Onshore Oil

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Onshore Oil Gas Order 1

• BLM/Forest Service Final Rule

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Onshore Oil Gas Order 1

• Ken McMurrough
• NRS BLM, Colorado State Office
• 303-239-3642 (x3799 fax)
• hugh_mcmurrough_at_blm.gov
• Hank Szymanski 303-239-3797
• Hank_Szymanski_at_blm.gov

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OverviewOnshore Oil Gas Order No. 1

• Authority
• This rule, effective April 6, 2007, revised the
  existing OO1 which supplemented primarily the
  federal regulations at 43 CFR 3162.3 and 3162.5.
• Purpose - Approval of Operations of Federal and
  Indian Oil and Gas Leases
• The purpose of OO1 is to state the application
  requirements for the approval of all proposed oil
  and gas and service wells, certain subsequent
  well operations, and abandonment.

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OverviewOnshore Oil Gas Order No. 1

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

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BackgroundReasons for Revision of Previous Order

• Leasing Reform Act of 1987
• Energy Policy Act of 2005
• Update for Current Practices
• Split estate policy
• Cultural wildlife inventory
• Right of Way coordination
• Master development plans, directional drilling
• Best Management Practices

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BackgroundStatus

• Proposed rule Published July 2005
• Energy Policy Act Signed August 2005
• Further proposed rule Published March 2006
• Public comments Received nearly 90 from
  industry, interest groups and the public at large
• Final rule March 7, 2007

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BackgroundMajor Revisions

• Process time line
• Section 366, Energy Policy Act of 2005
• Requires compliance with applicable law
• Define terms
• Complete APD
• Onsite inspection included
• Cultural wildlife Inventories not included
• Geo-referenced well plat

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BackgroundMajor Revisions (continued)

• Split estate
• Operator provides SUPO COAs to surface owner
• Bond compensation for loss or damages for access
  based on statutory requirements on patented lands
  (min 1000)
• Onsite inspection
• 15 day requirement eliminated
• Onsite required for complete APD
• Valid period for APD
• Changed to 2 years with 2 year extension

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BackgroundControversial Issues

• Time line
• Onsite inspection required
• Required for complete APD
• NEPA, NHPA, ESA compliance
• Potential delays no definite time to process
• APD may be deferred or denied within 30 day after
  complete APD submittal

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BackgroundControversial Issues (continued)

• Valid period for APD
• 2 years with 2 year extension
• Split estate
• SUPO COAs provided to surface owner
• Good Faith Effort vs mandatory notification
• What is a good faith effort
• Bonding for access
• Compensation based on loss or damages or
• as required by specific statutory authority

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SpecificsDefinitions, New or Revised

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

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SpecificsGeneral

• Read the preamble first if you have questions
• Early notification is new (initial planning
  conference) is voluntary, precede NOS
• Best Management Practices, something we have been
  doing for decades, are strongly recommended

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SpecificsNotice Of Staking Option

• Provides operator opportunity to gather
  information to address site-specific resource
  concerns while preparing the APD package.
• 10 days after receiving NOS, an onsite inspection
  will be scheduled to take place as soon as
  weather conditions permit.
• Minimum staking required 1) center stake for
  proposed well, 2) 2 reference stakes, 3) flagged
  access centerline.
• BLM will invite surface managing agency (SMA) and
  surface owner, if applicable.

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SpecificsGeneral

• Geospatial database, required for well plat
• Operator must make a Good Faith Effort 1)
  notify the private surface owner for access, 2)
  provide operator with SUPO COA, 3) obtain
  surface access agreement
• Casual Use further explained, includes surveying
  and staking

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Specifics9-point Drilling Plan

• More complete casing and cementing information
• Added language for directional drilling

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Specifics12-point Surface Use Plan

• Geospatial data optional
• Additional staking required over that used for an
  NOS
• Certify or Good Faith Effort made to get the SUPO
  to the private surface owner (11)
• Moved Certification out of SUPO, it now stands
  alone as a required APD component

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SpecificsBonding

• Bond increase and phased release (lease bond
  only) are now in the Order
• BLM requires sufficient bond to restore surface
  adversely affected by lease operations after
  abandonment
• Authority to require additional bond to be
  applied to off-lease facilities required to
  develop a lease

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SpecificsNOS Processing Time Line

• Onsite scheduled within 10 days
• List of Concerns provided at onsite or within 7
  days
• Submit APD within 60 days or NOS may be returned

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SpecificsAPD Processing Time Line

• 10-Day letter for APD completeness notification
• Onsite scheduled within 10 days (unless NOS
  onsite conducted)
• Additional Deficiencies provided at onsite
• 45 days to submit additional information
• 30 days for BLM decision after complete APD
  submitted
• Decision to Approve, Defer, or Deny APD

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SpecificsAPD Permit Deferral

• BLM will provide the operator a list of pending
  actions and a schedule for completion before
  final APD approval can be granted
• BLM will inform the operator of the actions they
  could take to assist
• The operator has 2 years to take the specified
  actions
• BLM will approve the APD within 10 days after all
  actions are complete

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SpecificsAPD Approval

• FS has NEPA responsibility on the Forest
• On the Forest, BLM should be a cooperating agency
  (Co-lead) and adopt the NEPA analysis as a basis
  for its decision
• On Indian lands, BLM may be a cooperating agency
  (Co-lead) OR may adopt the NEPA analysis prepared
  by the BIA

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SpecificsMaster Development Plans

• Eliminated Master Drilling Plans
• Master development plan (MDP) for 2 or more APDs
  with common drilling plan, SUPO and POD.
• Subsequent APDs can reference the MDP for NEPA
  analysis
• Each subsequent proposed well must have a survey
  plat and an APD Form (3160-3)

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SpecificsOperator Responsibilities

• Section IV, General Operating Requirements
  Operator responsibilities discussed - includes
  requirements for
• NEPA
• General operations
• Protecting cultural historic resources
• Protecting endangered species their habitat
• Surface protection
• Safety
• Completion reports

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SpecificsCompletion Reports

• Well logs submitted in electronic format
• For directional wells be sure to report the
  bottom hole lat/long locations (at top of
  production interval and at total depth)

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SpecificsPrivate Surface

• Certify to BLM that a Good Faith Effort has been
  made to notify the private surface owner before
  entry
• Certify to BLM that a surface use or access
  agreement has been reached or a Good Faith Effort
  made
• Certify copy of SUPO COA provided to private
  surface owner or a Good Faith Effort made

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SpecificsSubsequent Operations

• NOI required for new construction,
  re-construction, or alterations that result in
  new disturbance.
• If no existing approved plan exists, an NOI must
  be filed approved by the BLM. New field
  inspection may be required additional cultural
  or biological inventories may be required.
• Split Estate - Operator must certify that good
  faith effort made to provide private surface
  owner a copy of any proposal for new surface
  disturbance.

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SpecificsWell Conversions

• Order includes a more complete explanation of
  well conversions
• Added a section on conversion to an injection well

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SpecificsWaivers, Exceptions, Modifications

• Waiver Permanent removal of lease stipulation.
• Exception Case-by-case exemption from lease
  stipulation.
• Modify Permanent change to lease stipulation
• Request should also include information to
  support that the stipulation no longer justified
  or the proposed operation would not cause
  unacceptable impacts.

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SpecificsAbandonment

• 6 months to complete earthwork (weather
  permitting) after well completion/plugging
• May be difficult on multi-well pad
• An agreement between the SMA or private surface
  owner and the operator necessary before assuming
  improvements (roads, pads, other)

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SpecificsAppeals

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

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Thoughts, Comments?

• Onshore Oil and Gas Order Number 1, Approval of
  Operations
• Federal Register, Volume 72, Page 10308-10338
  (72FR10308), Wednesday, March 7, 2007
• Effective May 7, 2007