The Bureau of Land Management (BLM) recently proposed changes to its Onshore Orders 3, 4 and 5. Below are NMOGA comments related to changes to Onshore Order 4 and Onshore Order 5. As they now stand, these changes could be very bad for the oil and natural gas industry in New Mexico.
NMOGA’s Comments Regarding Proposed Changes to BLM Onshore Order No. 4
Below is the text of the comments filed by NMOGA at http://www.regulations.gov/ on December 14, 2015
December 14, 2015
U.S. Department of the Interior
Director (630), Bureau of Land Management
Attention: 1004-AE17
20 M Street SE
Room 2134LM
Washington, DC 20003
Re: ONSHORE ORDER 4 – Onshore Oil and Gas Operations: Federal and Indian Oil and Gas Leases; Measurement of Oil
Dear Director Kornze:
The New Mexico Oil and Gas Association (“NMOGA”) appreciates the opportunity the Bureau of Land Management (“BLM”) has provided to comment on proposed changes to Onshore Order (“OO”) 4 which we understand will be amended and codified in 43 C.F.R. Part 3170 and new Subpart 3174.
While NMOGA and industry share BLM’s goal of accurately measuring oil and natural gas, we believe balanced, clear and stream-lined regulations are possible. Specifically, regulations should take into account changes in technology as well as evaluating the current resources and ability of the BLM to carry out such regulations. We understand the role the BLM plays in managing our public lands to meet the needs of the general public, the development of our energy and mineral resources and protection of cultural and historical values.
NMOGA is a trade association whose members account for 95% of the oil and gas production in New Mexico; this production occurs primarily in the southeastern and northwestern portions of the state. Our members also include midstream sector companies operating in New Mexico.
In an April, 2014 article the Institute for Energy Research stated that since 2009, oil production on federal lands is down by 6 percent and natural gas production is down 28 percent. At the same time, oil production on non-federal land is up by 61 percent and gas production on non-federal land is up by 31 percent. Why are production levels on federal lands so strongly declining while production from non-federal lands is increasing? The primary reason for this production decline on federal lands is not due to declining resources or a lack of industry desire; the problem is clearly linked to excessive regulations, severe time constraints, and overwhelming regulatory costs. There are similar issues on Tribal Lands.
What can be done to restore federal production to levels necessary to generate federal royalty payments sufficient to fund the many programs which have been severely curtailed due to budget limitations? There should be specific efforts to encourage the increase of oil and gas production on federal lands across this nation. Instead, what we continue to see are proposals which will result in increased costs, redundant regulatory functions and inefficient reporting requirements that promote continued declines in oil and gas production on federal and tribal lands. NMOGA is concerned with the continued proposal of regulations which will require additional staff in BLM field offices at the same time that BLM budgets continue to be reduced. Some of BLM’s New Mexico field offices in particular are backlogged and are unable to fill current open positions at these offices. With such a high level of backlog, it is currently taking up to a year in some cases to process Applications for Permits to Drill (APD). In addition to a delay in APD approvals, there is also a delay in processing sundry notices, right of ways, change of operator forms, etc. The addition time it will take to implement the new regulations in Onshore Orders 3, 4 & 5, will only add to this backlog and increase the workload of already overburdened field offices.
During a time when the industry is facing a critical financial shortfall caused by declining oil prices, drilling on federal land has already slowed down and staffing has been reduced. Given increased regulation and slow processing times, drilling on federal lands is less likely to be an industry priority when drilling activities resume. It is part of the mandate of BLM to encourage continued drilling on federal lands instead of creating more restrictive regulations that will cause further delays. The implementation of these new regulations will cause undue burden on an already stressed industry. The cost of compliance with these new regulations as well as penalties for non-compliance will result in the shutting in of many wells by operators that cannot financially afford to make the changes these new regulations will require. This will result in the loss of revenue to both the federal government and the State of New Mexico and ultimately result in higher costs to consumers.
In addition to being subject to federal regulations, operators are also required to follow several state regulations. The state of New Mexico Oil Conservation Division rules strictly limit the number of inactive wells that an operator can have at any given time. If an operator cannot comply with these new federal regulations in a timely manner, or not at all, there could be significant negative impacts. For example, if an operator is forced to shut in several of their wells, they could run the risk of having their whole lease shut in due to being out of compliance with state regulations. Even worse, if the cost of complying with the proposed Onshore Orders 3, 4, or 5 is not economically justified for individual wells, it may force the premature plugging and abandonment of those wells and resulting loss of reserves. This potential loss of revenue could have devastating results on several companies which could result in further impacts to the state and national economy, not only through loss of revenue but loss of jobs, both private and federal. The loss of jobs alone would increase the unemployment rate.
Furthermore, the proposed changes in Onshore Orders 3, 4 and 5 are overly restrictive and put the BLM in the role of being involved in the day-to-day operations of producing oil and gas. It is unclear that such regulations are warranted, since the BLM has provided no demonstrative evidence that current facilities are not accurately capturing and accurately measuring production. Retroactive application of these proposed new standards and rules will impose significant costs on operators and could cause production to be shut in or wells to be prematurely plugged and abandoned. We urge the BLM to not apply these rules retroactively to the tens of thousands of existing facilities on federal lands but rather implement the new regulations on a go-forward basis only.
Another major concern to industry is the environmental impact that will result when complying with the new proposed Orders. For example, the rigging up and installing of separate FMPs and gathering lines for commingled wells on currently undisturbed wells pads will cause significant surface and sub-surface disturbance. There will be increased road traffic due to increased frequency of testing and sampling. In addition to the potential environmental impact of retroactive compliance, there is also a potential safety risk to personnel by the constant de-pressurizing and re-pressurizing of lines during compliance implementations. The opening of lines also could result in increased VOC air emissions which could prompt violations and penalties to operators from both the New Mexico Environmental Department Air Quality Bureau as well as the Environmental Protection Agency.
The comments below address specific provisions in proposed BLM CFR 3170 Subpart 3174:
1. 3174.5 (b) (3) requires all oil storage tanks, hatches, connections, and other access points to be vapor tight.
Comment: We have over 30,000 wells with many of them on Federal/Indian properties. Industry is working with the EPA greenhouse gas regulations to insure compliance with vapor recovery. We would ask that the BLM take current EPA regulations into consideration in order to avoid compliance conflicts between federal agencies. It is impractical for the BLM to require oil storage tanks to be vapor tight when this rule becomes effective. There must be 180 days, at a minimum, for industry to be in compliance with this sub-section.
2. 3174.5 (c) (1) (ii) requires that oil in tanks be measured in 1/8” increments.
Comment: Changing from ¼ inch to 1/8” will require all tank charts be recalculated throughout the industry. Since the new rule will not allow “standard” tank tables, all tanks will also need to be recertified at significant cost to industry to comply. In the discussion on this section, the BLM states, “which would match the current industry standard”. All tank tables are currently set up using ¼” measurements, this is industry standard. With every operator doing this at the same time, this will take an immense amount of time, will be costly, and is totally useless since there is no evidence this will increase revenue to the BLM. This section needs to be deleted from this proposal.
3. 3174.5 (c) (3) requires industry to submit sales tank calibration charts to the BLM within 30 days after calibration.
Comment: This is another example of the BLM getting into the day-to-day operations of industry. We feel that this is not a reasonable request and would like the BLM to provide justification for the necessity of submitting these charts.
4. 3174.9 (a) requires the specific makes, models, and sizes of Coriolis meters and associated software be within the confines of the BLM website and be approved.
Comment: Again, the BLM is getting into the day-to-day operations of field operations. The BLM has absolutely no need for this information and from industry perspective nothing good can come of it. The BLM does not have the right or authority to list the equipment by make and model that can be used in field operations. They do have the authority to put out standards which industry should follow, but how the operator obtains those standards should be the decision of the individual operator. When vendors are in a situation where their equipment must be used on Federal/Indian lands, supply and demand dictates the price of that equipment will increase significantly.
5. 3174.11 (e) (2) requires that meters be proved when production increases by 50,000 bbl or quarterly, whichever occurs first
Comment: There are parts of the country where a quarterly meter proving could be difficult in winter months with 6’ of snow and ice on the ground. There needs to be a statement concerning weather conditions.
6. 3174.12 (a) (14) requires the operator’s representative to certify that the measurement is correct.
Comment: Currently, operators do not have the field personnel to witness every oil tank haul made. Some tanks have several hauls each day. A company employee will not verify such information unless they are there to witness the tank measurements. Such oil hauling is done at the convenience of the oil hauling company; to have to schedule these when a company man can be present will be a severe problem in oil field operations. If a schedule is set up and the company man is detained on another problem and can’t make the trip to witness the haul measurements, the hauler will leave and reschedule the load haul which could cause a well to be shut-in until this is done. Industry may have to hire an individual to do nothing but witness tank gauges. This would cause undue financial strain to an industry that has already experienced significant layoffs due to lower oil prices. This requirement should be deleted from this proposal.
7. 3174.15 identifies certain acts of noncompliance that would be subject to immediate assessments.
Comment: The preamble states that the BLM will develop an “internal handbook” for inspection and enforcement. This handbook would provide direction to BLM inspectors on how to classify a violation as minor or major and the corrective action and timeframe for corrections. This handbook would be in place by the final effective date of the rule. This is a new complex rule and things will go wrong at the beginning. The BLM needs to give industry the time to bring operations into compliance, which is going to take six months at a minimum. Any penalty should be based on a “knowingly and willfully” situation or a continued reoccurrence with the same problem. The term “immediate assessments” is extremely disconcerting to industry and looks as if the BLM is looking for and expecting to find opportunities to penalize operators.
NMOGA has also responded to Onshore Order No. 3 and will be providing comments on Onshore Order No. 5 as well. Since we have many of the same general concerns that cross all three of these Onshore Orders and in an effort to avoid unnecessary repetition across all three documents, we would refer you to the separate comments submitted by NMOGA for OOS 3 and OOS 5 that apply to OOS 4 as well.
NMOGA appreciates the opportunity to comment on this Onshore Order No.4. Industry would be in a better position to offer positive feedback if the comment period were extended. Several of the members of NMOGA attended the BLM presentations in Durango, NM and Oklahoma City, OK. Presentation slides at these meetings dealt with Specific Data/Comment Requests for all three Onshore Orders. Having less than two weeks to accumulate that information from the first public meeting on December 1st, and less that one week from the last public meeting on December 8th, does not allow enough time for industry to thoroughly review and prepare a comprehensive response to the extensive and technical changes proposed in this Onshore Order.
Sincerely,
Steve Henke
President
NMOGA’s Comments Regarding Proposed Changes to BLM Onshore Order No. 5
Below is the text of the comments filed by NMOGA at http://www.regulations.gov/ on December 14, 2015
December 14, 2015
U.S. Department of the Interior
Director (630), Bureau of Land Management
Attention: 1004-AE17
20 M Street SE
Room 2134LM
Washington, DC 20003
Re: ONSHORE ORDER #5 -Onshore Oil and Gas Operations: Federal and Indian Oil and Gas Leases; Measurement of Gas
Dear Director Kornze:
The New Mexico Oil and Gas Association (“NMOGA”) appreciates the opportunity the Bureau of Land Management (“BLM”) has provided to comment on proposed changes to Onshore Order (“OO”) #5 which we understand will be amended and codified in 43 C.F.R. Part 3160 and new Part 3175. As an industry, we understand the role the BLM plays in managing our public lands to meet the demanding needs of the general public and the development of our energy and mineral resources; while protecting the cultural and historical values found there. NMOGA shares these goals and believes balanced, clear and stream-lined regulation that takes into account changes in technology along with the resources and ability of the BLM to carry out such regulations is possible.
NMOGA is a trade association whose members account for 95% of the oil and gas production in New Mexico which occurs primarily in the Southeastern and Northwester portions of the State. Our members also include midstream sector companies operating in New Mexico.
In an April 2014 article the Institute for Energy Research stated that since 2009 oil production on federal lands is down by 6 percent and natural gas production is down 28 percent. At the same time, oil production on non-federal land is up by 61 percent and gas production on non-federal land is up by 31 percent. We should ask why this trend is so varied and what can be done to bring federal production to the level that the federal government not only desires, but also needs in order to increase federal royalties to fund the many programs which have been severely curtailed due to budget limitations. The primary reason for this shortfall can’t be due to declining resources or industry’s desire to produce it; the problem is over-burdening regulations, time constraints, and costs. There are similar issues on Tribal Lands.
There should be concentrated efforts to encourage the increase of oil and gas production on federal lands across this nation. Instead, what we continue to see are proposals which will increase cost, regulatory functions and reporting that promote continued
delays of oil and gas production on federal and tribal lands. NMOGA is concerned with the continued proposal of regulations which will require additional staff in BLM field
offices, while BLM budgets continue to be reduced. Some of BLM’s New Mexico field offices in particular are backlogged and are unable to fill open positions at these offices. How can BLM staff administer and enforce new regulations such as the proposed changes to OO No. 5 (in addition to anticipated proposals for OOs 3 and 4) when it is currently unable to timely process APDs, sundry notices, ROWs, change of operator forms, etc.? Further, even though the Hydraulic Fracture Rule has been stayed, it is unclear how the field offices will administer this rule if it goes into effect.
This proposal is another, of a long line of recent proposals, which is unnecessary and will discourage the production of oil and gas on federal and tribal lands. Industry can obtain approvals and drill two wells on non-federal lands in the time it takes to submit and obtain approval of a single well through the BLM.
The BLM makes several presumptions with OO No. 5 which NMOGA takes issue. First is the huge unquantifiable presumption that most if not all wells are not accurately metering, measuring, analyzing and accurately reporting production. Prior to being required to make a complete change impacting thousands of wells under OO No. 5, this presumption should be rebuttable and if a problem cannot be proven, then the current metering and measurement should be grandfathered in so as to not create additional expense on the leases.
A second presumption is that this proposed Order would not interfere with constitutionally protected property rights as a taking available to industry under Executive Order 12630. Many of the wells impacted by the retroactivity of the new rule are marginal today, but utilize the measurement devices that were authorized and available when they were drilled and completed. Many of these marginal gas wells are operated by small independent companies and individuals that cannot afford to make the changes desired by the Orders and certainly cannot afford the unnecessary increase in fines if they do not make the changes. With depressed oil and gas prices the entire industry has been forced to cut back on costs and there have been numerous reductions in staffing.
Due Process under the Fifth and Fourteenth Amendments and case law definitely play a role in the impact of these new Orders. Due Process is the basic right to protection afforded individuals and companies from the government unjustly proceeding against them and taking their life, liberty and property. Under Due Process, past acts of criminal activity and civil violations prior to legislation being enacted have been protected from government prosecution and litigation by these fundamental rights. Here the BLM is avoiding this Due Process protection by Rules that allow retroactivity which create an unjust taking by making the new Orders apply to measurement procedures, facilities and equipment that were acceptable to, and approved by, the BLM when they were initially installed and activated. NMOGA finds the uncertainty and taking the BLM is creating with these Orders’ retroactivity totally unacceptable.
The industry standards set out by the American Petroleum Institute (‘API’), American Gas Association (‘AGA’) and the Gas Processors Association (‘GPA’) that the BLM incorporated by reference are intended to be prospective and were not intended to be retroactive. The BLM stated that some of these standards could not be set out verbatim in the Rule because of copyright restrictions thus making industry go to the different sources. Access to the standards has been a real hardship to non-members of the above organizations and smaller operators with limited budgets.
In addition to the tremendous number of BLM and Tribal Leases in New Mexico there are also tens of thousands of acres subject to fee and State Land Office Leases within Federal Units and Communitization Agreements that could be compelled to follow the new rules which is a Federalism issue.
The BLM claims that the Small Business Regulatory Enforcement Act is not in play because their estimate of compliance is under the $100 million threshold and only an increase of $46 million annually and an initial $33 million. These total estimates for compliance we find are overly conservative, probably in the San Juan Basin alone. Because they are interrelated, the total costs of compliance should be an aggregate of OOs Nos. 3, 4 and 5.
We see this proposal as an effort by the BLM to get involved in the day to day operations of producing oil and gas wells, far exceeding the guidelines for the BLM. Many of these proposals can be seen as laying ground work for future, more restrictive regulations which will put the BLM more involved in day to day field operations. Why would industry put itself in such a situation when it can choose to stay off federal lands and not be hindered by such regulations? Further, is there demonstrative evidence that the current measurement facilities are not accurately capturing the production, or are these new procedures based purely on a speculative hypothesis?
The potential revenue for the Federal government for new drills on Federal lands is astronomical. The oil and gas industry is concerned about these latest OO’s regulatory proposals from the BLM that the growing trend is more restrictive regulations, slower approval process due to an overworked staff, and increased cost. Currently industry is facing a critical financial short-fall and drilling is scarce in many areas. When the drilling activities resume, operators will be drilling the most promising locations which offer the best return on investment. As things exist now, drilling on federal land may not be on the top of the list. Only the DOI/BLM can correct these situations to encourage the drilling on federal lands.
Throughout the proposed Orders the BLM needs to better define, explain and demystify the ‘PMT’ as to its membership, credentials, powers, responsibilities and authority.
NMOGA requests that the short reopening of OO No. 3, extension of OO No. 4 and limited time to respond to OO No. 5 all be extended for a more reasonable review period. The BLM has finally had Public Meetings on December 1st, 3rd and 8th on the interrelationship of the three Orders which is right up to the December 14th deadline for comments. With the extended Thanksgiving Holiday and upcoming Christmas and New Year Holidays, along with industry year-end requirements, time for industry to provide meaningful responses to all three OOs is definitely compromised. Throughout the proposed OOs there are incomplete descriptions of acceptable equipment, what formulas were used to arrive at requirements, no proposed field handbooks, and underlying justifications to analyze for many of the change requirements that cost lots of money with no articulated benefits. There were oversights like the one identified in the San Juan Basin where drip pots are not allowed in any part of gauge lines. Approximately 90% of the meters in the Basin have drip pots which would mean most gauge lines would have to be re-tubed creating a significant expense. Industry wants to work with the BLM to achieve the best results, but has to have more certainty in the proposed Order to do so.
Another major concern to industry is the environmental impact that will result due to compliance with the new proposed Orders. For example the rigging up and separate FMPs for commingled wells on currently undisturbed wells pads. There will be significant surface and sub-surface disturbance from replacing the meters and gathering lines and systems due to new requirements. There will be increased road traffic due to increased frequency of testing and sampling. What exceptions will there be to the time limits in conjunction with seasonal wintering restrictions among regulatory restrictions? The BLM has not and needs to follow all NEPA procedures for OO #5.
The comments below address specific provisions in BLM CFR 3163 and 3175:
Section 3163 Remedies and Civil Penalties
There is real concern that fines which can go up to $10,000 and even $25,000 are excessive and punitive when they should be geared to resolving problems. Fine first and resolve later is counter-productive. Also under 3163.1 (c) an appeal to the State Director from Operators in the producing areas located in the extreme Northwest and Southeast parts of New Mexico take a half day of travel both to and from Santa Fe where the State Director resides. As stated below there have been real problems in the past with what is referred to as “Rogue Inspectors” who feel their primary mission is to impose fines. Taking valuable time from the BLM and industry to appeal unnecessary fines is a problem.
As one long time Engineer in the San Juan Basin noted there are numerous problems with BLM’s re-initiation of automatic assessments. When BLM had the authority to impose automatic assessments back in the 90s it took much of the discretion away from the Inspector/Engineer and the assessments, though not substantial ($250) became commonplace and in fact routine. One example was the 5 day production startup notice requirement where the operator was fined $250 for not timely reporting the production start-up on new wells or returning a well to production that had been shut-in for over 90 days if the report was filed on day six (6) or beyond. There are a number of reasons why an operator would have difficulty reporting within the five day requirement, but BLM’s “automatic “ assessments left no discretion to explain why a report was tardy. Another issue with automatic assessment is the “ Rogue Inspector” where assessment are automatic, some inspectors spend more time looking for opportunities to issue assessments than using common sense and “working” with the operator to get resolution to the issue. Another example was well signs; back in the day there was a provision to issue an automatic assessment if an operator did not abate an incident of non-compliance for a sign within the allowed abatement period of 30 days. In some cases an operator may have had hundreds of signs to change out because of an acquisition or name change but rather than working with an operator to get compliance, a rogue inspector would issue an assessment if signs were not changed out within the 30 days that the rule specified. If the inspector wanted to, each well sign would be considered a separate action and he could issue a $250 assessment for each well sign needing replacement… another inspector might just issue one $250 assessment for the package of wells.
These are just a couple of examples of why automatic assessments will be difficult for the industry to deal with. The BLM will also have other issues: they will have more billing and accounting problems and need more staff in collections not to mention the need for more training and staff to enforce these new Orders. The automatic assessments listed in OO No. 5 are for areas that the BLM deems immediate, substantial and adverse in terms of impacts to production accountability. Reasonable abatement periods should still be the requirement and not automatic assessments. If an operator fails to comply and cannot show cause why he has not complied then an assessment may be warranted and the gravity of the assessment should be based on the magnitude of the violation. BLM just needs to maintain the enforcement standards that are currently in their regulations. It appears the BLM is looking for the easy way out and issue an assessment rather than seek compliance which ultimately should be their goal and objective. A small mistake and the new penalties can easily exceed the remaining value in many of the marginal wells. This appears to be a revenue generating proposal as opposed to true regulatory enforcement.
Section 3175.10 – Definitions and classifications
The BLM needs to reevaluate the definitions for well classifications for wells at the Facility Measurement Points (FMP). It is understood that the economic forecasts that were used were based on higher prices than the current low $2.00s per MCF that is currently being realized (NYMEX gas was $2.23 on November 30, 2015). With the current depressed prices and the number of older wells in New Mexico, NMOGA requests the BLM reconsider the drastic changes in the proposed Order and bring them back in line with the existing OO #5:
NMOGAs recommendation: Marginal 0 to 100 MCFD
Low Volume >100 to 500 MCFD
High Volume >500 to 1000 MCFD
Very High Volume >1000 MCFD
This one change, which is consistent with how wells have been classified for the past 25 years, would save the industry millions of dollars and maintain revenue levels to the BLM and Tribal interests. It makes economic sense that the concentration of accurate measurement be placed on the wells producing the most product which are also the wells that will be able to absorb the dramatic increase in cost of equipment, inspections and maintenance. There are estimates that the new guidance and proposed lower volume classifications will result in plugging and abandoning of as many as 20-25% of the wells under Federal Leases, Units and COM Agreements in San Juan Basin. An Operator cannot continue operations on a Marginal or Low Volume well because it is not economically feasible to expect them to make up from a minimum of $3,000 to as much as $8,000 one-time equipment upgrade and annual maintenance cost of $1500± per FMP for increased meter verification and sampling along with the requirement for meter tube inspections (these figures could double if OO #3 requires separate FMPs for downhole commingling). There is only an assumption that measurement accuracy will improve and does not take into consideration the reality that all volume may be lost forever because compliance with the new Order will render the well uneconomic resulting in the plugging and abandoning of the well. The proposed Order does not address issues like the burden of also complying with State Regulatory requirements, such as the shutting in of wells.
Determining classification, how the MCF/day is to be calculated and averaged out over a period of time is unclear in the proposed Order. There should be procedures in place to reduce the classification when wells come in at very high volumes that last only or a very short period of time. More expensive equipment and inspections may not be appropriate based on an initial spike in volume that will not last.
3175.30 Specific Performance Requirements.
The explanation and justification of the BLM Uncertainty Calculator is ambiguous until the BLM supplies the actual equations used in determining them. Likewise industry needs a determination of how the Heating Value Uncertainty levels were developed.
3175.40-48 Measurement Equipment
The limitation of specific types of approved equipment by the PMT and the BLM will be very impactful to industry. The BLM entering free market determinations impacts what is acceptable and available to industry which will increase costs exponentially causing wells to be shut-in. Increased costs and shut-in time face an Operator that has equipment which is not approved or purchases equipment that does not make the approval list. Existing equipment should be allowed to be used unless it is proven inaccurate because wholesale changes could be a problem rendering the well uneconomic.
An example is 3175.43 Transducers where the BLM proposes that for high and very high volumes the transducers are type tested and that they have been approved by the new PMT. The lower volume classification requirements are a problem here. The BLM has not yet released a list of approved transducers or flow computers. How can industry evaluate their own equipment for implications from this rule if a complete list of approved transducers has not been made available by the BLM? Another uncertainty is under 3175.46 where the BLM is allowed to go beyond the API requirements and the procedures to do so are currently unavailable and ambiguous. Under 3175.48 there is uncertainty on the approval of ultrasonic linear measurement devises and cone meters which are currently used and approved by the BLM.
3175.60 Timeframe for Compliance
If this new Order goes into effect it will be a major change. Equipment may not be approved or available to comply, computers and software need to be developed and available and due to commodity prices many companies have been forced to downsize their employees. These transitions will take several years whether they are specifically granted or based on reality. For example, the BLM has not finished the Gas Analysis Reporting System (GARVS) and the programs with the FMP requirement of 11 digits needs to be addressed because it is concerning numerous Operators.
3175.80 Flange-tapped orifice plates.
The BLM needs to allow Operators and Pipelines to use currently approved equipment meeting previous standards. There are estimates that 60% of the potentially classified low volume, high volume and very high volume BLM FMP meter tubes in the San Juan Basin will need to be replaced. Operators and gathering companies both own the equipment at the FMP. The average estimates in the Basin of what the costs will be to comply with OO #5 have been between $3,000 and $4,000. Using the San Juan Basin as an example it is estimated that there are approximately 20,000 FMPs subject to review (even more if downhole commingles are not grandfathered in) times 60% needing to be replaced, which results in approximately 12,000 FMPs times the estimated average cost of $3,000 to $4,000 at each FMP which would result in an additional expense of $36,000,000 to $48,000,000. This estimate may be considered conservative. Southeast New Mexico operations will also be significantly impacted.
The visual meter tube inspection under (h) has several concerns especially with expense and safety. This work is time consuming with multiple safety issues related to using a borescope in the way proposed by the rule. In the San Juan Basin this expense for this rule can exceed $2,000,000 a year. This cost does not include the lost revenue to Operators and the BLM for wells shut-in during the testing period. The BLM needs to reevaluate these inspection requirements and it would help if it were changed to the AO requesting inspections when other information deems it necessary.
3175.91 & 3175.101 Installation of mechanical recorders and EGM systems.
The new requirement requiring gauge lines and valves to have .375” internal diameter requiring 1/2” tubing is inconsistent with the current 3/8” tubing OD (outside diameter). Industry is hoping this was an oversight and the BLM was meaning not less than 3/8” OD. If BLM expects industry to upgrade all tubing to ½” SS tubing the cost and the resources to perform that task for “no” measurable benefit will be hard to accomplish without spending millions of dollars. The unnecessary environmental impact will be significant.
3175.100 Electronic gas measurement (secondary and tertiary device).
The BLM should reconsider the API 21.1 as a guideline because it is not universally used in industry due to the complexity and difficulty in implementing it for wellhead measurement.
3175.102 Verification
The BLM has added confusion under 3175.102 (a) (2) with added language to the API standards on replacement of the transmitter. Under 3175.102 (c) (7) the BLM needs to review the language to see if they intended to say “check the zero” instead “must be rezeroed”. If the transducer zero is changed then the operator has to perform another verification. Under 3175.102 (g) the BLM should consider changing the volume on report corrections in a change greater than 2% or 2 MCF whichever is ‘greater’, rather than ‘less’. Larger volume wells would be at a disadvantage with a low 2 MCF threshold. 3175.102 (h) (1). The BLM should reconsider this provision for a more realistic threshold for the upper calibrated limit of the transducer being tested because the level of accuracy is very hard to accomplish outside of the laboratory.
3175.103 (a) (2) Flow rate, volume, and average value calculations
This provision is open ended allowing the PMT to establish the parameters instead of affirmatively setting them out in the Order.
3175.104 Logs and Records
The BLM needs to review this section and clarify the recording of power outages to more accurately reflect what actually happens when the ‘primary’ power is lost.
3175.112 Sampling Probe and Tubing
This language is too restrictive and cannot be implemented in all instances.
3175.112 (b) and (c) (4) Sampling Probe and Tubing
There is an inconsistency in measurement of gaseous hydrocarbons that are liquid free and these two provisions. Because they are unnecessary, industry recommends they be eliminated.
3175.113 Spot samples
Under (a) there needs to be more flexibility in the requirements for Operators sending documentation on all non-flowing FMP’s at the time of sampling via the BLM GARVS. It is also problematic that GARVS has not been built yet and industry does not know the protocol necessary to comply with that system. Not knowing this will adversely impact our ability to comply within the timeframe for the new rules. Under (b) the 72 hour notification period prior to sampling is a real burden and not reasonable in normal operations. In (c) (1) the requirement for stainless steel cylinders would require industry to stop using the many aluminum cylinders currently being used for low pressure spot sampling. Operators would request the BLM consider allowing aluminum cylinders also be used. Under (c) (4) the proposed Order requires cylinders to be sealed which can only be opened just prior to sampling. This is not common industry practice and having seals will also require replacement of valves on most cylinders. Tracking seal numbers will be very cumbersome for negligible if any benefit. It also does not detail if the seal is required after the cylinder has been cleaned at the lab and/or if the seal is required after the sample is pulled. In (d) (iii) (2) cleaning or replacing filters at the inlet before sampling will be difficult in the field and should be more limited to when it is really necessary. Under (d) (iii) (3) (4) and (5) all need to be reviewed for clarity and more flexibility to allow for new techniques for improved processes.
3175.115 Frequency
These provisions need further explanation as to what the BLM is attempting to accomplish and the underlying criteria used to formulate their provisions. Under (d) the time frames for installing composite samplers and on-line gas chromatographs of 30 days is not consistent with actual waiting periods for equipment availability guaranteeing a violation.
3175.118 Gas Chromatograph Requirements
There is concern that these requirements were based on laboratory gas chromatographs in controlled environments and under ideal circumstances. The rules are not adapted for field or portable gas chromatographs which are subject to travel and ambient changes with weather and altitude.
3175.119 Components of Analysis
Under (b) the increased analysis for Hexanes, Heptanes, Octanes and Nonanes+ when the C6+ exceeds .25 mole percent is justified, but the increase in heating value is generally insignificant. If these findings show only insignificant increase to the value of the gas resulting in no realized benefit to the royalty owner, why create more obligations on industry and the BLM.
3175.120 Gas analysis report requirements.
Under (b) the Order will require reprograming of some systems to set out the gas components that were not tested in the Report. Under (e) whether industry can meet the 5 days reporting requirement is hard to analyze because industry cannot evaluate the proposed GARVS system. As pointed out above there will be a great deal of work integrating internal software systems to coordinate the communication of the reports to GARVS once it is made available.
3175.150 Immediate assessments.
NMOGA went into great detail above objecting to the Civil Penalties in comments on Section 3163 above. This new rule will allow the BLM to impose immediate fines for 10 (ten) listed measurement items. These enumerated tasks are performed thousands of times every day of the year by industry in New Mexico. For the BLM to immediately assess $1000 fines for non-compliance will be an undue burden on the industry to try to be “perfect”. These items are missed on occasion and when an internal or external audit finds the non-compliance the two parties work to correct the problem. The rule also does not give guidance if the $1000 assessment will be for each missed task or for a combination of missed tasks. There are always reasons for not being able to perform a meter test, plate inspection, or gas sample such as; weather, lack of resources, agency restrictions during time of the year or unforeseen conditions at the time. Leaving much of the interpretation in handbooks and manuals and possible IMs is very concerning that the ultimate meaning of these Orders may be enforced entirely different than what they appear. There is currently no guaranty to industry that the protections of the Administrative Procedures Act will be followed by the BLM. This section should be removed entirely.
NMOGA will be responding to the decision to make OO #3 retroactive to the thousands of wells in the State of New Mexico that are currently downhole commingled that was discussed at the December 1st meeting in Durango and in a separate letter by NMOGA amending our initial #3 response. That arbitrary decision will have a devastating impact on industry and ultimately to the Federal and Tribal Royalty. In regard to its impact on OO #5 many of the cost estimates included herein will be doubled if the BLM reneges on previous approvals and Orders and then requiring additional FMPs for production from different Pools in a commingled well to be subsequently measured separately. The end result will result in more lost revenue on BLM and Tribal leases because of the wells being plugged and abandoned prematurely due to not being able to justify the additional expenses.
NMOGA appreciates the opportunity to comment on this OO #5. Industry would be in a better position to offer positive feedback if the comment period were extended for it like the BLM offered for OOs #3 and #4. Several of the members of NMOGA attended the BLM presentation in Durango on December 1, 2015. Two of the last three slides at that meeting dealt with Specific Data/Comment Requests for 3175. Having less than two weeks to accumulate that information from the 1st, and one week from the last public meeting on December 8th, causes industry to wonder if the BLM is actually serious about wanting that information or if they were just putting it in their program to document that they asked for it?
Sincerely,
Steve Henke
President