1. Onshore Oil & Gas Order #1 BLM/Forest Service Final Rule

2. 2 Onshore Oil & Gas Order #1 Ken McMurrough NRS BLM, Colorado State Office 303-239-3642 (x3799 fax) hugh_mcmurrough@blm.gov Hank Szymanski – 303-239-3797 Hank_Szymanski@blm.gov

3. 3 Overview Onshore Oil & Gas Order No. 1 Authority This rule, effective April 6, 2007, revised the existing OO#1 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 OO#1 is to state the application requirements for the approval of all proposed oil and gas and service wells, certain subsequent well operations, and abandonment.

4. 4 Overview Onshore Oil & Gas Order No. 1 Defines terms Components of APD Time line Approval requirements Split estate Indian leases Reclamation/Abandonment Appeals

5. 5 Background Reasons 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

6. 6 Background Status 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

7. 7 Background Major 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

8. 8 Background Major 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

9. 9 Background Controversial 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

10. 10 Background Controversial 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

11. 11 Specifics Definitions, 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

12. 12 Specifics General 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

13. 13 Specifics Notice 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.

14. 14 Specifics General 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

15. 15 Specifics 9-point Drilling Plan More complete casing and cementing information Added language for directional drilling

16. 16 Specifics 12-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

17. 17 Specifics Bonding 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

18. 18 Specifics NOS 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

19. 19 Specifics APD 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

20. 20 Specifics APD 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

21. 21 Specifics APD 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

22. 22 Specifics Master 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)

23. 23 Specifics Operator 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

24. 24 Specifics Completion 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)

25. 25 Specifics Private 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

26. 26 Specifics Subsequent 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.

27. 27 Specifics Well Conversions Order includes a more complete explanation of well conversions Added a section on conversion to an injection well

28. 28 Specifics Waivers, 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.

29. 29 Specifics Abandonment 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)

30. 30 Specifics Appeals FS SUPO subject to FS appeal requirements BIA decisions subject to BIA appeal requirements

31. 31 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