Last week Commissioner Dunn at the New Mexico State Land Office held a very productive meeting with industry regarding having an open discussion about the economic pressures operators are facing in this low commodity environment.

PLEASE SEND YOUR COMMENTS TO PATRICK PADILLA AT THE STATE LAND OFFICE at PPadilla@slo.state.nm.us Please submit by Friday March 11th at COB.

First, the Commissioner needs to hear from industry whether we would ask for the option to shut in oil wells. The NMSLO is proposing a separate policy from TA well status that would allow operators to leave production equipment in the wellbore and not be subject to MIT tests, but rather perform an annual bradenhead test to demonstrate wellbore integrity. In order to allow industry to have this option, the Commissioner would need to go through a public hearing process to invoke the provisions in statute. This would open the agency up to vigorous debate from those opposed to industry obtaining any relief (the “Leave it in the ground” folks). While the Commissioner has made it clear that he is willing to go the route of allowing for the shut in for oil wells, he needs to hear from industry directly to make sure that this is an effort worth making on their behalf and would be actually used – unlike the current stripper well program.

Second, industry needs to understand that the costs associated with this relief are set by statute and limited only to OIL wells. Because these provisions are in statute, the State Land Office would not be able to amend them (only the Legislature can amend statutes). In simple terms, an oil well would be allowed to be shut in for economic considerations for up to two years with an annual per well payment equal to either $320 or twice the annual rental for the lease on which it is located, with the greater of the two of those amounts being the rate called for by statute. if there is concern with this provision, please let Mr. Padilla know.

Lastly, while OCD is working with industry and the NMSLO on this, at this time, if operators need assistance with the TA policy, they must speak to Daniel Sanchez at the NMOCD at Daniel.sanchez@state.nm.us

Please make sure that someone from your office responds to Mr. Padilla concerning this issue by Friday this week. It is important that the Commissioner know that industry would be interested in obtaining relief as soon as possible. I would also ask that you cc me in any comments you send, so I can continue to keep this issue at the forefront.

If your company pays into the BLM Permian Basin Programmatic Agreement, there is a meeting scheduled for Thursday, March 3rd, in Santa Fe from 12:30 to 3:30. The BLM intends to extend the PA for another 10 years with the following proposed amendments.

1. To expand the Agreement area by adding all or a portion of 11USGS 7.5 Minute Quadrangle Maps to the 28 quadrangle maps that comprise the existing programmatic Agreement area (PA area). The BLM wishes to expand the area to encompass the increased drilling that is taking place beyond the current boundaries. The additional maps were chosen based on a NM Tech study called, “Reasonable Foreseeable Development” and tracked actual drilling locations for the last three years. Although the PA process cannot be used on State Trust Lands, the distribution of these lands along with private lands was also taken into consideration for the expansion. Please note that although the BLM will tell you differently, if your company intends to have a location on State Trust Lands it is recommended you do an ARMS survey, but no full archeological survey is required. The BLM also states that there are no known Traditional Cultural Properties related to any tribes or pueblos with ancestral ties to the expanded region. Many of the proposed areas have greater than 20% of the area previously surveyed.

The expanded area includes Maps of the following areas:

Angel Draw Quadrangle
Bell Lake Quadrangle
Bell Lake Quadrangle II
Bond Draw
Bond Draw II
Carlsbad East Quadrangle Proposed Area
Cottonwood Hills Quadrangle
Illinois Camp SE Quadrangle
Indian Flats Quadrangle
Malaga Quadrangle
Malaga Quadrangle II
Red Bluff Quadrangle
Red Bluff Quadrangle II
Red Lake Quadrangle
Red Lake Quadrangle II
Spring Lake Quadrangle

2. In addition, the BLM proposes to increase fees every January 1 based upon the rate of inflation determined by the Bureau of Labor – this is instead of the 3% increase on your anniversary date. The allocation of PA project funds will also change from a formula of 75% devoted to excavations and 25% to the preparation of historic contexts, additional surveys, training and data management – to a yearly allocation based on the balance of the funds in the PA, the Workgroups priority determinations, progress on mitigation priorities, and the funding requirements of the Assistance Agreement between the BLM and the NM Department of Cultural Affairs.

Karin Foster, our Executive Director, will be at the March 3rd meeting. HOWEVER, if you have concerns about either of these amendments, please send Martin Stein, Permian Basin PA Coordinator an email AND copy Karin. Mr. Stein’s email is stein@blm.gov and Karin’s email is karin@ipanm.org.

During the course of the Legislative session, we have had several conversations with Secretary Martin, his staff and Aubrey Dunn and his staff regarding finding creative ways to provide some relief to New Mexico’s oil and gas producers. All IPANM members and others in industry are invited to a meeting in Santa Fe on February 26th at 10am. Right now, the meeting is scheduled to be held at Morgan Hall at the State Land Office (the last meeting there before the demolition of that auditorium). However, there is no conference call in capability at Morgan. I am working on obtaining conference call in number and will let you know when one is set up.

Last week I sent out an email invitation to our membership regarding a meeting to be held TOMORROW at 10am at the New Mexico State Land Office. This meeting will be an opportunity for industry to tell our regulators where we need some relief due to low commodity pricing.

In addition, we will have the opportunity to discuss the current stripper well program 19-10-5.1 NMSA (attached) which is already available to producers but is not widely used. This program allows oil well stripper producers to ask for a royalty rate reduction from 12.5% to 5% for a period of three years upon a showing that the operator has taken reasonable steps to minimize his costs of operating the oil well; the oil well will likely be plugged and abandoned in the near future, with a resulting loss of reserves, if operating costs are not reduced further; the oil well will produce for a longer period, and the amount of oil produced will ultimately be larger, if the royalty rate is lowered; and a lower royalty rate will actually maximize revenue to the trust beneficiaries.

If it is important for you or your company to 1. understand the current regulations on the books regarding royalty rate reductions or, 2. to understand the current regulations for temporary shut-in status, or, 3. to ask our regulators for some relief in another area. Please attend this meeting!

If you can not attend, PLEASE SEND ME YOUR COMMENTS so we have the opportunity to present our concerns! Due to technical limitations we will not have conference call ability.

The BLM has announced four public meetings on their proposed rule to reduce waste from venting, flaring and leaks, and to clarify when produced gas lost through venting, flaring or leaks is subject to royalties. The first of the four meetings will be held February 16 in Farmington at the San Juan College Room 7103 at 1:00 p.m.

Please see the linked notice for RSVP information and additional dates and locations. A call-in number is also provided for those who cannot attend. The proposed rule can be found at . The attached also provides contact information if you have further questions.

If you currently have Rights of Way (ROW) on Federal Lands, the Federal Government has updated the fees associated with ROW annual payments beginning for years 2016 to 2025.

Please see the attached letter which was sent to current ROW holders in December 2015.

Updated information on Federal ROW rental fee schedules (cost recovery) can be found at this website.

If you have questions, please contact Stephen Fusilier, BLM Rights-of-Way Branch Chief, at (202.912.7148) or sfusilie@blm.gov