American Oil and Gas Reporter - July 2015 - 136

ConventionSection: Independent Petroleum Association of New Mexico
IPANM southeast vice president.
Fortunately for companies operating
in the Permian Basin, there seems to be
little sentiment among area counties and
municipalities to attempt to hamstring
the industry, adds Krakauskas, senior
landman at Strata Production Co. in
Roswell, N.M.
"Southeastern New Mexico is very industry friendly. We all have grown up
with the industry here," he assesses. "The
industry has supported this part of the
state for a hundred years and is always
going to be here. Many industry folks
call this part of the state home. That does
a lot to allow us to get the right people in
office, so it's a very friendly atmosphere."

Exports And Royalties
IPANM continues to urge New Mexico's congressional delegation to support
lifting the federal ban on exporting crude
oil, Papp says, and supported a nonbinding
memorial in the state legislature asking
its two U.S. senators and three House
members to back the revocation.
"We think, as do a lot of other people,

that the differential between Brent prices
and West Texas Intermediate is largely
caused by the export ban, and once that
ban is lifted, we would see a rise in the
WTI price," Papp reasons.
Unfortunately, not all the state's congressional delegation is fossil-fuel focused,
he says. "It makes it more difficult," Papp
concedes. "We asked the state legislature
to ask them. A lot of high-powered people
are requesting the same thing, which
should give it traction. Whether it's enough,
we will have to wait and see."
Foster says the proposed rule making
by the Department of Interior's Office of
Natural Resources Revenue known as
Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform
also is troublesome to IPANM members.
DOI contends its proposed rule, a
summary states, will increase simplicity,
certainty, clarity, and consistency in
valuing production on federal lands
while making regulations more understandable, decreasing industry's cost of
compliance and ONRR's cost of enforcement, and providing certainty to

136 THE AMERICAN OIL & GAS REPORTER

industry and ONRR that companies
have paid what is due.
But Foster contends costs for operators
will go up under the proposal. "Basically,
ONRR wants to effectively increase the
royalty rate, even though the 12.5 percent
royalty rate is set by Congress," she says.
As an example, she says, under the
guise of "unbundling," operators will not
be allowed to deduct transportation costs
to move natural gas through a pipeline
and processing plant. "The (royalty) is
going to be assessed on an amount the
operator technically cannot receive because
the fees he paid to process that gas no
longer are going to be deductible," she
says.
Foster says IPANM is submitting comments opposing any increase in royalty
rates, as well as raising bonus and rental
payments, or increasing civil penalties.
"The ONRR is hitting us on all fronts by
not only increasing royalties, but also increasing all other costs," she charges. "It
is going to make operating on federal
lands that much less attractive, which I
guess is this administration's goal."
American Oil and Gas Reporter - July 2015

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