American Oil and Gas Reporter - September 2016 - 111

abated. Spills greater than 100 barrels
are considered major releases. "OCD
wants to lower that five-barrel minimum
to zero, so even de minimis spills have to
be reported," she worried.
Other topics discussed by Catanach
included a concern raised by operators
that some disposal wells in the Permian
Basin's Delaware formation were injecting
into overpressured areas and "there probably is some injection into potentially
productive areas."
He said the OCD intended to review
its horizontal well rules, including addressing horizontal wells that crossed the
state line between New Mexico and Texas.
"We will need to develop some type of
agreement with the Railroad Commission
on how to handle those," he mused.
Finally, Catanach said that as part of
Governor Susana Martinez's policy initiatives for 2015, the OCD now required
operators to file a gas capture plan with
applications for permits to drill that identified intended natural gas outlets, whether
a gathering line would have to be constructed, who would transport and process
the gas, etc. "One of the governor's initiatives is a phased reduction of vented
and flared gas volumes," he observed.
State Land Office
Back at the SLO, Commissioner Dunn
touted an Aug. 3 announcement of draft
legislation to create the Early Childhood
Education Land Grant Permanent Fund
as a means to finance early childhood
development.
He noted that the BLM owned the
mineral rights beneath 5.3 million-6.5
million acres of privately-owned surface
lands in New Mexico. The idea, he said,
is for Congress to transfer those mineral
rights to the SLO to lease, with the proceeds earmarked for the Early Childhood
Education Fund.
Acknowledging that "New Mexico's
congressional delegation will need to
spearhead the effort to transfer the federal
subsurface mineral acreage," Dunn said
SLO would return half the royalties and
bonus payments to the federal government
for 10 years. He estimated the proposal
could generate $171 million-$210 million
a year.
IPANM's Foster brought up an SLO
proposal announced May 31 to replace
all agency fees embedded in rules with a
fee schedule posted on the agency's website. The problem, she held, is that the
commissioner will be able to change fee
amounts without going through any rulemaking process.
"What happens if we have a land commissioner who is not a friend of the industry?" she posed. "It puts us at great risk."

The Bureau of Land Management's New
Mexico ﬁeld offices intend to work with
industry to ﬁnd "practical and pragmatic"
ways to implement the agency's new
onshore orders, State Director Amy Lueders promises the Independent Petroleum
Association of New Mexico.

Public Lands
At the federal level, Foster drew attention
to recommendations released in April by
the Congressional Budget Office on ways
the government could increase revenues
from its oil and gas leasing program.
The first idea-lease more federal lands-
IPANM could get behind, Foster remarked,
except that it is directed primarily at the
Arctic National Wildlife Refuge and the
Outer Continental Shelf. "It isn't going to
help (onshore operators) much," she mused.
The second idea, she said, was borrowed from the New Mexico State Land
Office and is to set varying lease terms,
including rental rates, minimum bids and
royalty rates, according to the quality of
the lease.
Other suggestions, Foster outlined, include raising the minimum bid from $2.00
an acre to $10.00 an acre, which CBO
calculates will bring in an additional $50
million over 10 years; change the fee for
nonproducing leases from $1.50 an acre
for the first five years and $2.00 an acre
the next five years to a flat $6.00 an acre,
which CBO estimates will raise $200
million; and increase the federal royalty
from 12.5 to 18.75 percent, which also
will earn $200 million.
As to the impact on industry, Foster
observed, "CBO says changing the royalty
rate would have negligible effect because
we don't pay royalties until we actually
drill the well, and we are going to wait
for better economic times to drill, so we
will be financially stronger and able to
pay that larger royalty with no problem."
Turning to BLM's onshore orders,
Foster noted that Onshore Order No. 3 on
site security would require New Mexico
operators to obtain BLM APDs for all
state trust and private leases within a unit

or communitization agreement, as well as
subject those leases to federal regulations.
She said both IPANM and the State Land
Office filed comments opposing that.
She said Onshore Order Nos. 4 and 5,
crude oil and natural gas measurement,
respectively, required separate metering
of crude oil and natural gas streams at
federally-designated facility measurement
points (FMPs). "You are going to have
to have an FMP for every well," Foster
said, adding that meters must be approved
by the "national production measurement
team" in Washington.
"Basically, that means small producers
are going to get 'Cadillaced' out of the
conversation," she worried.
BLM State Director Lueders remarked
that she anticipated the onshore orders
would be published in late summer and
said, "We look forward to sitting down
with you (to determine) practical and
pragmatic ways to implement them. I
appreciate that in the past you have been
willing to come to the table, and I look
forward to continuing that."
Foster also was critical of BLM's
"Planning 2.0" proposal announced in
February on landscape-scale resource
management planning. "It will take away
the authority of local offices and district
managers, ignoring their expertise and
knowledge," she complained.
As an example, she said, there no
longer would be a Carlsbad, N.M., RMP.
Instead, "You may have a Southeast New
Mexico RMP or even a Southwestern
United States RMP," Foster illustrated.
"You are going to have less opportunity
for direct input."
Additionally, she predicted, "It is going
to be harder for you to make (operational)
decisions under a rangewide plan because
you may have to deal with social, economic and environmental impacts on a
much larger area."
On the topic of resource management
plans, Lueders said she anticipated the
draft Carlsbad RMP "will be out before
September this year." She said she expected
the Mancos amendment to the Farmington,
N.M., RMP early next year, while BLM's
Las Cruces, N.M., office likely would
release a supplemental draft environmental
impact statement for the Tri-County RMP
in summer 2017.
❒

Coming In October
Gulf of Mexico Operations, profiling the Hess Corp.-operated Stampede Field, scheduled to commence
production in 2018 from reservoirs at
depths of ~30,000 feet.
SEPTEMBER 2016 111

American Oil and Gas Reporter - September 2016

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