and revision effective date. If no revision date is specified, the system will use the current date for this field. System updates the information in the database, and notifies the user that the data was successfully saved.

19. User enters tract data from exhibit “B” for each tract: tract number, ownership (Federal, State, or Private), lease (and assignment) number, acreage, and commitment status (Y/N). If adding tracts to an existing unit the user may specify the revision number and revision effective date. If no revision date is specified, the system will use the current date for this field. System updates the information in the database, and notifies the user that the data was successfully saved.

20. The user enters pool identification number, pool name and effective date for each pool to be added to the unit. System updates the information in the database, and notifies the user that the data was successfully saved.

21. User enters Oil Conservation Division order number. System updates the information in the database, and notifies the user that the data was successfully saved.

ALTERNATIVE FLOW OF EVENTS In step 2, if doesn’t meet requirements notify operator or their representative of deficiencies, required clarifications, etc. and wait until situation is clarified, or send rejection letter and return application.

In step 4, if rejection recommended then return application to applicant with letter of explanation and notify OCD (and BLM if applicable).


USE CASE EXTENSIONS Type I State Exploratory Unit:After step 19, user enters unit tract percentages data. The system displays the tract numbers, ownership, lease number and lessee of record for each tract. The user enters the phase number, percentage revision number, phase effective date, (revision effective date if modifying tract percentage data), and product name(s) (e.g. oil, gas, CO2). For each tract, the participating area (%) is added. The system displays a running total of the sum of tract percentages as each tract participating area is entered. System updates the information in the database, and notifies the user that the data was successfully saved.

Step 20 may be performed after a commercial well has been drilled and completed instead of during the unitization process.

Type II Federal/State Exploratory Unit:After step 20, user enters participating area data: participating area name, expansion number, effective date, SLO-OCD-BLM approval dates for each participating area in the unit. System updates the information in the database, and notifies the user that the data was successfully saved. The user then enters the tract participation data: by first selecting the participating area name to enter tract participation percentages for. The system displays the tract number, ownership, lease number and acreage for each tract. The user enters the participating percentage for each tract. System updates the information in the database, and notifies the user that the data was successfully saved. The user enters the subdivisions in participating areas for State acreage only. The system will display the tract number, section, township, range, and unit letter. User enters the effective date for each tract. System updates the information in the database, and notifies the user that the data was successfully saved. The user then enter well completions data by first selecting the participating area name (and expansion number if appropriate), and as of date. User enters the property number which pertains to unit, well number, pool number, and effective participating date (or allow to default to current date). The system validates the data against the OCD well completion database, and updates the information in the database, and notifies the user that the data was successfully saved.

RELATED BUSINESS RULES 1. Unit agreement form must meet State minimum requirements as to form and content.2. SLO policy prohibits naming a Unit the same as another unit on State lands, whether active

or terminated. The word “Federal” should not be in the Unit name if it contains both State and Federal Land unless it also contains the word “State”. The word “Federal” can only be used alone if the unit contains no State trust lands.

3. Secondary recovery units must comply with Rule 19.2.100.51.C(2) NMAC Use of Fresh Water. Initial plan of operation must also be approved

4. Secondary recovery units must send in redesignation of all well names and numbers participating including old name, new name, API number, and well location for final unit approval.

5. Any unit containing open State acreage within Unit boundaries will not be approved per SLO policy.

6. State exploratory units all participate 100% of committed acreage.7. Units may be formed for oil, gas, carbon dioxide (CO2) or helium.8. Oil & gas leases are statutory, and may only be modified by unit or communitization

agreements.


9. Unitization requires 75% of leases for exploratory units, and 80% of leases for secondary recovery units.

10. Unit allocation type is either tract or participating area (PA).11. Final unit application fee is currently $30/section or portion thereof.12. The sum of committed unit tract percentages for Type I State Exploratory Units must total

100%. The sum of participating percentages for Type II Federal/State Exploratory Units must total 100%.

13. The OCD order number consists of three parts: OCD order type (prefix), OCD order number, and OCD order suffix ID number.

Primary Subject Matter Expert(s): Pete Martinez




USE CASE 6: INDUSTRIAL MINERALS, SALT, & POTASH EXPLORATION & LEASING

OVERVIEW The purpose of this use case is to review and issue leases for industrial minerals, salt, or potash, including Exploration SUA’s.

PRIMARY ACTOR Minerals geologist or analyst from Oil, Gas, and Minerals Division

STARTING POINT Potential lessee inquires about obtaining exploration SUA or lease for industrial minerals, salt, or potash.


MEASURABLE RESULT The lease has been approved or rejected, all applicable information has been added into the database, and applicable entities have been notified.

FLOW OF EVENTS 1. Potential lessee inquires about obtaining lease for industrial minerals, salt, or potash, and is

sent information about the leasing process. Check land availability in tract books. Potential lessee submits application and fees for Exploration SUA for industrial minerals, salt, or potash.

2. Review package for completeness and accuracy. Application should include application fee, advance rental payment, bonding, and notarized application form.

3. User assigns lease number.4. User “Pencil posts”in Minerals tract book.5. User conducts Minerals Technical Review which could include but not limited to: Site visit,

request Field report which could include an ARMS check (for archaeological, cultural resources, and endangered species). Prepare SUA lease package to include: the SUA, completed Field report from DRM, Summary sheet/maps, and Transmittal letter to be signed by Commissioner and mailed to potential lessee. Prepare Concurrence form as a cover to lease package and route through other SLO divisions for ACs/Director’s signatures. Route approved lease package to Commissioner for signature of transmittal letter. May include site-specific restrictions. Send 3 originals of SUA to applicant for signature and applicant signs and returns SUA’s.

6. Prepare and send package to Commissioner (signed SUAs, Transmittal Letter, previously signed Concurrence form, Summary sheet, and letter to Grazing lessee). Commissioner signs SUAs and letters.

7. User enters lease data: lease number, lessee, bill to, location/legal description, rental rate, royalty rate, effective and expiration dates (typically 15 days after effective date).

8. Prepare permanent SUA file with one original SUA and rest of paperwork. Send one original to Records Management for permanent posting in the tract books (all 3) and third original of approved lease to Lessee. Right of Entry notification is sent to Grazing Lessee (or surface owner).


9. Records Management returns SUA file to OGMD to archive.10. Leases : Potential lessee submits application to lease, and other appropriate forms.11. User checks tract book for availability, and assigns lease number.12. User “Pencil posts” Minerals tract book.13. User reviews package for completeness and accuracy. Application should include correctly

completed application form, correct legal description, signed and notarized, with application fee and rental included. Mine Operation Plan (MOP) (with site drawings), Mine Reclamation Plan (RP), Bond, and Environmental Questionnaire. If information is missing or unsatisfactory notify applicant by phone or email of additional requirements.

14. Determine if split estate (State owns minerals, someone else owns surface). If so send to Legal Division for determination if area should be leased.

15. Perform technical review of lease. Field personnel perform site visit (particularly for review for operations and local political issues) often jointly with Minerals Geologist (particularly for reclamation and special conditions issues review). Commercial resources reviews potential usage issues. ARMS check review for archaeological, cultural resources, and endangered species may be performed as determined in Field Report process, and MOP and RP are reviewed. Minerals Geologist reviews/approves MOP.

16. Revise MOP, if needed, to handle special conditions. [Every lease is site specific with different stipulations and unique MOP and RP.]

17. Prepare final lease package (Commissioner’s summary, Location map, Lease, Reclamation plan, Transmittal cover letter), and route to OGM management, Surface Division, and Field Operations for review. Each group writes recommendation about whether to lease or not.

18. Commissioner signs letter and User sends letter, 3 originals of the lease, and 3 originals of RP to lessee.

19. Lessee signs and notarizes lease (3) and RP (3) returns to OGMD with advance royalty payment.

20. User prepares package for Commissioner’s final approval. Package includes 3 originals of signed leases, 3 signed originals of RP, transmittal letter, and Right of Entry letter (ROE) to grazing lessee/surface owner. Commissioner signs cover letter, ROE, leases, and RP’s, and one set (approved lease and RP) sent to lessee. One set put in lease folder, third set sent to Records Management for posting in tract books and archiving. Notification sent to DRM and grazing lessee. Copy of transmittal letter sent to State of New Mexico Mining and Minerals Division (MMD). Salt leases require notification memo sent to OCD.

21. User enters lease data: lease number, lessee, bill to, location/legal description, rental rate, royalty rate, and effective and expiration dates.

ALTERNATIVE FLOW OF EVENTS In step 1, if applicant is not interested in SUA, they may begin lease process directly at step 12.

In step 2, if tract is not available send rejection letter to applicant with explanation. Refund rental payment.

In step 11 if tract is not available, or in step 14 if not recommended for leasing, send rejection letter to applicant with explanation. Refund rental after obtaining Director’s approval and signature.

USE CASE EXTENSIONS Potash Leasing (Rule 3):


Application requires: application fee (currently $30), 1st year’s rental payment, bond, land appraisal, and acreage limit.

Primary lease term of ten years (unless commission determines shorter term is in best interests of the trust), and as long as minerals are produced in paying quantities from the land.

Rental payments of at least $.10/acre or fraction thereof, payable annually in advance. First year rental shall be minimum of $100.

Lessee must begin drilling operations within one year, including coring to depth of formations containing minerals leased for. Additional test bore shall be drilled each year until number of bores equals number of sections of land in lease. Alternative prospecting work (e.g. shafts, tunnels, open cuts) may be accepted in lieu of drilling where mineral deposits are so situated.

If minerals are discovered in commercial quantities, they shall be produced in commercial quantities with reasonable diligence. Commissioner may authorize suspension of production of up to five years at any one time (up to ten years from date lease would have expired); where: temporary conditions preclude mining of maximum mineable ore in keeping with safe mining practices; several parts of lands covered by lease are situated with respect to other lands of lessee to allow reasonable time to proceed with orderly mining program of entire area; or temporary marketing conditions preclude mining except at a loss. Suspensions shall extend term of lease to coincide with term of suspension.

Salt Leasing (Rule 4): Application requires: application fee (currently $30), 1st year’s rental payment, bonds

(performance and surface improvement damage), and land appraisal. Primary lease term of ten years (unless commission determines shorter term is in best

interests of the trust), and as long as salt is produced in paying quantities from the land. Lease may provide for rental payments of at least $25 per subdivision of 40 acres more or

less, payable annually in lieu of advance royalty.

Industrial Minerals (Rule 5): Application requires: application fee (currently $50), 1st year’s rental, Mine Operation Plan,

Mine Reclamation Plan, Bond, and Environmental Questionnaire.

RELATED BUSINESS RULES 1. Leasing rules are mandated per 19.2.3 NMAC (Potash), 19.2.4 NMAC (Salt), and 19.2.5

NMAC (Industrial Minerals).2. Industrial minerals leases may not be less than 40 acres (lot) [quarter-quarter section].3. Online application form with built-in error checking should be available for lessees to verify

accuracy of their data. System should allow online tracking of approval process so lessees may know current status of the leasing process.

4. Exploration SUA advance rental payments are currently $1/acre or portion thereof.5. Archaeologist must be onsite during all invasive work during exploration SUA. 6. On completion of SUA, lessee must supply technical report to SLO, including all lab results,

mineral thickness data, etc. These results are kept confidential for one year.7. The commissioner must approve any lease assignments.

Primary Subject Matter Expert(s): Gene Darnell, Mary Ellen Carroll




USE CASE 7: COAL, GENERAL MINING, & GEOTHERMAL RESOURCES LEASING

OVERVIEW The purpose of this use case is to review and issue leases for coal, general mining, and geothermal resources.

PRIMARY ACTOR Minerals geologist or analyst from Oil, Gas, and Minerals Division

STARTING POINT Potential lessee nominates tract for coal or general mining or geothermal resources.


MEASURABLE RESULT The lease has been approved or rejected, all applicable information has been added into the database, and applicable entities have been notified.

FLOW OF EVENTS 1. Potential lessees nominate tracts for coal, general mining, or geothermal resources.2. User performs technical review of tracts, including Site visit, Geologic evaluation, and

request for a Field report (includes checking for threatened and endangered species). Assemble package for review by Commissioner.

3. User “Pencil posts” in all three tract books.4. Conduct lease sale (either sealed or oral). Award tract to highest bidder based on bonus bid

(provided they have everything in order).5. Prepare lease documents (3 originals). Review with OGM Director, who signs preliminary

approval letter. 6. Send lease to applicant. Applicant signs and returns lease along with bonus payment, first

years rent, and disclosure statement.7. Director signs leases and letters (for Commissioner).8. User enters lease data: lease number, lessee, location/legal description, rental rate, royalty

rate, and effective and expiration dates.9. Prepare lease file with one original in lease file and send one original to Central Records for

archiving, and third copy of approved lease to Lessee. Notification is sent to Grazing Lessee or surface owner.

10. Start tracking of Mine Operations Plan, Bonding, Reclamation Plan. Lessee must conduct mining activity in strict compliance with approved mine development and reclamation plans.

ALTERNATIVE FLOW OF EVENTS In step 2, if tract is rejected for leasing then the process is complete.

USE CASE EXTENSIONS Coal: Primary lease term of five years. Secondary lease term of five years, if lessee has submitted mine plan not disapproved by

commissioner within three months after submission, and lessee has incorporated leased land


with adjacent land (if necessary) into a logical mining unit, or adjacent federal land is not available but lessee has incurred substantial costs in developing leased land.

If at end of secondary term, lessee is producing coal at average annual rate of either 1% of the estimated recoverable reserves or 1% of estimated recoverable reserves from logical mining unit, then lease shall continue as long as 1% production is maintained.

In lieu of actual production requirement, lease expiration can be prevented by paying advance royalties equal to estimated 1% of recoverable reserves of leased land on or before lease anniversary date. Advance royalty payments may hold lease for up to ten years only, and any credits later taken against actual production shall not exceed 50% of total royalty due for any single reporting period.

General Mining: Primary lease term of three years, and so long thereafter as minerals produced in paying

quantities. Annual rent is $1/acre paid in advance each year. Secondary lease term of two years, and so long thereafter as minerals produced in paying

quantities. Annual rent is $10/acre paid in advance each year. Tertiary lease term of five years, and so long thereafter as minerals produced in paying

quantities. Annual rent is $3/acre paid in advance each year. Quaternary lease term of five years, and so long thereafter as minerals produced in paying

quantities. Annual rent is $10/acre paid in advance each year. Lessee may hold nonproducing lease by paying advance royalty during quaternary term in addition to rent, as follows: eleventh year: $10/acre, twelfth year: $20/acre, thirteenth year: $30/acre, fourteenth year: $40/acre, fifteenth year: $50/acre.

Upon commencement of mineral production in paying quantities, advance royalty payments for given year and previous two years shall be credited against royalty otherwise due.

If production in paying quantities commences during lease term and ceases before end of quaternary term, lessee may maintain lease by paying rent (and advanced royalties if applicable) until end of quaternary term.

If production in paying quantities ceases for any reason beyond lessee’s control, with written approval of commissioner lessee may continue the lease from year to year for up to three years, by paying annual rental of $10/acre and advanced royalty of $60/acre.

Production of minerals in paying quantities from anywhere on the premises will continue the term of the lease and all assignments thereof. Within five days after commencing production, lessee shall notify commissioner in writing of such production, including production start date, and legal description where production occurred. Lessee shall provide same notice where production restarts after cessation lasting three consecutive months or longer.

Geothermal Resources: Leases are limited to 2,560 acres or less, and cannot be less than a legal subdivision in size,

and are generally at least 640 acres, and must be composed of contiguous acreage. Current geothermal leases are an exception to this rule in practice since they were granted before the rule was passed.

Leases may be granted by application by over-the-counter leasing, or by sale (sealed or oral), at Commissioners discretion or if land is in tract book as a “known geothermal fields”.

No entity shall control state geothermal resources exceeding 51,200 acres.

RELATED BUSINESS RULES 1. Leasing rules are mandated per 19.2.2 NMAC (General Mining) and 19.2.6 NMAC (Coal),

including statutory coal lease form.2. Mandatory application fee is currently $100 and 1st year rental, or $500 minimum.


3. Incomplete bid applications are rejected.4. Lessee is required to have bond: exploratory is $15/acre, development is $20,000/lease. May

have single lease bond or mega bond.5. Lessee’s obligation for reclamation of land survives any lease termination, suspension, or

relinquishment. Commissioner will provide lessee with written authorization to carry out reclamation plan.

6. The commissioner must approve any lease assignments.

Primary Subject Matter Expert(s): Gene Darnell



USE CASE 8: COMMUNITIZATION OR CONSOLIDATION AGREEMENT TERMINATION

OVERVIEW The purpose of this use case is to terminate communitization or consolidation agreements.

PRIMARY ACTOR Petroleum Engineer user from Oil, Gas, and Minerals Division

STARTING POINT Review communitization or consolidation production data.


MEASURABLE RESULT The Communitization or consolidation agreement has been terminated, all applicable information has been added into the database, and applicable entities have been notified.

FLOW OF EVENTS 1. Review communitization or consolidation production data.2. Determine that lands are not currently in productive status, and no shut-in royalty is being

paid, and lease expiration will transpire if agreement terminated; or commercial status is not justified.

3. Terminate Communitization or consolidation agreement and recommend lease expiration to lease Management Analyst. Terminate Communitization or consolidation agreement in lease files and tract book.

4. User enters termination effective date, termination approval date and reason for termination (from standard list of reasons).

5. Prepare Communitization or consolidation agreement termination letter. Division Director signs letter. Send original to operator and file copy in Communitization or consolidation agreement file and Division reader file.

ALTERNATIVE FLOW OF EVENTS In step 2, if lands are in productive status but production is not in paying quantities, then send Paying Quantities letter and worksheet to well operator. Wait for reply. Determine if commercial status is justified and continue with step 3 if not justified.

USE CASE EXTENSIONS


Primary Subject Matter Expert(s): Jeff Albers



USE CASE 9: LEASE RELINQUISHMENT (RELEASE)

OVERVIEW The purpose of this use case is to relinquish a lease.

PRIMARY ACTOR Management Analyst user from Oil, Gas, and Minerals Division

STARTING POINT Lessee submits request for relinquishment.


MEASURABLE RESULT The lease has been relinquished, all applicable information has been added into the database, and applicable entities have been notified.

FLOW OF EVENTS 1. Lessee submits request for relinquishment on Form OG-31 with appropriate fee. Lessee

specifies lease number, pertinent assignment number (if any), partial or full relinquishment, and if partial relinquishment - description of acreage to be released (by blocks).

2. Verify lease is in good standing, and request is from lessee of record. Review for completeness and accuracy.

3. User enters lease number, release effective date, partial or full release and reason for relinquishment. System displays remaining active acreage for that lease. If partial release, user specifies acreage by section, township, range, unit letter or lot identifier. System updates the information in the database, notifies the user that the data was successfully saved. System automatically generates notification letter.

4. Director signs notification letter. Send letter with copy of release to Lessee.5. Stamp lease file “Released”, (for all releases, partial or full). File copy of release letter in

lease file. Return lease file to Central Records with memo indicating that lease has been released.

ALTERNATIVE FLOW OF EVENTS In step 2, if not correct return to Lessee with an explanation of rejection.

USE CASE EXTENSIONS


Primary Subject Matter Expert(s): Darlene Vigil



USE CASE 10: LEASE CANCELLATION

OVERVIEW The purpose of this use case is to cancel a lease.


STARTING POINT Pending Cancellations Report is generated.


MEASURABLE RESULT The lease has been cancelled, all applicable information has been added into the database, and applicable entities have been notified.

FLOW OF EVENTS 1. System automatically generates on a periodic basis (one week after rental payment due date)

or Pending Cancellations Report is run by user. This is almost always due to non-payment of rental.

2. Verify lease payment is not in suspense, or misapplied to a different lease.3. Notify lessee and/or operator by phone or email that payment is delinquent. If successfully

contact person and they respond that it will be resolved then hold off further processing until payment received (or 30 days has passed). Operator has 30 days to resolve delinquency after receipt of second notice. If successful, and contact party responds that it will be resolved, then hold off further processing until payment received (or 30 days has passed).

4. Mail notice to operator/lessee by certified mail with return card request. Operator has 30 days to resolve delinquency.

5. Receive returned, signed, certified mail card on lease to be cancelled.6. User enters lease number, cancel effective date, certified letter sent date, and reason for

cancellation. System updates the information in the database, notifies the user that the data was successfully saved. System automatically generates cancellation notification letter.

7. Mark big “X” with black marker and stamp front of lease folder with cancel stamp. Annotate effective date and time of cancellation. Stamp plat and record payment sheet with cancel stamp. Annotate certified number from green card on record payment sheet. File copy of letter and green certified mail card in lease file. Send out original cancellation notification letter. Return lease file to Central Records with memo indicating that lease has been cancelled.

ALTERNATIVE FLOW OF EVENTS In step 2, if payments have been made and lease should not be cancelled then update payment record(s) to remove lease from Pending Cancellation list. If not marked paid, generate memo to accounting to mark lease paid.




USE CASE 11: LEASE EXPIRATION

OVERVIEW The purpose of this use case is to expire a lease.


STARTING POINT Production Status Changed Report (UPPS) is generated.


MEASURABLE RESULT The lease has expired, all applicable information has been added into the database, and applicable entities have been notified.

FLOW OF EVENTS 1. System automatically generates Production Status Changed Report, and Updated Production

Status Report (UPPS) on the 3rd working day of the month.2. Review lease for units, communitizations, production, or extension.3. User enters lease number, and expiration effective date, and optionally the reason for

expiration. If partial lease expiration, select section, township, range, unit letter or lot identifier of acreage to expire. System updates the information in the database, notifies the user that the data was successfully saved. System automatically generates expiration notification letter.

4. Director signs letter. Send original to lessee, one copy to lease folder, one copy to reader file.5. Mark big “X” with black marker and stamp front of lease folder with expiration stamp, for

full expirations only. Annotate expiration effective date and initial on cover of lease folder. Stamp plat and record payment sheet with expiration stamp. Return lease file to Central Records with memo indicating that lease has expired.

ALTERNATIVE FLOW OF EVENTS In step 2, if lease is in a unit, communitization, or has production, then the lease will not expire.If the lease has been extended, monitor activity on the lease for continuance of extension and notify accounting personnel and have an invoice created and apply suspended money to the extended lease and update Next Bill Date Year.

USE CASE EXTENSIONS





USE CASE 12: LEASE REINSTATEMENT

OVERVIEW The purpose of this use case is to reinstate a lease.


STARTING POINT Lease was cancelled or expired in error, and needs to be reinstated.


MEASURABLE RESULT The lease has been reinstated, all applicable information has been added into the database, and applicable entities have been notified.

FLOW OF EVENTS 1. User verifies that lease should be reinstated.2. User enters lease number (including assignment number) of lease to be reinstated. System

updates the information in the database, notifies the user that the data was successfully saved. System automatically generates reinstatement notification letter.

3. Director signs letter. Send original to lessee, one copy to lease folder, one copy to reader file.4. Make new lease folder without expiration stamp. Cross out the expiration or cancel stamp on

the record payment sheet, and stamp with reinstatement stamp. Whiteout the expiration or cancel stamp on the plat. Stamp the expiration or cancellation letter and new lease folder with the reinstatement stamp. Return lease file to Central Records with memo indicating that lease has been reinstated.

ALTERNATIVE FLOW OF EVENTS

USE CASE EXTENSIONS


Primary Subject Matter Expert(s): Jeff Albers



USE CASE 13: LEASE STIPULATIONS OVERVIEW The purpose of this use case is to process a Stipulation and the related fee. Stipulations are normally done to allow for a well to be shut-in or reworked where provision was not made in the original lease.

PRIMARY ACTOR(S) Designated users from State Land Office: Oil, Gas and Minerals (OGM) and Accounting (Acct).

STARTING POINT SLO receives a Stipulation form and related payment.

ENDING POINT The Stipulation is processed, funds distributed, the database is updated, and copies of the Stipulation filed and mailed.

MEASURABLE RESULT Executed copies of the Stipulation are attached to the original lease, and mailed to the Applicant with an approval letter signed by the director. Database is updated to reflect the Stipulation and funds were distributed.

FLOW OF EVENTS 1. SLO Acct receives a Stipulation (Form O-31 (This form may be obsolete!) or O-32) and the

related fee. Acct stamps the form with the data and time received. The stipulation is endorsed with the deposit information.

2. Stipulation is routed to the OGM Oil and Gas Analyst or to the OGM Minerals Analyst as appropriate. OGM Analyst reviews the stipulation for completeness: Title holders, notarizations, and signatures. The working interest owners are not tracked and therefore not required.

3. OGM Analyst looks up the Lease using the Lease Number (AANNNN NNNN) to determine if the lease is in good standing, all payments are current, etc.

4. Analyst enters the Stipulation, Form Number, Date Received, Date Approved, Amount Received, Status, and any Comments. System displays the Lease Type LH or V0 (based on the previous lease). Analyst confirms Lease Type. Analyst saves data and the system automatically enters the User ID and timestamp, updates the database, and notifies the user that the data was saved successfully.

5. Analyst records on the Stipulation the following information from the database: Legal Description of the lease and assignment, the Section, Township, and Range, Term of the Original Lease, New Lease Term, and New Rental Rate per Acre.

6. OGM Analyst gives the Stipulation to the Director for approval.7. OGM Analyst verifies the Lease Status information in the database.8. A copy of the stipulation is filed with the original lease file, a copy is sent to the remitter, and

a copy is filed in the reader file.

ALTERNATIVE FLOW OF EVENTS If the Stipulation does not have the appropriate fee attached, the Stipulation is returned to the remitter.


If the Director does not approve the Stipulation, it is returned to the Remitter with an explanation of why it was returned. Analyst updates the database with the Stipulation and Reason for Rejection.

USE CASE EXTENSIONS


1. Deposit Rule: 6-10-3 NMSA requires agencies to deposit monies by the next business day after receipt. See CFRAS Vol. 1. Chapter 3A, Date Produced: February 12, 1999, http://www.dfafcd.state.nm.us/manuals/INTRO-1F.PDF.

2. Stipulations to Current Lease Provisions are described in 19.2.100.55 NMAC and also 19.2.100.65 NMAC. Fee is currently $75 and is non-refundable.

3. Bid Stipulations are described in 19.2.100.30 NMAC. Fee is currently $75 and is non-refundable - 19.2.100.65 NMAC.

4. Helium stipulations are only required for leases issued after 1964, per 19.2.100.8 NMAC – Products Included. Fee is currently $75 and is non-refundable - 19.2.100.65 NMAC.

5. Stipulation status may be: Approved, Disapproved, or Pending Approval.6. Lease Type: 10 year leases conform to LH lease; 5-year leases conform to V0 leases.

Primary Subject Matter Expert(s): Anna Villa and Mary Ellen Carroll.


http://www.dfafcd.state.nm.us/manuals/INTRO-1F.PDF


USE CASE 15: OIL & GAS CONTAMINATION

OVERVIEW The purpose of this use case is to cleanup oil and gas related contamination on lease sites, and process any royalty payment due.


STARTING POINT Receive report of a contaminated lease site from OCD on C-141 Spill Report.

ENDING POINT Site has been remediated, or legal measures are underway to pursue remediation.

MEASURABLE RESULT Site has been remediated, or legal measures are underway to pursue remediation. Data has been updated into the database, and all applicable parties have been notified.

FLOW OF EVENTS 1. Coordinate with OCD and Field Division to investigate contamination.2. For spills of 10 or more barrels, user enters spill status, OGRID number, legal description,

lease number, county, facility type, facility name, spill amount (number of barrels), and spill date. System automatically generates the spill number and date notified fields, updates the information in the database, notifies the user that the data was successfully saved. System automatically generates a remediation request letter (and 3 copies).

3. User sends certified letter for remediation to operator, with copy of spill report. One copy to reader file, one copy to Field Division with copy of spill report, user retains one copy with spill report.

4. Operator agrees to perform remediation. If operator refuses to perform remediation, contact lessee of record to perform remediation.

5. Operator/lessee send in royalty payment due for spill. Calculate value against posted crude oil price relating to the date of the spill.

6. User enters spill number and the system displays the data for that spill. User then enters date royalty paid, and royalty amount. System automatically marks spill as inactive.

ALTERNATIVE FLOW OF EVENTS In step 1, if the site is not contaminated and is in acceptable condition per regulations, then no further action is required.

In step 4, if both operator and lessee of record refuse to perform remediation, coordinate with OCD to build environmental case. Request assistance from Legal Division.

In step 5, if royalties not paid in 30 days from date of notification letter, then enter spill number and request for follow-up letter. System automatically generates follow-up letter. Mail original letter, put copy in reader file, and retain copy. If royalties are not paid in 30 days then cancel lease.


In step 6, if royalty value paid is incorrect, contact remitter and request balance.

USE CASE EXTENSIONS

RELATED BUSINESS RULES 1. Operators are required to report any hydrocarbon spills that occur.2. If remediation is not performed, no lease assignments for that operator/lessee will be

approved, lease is reviewed for expiration, and legal proceedings commence.




USE CASE 16: REMOVAL OF UNWANTED EQUIPMENT

OVERVIEW The purpose of this use case is to have non-functional, non-essential, or abandoned equipment removed from an active oil and gas lease site.


STARTING POINT Receive report of non-functional, non-essential, or abandoned equipment on an active oil and gas lease site.

ENDING POINT Equipment has been removed, or referred to Legal Division for possible further actions.

MEASURABLE RESULT Equipment has been removed, or case has been referred to Legal Division for possible further actions. Data has been updated into the database, and all applicable parties have been notified.

FLOW OF EVENTS 1. Coordinate with Field Division District Resource Manager to investigate lease.2. Prepare letter to operator with copy to lessee of record for removal of equipment. (If lessee

operates well, prepare letter to lessee only).3. Verify that operator/lessee has reclaimed lease to Field Division District Resource Manager’

specifications.

ALTERNATIVE FLOW OF EVENTS In step 1, if the site does not require any action per District Resource Manager, then no further action is required.

In step 3, if both operator and lessee of record have not reclaimed lease to District Resource Manager’s specification, then refer to Legal Division for possible further actions. No future lease assignments are allowed if this occurs, and lease reviewed for expiration. User enters OGRID number, lease number, flag indicating lease assignments may not be made for the given lease, and effective date. System updates the information in the database, notifies the user that the data was successfully saved.

USE CASE EXTENSIONS


Primary Subject Matter Expert(s): Scott Dawson



USE CASE 17: GEOPHYSICAL PERMIT

OVERVIEW The purpose of this use case is to permit for geophysical surveys.

PRIMARY ACTOR Designated users from State Land Office (SLO) Oil, Gas, and Minerals (OGM), and Accounting (Acct).

STARTING POINT Receive geophysical permit application from operator/geophysical contractor/permit agent.


MEASURABLE RESULT The geophysical permit was issued, all applicable information has been added into the database, and applicable entities have been notified.

FLOW OF EVENTS 1. Receive request for research on feasibility for permit application. Verify State ownership

(surface and/or subsurface) in tract books, database (or GIS, if current and complete). Determine if currently leased, already permitted, or nominated for leasing. Calculate fees based on crossings on trust land.

2. Notify potential permittee by phone or email of calculated fees due.3. Permittee sends application and payment.4. Accounting receives payment, asks geologic staff for permit number.5. Give permit number to accounting (based on incrementing last permit number by one, e.g. if

SP0298 was last permit issued then next permit number would be SP0299).6. Accounting User enters revenue source and type (for geophysical permits), date received,

amount received, OGRID number. System automatically creates the permit number, updates the information in the database, and notifies the user that the data was successfully saved. The system puts the fees into a suspense fund, while waiting to be permitted. Accounting gives permit application to Geologist with copy of check with permit number annotated.

7. Geologist verifies payment data is entered and correct. If fees are less than calculated, then additional payment is arranged. Overpayment is either left in suspense or refunded upon issuing of the permit, per permittee’s preference. If additional payment is entered into system, a unique pay ID is issued to it and permit number is annotated by accounting after confirmation with geologist.

8. Geologist enters permit data: selects the appropriate permit for processing (e.g., by permit number or permittee name). The system automatically displays permit number, permittee (name and unique ID), fees paid, pay ID, and fees receipt date. If additional fees need to be included, Geologist enters next pay ID and fee receipt date. Geologist enters permit commencement date, appropriate land and fee data per subdivision from the permit application (optionally using GIS map, or text entry method). Geologist enters freeform text describing any reclamation requirements specific to that permit or selects default “No Specific Reclamation Requirements For This Permit”. System verifies that fees paid match fees due. If any discrepancy, system notifies the user. System calculates and displays permit


expiration date (defaults to 90 days after permit effective date), and fee data for editing and final verification. System updates the information in the database, and notifies the user that the data was successfully saved. System calculates beneficiary distribution based on leases, and distributes funds from suspense to appropriate accounts.

9. The system displays the permit in editable format (WYSIWYG), where it is available for printing. Permit includes letterhead on first page, and Permit Number, Date Permit Issued, Permittee Name, Permittee Address information, Lands Covered by Permit, Commencement Date, Reclamation Field info (or default text). Geologist prints two originals of this permit.

10. The system generates and displays the cover letter including letterhead. Geologist prints cover letter, after editing, as needed. The cover letter and both permits are sent to the permittee for notarized signature.

11. Geologist pencil post tract books with term of permit.12. The permittee returns both originals of the signed permit to the Land Office; a signature

designee for the commissioner (usually the director of OGMD) signs and seals both originals after cleared by geologist for accuracy and permittee’s input.

13. If the permittee needs a field copy generated immediately to begin operations, a copy of completed permit is faxed, and the original is mailed to them; otherwise, one of the two originals is returned to the permittee by mail. The other copy filed in Geophysical Permits file by permit number.

14. If changes are necessary to a permit before or during its active status such as relinquishments, additions or cancellations, those changes will be automatically annotated with date, name of user entering changes, type of change (“R”, “A”, “C”), and actual change done.

15. Currently, pencil postings are removed from tract books on expiration of geophysical permit. A permanent record should be kept of all permits in the tract books.

ALTERNATIVE FLOW OF EVENTS In step 1, if permit is denied notify permittee of reason why rejected, or what corrections permit needs. Arrange refund, if applicable.

USE CASE EXTENSIONS Geophysical trespass:This is an entire issue that is unresolved at this time, e.g. geophysical prospecting using aerial methods solely where no actual physical crossings are performed on the land surface.

RELATED BUSINESS RULES 1. Geophysical permitting is regulated per 19.2.17 NMAC.2. Geophysical survey permits are required on all State trust lands not currently leased for oil

and gas, including those lands in which the State owns only the surface estate. (An oil and gas lease conveys rights to the lessee to perform geophysical prospecting during the lease period).

3. Applications must include SLO application form, appropriate fee, topographic map showing approximate location of all survey lines, proposed survey operations plan (including description of survey methods, equipment to be used, ingress and egress locations, and spill prevention and control plan.

4. Geophysical permits are valid for up to 90 days from permit approval date only, unless extension is granted by the commissioner because of unavoidable delays.

5. Permittee or their client is required to have damage bond of not less than $5000 per section or portion thereof covered by the permit. Permittee may instead have one megabond or blanket bond of no less than $25,000. Permittees are responsible for compensating SLO


surface lessees for actual damages incurred, although they are not entitled to compensation for access across trust land.

6. Permit may not be issued if the lease has another active geophysical permit, or has been nominated for leasing. Official precedence date is date payment is received for geophysical permit. The tract nomination date is the official date for nominated tracts, not the sale date.

7. Geophysical permit fees are based on total number of crossings in each section: currently in restricted districts $200 per crossing for trust surface or surface and minerals, and $60/crossing for trust minerals only, and non-restricted (frontier basin) areas are $100 per crossing for trust surface or surface and minerals, and $60/crossing for trust minerals only. Total fee is the sum of the fees for each section.

Primary Subject Matter Expert(s): Joe Mraz, Eleanore Nestlerode



USE CASE 18: LEASE SALE NOMINATIONS

OVERVIEW The purpose of this use case is to nominate tracts to be included in the monthly oil & gas lease sale and analyze those tracts.

PRIMARY ACTOR Geologist user from Oil, Gas, and Minerals Division.

STARTING POINT Tract nominations initiated by industry or staff.


MEASURABLE RESULT The tracts have been nominated and analyzed, all applicable information has been added into the database, and applicable entities have been notified.

FLOW OF EVENTS Nomination1. Collect nominations via phone, email, letter, fax from industry. Phone nominations are

written as interim to letter/email from nominator, since nominations must be in writing. Nominations should include company name and address, and related contact information, contact person, requested tract description (section, township, range, description), total acres, requested royalty rate, sealed or oral, and sale month requested. The nomination information is considered confidential (accessible only by geologists and geologic supervisory staff), and therefore is not entered into the database, to ensure confidentiality. A backup system consists of documenting the nominated tracts in a shared MS Word file on the network directory. Tracts are collected up to a trigger date – the Friday before the current month’s sale.

2. Geologist analyzes nominations to verify nominated tracts are State trust lands, land status is open, tract is not under 60-day lease expiration period, not under valid geophysical permit, and not annotated “Do not lease”. Also verify that the in-house data for the tract is correct, otherwise submit correction request to Central Records.

3. If tract is not in any regular sale area then request field report per Field Report Use Case. 4. Review field report to verify that nominated tract is acceptable. Analysis5. Geologist enters all regular area nominations into a sale evaluation worksheet, including

legal description and acreage. Worksheet is given to chief geologist by start of business on Thursday of sale preparation week.

6. Geologist analyzes nominations for each tract per criteria in state statutes: 1) oil/gas trends, 2) structural/stratigraphic traps, 4) lease bonus rating, and 5) exploration/drilling activity. Engineering staff analyze: 3) reservoir volume/recovery rate and 2) structural/stratigraphic traps.

7. Geologist updates worksheet with evaluated scores for each criterion for each tract (range from zero to twenty points) by close of business on Thursday of sale preparation week. Geologist determines total point values for each nominated tract and determines royalty rates based on values as follows: 0 – 49 = 1/8th, 50 – 74 = 1/6th, 75 – 89 = 3/16th, 90 – 100 = 1/5th.


Geologist assigns royalty rate, minimum bid amount, and sale type (oral/sealed) to nominations.

8. Chief Geologist reviews nominations, and Geologist makes any needed corrections.9. Chief Geologist posts sale nominations to tract books, verifying accuracy and availability for

leasing; records last lease expiration (checking for 60-day waiver period), checks surface ownership and records those not state surface, and checks for “Do not lease” annotations.

10. Chief Geologist verifies worksheet matches tract book, correct worksheet as needed. If database or tract book errors are found, submits to Records Management for correction.

11. Send notification letter to nominator.

ALTERNATIVE FLOW OF EVENTS In step 2, if the land is not available for lease, land is removed from list. If a third party nominated the land for lease, the third party is notified of the reason that the land cannot be leased.

In step 4, if tract is unacceptable, tract is rejected and nominator is notified, including reason(s) why tract was rejected.

USE CASE EXTENSIONS

RELATED BUSINESS RULES 1. Special sale tracts have 1/8th royalty, and a 10-year term.2. Regular sale tracts may have royalty rates of 1/8, 1/6, 3/16, or 1/5, and are for 5-year terms.3. All new leases do not cross section lines.4. SLO policy states a $10,000 per 640-acre minimum bid for new oil and gas leases in a

regular sale. Special sale minimum bid is $1/acre.5. For a regular sale, if a whole section is offered, new leases are split into ½ sections or

smaller.6. Bid types may be either oral or sealed.7. Nomination source is considered confidential.8. Minimum bid must be at least $100.

Primary Subject Matter Expert(s): Joe Mraz, Eleanore Nestlerode



USE CASE 19: RECLAMATION SUA

OVERVIEW The purpose of this use case is to review and issue reclamation SUA’s.

PRIMARY ACTOR Minerals geologist user from Oil, Gas, and Minerals Division

STARTING POINT Reclamation is not complete under expired lease, SLO/OGMD determines need for reclamation or additional reclamation and issues SUA


MEASURABLE RESULT SUA is issued and all data entered (ONGARD, Tract Book, Minerals Database)

FLOW OF EVENTS 1. Minerals determines that reclamation was not adequately completed or can not be completed

prior the end of lease. Since lease is or will be expired, need to be issued reclamation SUA to allow them to legally be on land. Reclamation requirements do not expire with lease, persist until site reclamation is completed.

2. Pencil post SUA in tract books.3. Prepare SUA package (SUA, Field report/maps, Summary sheet, and Transmittal letter). May

include site-specific restrictions. Reclamation plan from lease is modified as needed for completion of site reclamation. Send to commissioner for pre-approval.

4. Send 3 copies of SUA to applicant for signature. Applicant returns signed SUAs. 5. Prepare and send package to commissioner (signed SUA’s, Transmittal Letter, Concurrence

form, Summary sheet, and letter to Grazing lessee). Commissioner signs SUA’s and letters.6. User enters SUA data: lease number, lessee, location/legal description, effective and

expiration dates.7. Prepare SUA file and send one copy to Central Records for archiving. Send one copy to

DRM, and third copy of approved SUA to Lessee. Notification is sent to Grazing Lessee. 8. Records Management returns SUA file to OGMD.


USE CASE EXTENSIONS


Primary Subject Matter Expert(s): Gene Darnell



USE CASE 20: MINERAL EVALUATION & SPECIAL PROJECTS

OVERVIEW The purpose of this use case is to document an evaluation of minerals, or a respond to a special project request.

PRIMARY ACTOR Geologist and Minerals Manager from Oil, Gas, and Minerals Division

STARTING POINT Mineral evaluation request received from OGM division, commercial division (business lease), assistant commissioner for community development (land exchange), or surface resources (surface lease). Special project request received from anyone for anything.


MEASURABLE RESULT Presentation, memo, report, or some other final object created or result generated.

FLOW OF EVENTS 1. Evaluate request. Request additional information or clarification, as needed. Receive

additional information, if needed.2. Create file to hold all documents, research, and project correspondence. File by county and

project name.3. Review tract books/database for legal land description and ownership. Verify database

information correct (data integrity check) for given lands. If incorrect, send correction to Central Records for correction.

4. Research geologic data relating to mineral evaluation. (may include: Federal documents and maps at State Library, Bureau of Mines and Mineral Resources at Socorro, Geologic SLO files (expired units, “Geomap” maps, district resource manager reviews, and expired and active leases), NM Department of Transportation aggregate maps, Geological Society publications and guidebooks, Journals, periodicals, and magazines at State Library, or other sources. Copy pertinent sources for files. Order information sources, as appropriate. Geologic data should include access to commercial well database. (This will entail additional expenditure – but can be cost justified by access to drilling and test data from plugged wells, and other information currently not available to geologic staff, that could increase revenues by initiating/stimulating leasing in frontier areas. An example of this is recent leasing activity in the Tucumcari Basin).

5. Verify records in database, as applicable.6. Draft report for mineral evaluation; including construct, draw, or copy all relevant maps and

diagrams. Review and modify, as necessary. 7. Submit to OGM Deputy Director and Director for review and signature. Revise as needed.

Deputy Director, Director, and Geologist sign final print of report.8. Distribute copy to requestor, office file, and reader file.



USE CASE EXTENSIONS Special Project Request:In step 1, evaluate request, and request clarification. Response should be in written form (e.g. email). If verbal request only, send email to requestor stating scope of project). Notify management of request, and determine if feasible in given timeframe. If project is rejected, notify requestor.

Special projects may be for land exchange evaluations, mineral evaluations for business leasing, mining reserve calculations, presentations to schools or other organizations, or anything else.


Primary Subject Matter Expert(s): Joe Mraz, Gene Darnell



USE CASE 21: SHUT-IN ROYALTIES OVERVIEW The purpose of this use case is to receive a Shut-In Royalty Report and royalties.

PRIMARY ACTOR(S) Designated users from State Land Office: Oil, Gas & Minerals Division (OGM) and Accounting (Acct).

STARTING POINT SLO receives a Shut-In Gas Royalty Payment form (SIGRP) and payment.

ENDING POINT SIGRP is processed and funds are deposited

MEASURABLE RESULT SIGRP is processed or returned to Remitter. Funds are held in suspense until the end of the Shut-In Period. Database has been updated for payments received, refunded and distributed.

FLOW OF EVENTS 1. SLO Acct receives the SIGRP and payment. Acct performs a preliminary check of the API

Number to determine that the API Number reported matches the Well Name and Number. If it does not match, the SIGRP and check are returned to the remitter with a letter indicating that the information does not match.

2. Acct prepares endorses the payment and validates the SIGRP with the payment information including Fund and Amount. The funds get allocated to different beneficiaries if it is a shut-in.

3. A lookup is performed on the database using the API Number to verify that the information on the SIGRP matches the data in the database: Lease Number, Assignment Number, Well Name, Well Number, API Number, Section, Township, Range, Unit Letter, Date Shut-In, Date of Lease, Stipulation Date; Amount Paid, Remitter, Address Information (Delivery address, city, state, and zip).

4. Enter the Shut-In royalty payment and the Period Covered Beginning Date and save data. System calculates the Ending Date.

ALTERNATIVE FLOW OF EVENTS SIGRP MismatchIf SIGRP information does not match the database, SIGRP is returned to Remitter with a cover letter indicating that the data does not match and requesting corrected data.

USE CASE EXTENSIONS StipulationsIn the event that a well has been Shut-In for five (5) years a stipulation is required. See Use Case – Stipulations.Adjudication of Shut-In Payments

1. Payments are adjudicated one (1) year and ninety (90) days after payment has been received. Payment is either refunded or distributed to maintenance fund.

2. System should compare the amounts Shut-In payment to any Gas Royalties paid.


3. If Shut-In payment is less than Gas Royalties paid, the database should update the Refund Amount field with the amount of the Gas Royalties paid, and the Refund Reason with “Royalties Exceeded SI Payment Made.” OGM Analyst reviews the data, and accepts the calculation or corrects it if necessary. Data is saved.

4. If Gas Royalties paid is zero (0), the system should update the Distribution Amount, and the Refund field should be zero. OGM Analyst reviews the data, and accepts the calculation or corrects it if necessary. Data is saved.

5. If the Shut-In payment is greater than the Gas Royalties paid, system should update the Refund Amount with the Gas Royalties paid, update the Apply Amount field with Shut-In payment less Gas Royalties paid, and the Refund Reason field with “Royalty Partially Exceeded SI Payment Made.“ OGM Analyst reviews the data, and accepts the calculation or corrects it if necessary. Data is saved.

6. OGM Analyst prints a report of all Refunds showing: Payment number; Receipt date; Line Item number; Lease number, Amount paid; Producing Property, Well Number, Operator, API Number, Comm/Unit, Well Lease Location; Coverage Start and End Dates; Gas Royalties paid, Amount Applied, Refund Amount, and Refund Reason.

7. OGM Analyst reviews report for completeness and report is sent to SLO Accounting if a refund.



2. Shut-in payment due date: the next lease anniversary date that occurs after a 90 day period that begins on the day the well was shut in. Payment must be received on or before the payment due date. Late fees are rejected. It is held in suspense if is a stipulation is sent out.

3. Lease date:a. Leases issued prior to June 14, 1985

i. SI payment is equal to the greater of the rental amount or $100. ii. SI payment during the secondary term is the greater of the double the

rental amount or $100.iii. Continuation terms – May extend the lease by 5 years past the 10 year

expiration term by payment of SI royalties.b. Leases issued after June 14, 1985

i. SI payment is equal to the greater of the twice the annual rental amount or $320.

ii. SI payment during the secondary term is the greater of the double the rental amount or $100.

iii. Continuation terms:1. Discovery, Development and Five Year Exploratory leases may be

extended by 10 additional years. On or after the 10th year, the SI payment is the greater of the four (4) times the annual rental or $2,000 per well per year.

2. Regular Exploratory leases - 4. Adjudication date: One year and 90 days (455-456 days) after date SLO receives

payment. 5. Saving clauses of leases (paragraphs 16 & 17 of leases.



6. No regulations currently established for Shut-In Oil wells.Primary Subject Matter Expert(s): Anna Villa.



USE CASE 22: STRIPPER WELL REDUCED ROYALTY RATE

OVERVIEW The purpose of this use case is to process an “Application for Reduced Royalty Rate for Oil Wells.”

PRIMARY ACTOR(S) Designated users from State Land Office: Oil, Gas & Minerals Division (OGM), Royalty Management Division (RMD), and Accounting (Acct).

STARTING POINT SLO receives an “Application for Reduced Royalty Rate for Oil Wells” (ARR), associated fees, and related supporting documents.

ENDING POINT ARR is processed and funds are deposited

MEASURABLE RESULT ARR is processed or returned to Remitter. Funds are distributed appropriately, database has been updated, and qualified wells flagged to receive the lower five percent rate.

FLOW OF EVENTS 1. SLO Acct receives the “Application for Reduced Royalty Rate for Oil Wells” (ARR),

associated fees, and related documents. Acct performs a preliminary check of the API Number to determine that the API Number reported matches the Well Name and Number.

2. Acct endorses the payment and validates the ARR with the payment information including Fund and Amount in accordance with the Document Processing Use Case. Acct sends ARR to the OGM Petroleum Engineering Specialist.

3. Petroleum Engineering Specialist reviews the ARR to determine if the application is complete. Petroleum Engineering Specialist compares the attached OCD C-115’s to the data shown in the database to see that the monthly reported volumes are correct.

4. Petroleum Engineering Specialist enters stripper well data: flag in the database to show that the well(s) has an application pending for reduced royalty rate, application date, application number, and pool. System calculates the expiration date and indicates that the data was saved successfully. For qualified wells, the system automatically generates a letter for signature by the Commissioner or the Assistant Commissioner for Oil, Gas and Minerals for the reduced rate showing the API numbers, and pools if applicable, and the effective and expiration dates.

5. If approved by Commissioner, Petroleum Engineering Specialist enters flag to show the well qualifies for the reduced rate and the effective date. Petroleum Engineering Specialist saves and the system indicates that the data was saved successfully.

ALTERNATIVE FLOW OF EVENTS In step 1, if the API Number and well name do not match, the ARR and check are returned to the remitter with a letter indicating that the information does not match, and the remitter will need to resubmit corrected data in order to qualify.

In Step 4, if Well does not qualify, the Petroleum Engineering Specialist prepares a letter to the applicant indicating the reason that the well does not qualify.


USE CASE EXTENSIONS Upon expiration of the reduced royalty rate, the Applicant may request an extension by letter on company letterhead. No fee is required, however, the OCD C-115s for the preceding twelve (12) months should be attached.

REPORTS Reduced Royalty Rate Listing – wells included in the reduced royalty rate program. Report should be sorted by any of: Date of entry, Date of termination, API Number, Well Name, Location, County, Operator, and Lessee.

Well Production Report: Report of all wells that averaged less than 3 BOPD for perforations less than 5,000 feet, or less than 6 BOPD for perforations at 5,000 feet or greater. Report should indicate wells that do not meet the requirement that a single month cannot average 5 BOPD for perforations less than 5,000 feet, 6 BOPD for perforations at 5,000 feet or greater. Summary should include average monthly production in BOPD, and quarterly average production in BOPD.

Monthly Report – Report should include Applicant Name, Application Number, OGRID, Company, Lease Number, API Number, Renewal Number, and Renewal Date, and Well Name. Report should be able to be sorted by any column. Summary data should include: Total applications, Total OGRIDS, and Total Number of Wells.

Quarterly Report Data – Average BOPD per calendar quarter; Average Barrels of Oil Produced per Month; Average Price of Crude Oil per Month; Number of Producing Wells per Month, Linear Number of Qualifying Wells per Month, Cumulative Barrels of Oil per Month, and Linear Number of Barrels per Month, Total Number of Wells Approved Inception to Date, and Number of Wells Currently Participating,

Annual Report – Yields the “Status of the Program” It is due December 1st, every year. The Commissioner of Public Lands sends it to the New Mexico State Legislature and the Governor.


1. Reduced Royalty Rate is five percent per 19.2.100.68 NMAC, and NMSA.2. A fee, currently $40.00 per 19.2.100.68.B NMAC, must accompany application.3. Qualifying production levels for stripper wells per 19.2.100.68 NMAC and NMSA must be:

a. For wells producing from formations less than 5,000 feet deep, average less than 3 barrels of oil per day (BOPD) for the last 12 months and no more than 5 BOPD in any one month in the preceding 12 months; or

b. For wells producing from formations 5,000 feet or deeper, average less than 6 BOPD for the last 12 months and no more than 10 BOPD in any one month in the preceding 12 months

4. ARR required attachments per 19.2.100.68.B NMACc. Application feed. OCD C-115 for the preceding 12 monthse. Statement that the well is not capable of sustained production limits per Paragraph

(1) of the Subsection.


f. Provide information regarding negotiations to lower rates paid to other royalty holders and minimize operating costs of the well.

g. Any other facts that would justify the lowered rate.

Primary Subject Matter Expert(s): Jeff Albers, Scott Dawson



USE CASE 23: LEASE ASSIGNMENTS OVERVIEW The purpose of this use case is to process a lease assignment and the related fee.

PRIMARY ACTOR(S) Designated users from State Land Office: Oil, Gas and Minerals (OGM) and Accounting (Acct).

STARTING POINT SLO receives a lease assignment form and related payment.

ENDING POINT The lease assignment is processed, funds distributed, the database is updated, and copies of the assignment filed and mailed.

MEASURABLE RESULT Executed copies of the assignment are attached to the original lease, and mailed to the applicant. Information regarding the assignment has been updated in the database, and funds were distributed appropriately.

FLOW OF EVENTS 1. SLO Acct receives a lease assignment (Form O-30) and the related fee. Acct stamps the form

with the date and time received. The assignment is endorsed with the deposit information.2. Assignment is routed to the OGM Oil and Gas Analyst or to the OGM Minerals Analyst as

appropriate. OGM Analyst reviews the assignment for completeness: Title holders, notarizations, and signatures correct, appropriate fees paid, sufficient bonding is present, and form is unaltered (no depth limitations or percentages).

3. OGM Analyst looks up the Lease using the Lease Number to determine if the lease is in good standing, all payments are current, that the lease is not about to expire, and production status in good standing. Lease description is compared to assignment form. If blanket assignment, verify attached exhibit is accurate.

4. Prepare new assignment, increment last assignment number. Currently, record pertinent miscellaneous instrument numbers on “goldenrod sheet”: numbers, grantor, grantee, date filed.

5. Stamp old assignment “All assigned to [assignment number]”. Annotate new assignment number on every quarter-quarter section being assigned on the old assignment plat. If blanket assignment, stamp “Exhibit filed in lease #” on all except the first lease of blanket assignment, and annotate lease number.

6. Give lease assignments and memo to Director requesting approval of assignments.7. Director signs lease assignments (for commissioner) with commissioner’s signature and seal,

and returns to Analyst.8. Verify OGRID number exists for lessee, or create one if does not exist (follow Create

OGRIDs Use Case).9. Analyst enters the lease number, OGRID, file date, execution date, effective date, and

approval date. Select acreage being assigned (or all acreage in lease). User enters pertinent miscellaneous instrument numbers: miscellaneous instrument number, grantor, grantee, date filed (instead of during step 4). Analyst saves data and the system automatically prints the plats and next day approval letters, updates the database (including automatically updates “Goldenrod” data), and notifies the user that the data was saved successfully.


10. OGM Analyst highlights lease and assignment numbers on plat, and gives the assignment to the Director for approval.

11. Director sign letter. 12. Approved assignment (with validation of filing fee) and copy of letter is filed with the

original lease file, a copy is sent to the lessee. File copy of approved letter in reader file and copy to Petroleum Engineer.

13. Send lease folder to Records Management for posting and microfilming.14. Currently, document file in Excel file on network shared drive with date received and date

approved. User generates report for performance measures (instead of Excel file). 15.ALTERNATIVE FLOW OF EVENTS In step 2, if the assignment does not have the appropriate fee attached, a letter is sent to the remitter giving them 60 days to correct it. After 60 days, if have not received corrected version, then assignment is returned unapproved. The filing fee is distributed to the appropriate fund.

In step 7, if the assignment is rejected, it is returned to the Lease Assignment Specialist with explanation of why rejected. Lease Assignment Specialist makes necessary corrections and returns to Director.

USE CASE EXTENSIONS

RELATED BUSINESS RULES 1. Assignments to leases are described in 19.2.100.39-42 NMAC. Fee is currently $30 and is

non-refundable.2. Assignments must be filed with State Land Commissioner within 100 days after having been

signed by assignor, or else they will not be approved unless extreme hardship to one of the parties is demonstrated, and then a $75 late filing fee will apply.

Primary Subject Matter Expert(s): Anna Villa.



USE CASE 24: LEASE SALE NOTICE

OVERVIEW The purpose of this use case is to prepare, finalize, publish, and distribute lease sale notices.

PRIMARY ACTOR Designated users from State Land Office: Oil, Gas, and Minerals Division (OGM).

STARTING POINT A lease sale is being prepared.

ENDING POINT Lease sale notice is completed and posted on official bulletin boards, and website, and copies are mailed to bid list.

MEASURABLE RESULT Lease sale notice has been prepared and posted in accordance with state law and SLO policy.

FLOW OF EVENTS 1. Geologist enters nomination data: Sale month and year (defaults to next month in current

year), Bid type (oral or sealed), Sale type (special or regular), Lease terms, Minimum bid, Bid source (initials of staff member or “ind” for industry), optional Nomination comments, and Legal description (including subdivisions for the given tract). System updates the information in the database, and notifies the user that the data was successfully saved. System automatically generates notification letter for industry nominations.

2. Currently, Geologist transfers nominations from CICS P to TSO software, entering surface non-state ownership codes and footnotes; and then generates a draft of the sale notice tracts for review. Any needed corrections are made and the draft notice is printed. The system then prints a draft of the sale notice tracts for review.

3. Geologist reviews tract data, including verifying the rental amount, that the minimum bid matches the acreage, and that any restrictions are correct.

4. OGM Engineer proofreads draft, and Geologist makes any needed corrections.5. OGM Director reviews draft of sale notice, and Geologist makes any needed corrections.6. OGM Lease Analyst prepares bid analysis of last lease sale (to be included in lease notice).7. Geologist prepares public notice page for Directors signature (for Commissioner, gets

signature. 8. Geologist gives Office Manager copy of public notice for Newsline for the Blind publication.9. Geologist generates letter-sized GIS map of choice tracts (this sale) and top dollar tracts (last

sale) designated by separate symbols on map, and textual descriptions to the side of map. Map includes outline of geologic terranes. Geologist prepares featured frontier area(s) map and/or any other map deemed appropriate for inclusion. Director and Chief Geologist review maps, and Geologist makes any needed corrections.

10. Geologist combines all dynamic parts and adds sale calendar, computer designation notice (for OGRID number), bid application form, rules and regulations, and any optional attachments, and takes to print shop.

11. Print shop submits first run copy of sale notice for Director’s approval. Any needed corrections are made, and Director approves sale notice.


12. Geologist oversees assembly of 400 – 500 copies of the complete sale notice for mailing, and stocks OGM file cabinet with 100 copies. Post one sale notice on OGM bulletin board, and one copy in first floor bulletin board. Label both with current date and time of posting, and remove last month’s notices (to be sent to State Library) with cover letter.

13. Generate posting claim page with gold seal for Director’s signature, place in sale notice posting file.

14. Generate two original cover letters for State Library’s post-sale files. Attach the two posted notices removed from bulletin boards and four clear copies of last month’s sale notice, and mail to State Library.

15. State Library returns one date stamped copy of sale notice and one date stamped copy of cover letter. Geologist puts them in sale notice posting file together with signed Posting Claim Page with gold seal.


USE CASE EXTENSIONS


Primary Subject Matter Expert(s): Eleanore Nestlerode, Joe Mraz.



USE CASE 25: COMMUNITIZATION OR CONSOLIDATION AGREEMENT

OVERVIEW The purpose of this use case is to determine the need for and complete a communitization or consolidation agreement.


STARTING POINT Receive well completion report from the Oil Conservation Division (OCD).

ENDING POINT A communitization or consolidation agreement is completed, or not required.

MEASURABLE RESULT Agreement has been approved or determined to not be required, all applicable information has been added to the database, and all parties have been notified.

FLOW OF EVENTS 1. Engineer reviews well completion report. 2. Engineer determines that proration unit is greater 40 acres.3. Engineer determines that State lands are involved.4. Engineer determines that non-State lands are involved; and state lands, therefore a

communitization agreement is required. Contact well operator to notify them of requirement. 5. Receive communitization or consolidation agreement from well operator.6. Engineer verifies agreement is correct and properly ratified by all parties.7. Engineer enters agreement data: well name, operator, legal description, proration unit,

effective date, approval date, whether communitization or consolidation agreement, and status. The system updates the information in the database and notifies the user that the data was successfully saved.

8. System automatically prints an approval letter pertaining to the agreement. Engineer reviews the agreement for completeness.

9. Engineer mails the original approval letter pertaining to the agreement to the operator.10. Engineer files copy in the Communitization Agreement folder.

ALTERNATIVE FLOW OF EVENTS In step 2, if proration unit is less than 40 acres, then no agreement is required and process is complete.

In step 3, if no State lands are involved, then no agreement is required and process is complete.

In step 4, if non-State lands are not involved and State lands comprise only one oil & gas lease, then no agreement is required and process is complete. If more than one State oil & gas lease are involved and there is more than one record title owner of State leases then a consolidation agreement is required. Contact well operator to notify them of requirement.


In step 6, if agreement is not correct or ratified, contact submitter to discuss deficiencies and when received continue with step 7.

USE CASE EXTENSIONS

RELATED BUSINESS RULES 1. Proration unit must be greater than 40 acres.2. If non-state lands and state lands are involved, or two or more state leases are involved, a

communitization agreement is required.

Primary Subject Matter Expert(s): Jeff Albers.



USE CASE 26: REVIEW CORRELATIVE RIGHTS ISSUES OR OIL & GAS PRODUCTION

OVERVIEW The purpose of this use case is to review correlative rights issues affecting state trust lands, or oil & gas production.


STARTING POINT Receive various reports from the Oil Conservation Division (OCD), and other sources.

ENDING POINT Information has been reviewed and related notifications or processing has been completed.

MEASURABLE RESULT Information has been reviewed and related notifications or processing has been completed.

FLOW OF EVENTS Correlative Rights Issues:1. User reviews OCD form C-101 (applications for permit to drill, re-enter, deepen, plugback,

or add a zone), OCD form C-102 (well location and acreage dedication plats), or weekly activity reports for location of proposed oil & gas wells on all State, Federal, Fee and Indian lands in the State of New Mexico.

2. User determines well location - on state lease, or Federal, Fee, or Indian lease.3. If on state lease, and well has a standard bottom hole location, then process is complete. If on

state lease but nonstandard bottom hole location or non-state lease, then user determines if well offsets state owned oil and gas lease(s).

4. User determines drainage area and estimates impact on state leases. Determines there is a detrimental impact to state leases.

5. Notify OCD of well impact. Request revision of application for permit to drill or other fair and equitable action, or contact offset operator and inform them of possible drainage by offset well. Inquire about plans for further development on state lease(s) in question from current lessee of record.

Review of Oil & Gas Production on Multi-Section Lease6. Review lease production (volume and pools) from database.7. User determines that there is production on the lease.8. User determines whether lease is “held by production”, and if so documents as such and

posts sheets in lease file. Perform review again in three months. Otherwise perform database review of offset wells for alternative unexplored reservoirs or behind pipe reserves.

9. Determine that additional development is not warranted on the lease. 10. Determine that well is marginal, and that production is not in paying quantities. Send Paying

Quantities Letter to operator and/or lessee of record with request for reply within 30 days. If agree with reply perform review again in three months, otherwise give to Lease Management Analyst to expire lease per Lease Expiration Use Case.


ALTERNATIVE FLOW OF EVENTS In step 3, if non-State lands are involved, and well does not offset a state lease then process is complete.

In step 4, if no detrimental impact, then process is complete.

In step 7, if there is no production on lease, then give to Lease Management Analyst to expire lease per Lease Expiration Use Case.

In step 9, if determine that additional development is warranted on the lease, then send letter to operator requesting future plans for lease with reply within 90 days. If agree with reply then initial and post in lease file, otherwise give to Lease Management Analyst to expire lease per Lease Expiration Use Case.

USE CASE EXTENSIONS Economic Evaluations and Commercial Determination:Review OCD form C-104 to determine well’s initial potential, or use economic analysis data submitted by well operator. Determine if well capable of producing in commercial quantities. If State and applicant agree well produces in commercial quantities then recommend concurrence for participating area admittance to Units Manager. If applicant and State disagree, then review again and discuss with Units Manager, and request additional economic data from applicant. If well does not produce in commercial quantities, then recommend lease production status only for well to Units Manager.


Primary Subject Matter Expert(s): Jeff Albers.



USE CASE 27: COMMINGLING AND OFF-LEASE STORAGE

OVERVIEW The purpose of this use case is to process a commingling and off-lease storage request.


STARTING POINT Receive application for commingling and off-lease storage.

ENDING POINT Commingling request has been completed or cancelled.

MEASURABLE RESULT Commingling application has been approved, funds have been distributed, all applicable information has been added to the database, and all parties have been notified.

FLOW OF EVENTS 1. User reviews application for commingling and off-lease storage. Determines if application is

for wells on state trust lands using tract books and database, and verify $30 fee submitted.2. Review application per 19.2.100.53 NMAC, including: 1) formal application stating type of

permission desired, 2) plat showing location of leases, wells, flow lines, metering facilities, and common tankage, 3) list of leases, legal description, beneficiaries, 4) designation of pool from which each well produces, 5) economic analysis showing profit or loss to the state, 6) schematic diagram of system, 7) explanation of operating sequence, 8) allocation or metering proposal, 9) review of additional pertinent data, OCD form C-107A, OCD Orders, etc. Compare data on application with information in database.

3. Determine that application meets requirements of 19.2.100.53 NMAC.4. Prepare approval letter and memo for Directors review and signature (for the Commissioner).5. Director reviews letter. Any needed corrections are made. Director signs letter. 6. Prepare new commingling folder. Send approved copy with letter to applicant, file in pending

until OCD approval received. Send copy to OCD, and BLM if applicable.7. Receive OCD and BLM (if applicable) approval. OCD will issue an Order and BLM will

approve by letter. View OCD commingling orders by well ID online.8. Enter commingling data in database: commingling type (surface or downhole), application

date, status, operator OGRID number, SLO approval date, OCD Order number, comments, property ID, Pool ID, allocation method, legal description of well completion, lease numbers, beneficiary. System automatically updates the information in the database and notifies the user the information was saved successfully.

ALTERNATIVE FLOW OF EVENTS In step 1, if not state trust lands, return application to applicant with letter of explanation, and notify OCD. If filing fee not remitted, return application or ask remitter to send in fee.

In step 3 or 7, if application does not meet requirements or is rejected, return application to applicant with letter of explanation, and notify OCD and BLM as needed. Enter commingling data in database: commingling type (surface or downhole), application date, status (rejected),


operator OGRID number, SLO effective date, rejection reason, lease numbers, legal description of well completion.

USE CASE EXTENSIONS

RELATED BUSINESS RULES 1. Approval letter needs SLO approval prior to OCD, so must state that our approval is subject

to like approval by OCD, and BLM if applicable.




USE CASE 28: CHANGE OF UNIT OPERATOR

OVERVIEW The purpose of this use case is to process a change of unit operator.


STARTING POINT Receive application for change of unit operator.

ENDING POINT Change of unit operator request has been completed or cancelled.

MEASURABLE RESULT Change of Unit Operator application has been approved, all applicable information has been added to the database, and all parties have been notified.

FLOW OF EVENTS 1. User reviews application for change of unit operator and determines that change of operator

needed. User also determines that unit agreement requirements have been met and surety bond is on file.

2. Prepare approval letter Directors review and signature (for the Commissioner).3. Director reviews letter. Any needed corrections are made. Director signs letter. 4. Send approval letter to applicant and to OCD, BLM (if applicable), Taxation and Revenue

Division - Royalty, Commissioner’s file, reader file, and unit file5. Enter change of unit operator data in the database: new OGRID number, operator effective

date. System automatically updates the information in the database and notifies the user the information was saved successfully.

ALTERNATIVE FLOW OF EVENTS In step 1, if change of unit operator not needed, or unit requirements not met, or surety bond not on file, return application to applicant with letter of explanation.

USE CASE EXTENSIONS

RELATED BUSINESS RULES 1. Notification sent to Units Engineer whenever a unit operator OGRID number changes,

including tracking who changed the data and what changed.




MINERAL RESOURCES – ROYALTY MANAGEMENT USE CASE 29: FUNDS RECONCILIATION

OVERVIEW The purpose of this use case is to receive an Oil and Gas Royalty Remittance Document (OGR-1), supporting documentation, and/or electronic funds transfer, and reconcile these documents to funds deposited with the New Mexico Treasury Department.

PRIMARY ACTOR Designated users from State Land Office: Royalty Management Division (RMD), Information Systems Division (ISD), Accounting (Acct). Also include New Mexico Taxation and Revenue (TRD) processing department for Checks.

STARTING POINT Receive an OGR-1 Remittance Document filed electronically or on paper.

ENDING POINT OGR-1 Remittance Documents, and bank statements have been reconciled to the funds deposited with the New Mexico Treasury Department.

MEASURABLE RESULT All funds have been properly reconciled and applied to an OGRID. Database updated and royalty payment data is ready for the Receive Royalty Payment use case.

FLOW OF EVENTS 1. TRD processing department images checks and OGR-1 Remittance Documents. Documents

are batched by postmark date.2. Information on the OGR-1 Remittance Document is entered into a flat file capturing the

following information: Date and time, Postmark Date, Check Number, OGRID number, Amount Paid, and Batch Number. System automatically assigns a Payment ID. If an OGR-1 Remittance Document is not attached to the check, TRD prepares the form manually.

3. TRD prints the Treasury Department Verified Deposit Report and sends the completed batch to SLO RMD via interagency mail.

4. RMD verifies the deposit advice against the Treasury Department Verified Deposit Report. Differences are investigated and RMD makes corrections if necessary.

5. ACH/Fedwire remittances are received directly by Treasury Department. RMD Acct prints a copy of the bank report listing all ACH/Fedwire transactions. ACH data goes directly into the database through Wellsnet software. Acct enters the Fedwire information from the bank report. Electronic batches are all assigned batch number 9999.

6. RMD analyst notifies the manager when batches reconcile. Manager requests RMD ISD run a process that populates the database with: date and time, check number, postmark/EFT date, OGRID number, amount paid and Payment ID.

7. RMD prepares two reconciliations monthly. The total remittances are compared from the sources to the Treasury Department totals. Reconciling items may exist for inter-fund transfers that result from payments being submitted with the wrong Remittance Document, i.e. a production tax payment Remittance Document being used for a Royalty Payment.

a. Fedwire and ACH batches are listed by OGRID number, amount, and date.


b. Check batches are listed by batch number, date, and amount.8. Royalty Revenue Accounting Supervisor and Revenue Processing Manager sign the RMD

reconciliations.

ALTERNATIVE FLOW OF EVENTS Checks sent in error to the State Land Office (instead of TRD):1. Checks sent to the State Land Office instead of to TRD are received by the Accounting

Department who sends them to the RMD cash desk. A paper Royalty Return may be included with the check.

2. RMD cash desk prepares an OGR-1 Remittance Document for each OGRID included in the payment.

3. OGR-1 Remittance Document, Check, and Royalty Return are sent to TRD for standard processing.

USE CASE EXTENSIONS

RELATED BUSINESS RULES 1. Reconciliation must be performed monthly. 2. Payment submission method must be one of: (1) Fedwire, (2) ACH Credit, (3) ACH Debit, or

(4) Check. Fedwire and ACH Credit/Debit are processed the same as checks except as noted.3. System should allow for credit card payments at a future date, including the option to charge

the credit card processing fee to the Remitter.

Primary Subject Matter Expert(s): Paul Rivera, Patricia Castillo



USE CASE 30: RECEIVE ROYALTY RETURNS AND DISTRIBUTE ROYALTY

OVERVIEW The purpose of this use case is to receive and process an Oil and Gas Royalty Remittance Report (OGR-1) and supporting documents (OGR-2 and 2C) (“Return”) for an entity by OGRID (“Remitter”) and to distribute royalties.

PRIMARY ACTOR Designated users from State Land Office Royalty Management Division (RMD) and State Land Office Information Systems Division (ISD). Also includes New Mexico Taxation and Revenue (TRD) processing department for Paper Returns, which are the majority of returns.

STARTING POINT Receive a Return either on Paper, by EDI, or CSV.

ENDING POINT Return has been processed, recorded, validated and notices issued as appropriate. Royalties have been distributed.

MEASURABLE RESULT The Return has been processed and notices issued to Remitter/Lessee as appropriate. Database has been updated to show the final filed return if appropriate.

FLOW OF EVENTS Paper Return Start1. TRD processes Paper Returns received and creates a flat file.2. TRD transmits a flat file created from the Paper Returns and RMD analyst picks up the

corresponding batch of Paper Returns at TRD.3. Skip to Step 5.EDI/CSV Start4. SLO ISD checks listing of EDI or CSV return files received.5. SLO ISD user processes electronic data files. EDI files are split into individual returns at

1:00 AM and preprocessing files are created. CSV files are ready for processing. Validation checks are run on the EDI and CSV files. Daily a process is run on EDI, CSV, and TRD files to update the following data in the dB: Generated Return Number, Return Source Code, Date Submitted, OGRID number, Final Return (Y/N), Remitted Return (Y/N), Accelerated Royalty Payment Sales Month/Year, Accelerated Royalty Payment Amount, Total Oil/Gas Royalties, Total Oil/Gas Interest, Total Assessments Paid, Total Royalty, Interest and Assessments Reported, Total Regular Credit Taken, Lease Credit Taken Amount, Total Calculated Lease Credit Taken Sales Month/Year, Total Credit Taken, Net Advance Royalty Payment, Total Remittance, Payment Submission Method, Postmark Date, Receipt Date, Validated Remittance Amount, Company Name, Telephone Number, Fax Number, e-mail address, Address, City, State, Zip, Months Covered, Number of OGR-2 pages, OGR-2 page number, Sales Month and Year, OGR-2 Line Number, PUN, Lease Number, Product Code, Transaction Code, Transaction Code, Arm’s Length, Volume BBL/MCF, NGL Gallons, BTU content, Gross Proceeds, Transport Deductions, Other Allowable Costs (Gas Marketing Preparation, etc) State Royalty, Page Total, Grand Total, OGR-2C page number, Sale Month


and Year, Corresponding OGR-2 Line Number, Interest, NGL Credit Additions, Lease Credit Number, and Lease Credit Amount Used. System notifies SLO ISD user that data was properly processed.

6. RMD performs Validation checks of data, i.e. valid PUN/Lease, and computational checks (i.e. royalty rate, and tests of amounts).

7. Paper Returns Only – RMD requests a print of the Validation Reports for Paper Returns. The Validation Reports print on a separate sheet for each Return showing all errors. Reports are printed at SLO. (Currently, SLO staff picks up the Validation Reports, labels, and notices at GSD.)

8. Paper Returns Only – RMD staff attaches the Validation Report to the appropriate Royalty Return and distributes them to the appropriate analyst based on OGRID number.

9. Paper Returns Only – RMD analyst receives the Paper Returns with the attached Validation Reports. EDI/CSV Returns Only - RMD analyst prints EDI/CSV returns and the associated Validation Reports for their assigned OGRIDs.

10. RMD analyst reviews the Validation Report and the attached Royalty Return and corrects all “State Errors” (data entry errors from TRD flat file). The Corrected Return is saved with the analyst’s comments on a line-by-line basis. History is maintained for each change, including date and time of change, and analyst. A note is made on the Validation Report that the error has been corrected.

11. RMD analyst reviews the Validation Report and attached Return for “Remitter Errors.” Analyst contacts the Remitter by phone, mail, fax, or e-mail, to request corrections of Remitter Errors. If corrections are provided verbally, the Analyst requests written confirmation (e-mail, fax, or letter) of corrections made. The Remitter may also make corrections through a web-based system.

12. RMD analyst corrects errors according to information provided by Remitter, and attaches written support for change to Return. The Corrected Return is saved with the analyst’s comments on a line-by-line basis. History is maintained for each change, including date and time of change, and analyst. A note is made on the Validation Report that the error has been corrected.

13. RMD analyst marks Return as “Remitted” by changing status of field to “Yes.”14. RMD analyst matches Return to funds received.15. If Supervisor authorization is required, Return Remitted status is changed to “No.”

Supervisor is given return for review and takes appropriate actions. Return is given back to analyst. Analyst marks Return ready for evaluation by changing Remitted status to “Yes.”

16. RMD Manager schedules EVDR (Evaluation) process and MDSR (Distribution) process to be run. At end of month, RMD Manager prepares schedules for Accounting to make distributions to beneficiaries based on processed returns.

ALTERNATIVE FLOW OF EVENTS In Step 11, if the Remitter does not respond in a timely manner the return is processed and a notice is generated. The Remitter can respond to the notice or may elect to file an Amended Return.

USE CASE EXTENSIONS Annually1. Every June RMD Analyst will determine changes to “large producers” as defined in

19.2.100.57.A(1) NMSA. Query database to show the lessees whose average royalty for the 12-month period ending the previous March 31st exceeded $25,000 and all lessees with a non-blank Election Status. (Currently, Analyst runs an SQL query against the database to


extract this data.) Analyst reviews query results and prints a report showing the Lessee, Royalties Paid Per Month, Average Royalty, Election Status. Report is reviewed for completeness and accuracy. Analyst prints letters to all Remitters showing the Remitter, Remitter Mailing Address, Lease Number, Monthly Royalty Payments, Average Monthly Payment, and notice that under 19.2.100.57.A NMSA that Accelerated Payments are (a) now required in the amount of the Average Monthly Payment unless an election is made to pay Advance Royalties, or (b) no longer required. Letter is mailed to the lessee so that the July filing can be made timely and correctly. System automatically changes Election Status to Advanced (default) for lessees who have exceeded the $25,000 limit for the previous year or to blank for lessees who no longer meet that requirement and saves updated data. System updates User ID and timestamps change.

2. RMD Analyst receives any elections to change to Advance Payment Method and changes Election Status to Advance Payment Method and saves update. System updates User ID and timestamps change.

RELATED BUSINESS RULES 1. Final Return is Yes/No or True/False.2. Remitted Return is Yes/No or True/False.3. Payment submission method must be one of: (1) Fedwire, (2) ACH Credit, (3) ACH Debit, or

(4) Check.4. Returns are due by the 25th day of the second month after production except for Large

Producers [19.2.100.57.A(1) NMAC].5. Large Producers have average royalties of more than $25,000 for the 12-month period ending

the latest March 31. Large producers may elect the Advance Payment Method (default) or the Accelerated Royalty Payment Method. Accelerated Payments and an OGR-1 are due on the 20th of the month following the production month. OGR1, OGR-2 and OGR-2C are due on the 25th day of the second month after production. See the above rule. If advance payments are elected, a monthly advance royalty equal to the average royalty for the 12-month period ended the latest March 31 are due by July 25th and held on deposit by SLO. Each July 25th the amount will be adjusted to reflect the prior year average.

6. Large Producers Election Status: Accelerated Royalties, Advance Royalties, or blank. If no election has been made, Advanced Royalties is the default.

7. Late payments are assessed interest at 1.25% per month or part thereof for late submission. 19.2.100.71 SLO Form OGR-1, §56-8-3 NMSA.

8. Late returns do not have a penalty.9. OGR-1 may cover multiple months.10. Each page of OGR-2 and OGR-2C can only include data for one sales period.11. Each line on OGR-2C must match to a corresponding OGR-2 line.12. Product Codes are specified in the New Mexico Administrative Code, 19.2.100.70 NMAC et

seq.13. Transaction Codes are specified in the New Mexico Administrative Code, 19.2.100.70

NMAC et seq.14. Validation Error types:

o Critical errors – errors that will result in a notice if not correctedo Non-Critical – parameter check errors, statistical audit analysis errors, other errorso Rejection – errors that will result in notice. Credit lines or net credits will result in

a rejection error.15. PUN must be a seven (7) digit numeric code.


16. Oil and Gas Lease Prefixes and Royalty Rates:Dates Issued Prefix Type Royalty Rate Lease Term1922 X0 1/8 10 Years1928-31 A0 1/8 10 Years1928-44 B0, BA,

BH, B11/8 10 Years

1937 C Carbon Dioxide (CO2) 1/8 10 Years1945-56 E0, E1 1/8 10 Years1956-59 OG 1/8 10 Years1959-67 K0 1/8 10 Years1967-72 L0 1/8 10 Years1972-1981 LG 1/8 10 Years1981-Present LH Ten Year Exploratory –

Outside Restricted Area

1/8 10 Years

1975-Present V0 Five Year Discovery 1/6 5 Years1984-Present VA Five Year Exploratory –

In Restricted Area1/8 5 Years

1985-Present VB Five Year Development - In Restricted Area

3/16 5 Years

1986-Present VC Five Year Development - In Restricted Area

1/5 5 Years

Lower Royalty Rate – 19.2.100.68 NMSA

5% - Trans Code 65 for stripper wells

3 Years

The Lower Royalty Rate can be applied to any Lease Type subject to the conditions set in 19.2.100.68 NMSA. The rate can be renewed for additional three-year periods, but can also be terminated at any time at the sole discretion of the Commissioner.

Primary Subject Matter Expert(s): Cynthia Melton and Kurt McFall.



USE CASE 31: ROYALTY AND GAS PLANT AUDITS

OVERVIEW The purpose of this use case is to perform a Field or Desk Audit of Royalty Returns.

PRIMARY ACTOR Designated users from State Land Office Royalty Management Division (RMD) Gas Plant & Compliance (GPC), Oil & Gas Audit Section (OGA) and Legal (LGL).

STARTING POINT Audit cycle starts with the selection of an OGRID, Return, or PUN for audit.

ENDING POINT Audit report issued and audit subject has responded to audit findings. Additional royalties, and interest have been paid.

MEASURABLE RESULT Royalties and interest have been collected in accordance with New Mexico law and regulations. Database has been updated to reflect audited results and funds have been allocated to the appropriate beneficiaries.

FLOW OF EVENTS Audit Selection1. RMD audit manager prepares an audit plan that provides audit coverage of 80% of state

royalties paid to the State Land Office over a 4-year cycle. The audit plan includes the OGRIDs to be audited, the assigned audit team, and tentative audit dates. The audit plan is prepared from data compiled in the database.

Pre-Audit2. Auditor updates: OGRID of company being audited, Auditor ID, status flag set to “Pre-

Audit.” System updates the database and notifies the user that the save was successful. Auditor performs pre-audit research on the company being audited. The pre-audit research includes:

a. Company contact – The auditor will contact the company and schedule the audit. Company information is obtained from the database.

b. Audit questionnaire – The auditor will send the company a questionnaire requesting information on business practices and business relationships

c. Audit scope determination – The auditor will generate and analyze various reports to determine properties and time periods to audit. Data on these reports is derived from the database system and obtained through web-based applications. Some of these reports include:

Volume comparison report (comparison of OCD, TRD, and SLO well head volumes)

Remittance reports (OGRID royalty remittances) Value comparison reports (comparison of SLO and TRD reported values) Price exception reports (computed from royalty returns) Deduction exception reports (computed from royalty returns) Balancing reports (comparison of OCD production and disposition data) Inquiry screens (PUN, Lease, and allocation data)


3. The auditor will also review severance tax audit information along with the questionnaire responses during the scope determination process.

4. Auditor updates: status flag set to “Engagement Letter Issued” and Field Audit Dates. System updates the database and notifies the user that the information was saved successfully. Once the Scope has been determined the auditor will send an Engagement letter to the company including two attachments: the audit scope and a listing of company documents to be reviewed at the time of the field audit. The Engagement letter will also request a sample package that includes the documents used be the company to report royalties.

5. The final step of pre-audit is a review of the requested sample package.Field Audit6. The auditor will conduct a two-week field audit of the company that involves an opening

conference, audit testing, and the closing conference. Report Write-Up7. Auditor updates: status flag set to “Report Write-Up.” System updates the database and

notifies the user that the save was successful. The audit results are documented. This is accomplished through final preparation of audit schedules and the preparation of detailed narratives. The auditor will also attach an issue letter to be sent to the company.

Review8. Auditor updates: status flag set to “Review.” System updates the database and notifies the

user that the save was successful.9. The audit manager will review the entire audit package.Resolution10. Auditor updates: status flag set to “Report Complete.” System updates the database and

notifies the user that the save was successful.11. Once the audit package has been reviewed it will be sent to the company with a 30-day

response period.12. The audit findings are then resolved through a) amended royalty returns with additional

royalty payments, b) settlement agreements or c) litigation.13. Auditor updates: status flag set to “Complete.” System updates the database and notifies the

user that the save was successful.

ALTERNATIVE FLOW OF EVENTS In step 2, Auditor updates information in the database as appropriate for any changed information.

In step 3, if issues arise during fieldwork, the Audit Manager, Director, and if appropriate, Legal will be involved. The Commissioner will also be notified as appropriate. Settlements will always include the Commissioner and Legal. Settlements are private and may not be used as precedents by other remitters.

In step 6, Auditor prepares a default assessment based on information available if the respondent does not reply timely.

In step 11, the auditor is notified at the end of 30 days if the Company has not responded.

In step 12, resolution by settlement or litigation requires the Auditor to prepare a royalty return to enter data into the database.


USE CASE EXTENSIONS Gas PlantsIn step 2, the audit questionnaire also includes the following gas plant information:

Plant accounting data1. Types of purchase or processing contracts w/ producers2. Processing agreements with others3. Chart integration Service4. Sales agreements

a. Non-processed gasb. Residue gasc. Liquids

5. Pipeline agreements for non-processed or residue gas sales6. Volume balancing procedures

d. Theoretical vs. actual liquids extractede. Intake vs. disposition statement

Points of sale of gas and gas products How do you account for expenses for processing for liquids based on points

of sale How do are volumes and values of unprocessed and residue gas and liquids

allocated back to the leases for taxes and royalties How is value determined for taxes and royalties Who, including contact info, prepares the state of New Mexico:

1. Tax forms2. Royalty reports

Desk AuditsDesk audits are significantly smaller than field audits and may include fewer properties or limited issues. Desk audits include the same activities as the pre-audit phase of the audit process. Audit schedules are sent to the company with a request for a response within 30 days. The results of desk audits are resolved through submission of amended royalty returns with additional royalty payments.REPORTS Volume comparison report – comparison of OCD, TRD, and SLO well head volumes Remittance reports – OGRID royalty remittances Value comparison reports – comparison of SLO and TRD reported values Price exception reports – computed from royalty returns Deduction exception reports – computed from royalty returns Balancing reports – comparison of OCD production and disposition data

RELATED BUSINESS RULES Royalty Returns1. Royalties are covered by 19.2.100 NMAC. 2. Large remitters are audited on a 4-5 year cycle.3. Audit Status: Unaudited, Audit Questionnaire, PreAudit, In Process, Report Complete,

Report Issued, Audited.4. Refunds

a. Audit – Royalty remitter must file a claim for refunds determined during the course of an audit. Claim must be filed within 90 days of notice being received per 19.2.100.74 NMAC and 19-7-60 NMSA.


b. Company requested – Royalty remitter must file a claim within two years of accrual per 19.2.100.74 NMAC and 19-7-60 NMSA.

Gas PlantsSelection Criteria

a. Audit every large and mid-sized companies on a cycle basis.b. Large credit balances >= 25,000c. Federal or state tax return issuesd. Plant types: cryogenic, turbo-expander, refrigeration, etce. Related companies will generally be included in the audit selection as appropriate.

2. Gas plant deductions in 19.2.100.72 SLO Form OGR-2.5. Desk Audits – Similar to field audits with the exception that an audit questionnaire is not

required. Desk Audits are used for Pun, Plant, and Smaller Company audits.

Primary Subject Matter Expert(s): Velvet Money and Danny Martinez



USE CASE 32: SHUT-IN ROYALTIES

OVERVIEW The purpose of this use case is to receive a Shut-In Royalty Report and royalties.

PRIMARY ACTOR(S) Designated users from State Land Office: Royalty Management Division (RMD) and Accounting (Acct).

STARTING POINT SLO receives a Shut-In Gas Royalty Payment form (SIGRP) and payment.

ENDING POINT SIGRP is processed and funds are deposited

MEASURABLE RESULT SIGRP is processed or returned to Remitter. Funds are held in suspense until the end of the Shut-In Period. Database has been updated for payments received, refunded and distributed.

FLOW OF EVENTS 1. RMD Acct receives the SIGRP and payment. Acct performs a preliminary check of the API

Number to determine that the API Number reported matches the Well Name and Number. If it does not match, the SIGRP and check are returned to the remitter with a letter indicating that the information does not match.

2. Acct prepares endorses the payment and validates the SIGRP with the payment information including Fund and Amount.

3. A lookup is performed on the database using the API Number to verify that the information on the SIGRP matches the data in the database: Lease Number, Assignment Number, Well Name, Well Number, API Number, Section, Township, Range, Unit Letter, Date Shut-In, Date of Lease, Stipulation Date; Amount Paid, Remitter, Address Information (Delivery address, city, state, and zip).

4. Enter the Shut-In royalty payment and the Period Covered Beginning Date and save data. System calculates the Ending Date, and notifies user that the data was successfully saved..

ALTERNATIVE FLOW OF EVENTS SIGRP MismatchIf SIGRP information does not match the database, SIGRP is returned to Remitter with a cover letter indicating that the data does not match and requesting corrected data.

USE CASE EXTENSIONS StipulationsIn the event that a well has been Shut-In for five (5) years a stipulation is required. See Stipulations Use Case.Adjudication of Shut-In Payments1. Payments are adjudicated one (1) year and ninety (90) days after payment has been received.

Payment is either refunded or distributed to maintenance fund.2. System should compare the amounts Shut-In payment to any Gas Royalties paid.


3. If Shut-In payment is less than Gas Royalties paid, the database should update the Refund Amount field with the amount of the Gas Royalties paid, and the Refund Reason with “Royalties Exceeded SI Payment Made.” RMD Analyst reviews the data, and accepts the calculation or corrects it if necessary. Data is saved.

4. If Gas Royalties paid is zero (0), the system should update the Distribution Amount, and the Refund field should be zero. RMD Analyst reviews the data, and accepts the calculation or corrects it if necessary. Data is saved.

5. If the Shut-In payment is greater than the Gas Royalties paid, system should update the Refund Amount with the Gas Royalties paid, update the Apply Amount field with Shut-In payment less Gas Royalties paid, and the Refund Reason field with “Royalty Partially Exceeded SI Payment Made.“ RMD Analyst reviews the data, and accepts the calculation or corrects it if necessary. Data is saved.

6. RMD Analyst prints a report of all Refunds showing: Payment number; Receipt date; Line Item number; Lease number, Amount paid; Producing Property, Well Number, Operator, API Number, Comm/Unit, Well Lease Location; Coverage Start and End Dates; Gas Royalties paid, Amount Applied, Refund Amount, and Refund Reason.

7. RMD Analyst reviews report for completeness and report is sent to SLO Accounting.



2. Shut-in payment due date: the next lease anniversary date that occurs after a 90 day period that begins on the day the well was shut in. Payment must be received on or before the payment due date.

3. Lease date:a. Leases issued prior to June 14, 1985

i. SI payment is equal to the greater of the rental amount or $100. ii. SI payment during the secondary term is the greater of the double the

rental amount or $100.iii. Continuation terms –May extend the lease by 5 years past the 10 year

expiration term by payment of SI royalties.b. Leases issued after June 14, 1985

i. SI payment is equal to the greater of the twice the annual rental amount or $320.

ii. SI payment during the secondary term is the greater of the double the rental amount or $100.

iii. Continuation terms: 1. Discovery, Development and Five Year Exploratory leases may be

extended by 10 additional years. On or after the 10th year, the SI payment is the greater of the four (4) times the annual rental or $2,000 per well per year.

2. Regular Exploratory leases - 4. Adjudication date: One year and 90 days (455-456 days) after date SLO receives payment. 5. Saving clauses (paragraphs 16 & 17) of leases.6. No regulations currently established for Shut-In Oil wells.

Primary Subject Matter Expert(s): Anna Villa.




USE CASE 33: REFUND OF ERRONEOUS PAYMENTS

OVERVIEW The purpose of this use case is to receive and process a Claim for Refund.

PRIMARY ACTOR Designated users from State Land Office (SLO): Accounting (Acct), and Royalty Management Division (RMD)

STARTING POINT Receive a Claim for Refund.

ENDING POINT Claim has been audit, processed, and a refund issued if appropriate.

MEASURABLE RESULT The Claim for Refund has been processed and notices issued to Remitter/Lessee as appropriate. Database has been updated to show the result of the Claim.

FLOW OF EVENTS 1. SLO Acct receives a Claim for Refund Form and processes it according to the Document

Processing Use Case.2. RMD reviews the Claim for Refund for completeness. RMD reviews the database payment

history to determine that the claimed funds have been received and have not been previously applied to a royalty liability or refunded.

3. RMD reviews Volume and Dollar amounts per OCD returns.4. RMD Manager approves refund.5. SLO Acct processes refund request.

ALTERNATIVE FLOW OF EVENTS In step 1, if any information previously reported is to be changed, the appropriate amended returns must be included.

In step 2, the Claim for Refund is made on either the OGRCR-1 for Distributed Funds or the OGRCR-2 for Non-Distributed Funds.

If the wrong Claim for Refund form was used, RMD will return the Request with a copy of the appropriate form and request that the proper form be completed.

In step 4, RMD Manager may flag return for audit according to the Royalty and Gas Plant Audit Use Case. Currently, per SLO policy the audit will extend back until additional assessments equal the Claim for Refund.

In step 5, if the Claim for Refund is in excess of $2,000, the Commissioner must request permission from the State District Court for Santa Fe County.


USE CASE EXTENSIONS

RELATED BUSINESS RULES 1. Claim for Refund – Form used depends on whether the funds have been distributed to a

beneficiary. (NOTE: Forms appear similar except for the statement that the applicant “knows that the payment is/is not in a suspense fund” and the reference to 19-7-59 NMSA. RMD should consider combining the forms if appropriate.)

a. OGRCR-1 – Distributed Fundsb. OGRCR-2 – Non-Distributed Funds

2. Statute of Limitations on Refunds – Two (2) years from date of payment. This does not apply to previously established credits. (Section 37-1-23 NMSA 1978 as amended - Contractual Liability)

3. Statute of Limitations on Audits – There is no statute of limitations on audits at this time. Therefore the state has been frequently extended the audit period back to offset a Claim for Refund. NOTE: Currently, the industry has asked that a statute of limitations be created.

4. Claims for Refund in excess of $2,000 require approval from the State District Court for Santa Fe County by the Commissioner of Public Lands, prior to any disbursement of state funds.

Primary Subject Matter Expert(s): Cynthia Melton and Kurt McFall.


ADMINISTRATIVE SERVICES

USE CASE 34: DOCUMENT PROCESSING

OVERVIEW The purpose of this use case is to receive documents and/or payments from applicants and lessees.

PRIMARY ACTOR Designated users from State Land Office: Administrative Services Division (ASD).

STARTING POINT A document and/or payment has been received from an applicant or lessee by mail or in person.

ENDING POINT The document has been date stamped and funds deposited.

MEASURABLE RESULT Mail has been date stamped and sent to the appropriate departments daily and all funds have been deposited by the close of the next business day.

FLOW OF EVENTS MAIL OPENING AND SORTING 1. ASD user picks up mail at the post office each business day at 7 am.2. User opens mail and all documents are date and time stamped.3. User places mail without a check (or other funds) enclosed in the appropriate departments

mailbox. Mail with a check is sent to Check Validation.CHECK VALIDATION 4. ASD user sorts the checks and related documents by Type of Payment.5. ASD user validates all checks and related documents.6. ASD user endorses the checks with the appropriate deposit stamp.7. ASD user prints the WinTeller Teller Totals Report.8. Checks and documents are sent to the Entry Desk.ENTRY DESK 9. ASD user enters: Document Number (Payment ID), Source, Type, Remitter OGRID/STID,

Amount, Check Number, selects the Invoice Number from the open invoices for the Remitter (if applicable), and Lease Number (if applicable). System updates the information in the database and informs the user the information was saved successfully. For new leases, the system assigns the lease number. (Currently, each department creates the lease number manually. System assigned lease numbers will assist in creating tracking information and statistical analyses.)

10. ASD user (Financial Specialist Supervisor) prints the “Cash Receipt Report by Remittance Type” and the “Cash Receipt Report by Source and Type” and notifies Payment Application Desk that entry is complete.

PAYMENT APPLICATION DESK 11. ASD user reviews each document to determine the nature of the payment.12. ASD user locates the associated payment by using the previous Document Number. If the

information entered for the payment is correct, the ASD user marks the funds for


disbursement or suspense. System updates the information in the database and informs the user the information was saved successfully.

13. ASD user (Financial Specialist Supervisor) prints the Cash Application Report.14. ASD user distributes the reports to the Division mailboxes after the Reconciliation process is

complete.RECONCILIATION 15. ASD user prints the “Deposit Slip Report”, and reconciles the subtotals and grand total on

the Cash Receipt Reports, Cash Application Report Deposit Slip Report and the WinTeller Report.

16. ASD user enters the deposit information into MIP and prints the deposit slip. Deposit slip and funds are placed in a bank bag.

17. ASD user sends deposit to the bank and State Treasurer.18. ASD user attached deposit slip to the daily reports.19. The following day, ASD user compares the “Daily Distribution Report” and “Daily

Distribution Report Month-to-Date” to the amount deposited.

ALTERNATIVE FLOW OF EVENTS In step 1, a lessee or applicant may come to a SLO Division with a payment, application, or other document. The Division should inform them that ASD must accept all payments or documents, and if appropriate, guide them to ASD to turn in the paperwork.

In step 4, if a royalty payment check is sent to SLO, ASD copies the check and sends the original to TRD for processing. The copy of the check is date and time stamped and filed in ASD.

In step 11, if the payment information is not correct, or the application of the funds is not clear, the funds are left in suspense.

In step 11, if the payment does not show an invoice, the Application Desk should check the database for an open invoice.

In the Reconciliation Process, if the amounts do not reconcile, the difference is investigated and the amount corrected.

USE CASE EXTENSIONS

RELATED BUSINESS RULES 1. Daily reconciliation is mandated by 6-10-2 NMSA 1978.2. Daily deposits are mandated by the next business day rule, 6-10-3 NMSA 1978. For State

Land Office, funds must be deposited by 3:00 the following day as the banking day closes at that time. SLO policy is to make the deposit the day of receipt.

3. Documents may be validated on the reverse side if there is no room on the front.4. For internal control purposes, segregation of duties must be maintained. Therefore, different

users within ASD are assigned the different tasks.5. Payment Types:

a. Filing Fees, photocopies, subleases, penaltiesb. Rentals Royalties, Interest, Suspensec. Miscellaneous – Reimbursements, Morgan Hall Rental Fee, Telephone Calls

6. Bank Accounts: SLO deposits into two accounts, fees are deposited into maintenance account, and all other payments are deposited into the Land Suspense Account.


a. 098 – Maintenance Accountb. 777 – Land Suspense Account

7. Validation:a. The check is always validated before the associated documents. Thus, the first item

for the day would be a check, with Document ID 1; the next would be the associated document, with Document ID 2. When looking for the check associated with the document, the user looks at the previous number, and if that is also a document, the number before that one.

b. Document ID always begins over each day with 1 (one).c. Each document is validated separately on the first page. If there is no room on the

front of the document, the back is validated.d. Validation stamp includes the: Type of Payment, Document ID, Date, Time, and

Amount.8. Document Number and Payment ID are used interchangeably when referring to checks.

Primary Subject Matter Expert(s): Margaret Sena, Audra Garcia



USE CASE 35: DISTRIBUTION TO BENEFICIARIES

OVERVIEW The purpose of this use case is to distribute funds to the beneficiaries monthly.

PRIMARY ACTOR Designated users from State Land Office: Administrative Services Division (ASD).

STARTING POINT Month end distribution is done the day before the last business day of the month.

ENDING POINT SLO expenditures have been allocated to the beneficiaries based on the proportion of the beneficiaries to the total to be distributed and the net funds distributed.

MEASURABLE RESULT Funds have been distributed to the beneficiary or Permanent Fund via operating transfers or by check by the last business day of the month. Database has been updated to show the amount distributed.

FLOW OF EVENTS 1. ASD user updates the Month, Year, Expenditure Amounts fields. (Expenditure Amount is

based on actual expenditures, transfers, and expenses per the Expenses Use Case.) System calculates the Allocated Expenditures for each beneficiary and sets the Distribution Flag to Pending Approval. System updates the information in the database and informs the user the information was saved successfully. System prints a Distribution Report.

2. ASD user reviews the Distribution Report for reasonableness and sends the report to the ASD Manager.

3. ASD Manager approves the Distribution Report.4. ASD user enters data from the Distribution Report into the Advantage Accounting System

and generates operating transfers and check requests. System generates a file that can be imported into the Accounting System to minimize input. DFAS Distribution Request is reconciled to Distribution Report and distribution approved in DFAS.

5. ASD user sets Distribution Flag to “Approved.” System updates the information in the database and informs the user the information was saved successfully.

6. ASD user files a copy of the month end reports (Distribution Report, DFAS Distribution Request, etc.) in the monthly accounting file.


USE CASE EXTENSIONS

REPORTS BTRF Report – Report showing total amount received for each beneficiary and for the SLO as a whole. Details include: Beneficiary Name, Gross Receipts, Refunds, Suspense, Subtotal Receipts, Allocated Distribution, Net Distribution Amount.


RELATED BUSINESS RULES 1. Distribution processing is begun on the day before the last business day of the month.2. SLO actual expenditures for the month are allocated based on the “Calculation of Beneficiary

Distribution Amount” procedures.3. SLO actual expenditures are from the AIMS Accounting System.

Primary Subject Matter Expert(s): Della Gutierrez, Audra Garcia



USE CASE 36: BUDGETING & EXPENSES

OVERVIEW The purpose of this use case is to document the expense process.

PRIMARY ACTOR Designated users from State Land Office: All Divisions, Administrative Services Division (ASD), and Accounting (Acct).

STARTING POINT Accounting receives budgeting or purchase documents.

ENDING POINT SLO expenses have been recorded and paid.

MEASURABLE RESULT SLO expenses have been paid in accordance with state law, SLO budget, and invoices. Encumbrances or payments have been recorded in the Accounting System.

FLOW OF EVENTS Encumbrance of Purchases (as required)1. Divisions create an Excel spreadsheet for purchases. The spreadsheet indicates the Division,

Category/Line, and item purchase details (item, name, description, quantity, etc). Purchases over $1,500 (either singly or in aggregate for an item or class of item, e.g. office supplies) from a single vendor must be on state purchasing contract unless it is a one-time purchase.

2. The Division Director approves the purchase document and sends it to Acct.3. Acct Manager reviews the purchase for budget capacity, legality, and to see if the purchase is

being made on contract.4. Acct encumbers the purchase.Daily5. Acct receives an invoice for an approved purchase. Requestor, or their supervisor must sign

to indicate that the item or service has been received or completed.6. Acct relieves the encumbrance and records the purchase at the actual amount.7. Acct generates a payment voucher on-line, prints the payment voucher, and sends the daily

batch to DFA.8. Acct authorizes warrants based on outstanding purchase vouchers. Per SLO policy, Acct does

not take advantage of payment terms, but will take any discounts permitted.9. DFA prints the warrants, which are signed by machine.10. The warrants are sent to SLO Acct.11. Acct prints a copy of the associated purchase voucher.12. Acct attaches the warrant to the purchase voucher.13. Acct mails signed warrants, and files the voucher package.End of Month14. The day before the last business day of the month, a report is run showing the actual

expenditures, transfers, and expenses for the month. Total expenditures, transfers, and expenses are used in the Distribution to Beneficiaries Use Case.


ALTERNATIVE FLOW OF EVENTS In step 1, one-time purchases that exceed $1,500 require three (3) bids to be attached. In addition to being sent to DFA, the package must be sent to State Purchasing Division. See the Related Business Rules below.

In step 3, if aggregate purchases exceed the $1,500 from a single vendor for an item or class of items, the purchase request will be sent back to the Division requesting a change to an approved vendor unless the vendor is on state contract. The purchase request will also be returned if the purchase is does not comply with SLO policy or is illegal.

In step 3, if the purchase exceeds the available budget capacity (Beginning budget less expenditures YTD less encumbrances), the Acct Manager will return the purchase to the Division and advise them that they will exceed the budget.

In step 4, encumbrances of $1,500 or more are required to be sent to DFA for recording in the state system. In addition, see the Related Business Rules for State Purchasing Division requirements.

In step 5, payroll is base on bi-weekly timesheets signed by the employee, approved by the supervisor and HR.

In step 6, Acct must verify that payments in excess of $1,500 have been recorded by DFA before processing.

If the invoice amount exceeds the encumbrance by up to $ 1,500 Acct will process the invoice. The encumbrance will be relieved and the actual invoice amount will be entered as long as it does not exceed budgetary capacity.

In step 8, Acct prepares transfers to other State Agencies without a purchase voucher. The Acct Manager must approve transfers. Common transfers include: ONGARD (monthly), TRD (quarterly), Unemployment, and ISD Charges.

USE CASE EXTENSIONS AnnuallyBudgeting1. Divisions prepare a budget for the fiscal year (July 1 to June 30) by category/line. The budget

is submitted to the appropriate Assistant Commissioner for approval.2. The approved budget is submitted to ASD and Acct for review and recommendations. Acct

will compare the budget to prior years for reasonableness, and apply other tests as appropriate. The budget may be returned to the Division for clarification. Processing continues at Use Case Extension step 1.

3. The budget is submitted to the Commissioner for approval.4. The approved budget is returned to Acct for entry into the Accounting System. Note: Acct is

in the process of transition from AIMS Accounting System to MIP.Encumbrances5. In addition, at the beginning of the fiscal year, encumbrances for utilities, telephone,

uniforms, maintenance and repair, gasoline, ISD, payroll and other recurring charges are set up based upon the average amount spent in the prior year unless some other expenditure pattern is projected.


6. Acct encumbers funds based upon approved purchase contracts at the time of approval for all other items.

Non-Cash Items7. SLO depreciates the building and equipment on a monthly basis.

RELATED BUSINESS RULES 1. Accounting must comply with GASB and FASB standards. In addition, New Mexico DFA

has issued standards to comply with Title 2 of NMAC.2. SLO policy is to authorize payment of invoices on receipt. All appropriate discounts are

taken, but other payment terms are not taken.3. Purchases of $1,500 or more require:

a. Three (3) bids to be sent to State Purchasing Division except for a limited number of items including: subscription & dues, payments to another state agency, travel expenses, legal, etc.

b. If the Agency does not select the low bidder, a justification must be attached for the alternate selection.

c. Encumbrance must be sent to DFA for recording.4. Expenditures of $5,000 or more have additional requirements:

d. RFP is required.e. State Purchasing Division will send out for bid, award the contract, and notify

Agency and selected vendor.Accruals5. Accruals are performed only at fiscal year-end to ensure proper cutoff for the fiscal year.

Monthly accruals are not considered necessary as the expenditures are allocated on a cumulative basis. (See Distribution to Beneficiaries Use Case) In addition, at year-end, open expenditures are also accrued.

Primary Subject Matter Expert(s): Della Gutierrez, Audra Garcia



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