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information & issues

Welcome to IPANM’s Information & Issues webpage!

IPANM is not afraid to take strong stances on many current issues threatening our industry. We have to! Seemingly minor changes to regulations or rules can have a major impact on the financial solvency of our small oil & gas producers. While we will never compromise on our duties to protect human health, fresh water and the environment in our daily activities, we will fight unnecessary government overreach when new regulatory proposals are not based on sound science and do little to protect the environment.

Below, we’ve identified serious issues facing our producers. Please click on the corresponding button to learn more about each issue and IPANM’s stance on the issue. (Note: Some of this content may be restricted for members only. To access this exclusive content, please join our association!)

RECENT NEWS: All Issues

Last week the ONRR published new documents as examples of how to calculate unbundling percentages for several plants. On the
Late last night S. 2440, the BLM Permit Processing Improvement Act of 2014, passed the Senate. Both NM Senators Udall
IPANM Comments on BLM-SHPO Protocol Document
The Office of Natural Resource Recovery (ONRR) is at it again. This time, they have proposed a rule that would
he Bureau of Land Management is moving forward with the public outreach sessions for the revisions to their Resource Management
Last week, the New Mexico Court of Appeals heard arguments on issues relating to the Surface Owners Protection Act (SOPA).
Last Monday, the members of the IPANM Air Quality Committee and I submitted comments to the EPA, Office of Planning,
Today, IPANM submitted comments to the BLM on their proposed Venting & Flaring policy changes which were mandated by the
IPANM held a two-day seminar on air quality issues on June 2-3, 2014 at the Sandia Resort and Casino. Below
Last Friday, a group of US Senators led by Senator Tom Udall (D-NM) and Senator Barrasso (R-WY) introduced S.2440, a

Last week the ONRR published new documents as examples of how to calculate unbundling percentages for several plants. On the ONRR webpage, they again give industry an example of how they expect operators to do the unbundling – still requiring operators to use old numbers to calculate the percentages and then amend them when the agency publishes new numbers.

How to use the published Unbundling Cost Allocations (UCAs) posted on ONRR website Sept 8, 2014 –

Example:

1. ONRR publishes UCAs for 2010.
2. You use 2010 UCAs to estimate 2011, 2012, and 2013.
3. ONRR publishes UCAs for 2011 and 2012.
4. You replace estimated values for 2011 and 2012 (there is no change for 2013).
5. You use 2012 (most current) UCAs for future reporting period estimates.
http://onrr.gov/unbundling/default.htm

Given the latest proposed rule changes increasing penalties for ‘knowing and willful’ misreporting, it would seem to me that an operator, knowing the agency will probably change the numbers in the future, could be hit will penalties for estimating 2011, 2012 and 2013 when using the published 2010 numbers.

The September 8, 2014 clarifications on the ONRR site include pdfs on the following plants:

– Buena Suerte
http://onrr.gov/unbundling/pdf/Buena_Suerte_Transportation_System.pdf

– Lybrooke & Otero
http://onrr.gov/unbundling/pdf/Otero_and_Lybrook_Transportation_Systems_Huerfano_Mountain_Gas_Plant.pdf

-San Juan – Ignacio
http://onrr.gov/unbundling/pdf/Williams_San_Juan_Conventional_Trransportation_System_Ignacia_Plant.pdf

-San Juan – Blanco
http://onrr.gov/unbundling/pdf/ConocoPhillips_San_Juan_Blanco_Plant.pdf

– Carlsbad Transportation system
http://onrr.gov/unbundling/pdf/Enterprise%20Carlsbad%20Transportation%20System%20and%20Dew%20Point%20Plant.pdf

– ValVerde
http://onrr.gov/unbundling/pdf/Val_Verde.pdf

Late last night S. 2440, the BLM Permit Processing Improvement Act of 2014, passed the Senate. Both NM Senators Udall and Heinrich have released press releases highlighting their efforts on behalf of industry. S. 2440 would expand and maintain the Pilot Program implemented under the 2005 Energy Policy Act. It increases APD fees to $9500 per application from the current $6500 rate. The bill would require that 25% of the fees collected by the local offices would remain with those offices and that the fee would remain at the $9500 level for 10 years. This bill was drafted at the behest of several larger companies seeking to limit the rapidly increasing fees imposed by the BLM. In a 2014 report, the BLM claimed that once the provisions of the 2005 Energy Policy Act expired in 2015, that they intended to increase the fees to at least $12,000 with no limit on increasing the fees annually. To pay for the program, the bill reduces the interest rate and reimbursements to industry from 3% to 2% while maintaining the penalty interest rate on underpayments and assessments on industry at 3%.

Several IPANM member companies have raised concerns about the bill stating: The real problem at BLM is their internal process and priorities – namely they spend more time preparing for potential lawsuits from environmentalists than processing APDs. Since industry returns to the federal government between $40 – $66 for every $1 they spend on administration, maybe what Congress needs to do is review how this agency spends its funds instead of continually increasing fees. In addition, it is interesting to note that while the BLM claims they need additional funding, that in their budget request this year they did not even ask for additional funding for APD administration – the increases requested were for enforcement. Which raises the final point – this bill states the funding is to be used for ‘permit processing operations’ this does not ensure the pilot offices will even use the money for processing actual APDs. As drafted, the bill would allow BLM to use these funds for more NEPA, EIS, climate change and RMP studies which staff persons at BLM have claimed are all part of the APD process.

Senator Udall’s Office expects the bill to be passéd by the House after the mid-term elections.

Udall, Barrasso Hail Senate Passage of Bill to Streamline BLM Energy Permits
WASHINGTON – Today, U.S. Sens. Tom Udall (D-N.M.) and John Barrasso (R-WY) announced that the Senate passed their bipartisan bill to extend a pilot program that has helped the Bureau of Land Management (BLM) balance complex demands, including oil and gas permitting and environmental management, in New Mexico, Wyoming and other parts of the West. The BLM Permit Processing Improvement Act of 2014, which passed the Senate by unanimous consent, permanently extends a pilot program from the Energy Policy Act of 2005 that was designed to help the agency deal with a backlog of permit applications while balancing other duties. The program, which also established a dedicated fund, has helped streamline operations in BLM field offices in Farmington and Carlsbad, N.M., and Rawlins and Buffalo, WY, among others.

“This is a great step forward for our BLM offices in Carlsbad and Farmington to ensure they will have the necessary resources to balance the complex demands of oil and gas permitting and environmental management,” Udall said. “Oil and gas production is critical to New Mexico’s economy and for our children’s education, and I thank Senator Barrasso, Senator Heinrich, and all of our cosponsors on both sides of the aisle for their commitment to keeping this program going. I am hopeful the House will act quickly to give the BLM and industry the certainty they need to produce for New Mexico.”

“Today’s vote is great news for Wyoming and other Rocky Mountain states who want to decrease permitting backlogs and increase oil and gas production on federal lands,” said Barrasso. “Thanks to Senator Tom Udall and our bipartisan group of cosponsors for teaming up to help advance this critical legislation. Our bill will give local BLM offices the resources they desperately need to ensure oil and gas permits are processed in a timely manner. Now it’s time for the House to act so we can get this bill signed into law as soon as possible.”

Funding for the pilot program is set to expire in 2015. The senators’ bill permanently reauthorizes the Permit Processing Improvement Fund, and provides the Interior Secretary with greater flexibility to designate new pilot offices and proactively allocate resources based on shifting oil and gas production trends. Additionally, the bill revises the fee structure, and directs the proceeds to be retained by the BLM to support oil and gas permitting operations.

The Permit Processing Improvement Fund provides approximately $18 million each year for the Secretary of Interior to distribute to pilot offices for reinvestment in additional staff and resources to help improve efficiency, and support BLM’s diverse responsibilities, such as mineral leasing permits and wildlife and range conservation. The bill improves upon this program by providing the secretary with the flexibility to designate new project offices in response to shifts in industry demand while directing the BLM to consider public industry reports to reallocate resources more proactively. In order to pay for the extension of the pilot program, the Udall-Barrasso bill adjusts the interest rate that industry receives on overpayment of oil and gas royalties.

In addition to permanently reauthorizing the pilot program, the bill sets a $9,500 fee, to take effect 2016, for applications for permits to drill (APDs). The BLM will retain the funding, which the bill locks in through 2026, to support the agency’s base oil and gas permitting operations. Additionally, the bill prohibits the Secretary from raising this fee through a rulemaking, though the fee is indexed for inflation. The legislation further requires that at least 75 percent of funds to be distributed to the state offices where they were collected, and gives BLM the flexibility to allocate the remaining funds.

The bill has been endorsed by the Independent Petroleum Association of America, American Petroleum Institute, Western Energy Alliance, Western Governors’ Association, U.S. Oil and Gas Association, and countless municipalities, trade associations, and oil and gas companies. In a July 29 hearing before the Senate Energy and Natural Resources Committee, the Western Energy Alliance, Concho Resources, Campbell County (Wyoming) Board of Commissioners, and Bureau of Land Management all testified in strong support.

The bill is cosponsored by Sens. Martin Heinrich (D-N.M.); Heidi Heitkamp (D-N.D.); John Hoeven (R-N.D.); Mike Enzi (R-WY); Mark Udall (D-CO); Dean Heller (R-NV); John Walsh (D-MT); James Inhofe (R-OK); Jon Tester (D-MT); Mike Lee (R-UT); Orrin Hatch (R-UT); and Michael Bennet (D-CO).

The Office of Natural Resource Recovery (ONRR) is at it again. This time, they have proposed a rule that would effectively water down the ‘knowing and willful’ standard that the agency must use to prove that an oil and gas producer made a mistake in royalty payments. In addition, the rule would eliminate any extension requests for hearings–the hearings would have to occur within 30 days regardless if an operator is still awaiting information from the ONRR. With the issues we discussed at the ONRR workshop pertaining to unbundling and the use of their ‘numbers,’ a change in the knowing and willful standard and penalties will have disastrous impacts on small producers. In addition, the agency’s historic lack of responsiveness is now a bigger issue than ever with the set timeframes in this proposed regulation.

Draft IPAA Comments ONRR Civil Penalties July 2014.pdf
ONRR Fed reg notice.pdf

Specifically, ONRR states;

“Our intent is to define ‘‘knowing or willful’’ as the lowest possible standard so that it encompasses all higher standards. Therefore, we are proposing that the definition of ‘‘knowing or willful’’ means gross negligence. ONRR believes that ‘‘gross negligence’’ requires only that it show a company or person has ‘‘fail[ed] to exercise even that care which a careless person would use. The proposed definition encompasses situations in which a corporation or individual in a corporation acts with actual knowledge, as well as situations in which the corporation acts with deliberate indifference or reckless disregard. It does not require specific intent (emphasis added). It is intended to penalize companies whose management remains deliberately ignorant of the actions of their employees and agents. It is also intended to penalize companies whose management is in reckless disregard as to whether their employees and agents are committing prohibited acts. In addition, our intent is to hold persons who are subject to FOGRMA strictly and vicariously liable for the prohibited actions of their employees and agents. The definition would specifically state that knowing or willful means the mental state of a person (which includes corporations), including the person’s employees or agents. This means that the corporation/person has the same knowledge or willfulness as its employees and agents. The corporation/person is thus liable for the civil penalty even if the managers, principals, or owners may not have actual knowledge of specific prohibited acts their agents or employees commit.”

Obviously, the implications of this change at ONRR and the way they impose their penalties will have huge implications on IPANM members. I am working with attorneys at the Norton Rose Fulbright firm and IPAA to get comments to the ONRR by their deadline, which is July 21st.

Mark Barron, at the Fulbright firm is the lead attorney on this issue. Anecdotal evidence of your dealings with ONRR, especially from small producers on the unbundling issues will be important. The difficulty in dealing with a non-responsive agency also needs to be highlighted. The following questions were sent out to IPAA members in order to prepare draft comments. If you want to respond to any of these questions or comment on the draft, it is attached to this email.

1. ONRR Proposes to Eliminate the Ability to Seek a Stay of Penalty Accrual.
Can you provide examples of how an inability to stay the accrual of civil penalties during the hearing and/or appeal process would make challenging ONRR notices and orders impossible or cripple business operations during the period a challenge is pending?

2. ONRR Proposes to Eliminate Time Extensions for Hearing Requests.
Can you provide examples of circumstances in which a timely hearing request challenging an ONRR notice or order could not be submitted within thirty days, irrespective of the company’s diligence and organizational abilities?

3. ONRR Proposes to Prohibit Challenges to Courtesy Notices.
Can you provide examples in which ONRR issued you a courtesy notice informing you of additional penalties that have accrued, where the agency made purely mathematical miscalculations?

4. ONRR Proposes to Eliminate Early Discovery in Hearing Proceedings.
Can you provide examples in which after requesting a hearing to challenge an ONRR notice or order, you engaged in early discovery with the agency that revealed significant or material facts that helped to narrow the disputed issues or that encouraged early settlement?

I have attached a copy of the Federal Register notice of proposed rulemaking and have also attached a DRAFT comments response that has been sent out to IPAA members on this issue. Feel free to comment on that draft as well.

Please send your comments to Karin Foster at karin@ipanm.org by Wednesday July 17th. IPANM will be a cooperating association on the IPAA comments but I would also like to file our own comments– particularly if we have our own stories to tell. Obviously, your company name will be kept confidential.

The Bureau of Land Management is moving forward with the public outreach sessions for the revisions to their Resource Management Plan. Please see the flyer below inviting IPANM members to participate in their meetings in Carlsbad and Artesia on July 8 and 9 to discuss “Lands with Wilderness Characteristics”
Workshop Flyer

This content is for members only.

Please login here! If you have any questions about your membership, please email megan@ipanm.org.

Last Monday, the members of the IPANM Air Quality Committee and I submitted comments to the EPA, Office of Planning, on the five whitepapers issued by that Agency. The whitepapers, which came about at the request of the President in his March 2014 Climate Change: Strategy to Reduce Methane Emissions Report, sought to create a technical basis for reducing methane emissions in the oil patch from compressors, pneumatic devices, completions from hydraulically fractured oil wells, and during the liquids offloading process. The final whitepaper sought to review the “science” on methane leaks at oil and gas facilities.

The EPA whitepapers were meant to be a technical review of the existing studies in order to give EPA a “robust understanding” of the issues, but in reality it was nothing more than a data dump from carefully selected studies that used mostly modeling and not actual measurement from the field. The one study that did use some measurements was completed by UT professors, but it only looked at oil and gas facilities in shale plays. The main point raised by IPANM in our responses to the EPA was that the studies on methane emissions were flawed as they had very small samples, huge and extremely flawed extrapolation methodology and the whitepapers relied on studies completed by biased entities. In every whitepaper, there was heavy reliance on a study of 22 locations that was commissioned by the Environmental Defense Fund. On every panel doing a “peer review” of the whitepapers, there was a person from the Environmental Defense Fund. A second point made by IPANM was that the EPA should not rush this process and should learn from the data submitted by industry to the recent NSPS OOOO regulations.

On June 2nd, IPANM also submitted lengthy comments to the BLM Venting & Flaring Public Outreach Powerpoint presentation. This initiative, also the result of the President’s March Climate Change Report, was intended as a first step towards developing regulations on reducing methane emissions from compressors, liquid unloading, hydraulically fractured natural gas wells, leaks and pneumatic devices. Note that the subject matter of these regulations are nearly identical to the issues reviewed by the EPA in their whitepapers, but the BLM claims it has the authority to force regulations on methane emissions under a legal theory of prevention of waste and royalty collections. IPANM strongly contested this assertion in our comments.

According to the President’s Climate Change Strategy to Reduce Methane Emissions Report, both the EPA and the BLM are to have all rules and regulations on these issues completed by the end of 2016.

All of the comments submitted to the EPA are available below:

IPANM Leaks Comments to EPA
IPANM Compressors Comments to EPA
IPANM Completions Hydraulically Fractured Oil Wells Comments to EPA
IPANM Unloading Comments to EPA
IPANM Pneumatic Devices Comments to EPA

Today, IPANM submitted comments to the BLM on their proposed Venting & Flaring policy changes which were mandated by the Whitehouse in its March 2014 Climate Strategy for Methane Reductions report. I have attached a copy of the comments to this email for you to read at your leisure. The IPANM comments will be distributed to the EPA as their pending whitepapers on methane reductions strategies are on the same topics. IPANM will be submitting comments to the whitepapers as well.

At the IPANM air quality workshop “UP the PIPE,” which was held last week in Albuquerque, the participants had the opportunity to learn about NSPS SubPart OOOO, the Whitehouse Climate Change Strategy, the BLM Venting plan and the EPA’s plans to further regulate methane emissions. We also had several sessions on the newly implemented Colorado Venting rules. We heard from some excellent experts from Trinity Consulting and TRC Companies as well as the regulators from EPA, BLM, NMED and CO. All the materials from the workshop are now on the IPANM website. The comments to the BLM and the EPA will be included at www.ipanm.org on the Regulatory tab as we submit them.

All the work to digest the technical papers and draft comments could not have been done without the extreme time and effort of IPANM Air Quality Committee members Bruce Stubbs, Kyle Alpers, Ed Hasely and Board President Richard Gilliland! Please thank these members for me when you see them. As always, if you have any questions or comments let us know.

BLM Venting & Flaring Comments by IPANM

IPANM held a two-day seminar on air quality issues on June 2-3, 2014 at the Sandia Resort and Casino. Below are links to the presentation information from the seminar:

CO & NM Air Issues
EPA Presentation, Comments, Documents
Subpart 0000 & Tribal
BLM Presentation and Comments
Overview and Obama Plans

June 26, 2014
IPANM Leaks Comments to EPA
IPANM Compressors Comments to EPA
IPANM Completions Hydraulically Fractured Oil Wells Comments to EPA
IPANM Unloading Comments to EPA
IPANM Pneumatic Devices Comments to EPA

BLM Venting & Flaring Comments by IPANM

Last Friday, a group of US Senators led by Senator Tom Udall (D-NM) and Senator Barrasso (R-WY) introduced S.2440, a bill to expand and extend the BLM pilot program created under the 2005 Energy Policy Act. The pilot program is set to expire in 2015 and New Mexico has two pilot offices which strive to have a multi-disciplinary approach to permitting.

In order to fund the increased staffing the BLM claims it needs, S.2440 will increase the permitting fee from the current $6,500 to $9,500. (Although I am told the fee is going up to $7,500 for 2015 anyway.) The $9,500 level would be set for 11 years starting in 2016 and could not be changed by the BLM through rule making although it is set to the consumer price index. According to Senator Udall’s staff, if the current provisions of the pilot program expire and the BLM were to do a rule making to set the APD fee, it would be minimum $11,000 per application.

In addition, S.2440 requires that from 2016 through FY 2019 that 15% of the bonus fees collected at the NM lease sales would have to stay with the NM BLM to assist with permitting needs. From 2020 to 2026 100% of the fee would go to the BLM Processing Improvement Fund for the agency to draw from for permitting costs. (Note that additional costs industry currently pays such as ‘rights-of way’ fees, air permitting fees to the BLM do not go into this fund and this fund can only be used for processing Applications for Permits to Drill.

The bill will also allow the secretary to designate new project offices anywhere in the US and does not limit funding for pilot offices just to offices in NM, WY, MT, CO, or UT as does the current law. S. 2440 adjusts the interest rate that industry receives on overpayment of oil and gas royalties from 3 percentage points over the Federal short term rate to 1 point over that rate. Note that the underpayment of royalty penalty is still 3 points over the Federal short term rate. The bill was referred to the Committee on Energy and Natural Resources. S. 2440 is co-sponsored by Sens. Martin Heinrich (D-N.M.); Heidi Heitkamp (D-N.D.); John Hoeven (R-N.D.); Mike Enzi (R-WY); Mark Udall (D-CO); Dean Heller (R-NV); John Walsh (D-MT); and James Inhofe (R-OK).

A copy of the pre-filed legislation is linked here.