The Secretary of the Interior’s new order regarding oil and gas exploration, “Drilling and Production in the Secretary’s Potash Area,” was published in the Federal Register on December 4, 2012. IPANM and a number of independent producers submitted comments to the draft order this past summer. Although some of our comments were accepted and changes made to the wording of the Order, the policy statement still remains the same: “It is the policy of the Department of the Interior to deny approval of most applications for permits to drill oil and gas wells from surface locations within the Designated Potash Area.”

EA – Potash Order
11-16-12 Potash Comment Responses

The Secretary’s response to our comments regarding this policy statement is: the revised Order extends the Drilling Island Concept to areas of Inferred, Indicated, or Unknown potash resources and allows for Development Areas to be proposed anywhere in the Designated Potash Area, including those areas known to have commercial deposits of potash. Another response states: “The BLM does not want the Order to imply that only the areas in which potash is already known to exist in sufficient thickness and quality to be mineable under existing technology and economics are subject to careful management.” In response to comments relating to a failure to follow NEPA by including appropriate environmental and economic analysis, the BLM prepared an Environmental Assessment (EA) and issued a finding of no significant impact (FONSI) concluding the new Order might allow for increased oil and gas drilling.

Only time will tell if the new Order will result in increased drilling. I remain concerned that the policy statement to deny drilling in the entire area (with only three exceptions) will result in decreased drilling within the Potash Area. I have heard that some Independents are considering a judicial action challenging the implementation of this new Order, but nothing has been filed as of the date of this report (December 14, 2012). IPANM has posted the response to the comments and the EA on the website for those of you who are interested in reading the documents.

This morning the Department of Interior, Office of the Secretary, released the new Secretarial Order for the Potash area. Note that the order is final. In addition, the DOI has a new web-page on the order which is at this link. Note that in response to comments submitted by Greg Nibert, former President of IPANM, on our behalf, the DOI did revise a several definitions and terms in the document. The drilling island concept is still prevalent in the document and will be a preferential mode of obtaining permits in the potash area moving forward. The Order must be published in the Federal Register to be final, which is expected to occur soon.

An update on the proposed BLM commingling Instructional Memoranda 2011-0184 (11/20/2012)

A small group of operators, both major and independent producers met with a group of BLM representatives from the Washington, DC office on November 8. Commingling in the State of New Mexico has been a common practice for the past 40 years and the new IM would have eliminated its use in many situations including down-hole commingling and surface commingling. Both the Farmington BLM Field Office and the Carlsbad BLM Field Office opposed implementing the order and encouraged the State office to set up a meeting with several producers to discuss the pertinent issues. A lot of facts were presented at the meeting and after a few days of reviewing the information, the DC office is going to hold back on issuing both the commingling and beneficial use IM’s. This is great news for operators across the state. However they may pursue these issues during the re-write of Onshore Oil and Gas orders currently being updated and expected to hit the Federal Register next spring.