**National Oil and Gas Policy**

**BLM National Training Center Telecast**

**October 30, 1997**

This transcript is from the closed-captioning file produced during the
telecast.

It may contain errors in transcription and omissions.

Announcer: the Bureau of Land Management Satellite Network Presents Live
from the BLM National Training Center in Phoenix, Arizona\... A Forum on
the National Oil and Gas Policy Regulation Rewrite. And Now, the Host of
Your Program, Sherry Barnett.

Barnett: Good Morning, Everyone. Welcome to the Show. It\'s Our Pleasure
to Be Here Today. Purpose of this Telecast Is to Explain How the New
Proposed Oil And Gas Regulations Will Work, Give You Some of the
Background Behind the Changes and Give You an Opportunity to Discuss
Your Thoughts with the Team. We\'re Also Going to Give You an Update on
Where the Regs Are in The Process and What You Can Expect next. Joining
Me for Our First Segment Today Is Pam Lewis from the Wyoming State
Office. Pam, We\'re Glad to Have You with Us Here Today.

Lewis: Thank You, Sherry. I\'m Glad to Be Here.

Barnett: We Have Pete Culp Joining Us from Portland. Good Morning, Pete.

I\'m Glad to Be Participating in the Broadcast. I\'m Calling in from
Portland, as You Said, Where We Finished up The Law Enforcement
Leadership Conference Last Evening. I Want to Take a Minute to Talk
about the Importance of this Regulation Package. As You Know, It\'s a
Comprehensive Review and Rewrite of the Oil And Gas Regulations and it
Will Impact the Way We Do Our Jobs Across the Board. The Review Was
Started in Response to Vice President Gore\'s National Performance
Review. Not Only Have the Regulations Been Rewritten in Plain English to
Make Them More Clear and Understandable to the Reader but Performance
Standards Will Replace the Prescriptive Standards That the Industry must
Use to Comply. I Particularly like How the Performance Standards Can
Provide Greater Flexibility to Our Customers and to the Field Offices
While Ensuring Protection of Public Health and Safety, the Environment
and Federal and Indian Financial Interests. I Do Know That for Many of
You, this Will Be a Significant New Way of Doing Business and One That
Many of You May Not Be Completely Familiar with. But the Team Has
Followed Executive Order 12866 to Make These Regulations as
Performance‑oriented as Possible. I Think the Broadcast Is a Great Way
to Present and Discuss the New Regs with BLM Folks Around the Country.
Sherry, the Package Is Just about Ready, Isn\'t It?

Barnett: We Think We\'re Pretty Close. We\'ve Had a Group of Folks from
the Field Working on Various Parts of this Package for over Two Years
Now.

Culp: the Team Certainly Deserves Tremendous Credit for the Work
They\'ve Done. I Would Also like to Thank the Field Staffs for Their
Reviews And Constructive Comments. I Also Want to Thank Everybody for
Participating in the Broadcast. I\'m Behind These Efforts 100% and I
Look Forward to the Presentations and Discussions You\'ll Be Having
Today.

Barnett: Thanks for the Encouraging Words, Pete. We Appreciate Your
Calling In.

Culp: Good‑bye.

Barnett: I Would Also like to Thank the Team for the Effort They\'ve Put
into this Process. We\'ll Be Hearing from the Braver Members of That
Team in Our Broadcast Today. Let\'s Go over the Order of the Things
We\'ll Be Covering in the Show Today. First, We\'ll Go Through a Section
by Section Analysis for the Leasing Regulations. Then We\'ll Present
Changes to the Operating Regulations. Because of the Nature and the
Complexity, We\'ll Be Describing Them in Much Greater Detail, Explaining
Where the Proposed Language Came from and Why We\'re Proposing the
Change. After We\'ve Covered Leasing and Operations, We\'ll Discuss the
Recent Changes to the Cooperative Agreement Regulations Covered Under
3190 Then Dennis Daugherty from the Solicitors Office Will Be Here to
Give Us an Opportunity to Discuss the Drainage Rule And its Provisions
on Who Is Liable for a Lease after an Assignment. We\'ll Plan to Spend
the Last 40 Minutes or So of the Program Discussing Any Comments or
Suggestions You Want to Bring Forward. We\'ll Have Pete Aguilar Joining
Us from the Bia to Help Us with Questions Regarding Indian Issues. Keep
in Mind as We Go Through Our Discussions Today That in Many Instances,
the Proposed Rules Do Not Change the Policy or Procedures of a Given
Section of the Current Regulations. They\'re Only a Translation from
Current Regulatory Language into Plain English. Some of the Discussions
Will Also Clarify the Existing Procedures or Policies. Before We Begin
the Leasing Presentation, I Would like to Mention That Throughout this
Program, You Will Be Able to Communicate with Us by Telephone and Fax
Using the Numbers Provided in Your Offices in Your Viewer Packages. You
Can Send Us a Fax at Any Time. Please Use the Form Provided with Your
Written Materials and Print Your Question with a Dark Marker, Please.
You May Call Us Whenever You like. Our Operators Are Standing By. Yes,
They Did Make Me Say That. We\'ll Take Your Calls as Soon as Possible on
the Air. There Will Be a 15 Minute Call‑in Period after the Leasing
Portion and Then a Discussion Period after We Hear from Dennis. These
Call‑in Periods Are Your Opportunity to Bring Your Issues Forward So I
Encourage You to Participate as Much as Possible During the Show. To Get
Things Started this Morning, Pam Is Going to Review the Proposed
Changing in the Leasing Regulations. Pam, You Want to Tell Us about Some
of the Changes You\'ve Made?

Lewis: Thanks, Sherry. I Appreciate this Opportunity to Come in and Talk
to Everyone Across the Country about What the Team Has Done with the
Leasing Regulations. As You Know, We Received a Lot of Really Good
Comments from the Field. And We Try to Incorporate as Many of Those
Comments as We Could Into this Package. And One of the First Changes
That We Have Made Is That We Eliminated the Formal Nomination Process.
You Know, the 1988 Final Rule‑making Package Provided this
Administrative Flexibility by Allowing for Both a Formal Nomination
Process and an Informal Nomination Process. The Director Has Chosen to
Never Exercise His Option with the Formal Nomination Process. The
Executive Order Requires That We Remove Regulations That We\'re Not
Using and Therefore in a Streamlining Effort, We Have Taken Those
Regulations out of this Particular Package.

Barnett: since We\'ve Never Used That Particular Regulation Before,
Industry Will Never Miss That, Right?

Lewis: That\'s Correct. It Was Tried in Some Test Sales but We Feel the
Oral Auction Better than a Formal Nomination Process.

Barnett: You Did the Same Kind of Thing with Presale Offers, Didn\'t
You?

Lewis: Yes, We Did. The Intent of the Reform Act Was Really to Emphasize
Competitive Leasing, Not Noncompetitive Leasing. We Feel That by
De‑emphasizing Presale Offers, it Puts the Emphasis Back on the
Competitive Process. The Current Process of Allowing Presale Offers Was
Instituted Strictly by Regulation and Therefore, Is Easily Removed. The
Current Process Is Also Quite Burdensome and We Feel That It\'s a Way of
Making Our Life Easier in the Bureau to Do Away With this Now Regulatory
Requirement.

Barnett: One of the Issues I Know Got a Lot of Comment from The Field,
When We Sent it out Was Maintaining the Parcel Integrity. You Want to
Tell Me about What You Did There?

Lewis: What We Did with the Parcel Integrity Period Is We Have Allowed
it to Continue but We Feel That the Bureau Should Control Parcel
Configuration and Not the Public. And Therefore, for the Two‑year
Window, after the Sale, We Would Now Require That Parcels Remain Exactly
as They Appeared on a Particular Sale List. This Would Ensure That
Stipulations Will Always Be Consistent on Those Parcels and it Puts BLM
in Control and Not the Offeror. It Streamlines the Process and Certainly
Makes it Much less Cumbersome and Burdensome. It Fits in with the New
Almrs System We\'ll Be Deploying To.

Barnett: this Also in Some Ways Can Benefit Customer Service Because
It\'s So Much Easier for Us to Process These Offers.

Lewis: What it Does Is Removes this Burden of Us Looking to See If the
Applicant Has Picked up All of the Lands Within a Section or the
Contiguous Lands to Meet the Existing 640 Acre Rule. It Also Removes the
Burden for Us Having to Decide Whether or Not the Lands Are in a Compact
Form Which Means Within a Six Square Mile Rule. We Will Be in Control of
That and We Feel this Is Much Better to Us and Actually More Customer
Friendly to the Public Also. They Won\'t Have to Do this Type of
Research Anymore and They Won\'t Have to Lose Priority of Their Offer by
Having Not Picked Up All of the Lands They Should Have in a Sale Offer.

Barnett: So It\'s Really Balancing. You Balanced out Some Customer
Service Issues but They\'ve Gained Some Other Things We Think Outweighs
the Benefits They\'ve Lost.

Lewis: That\'s Correct.

Barnett: It\'s Especially Important with the Changes to the Almrs.

Lewis: That\'s Correct. With That Coming to Us Soon, We Needed to
Accommodate the New System.

Barnett: I Understand You Did a Few Housekeeping Changes. You Want to
Tell Me about a Few of Those?

Lewis: Yes, We Did. We Wanted to Remove a Lot of Administrative Burden
from the Public. What We Did Was Reduced the Number of Copies for a
Noncompetitive Offer from Three to Two. Today, in Most of the Western
States Especially, That Third Copy Is Simply Thrown Away. So Not Only
Are We Reducing the Burden on the Public of Giving Us a Copy That We
Don\'t Need, We\'re Also Reducing Our Recycling Within Our Own Offices.
Probably the Only State That\'s Going to Find this to Be a Burden Is the
Eastern States Office Because of the Majority of Their Lands Are
Acquired and They Do Need an Extra Copy for the Service Management
Agencies. We Feel You Can Get Through That Xeroxing Process Easily
Enough.

Barnett: in General Though, That\'s Something That Industry Will like.

Lewis: I Think So Because Too Many Times You Didn\'t Send News Enough
Copies.

Barnett: Some Other Housekeeping Issues?

Lewis: Some of the Other Things We\'ve Done Is That We Are Limiting the
Acreage Today for Both Competitive and Noncompetitive Leases to Be
Consistent at 2560 Acres in the Lower 48 and 5760 Acres in Alaska. In
1992, You Know, We Had a Change in the Lease Terms, Made Them Consistent
for Competitive and Noncompetitive Leases, to Both Be Ten Years. Just in
an Effort to Continue to Make Consistency Between These Two Types of
Leases, We Wanted to Reduce the Acreage, Also. Another Change That We
Have Come up with Is That We\'re Going to Allow Balance of Bonus Bid
Payments. That Are Postmarked on or Before the Tenth Working Day to Be
Considered Timely Paid. This Is Extremely User Friendly to Both the
Bureau and to Industry. Because in the Past, We Have Lost out on That
Balance of Bonus Bid Money and When We\'ve Reoffered Those Lands at a
Future Sale, We Sometimes Received Far less in Bonus Bid than We Would
Have The First Time We Offered It. Also, We\'re Not Going to Be Having
Industry Forfeit Moneys That They Have Paid the Day of the Sale. We Feel
this Is a Win/win Situation.

Barnett: in Addition to Some of the Benefits You Mentioned For the
Government, There\'s Really ‑‑ this Is Something That Industry Is Really
Going to like Because They Can Mail this from Their Offices Back in
Wherever They\'re Located. They Don\'t Have to Actually Be in Our Office
to Make this Payment as They Would Have to under Our Current Procedure.

Lewis: Right. Today We Expect That the Money Has to Be Physically in Our
Hands By the End of the Tenth Day after the Sale. So Now If It\'s
Postmarked, it Will Be Considered to Be Paid. It Works Very, Very
Similar to the Way We Treat Rental Payments.

Barnett: Ok. Now, There Are Quite a Few Bonding Changes, I Understand,
Too.

Lewis: We Came up with a Lot of Bonding Changes. A Lot of Those Are
Strictly Based on the Bpr Effort That Had Taken Place. We\'ve Eliminated
Unit Bonds. We Feel That Unit Bonds Are Unnecessary Because You Can Bond
Units Through Either a Statewide or Nationwide Bonding Bond That You
Currently Have. We Could Still Require an Individual Bond for a Unit
Though If We Feel That the Unit Liability Is So Great That a Nationwide
Bond Wouldn\'t Cover It. But, of Course, You Know, Bonding Amounts Are
Minimum Amounts. And Therefore, Could Always Be Increased but You Know,
We Have a Little More Flexibility in How We Want to Deal with this Issue
Now.

Barnett: So this Starts to Address the Duplication of Bonding Issues. If
We Find a Need for an Additional Bond, We\'ll Just Increase Their
Bonding Requirements in That Specific Situation.

Lewis: That\'s Right. It Makes it Very Easy for Us and for the Customer.
Another Change That the Bpr Had Come up with Was Requiring That Inactive
Wells Now Have Additional Bonding Put on Them. So with Well That Has
Been Inactive for at Least 12 Months Would Be Required to Give Us an
Additional Bonding of \$2 per Foot for The Depth of the Well or a \$100
Yearly Holding Fee. That Holding Fee Would Go into a BLM Managed Account
and We Would Use That Money Then in Our Orphan Well Plugging Program.

Barnett: These Are Pretty Innovative Ideas. Didn\'t They Come from
Howard Lamm and Bob Anderson\'s Team?

Lewis: Yes, They Did. They Had Been Accepted by the Bureau Which Is Why
They Were Put Into this Proposed Rule Package. The Government\'s
Liability Issues Is of Great Concern to Everyone and this Should Help
Defray Some of Those Concerns.

Barnett: I Understand That Our Liability for Orphan Wells for Unplugged
Wells Is So Enormous That We Need to Do Something to Get a Handle on
this. I Know That a Lot of People Have Suggested That Instead of Doing
This Kind of Band‑aid Approach, That Instead We Wipe the Slate Clean and
Come up with Some Whole New Process.

Lewis: We Don\'t Disagree. The Team, Especially That a Whole New Process
Is Needed. But this Is the Approach That We Are Going to Stick with.
This Is the Approach That Was Approved by the Administration and So this
Is What We Have Put into the Proposed Rule‑making Package.

Barnett: What Kind of Comments Did You Get from the Field on This Issue?

Lewis: Just the Fact That They Don\'t Feel Even the Increases In the
Bond Amounts That We\'re Proposing Are Enough to Take Care Of the
Concerns with Reclamation Costs, Plugging Costs and Any Outstanding
Royalty Issues out There. But, You Know, We Have, in this New
Rule‑making Package, Increased the Dollar Amount for Bonds from \$10,000
to \$20,000. And for Statewide Bonds from \$25,000 to \$75,000. Those
Increases Will Be Phased in under the New Rule‑making Package Once it
Becomes Final, If You Take an Action, You Will Immediately Be Subject to
These New Increases. However, If You Don\'t Take Any Action During the
Two Years Following this Final Rule Making Package, Then You Won\'t Be
Subject to the Increases until the End of That Two‑year Period.

Barnett: Ok. Now These Bonding Amounts You\'re Talking About, They Have
Been In Place since the \'60s?

Lewis: Yes, They Have. They Haven\'t Increased the Minimums since That
Time. So When They Did an Analysis on What the New Increases Should Be,
They Looked at the Inflation Factor and Had Determined That Had You
Really Put These Bond Amounts at What the Inflation Called For, an
Individual Lease Bond Should Have Been Increased To \$50,000 and a
Statewide Bond Should Have Been Increased to \$135,000. So We Feel That
These New Increases of \$20,000 and \$75,000 Are Really Justified and
That We Have No Problem Coming up with Those Particular Amounts.

Barnett: and Yet You Feel That the Increases That We\'ve Set, The
\$20,000 and the \$75,000, They\'ll Still Be Sufficient to Start
Addressing Our Liability Issues?

Lewis: They\'ll Be Sufficient to Begin to Address Them. And of Course We
Always Have the Right to Increase Bond Amounts. So, If We Have a Person
Who Meets Any of the Risk Factors That Are Already Outlined in Our
Current Regulations or in These New Proposed Regulations, We\'ll Be Able
to Easily Increase Those Bonds to a Higher Amount of Money.

Barnett: So Our Field Offices Still Have That Level of Flexibility to
Make Their Judgment Calls on this Issue.

Lewis: Absolutely. We Aren\'t Taking Any Flexibility Away from the
Field.

Barnett: Great. But That\'s Not the Only Kind of Bonding Changes, Not
Just Increase the Bonding. They\'ve Got Good News on These Regs, Too.

Lewis: for the First Time, We\'re Going to Allow Bonds to Be Cancelled.
That\'s a Whole New Approach to Bonding. In the Past, We Have Always
Strictly Allowed That We Terminate The Period of Liability on a Bond.
Which Meant That You Weren\'t Going to Be Responsible for Anything
Prospective in Nature but You Were Still on the Hook For Anything That
Occurred While You Were Operating That Particular Lease. In Essence, the
Solicitor Has Held We Were Holding People in Involuntary Servitude. You
Now Have an Opportunity to Get the Same Treatment on a Surety Bond That
You\'ve Been Really Getting on a Cash Bond. And That Has Always Been
When We Terminated the Period of Liability on a Cash Bond, We Physically
Gave You Back Your Money. But under a Surety Bond When We Terminated It,
it Was in the Hands of the Surety to Decide Whether or Not They Were
Going to Give Their Collateral Back to the Principal. Generally They
Were Not Willing to Do That. Now, Once We Have Gotten Concur Friends the
Minerals Management Service That There Are No Outstanding Royalties out
There and All of Our Offices Are Assured That the Reclamation Has Been
Done and the Well Has Been Properly Plugged, You Will Be Getting Your
Moneys Back. We Will Physically Cancel the Bond and the Surety Should Be
Releasing Any Collateral.

Barnett: this Is Almost a Better Approach than We Had Had Before Because
There\'s More Protection for Us Because We Actually Close out the Case
When We Physically Go out and Make Sure There Are No Problems Existing
on this Lease.

Lewis: Correct. We\'re Supposed to Witness Pluggings Today but You Know
We Can\'t Always Do That. We Are Supposed to Ensure That All of the
Royalties Are Paid but Mms Isn\'t Always Auditing Leases Timely. But We
Feel That at Least Now, There Is Some Little Light at the End of the
Tunnel for a Lessee to Get Their Bond Totally Canceled. If They\'ve Done
Everything They Needed to Do.

Barnett: I Understand You Made Changes in the Reporting Practices. What
They Have to File with Us.

Lewis: That\'s Correct. You Know, Today, You Have to File Copies of
Overriding Royalties With Us. You Also Have to File Payments out of
Production with Us. And These Are All Third Party Agreements to Which We
Are Not a Party Whatsoever. And Feel That We Really Don\'t Want That
Information in Our Records and We Don\'t Want to Burden the Public by
Having to File Those Documents with Us. And Charge Them Filing Fees for
Something That We Do Not Verify Or Adjudicate. We Will Continue to Ask
for Overriding Royalty Information Only If You Come and Ask Us for a
Reduction in Your Royalty. That Would Be the Only Time You Would Then
Have to Furnish Us With That Type of Information. But We Feel That this
Is a Real Win/win Situation, Again, for Both the Customer and the BLM.
Because We Will Not Have to Have So Much Retention of Records. It Will
Really Cut down on Our Storage and File Space by Not Hanging on to All
this Paper.

Barnett: the Bureau Has Been Directed to Cut down on Overhead Costs.
This Is One of the Ways That We Can Do It. Anytime That We Have an
Opportunity Where We Cannot Keep Things That We Don\'t Routinely Use, I
Think That\'s a Real Benefit to The Bureau. We Can Cut Our Overhead Cost
and That Way Our Budget Can Be Spent More on Getting the Work Done
That\'s Important to Protecting the Public Interest.

Lewis: I Agree with That Sherry. That\'s What We\'re Trying to Do. The
Team Has Looked at a Lot of Other Ways of Helping to Reduce The
Administrative Burdens Also.

Barnett: Ok. On the Overrides, You Can Still ‑‑ If We Wanted to Do an
Overriding Royalty Request, We Could Still Ask for That Information. We
Still Have That Authority.

Lewis: Absolutely. If You Came in and Asked Fuse Royalty Rate Reduction,
You\'re Going to Have to Prove to Us That You Need This, Not Because You
Are So Overburdened with Overrides but That It\'s Actually Because You
Cannot Operate this Lease Any Other Way but to Have The Royalty Reduced.

Barnett: Ok. And Pam, There\'s Some Other Kind of Record Keeping Issues
That We\'ve Addressed, Haven\'t We?

Lewis: What We\'ve Done Is We\'ve Eliminated the Filing of Option
Agreements. Option Agreements Have Been Required by the Regulations to
Be Filed by Industry for a Number of Years. But During the past Ten
Years, We Haven\'t Seen That Anyone Has Filed an Option Agreement with
Us. So, Therefore, We Have Removed That Burden from the Regulations But
We Have Continued to Say That for Acreage out of Purposes, You Would
Have to Supply Us That Information If You Were up for Audit.

Barnett: Ok. So Basically the Same as the Overriding Royalty Interest.

Lewis: That\'s Correct.

Barnett: Ok. Tell Me about Reinstatements. That\'s in Subpart 3142,
Isn\'t It?

Lewis: it Is. We\'ve Tried to Make this a Little More Customer Friendly
Also to The Public. You Know, Today If You Paid Your Rental on Time but
You Were Nominally Deficient, Then ‑‑ and Didn\'t Pay Your Nominal
Deficiency on Time, You Could Only Come in under a Class Ii
Reinstatement. What We Have Provided for in Here Is That You Could Now
Pay Your Nominal Deficiency Late and Still Qualify for a Class I
Reinstatement and Only Pay \$25 Rather than Have to Take on New Lease
Terms and New Royalty Terms.

Barnett: So this Is a Lot like Paying the Balance on the Bonus Bids,
Isn\'t It?

Lewis: It\'s Similar to How We Work on That, Yes.

Barnett: and There\'s One More Part of That Is That We\'ve Increased the
Dollar Amounts for Those? For Nominal Deficiencies?

Lewis: Yes, We Did. Today the Current Regulations Had Two Requirements.
One, Dealing with Offers That Came In, Noncompetitive Offers. And One
Dealing with Rentals That Were Paid. Both Had Different Requirements.
One Was 5% and \$100, Whichever Was Less, the Other Is 10% and \$200,
Whichever Is less and We\'ve Made Those Consistent by Raising Them and
Making Them Equal. So the Public Should like this Better. They\'re Both
Now Sitting at 10% or \$200 for a Nominal Deficiencies.

Barnett: Those Are the Major Changes That You\'ve Made in the Leasing
Process. But You Made an Awful Lot of Just Translating the Old
Regulatory Language, the Very Stiff Formal Language into Easier to
Understand Language. Can You Tell Me a Little Bit about That Process.

Lewis: We Did Do That. We Also Tried ‑‑ We Put it into Plain English.
Tried to Make it a Little Easier for the Public to Understand. Because,
as You Know, Regulations Aren\'t for Us So Much as They Are for the
General Public. Another Thing That We Did Was We Had a Lot of
Information That Exists in Our Current Policy with Our Handbooks and Our
Manual Sections but Was Never in a Regulatory Form. We\'ve Taken a Lot
of That Information Out, Such as Lease Consolidation and Put That
Actually into the Regulations So That It\'s Very Clear to the Public
What Requirements You Have to Meet Before We Would Consolidate Leases.

Barnett: Ok. You Also Did a Lot of Reorganization in Eliminating the
Duplication and Redundancy, Right?

Lewis: That\'s Right. One of the Things I Think Was Confusing to People
Is Why the Regulations Were in the Sequence That They Were In. So, What
We Have Done Is Sequenced Them in a Manner That ‑‑ It\'s Like from Start
to Finish Process. It Makes it Much, Much Easier Now to Go Through the
Regulations Because They Are Set up in the Manner in Which Occurrences
Would Happen. So We Think That this Is Going to Be Easier. Once the
Public Gets Used to Looking at These Regulations in This Numbered
Fashion.

Barnett: Ok. We\'ll Be Starting Our First Question and Answer Session in
about Five Minutes. So Now Would Be a Good Time to Start Faxing or
Placing Your Phone Calls. To Start Things Off, We Have Bob Lopez on the
Line. Bob Is the Group Leader for Minerals Adjudication at the Utah
State Office and He\'s Been Heavily Involved in Working with the Rewrite
Team. He\'s Been a Member of the Team since the Beginning, as a Matter
Of Fact. Good Morning, Bob.

Lopez: Good Morning, Sherry and Pam. Broadcast Is Going Well.

Barnett: That\'s Good to Hear from Your End. I\'m Sure You\'ve Heard All
the Stuff That Pam Has Explained to Me. Do You Have Anything You Would
like to Add to That?

Lopez: There Were a Couple of Other Changes That We Had Proposed. That
Was Eliminating the Requirement of Lease Offers That Cannot Be Made for
less than 640 Acres or One Full Section. That Was Eliminated Simply
Because Presale Offers Are Eliminated And this Rule Is Pretty Much
Obsolete Now. And with BLM\'s Ability to Control Tract Delineations on
Interest, it Was Not Needed. Another Change Was Eliminating the
Requirement That Lands Be Within a Six Mile Square. One of the Reasons
We Wanted to Eliminate this Was We Wanted to Simplify the Rule for
Determining If Lands Were Within a Six Mile Square. And You Know, with
the Elimination of Presale Offers, this Regulation Pretty Much Becomes
Obsolete. The Only Time this Would Come into Effect Would Be in the
Two‑year Window Post Sale. And We Had Proposed to Keep the Lands
Reasonably Compact. When Combining More than One Parcel or a Combination
of Parcels. This Was Open for Discussion and I Know We Talked about it
Back In Washington, Pam. You Know, on Whether it Should Just Be
Reasonably Compact and Maybe We Can Throw this out to the Field Now, on
Whether it Should Just Be Reasonably Compact or Whether it Should Just
Be Within the Same Township and Range. You Know, When We Get into the
Two‑year Window and We Allow People to Use Combined Tracts from
Different Sales, You Know, Reasonably Compact May Mean Something
Different to Industry than It Does Us. And So We Wanted to Simplify the
Rule Altogether So it Would Probably Be Easier to Define Reasonably
Compact or Go with Strictly Within the Same Township and Range. And
Maybe We Can Get Some Comments from the Field on That Particular Change.

Barnett: Pam, Would You like to Respond to That?

Lewis: I Think That\'s a Really Good Idea, Bob to Ask the Field What
They Think Would Be the Best Way to Approach this. Think it Would Be
Very Difficult to Stay Within the Same Township and Range Because, as
You Know, We Try to Configure Our Parcels Based on What the Public Has
Nominated. But I Really Think That by Policy, We Could Come up with What
We Now Decide to Be a Reasonably Compact Area. If That\'s Six Square
Miles, Four Square Miles, However We Want To Come up with That.

Barnett: but That it Doesn\'t Have to Be in the Regulations Necessarily.
That That\'s Something We Can Decide as a Policy Matter Within BLM and
That Way We Still Retain Some Flexibility to Change That When the
Conditions Warrant T.

Lewis: Exactly Right.

Lopez: That Would Be Good. As Long as We\'re Consistent, I Think it
Would Work out Well.

Lewis: Thanks, Bob.

Lopez: Thank You.

Barnett: Bob, Maybe You Would like to Answer Some of the Questions
We\'ve Gotten in from the Field as Well. I Would like to Start with a
Fax from Allen in Tulsa. He\'s Got Two Questions Actually. He Says in
Part 3101.1 C and Yes, He\'s Being Very Specific Here. He Said this
Appears to Remove the Bia from the Authority on Indian Lands. What Do
You Think, Pam?

Lewis: I Don\'t Think it Actually Removes the Bia. They Will Still
Monitor Indian Lands. Of Course You Know That the Bia ‑‑ That the
Leasing Regulations Rather Do Not Apply to Indian Lands. The Leasing
Regulations Are under the Mineral Leasing Act Only And So That Portion
Only Applies ‑‑ the Mineral Leasing Act Only Has Nothing to Do with the
Regulations on the 25 Cfr for Leasing Purposes.

Barnett: for Indian Lands, Bia Maintains the Lease and the Bond and That
BLM Is Not Involved in That Except as an Advisor To Bia.

Lewis: Bia Will Still Have Control.

Barnett: Allen Says in 3107.10 That the Bonds for Indian Lands Are Held
by the Bia.

Lewis: That\'s Still True. Even under the Proposed Rule‑making Package.
That\'s Still True.

Barnett: Those Are Based on Statutory Requirements. We of Course Don\'t
Have Power to Change Statutory Requirements.

Lewis: That\'s Correct and We Didn\'t Do That.

Barnett: Allen, Thank You for Your Fax. I Appreciate Those Points. We
Also Have a Fax from Brian Davis. Brian, You\'re in Farmington, Aren\'t
You? It\'s on 3107.43 in the Bonding Section. It Says That for Inactive
Wells, One Year Is Too Short of a Time Frame and That New Mexico Has
Reached an Agreement with Operators and the State of New Mexico to Look
at the Wells That Are Inactive for Two Years. He Thinks That We Need to
Leave the Option for States to Apply, A Time Frame That Works for Their
Producing Environment. Did You Receive a Comment like this During the
Original Comment Period, Pam?

Lewis: I Don\'t Recall Receiving a Comment like That but It\'s A Good
Comment. If New Mexico Has Reached an Agreement with the State, I Think
We Should Take this under Advisement. Of Course, You Know, That this Is
Strictly a Proposed Rule‑making Package, Still Subject to Change and
Perhaps We\'ll Have to Take a Look at this Again and Decide If One Year
Is Too Short a Period of Time for an Inactive Well.

Barnett: That\'s an Excellent Comment, Brian. I Appreciate Your Sending
That In. Bob, Did You Want to Address That? How Did You Come up with the
One‑year Time Frame?

Lopez: We Basically Took up with the Proposal by the Bpr, the
Recommendation by the Bureau Performance Team. And We Went with That.
Obviously, They Did a Lot of Analysis and Study on the Issue Itself. But
You Know, It\'s\'s Always Open for Discussion.

Lewis: We Have to Start Somewhere in the Regulatory Process. One Year of
Being Inactive Seems like it Could Be a Liability. Maybe Two Years Is a
Better Period of Time That You\'ve Been Inactive and Then Would Require
this New Bonding.

Barnett: If There\'s Anybody Else Who Has Thought about this Issue in
the Field and Would like this Considered Before We Go To the Final Edit,
Then We Would Appreciate Hearing from You. You Can Call Us at the Number
on Your Viewer Packet or Fax in And We\'ll Try to Address It. Is There
Anything Else That You Would like to Talk about on the Leasing ‑‑ on the
Bonding Issue? That\'s a Huge Issue. And I Know That it Really Is Going
to Be One of the Major Changes That Operators See.

Lewis: I Think It\'s Going to Be Very Contentious When We Put This out
in the Federal Register and We\'ll Probably Get a Lot of Comments on
this Particular Section in the Regulations. But I Think Industry Has to
Understand That the Government Has To Protect Itself and its Liability
and That We Do Need to Do Something about Bonding. I Don\'t Disagree
That this Is a Band‑aid Approach but It\'s a Starting Point.

Barnett: and the Bonding Fixes That We Came up With, They Were Based on
Having to Deal with Bad Situations in the Feel. Did Your Group Share a
Lot of Real Life Experiences When You Were Discussing this?

Lewis: Well, You Know, We Knew What the Bpr Report Had Been And Coming
from the Big Western States, We Knew the Problems We\'re Facing in Our
Own States, That We Have Had to Ask for a Lot of Additional Money from
Washington to Plug Orphan Wells out There. We Could Use a Lot More Money
to Plug Orphan Wells in Our States Because We Don\'t Have Bonds to Cover
Those Instances. And it Does Eat Away at Our Base Money. So We Would
Rather Put That Burden Back Where it Belongs, on Industry. Rather than
Take That Responsibility on Ourselves.

Barnett: Particularly on the Industry Groups That ‑‑ Not the Industry
Groups but the Members in Industry That Are Walking Away from Their
Responsibilities.

Lewis: Exactly Right. In Some Instances, That\'s What We Have Said to
Us. Take My Bond. It\'s Cheaper for Me to Give You My \$25,000 Bond than
it Is for Me to Plug this Well. And That\'s What They Have Done to Us
Sometimes. You Know a Deep Well Can\'t Be Plugged for \$25,000 and the
Surface Reclaimed. And We Aren\'t Giving up a Dime of Our Bond Money to
Minerals Management Service until We\'re Sure That the down Hole
Plugging Has Occurred and the Reclamation Has Been Done Properly Also.

Barnett: Bob, Did You Have Something to Add?

Lopez: I Think Pam Has Covered That. Obviously It\'s Needed. We Had to
Make Some Changes.

Barnett: the One Change That You Didn\'t Mention Is You Didn\'t Talk
about Nationwide Bonds, Pam.

Lewis: No, We Didn\'t Talk about Nationwide Bonds, I Guess, Because We
Felt That There Isn\'t a Problem Today with Holders of Nationwide Bonds
in That They Didn\'t Need to Be Increased from Their Current \$150,000.
Most Nationwide Bonds Are Held by Major Oil and Gas Companies. And We
Aren\'t Finding That They Walk Away from Their Their Plugging
Responsibilities. Most Times, They May Sell a Field to a New Operator
and It\'s This New Operator That We\'re Concerned with Who\'s Picking up
These Fields Who May Have a Liability Issue on Their Hands Now.

Barnett: Now, Some People Might Look at That and Say That Might Be an
Equity Problem. I Mean the Big Companies Get Away Without Any Increases
and the Little Companies End up Paying a Lot. A Lot More.

Lewis: I Think That\'s Just Part of Being in this Particular Industry.
If You Have Deep Pockets and You Are a Major Company, You Can Do A Lot
More than a Small Guy Working on a Shoestring Budget.

Barnett: and We Certainly Feel for Those Smaller Operators. Because They
Often Can\'t Get the Kind of Bonds That a Larger Company Can Get.

Lewis: Right. What Happens to Them So Many Times Is They End up Having
to Fully Collateralize a Bond. And Sometimes Very Difficult for Them to
Come up with \$25,000 Cash or \$10,000 Cash. And So I\'m Not Saying the
New Bonding Amounts Are Anymore Friendly to Them but It\'s ‑‑ I Still
Think We Need to Protect Our Own Interest Here.

Barnett: We Have Hundreds and Hundreds of Inactive Wells on The Books
Right Now. I Think Last Count Was over 6,000.

Lewis: That\'s Correct.

Barnett: That\'s a Tremendous Liability Hanging over the Heads Of All
Americans.

Lewis: Some of Those Will Be Used for Reinjection but Many Will Probably
Never Be Re‑entered Again. Or Used Again. So We Do Need to Get Those
Plugged.

Barnett: I Have a Couple Other Questions from Some Faxes That Came in
the Other Day. We Received Three Faxes Ahead of Time. I Really
Appreciate That. Except for the Parts That Are Covering the Leasing
Portion, We\'ll Hold That for Our Afternoon Discussion Period. We\'ll
Cover Those Issues at That Point but I Wanted to Bring up A Couple of
Issues That Came up That Cover the Leasing Section. Do the Proposed
Regulations Incorporate Current Policy on Lease Consolidation?

Lewis: Yes, Sherry, They Do. The Current Policy Is That You Can
Consolidate Leases as Long as They\'re Both Producing. You Cannot
Consolidate a Producing Lease with a Nonproducing Lease to Try to Save
the Nonproducing Lease. You Can\'t Consolidate Leases If You\'re Just
Simply Trying to Not Go Through the Unitization Process. If You Could
Unitize, Then There\'s No Reason to Consolidate.

Barnett: Hopefully with the Simplified Unitization Process That Rick Is
Explaining, There Won\'t Be a Need to Do That.

Lewis: Yes, Sherry.

Lopez: They Have to Have the Same Terms and Conditions. They Would Have
to Have it Expire Pretty Much at the Same Time.

Lewis: Right. You Couldn\'t Put a Reform Lease ‑‑ That\'s True, Bob.

Barnett: That\'s Not a Change from the Current Procedure, Is It?

Lewis: No but We\'ve Put That into a Regulatory Format. We\'re Just
Trying to Take out of like I Said Our Handbook and Manual Sections,
Those Sections That Are Strictly Policy and Incorporate Them into the
Regulations.

Barnett: So the Operators Know What They\'re Facing.

Lewis: and Our People, Too Because Many Times Our Own People Don\'t Know
What the Requirements Are.

Barnett: Ok. Pam and Bob, We Have Another Question, Too. It\'s Renewal
Applications Can Be Filed by the Operator. Do the Regs Clarify the
Section 14 Renewal Leases?

Lewis: Yes, We Did Clarify Section 14 Renewals. In 1992, I Believe it
Was, There Was a New Change in the Law That Said Section 14 Renewal
Leases Could Only Receive One Last 20‑year Renewal. At the End of That
Period of Time, They Had to Be in Actual Production to Continue. And If
They Weren\'t, Then They Would Die Just like Any Other Lease. It Was
Very Unclear to Us at First Whether That Was Just to Be Applied to Those
Types of Renewal Leases or Renewal Leases under Sections 17, 18 and So
Forth of the Mineral Leasing Act. Dennis Daugherty Has Clarified and His
Interpretation Is That, Indeed, Any Other Type of Renewal Leases Will Be
Renewed for Ten‑year Periods and Would Go on Imperpetuity. Only Section
14 Leases Would Come up for That One Time, Last Time, 20‑year Renewal
Then Have to Have Production.

Barnett: We Don\'t Have Very Many of Those Do We?

Lewis: We Do Have Quite a Few. In Wyoming Alone, We Have Close to 500 of
Those Type of Renewal Leases. Many of Them, of Course, Are in Units. Are
Not Subject to Renewal but Those That Aren\'t in Units Are Coming up and
We\'ve Done Quite a Few of Them Now to the One Time 20‑year Term.

Barnett: this Is a Heading off Upcoming Problem.

Lewis: That\'s Correct. We Would like to Get Those Lands Back. If
You\'re Not Going to Develop. If You\'ve Hold Them for 40, 50, 60 Years,
Develop Them or Let\'s Give Someone Else an Opportunity to Develop Them.

Barnett: I Wasn\'t Aware That Wyoming Had So Many. Are There Many in
Utah, Bob?

Lopez: I Think We Have One Renewal Lease. We Had Two. But I Think One
Has Expired Now.

Barnett: Ok. Is There Anything Else That You Would like to Add on Any of
These Changes That We\'ve Talked about or If We\'ve Left Anything Out
That You Would like to Cover?

Lopez: No. I Think it Was ‑‑ I\'ve Listened to Some of the Broadcast and
You Know, I Think That Pam Made Some Good Points and Expressed Them
Well. And I Think ‑‑ I Don\'t Have Nothing to Add.

Barnett: Darn, Bob. We Didn\'t Hear That from You During the Meetings
That We Had.

Lewis: Yeah, Bob, You Were Pretty Jackie in Washington.

Lopez: the Only Issue That We Thought Was Controversial Was The Partial
Integrity. I Wanted to Do an Analysis on the Parcel Integrity. And I
Pulled up a Report from Our Automated System on the Five States. The
States to See How Much of an Impact That Was on Each Individual State.
And it Was Minimal. I Think That There\'s Quite a Bit of Workload There,
but I Think With the Elimination of Presale Offers and with Most States
Going to Expressions of Interest, That Very Few Parcels Will End Up in
That Two‑year Window. I Talked to One State and They Said That They Sold
95% of Their Tracks or Leased 95% of the Tracks That They Offered on
Each Sale. So, You Know, That Probably Left the Remaining 5% for the
Two‑year Window. So, You Know, I Think It\'s Good to Maintain the Parcel
Integrity For Two Years. And I Did Talk to Some of the People in the
Forest Service and They Liked That.

Lewis: I\'m Glad You Mentioned That, Bob, Because They Have Always Been
Concerned about the Fact That the Public Could Reconfigure Their
Parcels. Because, You Know, in Wyoming in the Bt, They Do All of Their
Own Parcel Configuration for Us. We Don\'t Allow the Public to Come in
and Configure Those. So, I\'m Sure That this Will Be Very Agreeable to
the Forest Service.

Barnett: Pam, Any Final Thoughts Before We Wrap up this Section?

Lewis: Just That We Would Really like Everyone to Again, Review this
Package When it Comes out. We Look Forward to Your Comments on It. We
Really Did Try to Incorporate the Comments That You Gave Us This First
Time. Appreciated All the Hard Work That Went into this from Everyone.
Because Many, Many of the Comments Were Very Succinct and on Point and
We Did Change Accordingly. We Went into this Thing Cold Again So It\'s
Been a Long, Arduous Process, but I Think in the End, this Will Be a
Good Regulatory Package.

Barnett: Pam, I Thought We Would Be Able to Wrap up but We Just Received
Two More Questions or Comments. So If We Could Answer These ‑‑ We Still
Have a Little Bit of Time. This One Is from the Colorado State Office.
How Does a Requirement to Maintain Parcel Integrity Throughout The
Two‑year Window Meet Customer Service? I Think We Talked about That a
Little Bit. There\'s a Couple of Other Parts in Here. Maybe You Want to
Recap a Few of the Things We Talked about.

Lewis: I Would Say it Meets Customer Service for Us Simply Because We
Have to Accommodate That New Almrs System. And We Need to Be Concerned
How We\'re Going to Maneuver Through That New System Once We Are
Deployed. And I Can See from the Tests That We Have Seen on It, the
Information That I Continue to Get from My Data Administrator, That the
Best Thing We Can Do Is Maintain Parcel Integrity for The Entire Two
Years So That as We\'re Moving Those Lands, You Know, out of That Sale
‑‑ Serial Number File into Actual Files, This Will Work Very, Very
Easily as Opposed to Little Disjointed Pieces of Land Coming out from a
Number of Sales.

Barnett: Basically it Will Speed up the Process and Even in Those Areas
Where We Can Do it Now, Once We Deploy Almrs, We Won\'t Be Able to Do it
until a Future Fix. So Essentially If We Don\'t Go Ahead and Start this
Process Now, We\'re Going to Hit Industry with it Cold.

Lewis: Right. Every State, I Think Except ‑‑ Bob, I Don\'t Know ‑‑
You\'re Still Recycling Parcels, Aren\'t You Bob?

Lopez: Yes, Partially.

Lewis: Ok. So Every State Has Sort of Gone into an All Nomination
Process. If the Public Gave Us a Nomination and We Put it on the Sale
List as They Nominated Those Lands Then We\'ve Maintained it That Entire
Time, Think We\'re Meeting That Customer Need. That\'s the Way the
Customer Asked for It. That\'s the Way the Customer must Have Expected
to Pick it up as A Competitive Lease or Noncompetitive Lease During the
Two‑year Window Process.

Barnett: Another One from Colorado. Why Not Allow the Lands in a
Noncompetitive Offer to Be Described by a Parcel Number Throughout the
Two‑year Window as An Option. He Gave a Citation 3123.21.

Lewis: in Reality, You Would Have to Describe it During the Entire
Two‑year Process by That Parcel Number.

Barnett: So You Would Serialize it Right at the Start? The Parcel
Number?

Lewis: it Would Just Have a Parcel Number from the Sale. That Way We
Would Never Have to Worry about the Public Making a Typo and
Misdescribing the Lands. And Too Many Times That\'s What the Public Has
Done. They Get Their Southwest and Their Northwest Confused and next
Thing You Know, You\'re Having to Send Back Their Offer for Correction.
They Lose Priority. Someone Else Files Ahead of Them Again. It this
Could Never Occur under this Scenario. If You Describe it by the Parcel
Number of the Sale, You\'ll Be Assured of Having the Right Lands.

Lopez: the Current Rule Right Now Allows for Them to Describe It by
Parcel Number Through the End of the Month. We Extended That Through the
Entire Two Years.

Lewis: That\'s Correct.

Barnett: Ok. I Have Another Question from Colorado. It\'s Why Not
Require Three Copies of the Offer for Acquired Lands?

Lewis: That\'s a Very Good Comment. I Wouldn\'t Mind Putting That into
this Regulatory Package Because the Acquired Lands, You Know, You Would
Need the Third Copy for the Sma. So, I Really Agree with That. Thank You
Very Much.

Barnett: That\'s One of the ‑‑ That\'s a Comment We Can Easily
Incorporate in this Last Edit.

Lewis: Absolutely.

Barnett: Thank You Very Much. That\'s a Great Idea. I\'ve Gotten
Actually Several New Ones in Here. I\'ve Got One from Dale Manchester.
And It\'s on Bonding. Will There Be a New Bonding Fee Imposed for Wells
in Extended Shut‑in Status. It Seems That the New Regs Only Cover Ta
Wells. Is There Requirements?

Lewis: No We Did Not Cover Shut‑ins at All. Just Inactive Is What We
Said. I Really Think Rudy Would Be a Better Person to Answer That
Question and Why Don\'t We Try to Get Back to this Person with That
Answer.

Lopez: Pam, Too, We Also ‑‑ We Still Have the Discretion to Increase
Bond Amounts. You Know, These Are Minimum Amounts.

Lewis: That\'s Correct.

Lopez: the Authorized Officers Still Have the Discretion to Increase
Bonds If, You Know, If It\'s Justifiable. If If They Justify for Good
Reason Why the Bond Amount Needs to Be Increased.

Barnett: So, Did We Include Any Kind of Definition for the Term Inactive
Well? Because That Could Be ‑‑ If We Need to Extend this to Shut‑in
Wells, We Could Do it Solely by Definition.

Lewis: I Think by Policy, They Were Going to Come up with a Definition
of What an Inactive Well Is. It May Be a Part of the Definitions That
Have Been Incorporated Into this Regulatory Package. I Just Can\'t
Remember the Definition but We Can Get Back to this Person.

Barnett: We\'ll Try to Get Back to You Before We Finish this Comment
Period. I Think I Have Several Others That Are on Bonding. Let Me Try to
Cover Those While We\'ve Got Them in Front of Us. How Will the
Nationwide Bonds Be Administered for Wells. Will There Be a Yearly
Adjustment of Bond Amounts or Will the Lessee or Maybe BLM Be Required
to Keep Track of Each Well Which Becomes Idle. This Is from Jeff Prude
in California. I Was out There Last Friday and I Saw Fields That Are,
You Know ‑‑ I Would Have to Say Thousands of Wells That Could Be a
Serious Liability Issue Within the next Ten Years.

Lewis: His Question Is What Are We Going to Do with Nationwides?

Barnett: How Are We Going to Administer this? Is this Going to Be Kept
at the Local Level or Is There Going to Be a National Centralized
Administration?

Lewis: Today as They Have Been Discussing This, They Plan to Keep this
at a State Level. Each State Would Be Required to Take a Look at Their
Inactive Wells. And Administratively I Agree, this Could Be Quite a
Workload and I Think We\'re Going to Have to Work Through That When
We\'re Coming up with the Procedures on How to Implement this Change in
The Regulations.

Barnett: Ok. And Then the Second Part Kind of Follows on That from Jeff.
Is If a Lessee Already Has Some Kind of Bonding in Place Through His
Local or State Agency, Do We Have Any Kind of Provision to Take That
into Account So We\'re Not Doing a Duplicate Hit on These Small Mom and
Pop Operators?

Lewis: to My Knowledge, No. We\'re Not Taking That Other Agency\'s Bond
into Consideration for Our Purposes. Unless They Have Some Sort of an
Agreement in California That That Bond Is Also for the Use of BLM. But
I\'m Not Aware of That.

Barnett: Ok. Jeff, I Just Wanted to Talk about That a Little Bit. The
Issue of Duplicate Bonding, Particularly Duplicate Bonding With the
States Is an Issue We\'ll Be Tackling Probably Within This next Year.
This Is Something That Iocc and the BLM Have Pretty Strong Feelings
about. We\'re Both Walking along the Same Path. We\'re Both Seeing a
Serious Problem out There and That We Would Like to See it Addressed
with the Growing Numbers of Inactive Wells. But Knowing That We Have All
Those Inactive Wells, and We Need To Do Some Increasing and Bonding, We
Don\'t Want to Increase the Bonding So Much That We\'re Driving the
Operators out of Business. We Do Have to Work with the States and We\'ll
Be Using Iogcc as The Forum to Do That to See What We Can Do to Minimize
the Impact on the Operators. I Got Some Information for Dale on That
Inactive Well Definition. Right Now We Don\'t Have That in the Regs. It
Seems to Be an Oversight We\'ll Have to Address Before it We Go to Final
Rule‑making. I\'m Not Sure We\'ll Be Able to Do That Before We Go to
Proposed Rule Making but We\'ll Make Sure That\'s in There Before Final.
That Was a Really Good Comment, Dale. I Have a Question from Ceal Chang.
You Have Plenty of Experience in the Bonding Issue. He\'s Got ‑‑ I Think
this Is a Comment. In Regard to the New Bonding Requirements, I Want to
Say That Not Only Are the Recommendations of the Bbr Team but Also the
Recommendations of the Oig and BLM Agreed to Implement the
Recommendations. That\'s Why They\'re in the Proposal. The Bonding Issue
Has Been Discussed in Many Different Studies And Reviews and Some Work
Groups Have Gotten Together to Talk About this. This Is Such a Serious
Issue That We\'re Doing a Lot of Different Things Trying to Get this
Problem Addressed. And You\'re Right. Both Bpr and Ig Made Their Point
Very Strongly. Did You Have Anything to Say on That?

Lewis: No, I Agree with His Comment. That\'s What Those Changes Were
Based On.

Barnett: Ok. I Have Another One from the Colorado State Office. Do We
Have Any Kind of Written Guidance from the Solicit They\'re Specifically
Interprets 30 Usc Pertaining to Railroad Rights of Way. If the 30 Act or
the Code Is Applicable to Any Other Type of Right‑of‑way or Easement,
this Section Should Not Be Limited. Does That Give You Enough
Information That You Can Tell What ‑‑

Lewis: No. I\'ll Have to Research That. I Don\'t Understand What
They\'re Asking.

Lopez: I Don\'t Understand the Question Either.

Barnett: Ok. I\'m Not Sure Who Sent That in from Colorado, but If You
Would Like to Send Us in More Information or If You Would like to Call
Us and Talk about it on the Air, We Would Be Happy to Answer That but
Otherwise, We\'ll Try to Look into That and See Whether That Needs to Be
Addressed in this Rule Making. I Have a Suggestion That We Shouldn\'t
Limit Operating Right Descriptions to Depth and We Should Include it by
Formation.

Lewis: I Agree with That and You Can Do That Today on Those. You Can Say
They\'re to a Depth or Particular Formation. We Don\'t Adjudicate
Operating Rights. So If That Information Was on an Operating Rights
Transfer, We Certainly Would Not Send That Back.

Barnett: We\'ve Still Got about Three More Faxes but We\'re Going to
Need to Close this Section down for Now. We Will Get to These When We
Talk in Our ‑‑ When We Get to Our Discussion Period Later Today. Bob, Do
You Have Any Final Thoughts You Would like to Say?

Lopez: No, I Don\'t Sherry but I Do Encourage the Field Offices to Come
in with Their Ideas and Proposals. I Want Them to Kind of Review the
Regulations and Let Us Know.

Barnett: Thanks, Bob. Pam, Do You Have Something You Would like to Say?

Lewis: No but Thank You Very Much for this Opportunity to Be Here and
Present this.

Barnett: Thank You for Calling, Bob. At this Point We\'re Going to Take
a 15 Minute Break. When We Come Back, We\'re Going to Talk about Changes
in the Unit And Operational Regulations as Well as the Cooperative
Agreement And Legal Issues So Stay Tuned. We\'ll See New a Few Minutes.

Barnett: Welcome Back. We Have a New Panel of Guests Participating in
this Portion of Our Show. Joining Us for Our Second Segment Is Rick
Wymer, a Geologist From the New Mexico State Office. Good Morning, Rick.

Wymer: Good Morning, Sherry. How Are You Doing Today?

Barnett: Pretty Good. Hope You\'re Doing All Right.

Wymer: Just Fine.

Barnett: Also with Us Is Tim Abing, an Engineer from the Milwaukee
District. Weather Is a Lot Better Here than Milwaukee, Isn\'t It?

Abing: it Is Good to Be Here.

Barnett: We Also Have Jim Albano, Minerals Resource Special Ist from the
Montana State Office.

Albano: Thank You, Sherry. Hoping to Be Able to Focus People\'s
Attention on Specific Parts Of the Regulations Where We Did Make
Changes.

Barnett: this Is Going to Be Fun. We Have a Lot to Cover So Let\'s Start
with Rick. Rick Will Talk about the Unit Regulations and the Procedure
to Obtain a Communitization Agreement. Rick?

Wymer: Good Morning, Sherry. Basically What I Have to Say this Morning
Is That for Better or For Worse, the Reservoir Management Regulations
Have Been Consolidated in One Spot in the Regulations at 3130. Let Me Go
over Some of Those Points. Point by Point. First We Have Well Spacing at
3130. Agreements General at 3132. Communitization Agreements at 3133.
Storage Agreements at 3134. Development Contracts at 3135. Compensatory
Royalty Agreements at 3136 and Unit Agreements at 3137. And We\'ve Left
a Hole There at 3137 for the Drainage Relations To Slide Right in There.
One Other Thing That I Would like to Talk about Here Is That the Two
Major Changes Within the Reservoir Management Regulations Which Are Unit
and Communitization Simplification Processes Came Out of the Bureau of
Performance Review, Part of the National Performance Review. I Have a
Couple of Housekeeping Things to Talk about. The First Involves Our
Definition of Lease. And What I Want to Drive Home Here Is That Lease
Includes All Agreements. I Was Going to Read the Definition. Which
Defines a Lease as Any Contract, Profit Share Arrangement, Joint Venture
or Other Agreement Issued or Approved by the United States under a
Mineral Leasing Law That Authorizes Exploration For, or Extraction and
Removal of Oil or Gas. When You Hear the Word Lease in Our Regulations,
Think Agreements. Another Thing I Would like to Mention Is We\'ve
Changed the Way We Handle Indian Lands. At Least Within the 3130
Regulations. We Have a Mom and Apple Pie Statement That Basically Lays
out Our Role on All Agreements on Those Agreements Involving Indian
Lands. Another Thing I Would like to Drive Home Is That the 3130s Are
Considered as If They Were Part of Any Agreement, Just like They Were in
the Contract Itself. Now I Would like to Move to the Communitization
Simplification Process. Which Primarily Is That a Letter Is Now
Currently Sufficient as Long as it Describes the Tracts and the Drilling
or Spacing Unit, Identifies the Well and Formation to Be Drilled, Names
the Responsible Party, States the Effective Date of the Agreement And
Includes an Allocation Schedule. Last but Not Least, We\'re Changing
Something Concerning Commitment. We\'re Changing it to a Commitment
Certification. In Other Words, the Operator Will Self‑certify That They
Have All the Necessary Parties in Agreement Wanting to Communitize.
Another Thing We\'ve Done Is We\'ve Changed the Development Contract
Language. Basically It\'s Been Rewritten to Follow All the Gao
Recommendations. Now I Would like to Move on to the Unit Agreement
Section. Basically the Unit Agreement Section Came from Secretarial
Order 3199 Signed April 4, 1996. We Were Order to Re‑engineer Based on
Several Concepts, the First of Which the Unit Process Was Unnecessarily
Complicated And a Barrier to Innovative Thinking and Creative Thinking
Concerning Exploration Ideas. The Second Thing That Came out of That Was
There Was a Partial Discorrect Between the Interest That Share in
Production and the Interest That Paid to Drill Wells. Fourth Item Was
That Paying Well Determinations Based on Economics Is a Very Cumbersome
Process. It Leads to Long Delays and Corrections to Protection and
Royalty Reporting. Also the Designation Process Adds an Unnecessary
Complexity to The Process. Last but Not Least Is That the Model Unit
Form Contains Unnecessary Terms. But the Most Critical and Probably the
Primary Change That We Have Done in the Proposed Regulations Is That We
Are Focusing on Upfront Negotiation in the Process. In Other Words, BLM
and the Operators Enter into a Dialogue and Basically Develop What That
Unit Is Going to Look like Throughout its Life. The Negotiations
Themselves Are Based on Several Factors. A History of the Area, the
Environment, Logistics, Economics, The Number and Depth of Wells
Previously Drilled in the Area, The Size of the Area, and the Cost of
the Proposed Operations. They\'re Not Limited to That but Those Are Just
a Brief Idea What Might Go into It. What We\'re Hoping for Is That the
Additional Flexibility in Our Proposed Regulations Should Basically
Improve the ‑‑ or Increase The Number of Wells Drilled and Give an
Increase to the Moneys That Go Right Back to the Public. Another Point I
Wish to Make Is That Any Agreement Format Is Acceptable. So Long as it
Contains the Item Shown on Your Screen Right Now. A Description of the
Unit Area, Initial and Continuing Development Obligations, Productivity
Criteria and Participating Area Size, and Also a Provision That Allows
BLM to Modify the Quantity, Rate and Location of Development and
Production. Those First Four Terms Are the Mandatory Terms. But There
Are Two Additional Optional Terms That Could Be in Unit Agreements. They
Are Multiple Unit Operators and Agreement Modifications or Modifications
to the Agreement Itself. Basically We\'re Not Going to Allow Multiple
Unit Operators Without a Term. It Has to Be in There or You\'re Not
Going to Be Able to Do It. No Modifications Will Be Allowed Unless the
Original Parties Agree to the Modification. The Unit Will Be Assumed to
Include All Producing Intervals Unless There\'s a Term That Says
Otherwise. In Other Words, We\'re Trying to Make the Agreement as Simple
as Possible. No Other Agreement Terms Would Be Allowed. Another Change
We\'ve Made Is on the Operator Self‑certification. Basically, That
Self‑certification Is Going to Be a Requirement Or a ‑‑ Basically What
it Will Include Is That the Operator Has Invited All Interests to Join
the Unit, That the Commitment Status of All Leases Is Clearly Stated,
and That There Is Sufficient Interest Committed to the Unit for
Reasonable Control Of the Unit Area. We Will No Longer Do a Separate
Designation of the Unit. The Certification Determination Process Will Be
Rolled into the Approval Letter. Now I Would like to Talk about the Size
and Addition to Participating Areas. Basically, the Unit Agreement Will
Spell out the Amount of Land In an Initial Participating Area and All
That Will Be Spelled Out Very Clearly in the Unit Agreement. The Pas Are
Going to Be Specific to an Individual Producing Interval and All Pa
Decisions Have to Be of Similar Size. Let Me Explain this by Going to a
Picture. In My Little Cartoon Here, All the Squares ‑‑ You Can.

Sim There Are 640 Acres and the Unit Agreement Specifies for That
Particular Formation, These Four Wells Have Been Drilled to 640 Acres to
Keep it Nice and Simple. Well Number One in the Blue Box in the Upper
Left Hand Corner Basically Met the Productivity Criteria Which I\'ll Get
into a Little Bit Later. But for this Exercise, Let\'s Assume That That
Entire Northwest Block There Was Added Based on a Well Number One
Location. Well Number Two Comes in in the Upper Right Hand Corner, the
Light Pink. And Meets the Productivity Criteria and Another 640 Acre
Block Has Been Added to the Participating Area. Well Number Three in the
Lower Right Hand Corner, the Darker Pink, Basically Comes in as a Third
Addition and Adds Another Block. And I Have a Well Number Four up in the
Upper Left Hand or Light Blue Block That Comes in and What I Want to
Drive Home Here Is Whether or Not the Well Meets the Productivity
Criteria or Not, It Does Not Add Additional Lands Because the Block in
Which it Exists Was Already Added. What I Want to Drive Home Is Block at
a Time.

Wouldn\'t That Well to the Far Right There, Rick, Meet the Productivity
Criteria?

Wymer: Which We Hope We Have in Every Case. Every Unit Well Is a Gusher.
Let\'s See. To Give You an Idea, the Productivity Criteria ‑‑ Excuse Me,
the Size of the Block. It Can Be Tied to a Variety of Things Such as
Existing Drilling And Spacing Units. It Can Be Tied to Formation Depth.
It Could Be Tied to Other Criteria. Be Creative out There. So Long as
It\'s Clearly Spelled out in the Agreement. Those Upfront Negotiations
Are Critical to this Process. One Last Point on this Particular Subject
Is it Gets Real Complicated Coming up with Those Blocks in Unsurveyed or
Metes And Bounds Areas So Those People That Have to Deal with That
Situation Will Have to Be Really Creative. Another Subject Is That
Paying Well Determinations Will Be Replaced with this Criteria Which I
Just Mentioned. The Upfront Negotiations Are Not Strictly Tied to Well
Economics. That\'s a Recommendation from the Team. Rather, They\'re
Going to Be Tied to Such Things As\... Pay Thickness, Water Saturation
or Basically Any Other Factor You Can Think Of. Be Creative. The Only
Limit to Your Creativity Is That They must Be Adequate To Indicate a
Well Has Established Future Production Potential, Enough to Pay for the
Cost of Drilling, Completion and Operation. What We\'re Hoping with this
Change to Productivity Criteria Is The Operators Will Know Even Before
BLM Knows How the Drilling Effects Participation. They\'ll Know First.
Also, the Term of the Unit Agreement Has Been Changed. The Unit Would
Remain in Effect So Long as the Operator Meets Their Continuing
Obligations and Those Are Negotiated Again, Upfront and Set out in the
Unit Agreement. Continuing Development Obligations Are Not Directly Tied
to the Drilling of Wells Which Is Another Change. The Proposed
Regulations Allow for Such Things as Seismic Operations or Geochemical
Operations to Count Just like Drilling New Wells. Another Point Is That
We\'ll No Longer Accept Successor Unit Operators. All We\'re Going to
Require Is That They Provide Us with a Notice, the New Operator That Is,
Provides Us Notice and Has Acceptable Bonding. And Before I Close,
There\'s a Couple of Points I Would like to Talk about. First of All Is
That We\'ve Obtained the Ab Initio but We\'ve Changed the Language to a
Provisional Approval. In Other Words, We\'re Just Going to Give Our
Approval Provisional and it Will Become Final When They Actually Meet
Their Initial Obligation. These New Regulations Will Not Eliminate the
Workload Associated With the Decision and for All Those People That Have
Lots of Units, All Will Be Administered Exactly like They\'re Currently
Administered. On That Note, My Talk Is Finished. I\'ll Turn it Back to
Sherry.

Barnett: Thank You, Rick. We Have Received a Couple of Faxes. We Don\'t
Have Time to Get to All of Them. I Would like to Hit One of Them from
Allen in Tulsa, Who\'s Always Concerned about Indian Issues. I\'m Not
Sure If this Is a Suggestion or a Question Looking for Clarification but
He Says in 3130.10, That BLM Recommends Spacing on Indian Lands. Based
on a Technical Review. Bia Does the Approval for That. Is That Correct?

Wymer: No. The Approval Is Actually Within the Jurisdiction of BLM
Delegated from a Secretary\'s Office. BLM Does That. In Consultation
Sometimes with the Bia.

Barnett: I Know Later on We\'ll Be Hearing from Pete Aguilar From the
Bia as Well. Maybe We Want to Cover That a Little Bit at That Time as
Well. Thanks, Rick. Along with the Bonding Changes, the Unit Regs Are
the Biggest Changes to Our Proposed Package That the Operator Is Going
to See. Many of You Are Aware of Secretarial Order 3199 Which Was Issued
Originally on April 4, 1996. That Order Directed BLM to Re‑engineer the
Unit Regulations and Authorize BLM to Waive the Use of the Model Form
When Reviewing The Unit Proposals. The Intent of this Secretarial Order
Was to Allow You to Begin Experimenting with the Negotiated Approach for
Forming Unit Agreements. This Is a New Process for a Lot of Us. We
Needed to Have Time to Try it out First. This Order Was Recently Extend
and Is Going to Remain in Effect Until September 30 of 1998 So We Still
Have Another Year on this Waiver. So I Encourage You to Use this Process
Whenever Possible, Discuss with Unit Proponents in Your Areas, Different
Ways You Can Unitize More Efficiently. Try Some New Things and in
Particular, Try Some of the Proposed Changes in this Package. If You
Have an Opportunity to Use this Process and If You Want To Discuss Any
Case Specific Issues, You Can Call John Bebout Back in Washington or You
Can Call Any Member of the Bureau Performance Team That Put These Ideas
Together. They Are Rick Wymer from New Mexico We Just Heard From, Duane
Spencer from the Farmington District, Sherry Thompson from the Colorado
State Office and Sue Stephens from the Native‑american Office. Joining
the Program Now Is John Duletsky. He\'s Here to Participate in the
Enforcement Segment Coming up Next. Welcome to Phoenix, John.

Duletsky: Thank You, Sherry. It\'s a Pleasure to Be Here to Discuss the
New Regulations with You.

Barnett: Now Let\'s Turn the Time over to Our Panel Who Will Be
Discussing Changes to the Regulations. Tim Will Be Starting off the
Operational Segment of the Show. Tim, It\'s All Yours.

Abing: Thanks, Sherry. Before We Get Started into Discussing Specific
Changes Within The Sections, I Want to Talk about Some of the Ground
Rules We Were Asked to Follow When We Began this Effort. Pete Culp
Alluded to These in His Call‑in but I Think It\'s Worth Repeating. First
Thing Was That Regulations Had to Be Written in Plain English. By Now
You\'re All Familiar this Is the Question and Answer Format T Uses Short
Sentences and Familiar Words. There\'s an Increase Use of Listing Things
out. There\'s an Increase Use of Tables and It\'s Intended to Make
Things Familiar and Easier to Read and Understand. Particularly for
Individuals in Small Businesses. Now, the Philosophy Being That If
There\'s a Better Understanding Of What Is Required, We Should Get Some
Better Compliance. The next Ground Rule Is to Use Performance Standards.
This Means Telling Industry What We Want and Not How to Do It. We Tell
Industry What We Want by Setting Performance Standards That Will Define
the Goals We Really Want to Achieve. And Ideally When It\'s All Said and
Done out There on the Ground, We Should Have Measurable Results. Ground
Rule Number Three Is Reference to Industry Standards. In the Proposed
Rule, this Means Exclusive Reference to the Standards of the American
Petroleum Institute or Api. Api Has Developed Their Standards in
Conjunction with Other Associations Such as the American Gas
Association, the American National Standards Institute and the American
Society of Testing Materials. So, by Limiting Our References to Just
Api, We Kept Things Simple While Still Providing Adequate Regulatory
Guidance. Ground Rule Number Four Was to Eliminate Duplication. And
Given the Long History of the Regulations, the Structure of The Notice
to Lessees and Onshore Orders, There\'s Plenty of Elimination to Be
Eliminated. Ground Rule Number Five Was to Eliminate Self‑regulation.
The Proposed Rules Are Intended to Regulate BLM ‑‑ I\'m Sorry, The
Proposed Rules Are Intended to Regulate Industry and Not BLM. Unless
Something Is Specifically Required by Law, Most Things That Dictate How
to or When BLM Does Something Are Not Included In this Rule. So this
Means You Will Not See Things like BLM Will Send a Deficiency Letter
Within Seven Days after We Receive Your Apd. Or BLM Will Conduct an
On‑site Inspection Within 15 Days after You Why Submit Your Apd. That
Doesn\'t Mean That We Don\'t Do Those Things. It Just Gives Us Some More
Flexibility on Our Time Frames Within Which to Do this Em. And the Last
‑‑ to Do Them. And the Last Ground Rule Which Is a Favorite Is to
Eliminate Unnecessary Paperwork. Now the Flexibility of Performance
Standards Should Help in this Regard. And We Have Eliminated Some
Unnecessary Paperwork in this Rule. But Consider this an Open Invitation
That If Any of You out There Have Some Additional Ideas on Things That
We Can Eliminate Or Other Ideas about How to Streamline Processes,
Please Let Us Know. And So with Those Ground Rules, I\'ll Turn it over
to Jim Who Will Lead Us into the Discussion on Specific Changes in the
Various Subparts. Jim?

Albano: Thank You, Tim. We\'re Going to Start out with a Section That
Effects the Operation Regulation but Occurs Early in the Regulation
Package. In 3103. This Is a Table of Common Notices and Reports. These
Type of Reports Are Not Authorizations or Approvals. But the Type of
Reports We Receive. We Have Allowed Flexibility Here to Include the
Standard Forms Where Appropriate but Also Other Acceptable Filing
Instruments Including Electronic Filing, Other Forms, Faxes, Letters.
We\'ve Also Responded to Some Comments We Received from the Field On
this Particular Table and That Was That People Felt That Certain Notices
Should Be Directed from the Local Field Offices. These Type of Notices
Include Notices for Construction Startup Spud Notice, Running Surface
Casing or Bop Test Notices. These Are Things That Are Required at Every
Location So We Did Leave the Flexibility for the Local Field Office to
Adjust These Short Time Frames, the 24 Hour, 48‑hour Type of Time
Frames. Finally, It\'s Important to Note These Are Enforceable
Provisions And There May Not Be a Corresponding Section Within the Body
of The Regulations to Describe These T May Appear Only in this Table. An
Example of an Item That Falls under this Category Would Be The
Production Startup Notice for Starting New Production or Beginning
Production after a Well Has Been Shut In. Another Area That May or May
Not Be a Lease Operation Is Important to Cover Is Geophysical
Operations. One Item That You Won\'t Find with the Geophysical
Exploration Section Is the Bonding Requirements. These Have Been
Combined with the Lease Bond Requirements and They Follow in Order after
the Lease Bonds. The Federal Land Policy and Management Act Requires
That the United States Receive Fair Market Value for the Use of Lands
and Their Resources. Following ‑‑ in 1992, the Office of Inspector
General Also Directed the BLM after Conducting an Audit Report, to
Establish A Fair Market Value Fee for the Use of Public Lands for
Geophysical Exploration. This Is a Fee That Will Be Based Either on the
Miles or the Actual Area That\'s Effected. And the Fee Itself Will Not
Show up in the Body of the Regulations. This Is Analysis That Will Be
Conduct the by the Washington Office. I Would Expect That John Broderick
May Be Contacting Some People In the Field Locations That Have a Lot of
Geophysical Activity To Get Information for the Basis of this Analysis.
This Is One of the Places Where We Eliminated the Self‑regulating Time
Frame for BLM Processing and BLM Responses To a Notice of Completion. We
Have Added an Item, a Couple Items Here for Establishing a Time Frame
for Notices of Intent to Be Filed in the Lower 48 and Also for Filing a
Notice of Completion in the Lower 48. This Will Help Set a Benchmark
That Will Establish a Time Period In Which the Operator Can Expect That
His Permit Will Be Processed by the BLM. And Finally, There\'s a
Separate Cost Recovery Rule That Will Take a Look at Some of the
Geophysical Cost Recovery Items and Because of This, We Have Eliminated
the Current Application Fee For Permits in Alaska. Ok. We\'ll Move on to
Drilling Now. The First Item Change in the Drilling Regulations Is
We\'ve ‑‑ The Application for Permit to Drill Filing Time Frame for
Either Filing a Notice of Staking or an Apd Matches a Time Frame That We
Have Established If a Suspension Request Is Connected to Drilling a New
Well or Re‑entering an Abandoned Well. This Solidifies the Existing
Policy and Kind of Ties Things Together That We Didn\'t Have Tied
Together in Existing Regulations. The Existing Regulations Have a Time
Frame for Filing an Apd Before Commencement of Operations Is Planned but
There\'s No Specific Time Period for Filing an Apd If It\'s Connected to
a Suspension Request. And We\'ve Matched Those up So That it Is the Same
Period of Time, 31‑day Period. The Drilling Section Is a Place Where We
Have Developed Performance Standards. The Eight‑point Plan and the
13‑point Plan That Currently Exists Have Been Replaced with a Set of
Performance Standards. We Have Retained the Service Use Plan and the
Drilling Plan but Have Replaced the Specific Requirements in Onshore
Number One With Performance Standards. These Are Standards That Will
Cover the Concerns That BLM Has For ‑‑ That Need to Be Addressed to
Adequately Protect the Environment While Conducting Oil and Gas
Operations and Developing Oil and Gas. This Should Allow Operators to
Build Their Programs Around How They Intend to Conduct Operations to
Meet These Meaningful Performance Standards.

Abing: I\'ve Had Expressions to Me That There\'s Concern That By
Eliminating the 8 and 13 Point Plans That That\'s Going to Lead to a Lot
of Inconsistencies in the Type of Apds We Get Submitted. What Do You
Think about That?

Albano: I Know That Has Been a Concern. We Got Some Comments on this.
There\'s a Couple of Things I Think Is Going to Help out with the
Consistency Concern. Number One, the Technical Drilling Standards That
You\'re Going To Cover Shortly Will Provide a Basis for Consistency for
the Related to the Eight‑point Drilling Plan. Number Two, the Goal Book
Which Describes BLM\'s Operating Standards, Surface Operating Standards,
Is a Document That Is Still an Effective Document That Will Be Used ‑‑
That We Expect Operators Will Continue to Use. And Thirdly, We Will Be
Developing Guidance Documents for Our Operating Standards. This Is the
Place Where We Already Have a Pretty Good One as a Basis. The Gold Book.

Abing: as a Last Resort, Too, We Still Always Have the Option To Write a
Deficiency Letter and Request That the Operator Fill In Any
Informational Gaps That Are Needed with It. So That Is Always an Option
and That Should Assist in Getting Complete Plans.

Albano: That\'s Right, Tim. It\'s Going to Encourage More Upfront
Involvement Between the BLM And Operators. That\'s One of the Things We
Hope the this Will Accomplish.

Barnett: Before You Go on to Further Stuff on Drilling, I Have a Fax
Here from Colorado. They Wanted to Know Something about Geophysical.
Before We Get Too Far from That, Can You Answer That. Why Is the
Geophysical Cost Recovery Fee an Exception to the Various Types of
Applications? Cost Recovery in the Future.

Albano: the Cost Recovery ‑‑ at One Time, this Regulatory Package Had
Cost Recovery Fee in it for Geophysical Operations. That Is Not in Our
Regulatory Package That We\'re Talking about Today T Is Going to Be Part
of the Overall Rule for Cost Recovery Which Will Include Many Other
Activities for Cost Recovery. The Fair Market Value Fee Is a Separate
Fee and It\'s Important To Understand One Thing That People Do Need to
Understand about This Is That It\'s Going to Affect Third Parties Who
Are Conducting Geophysical Operations and it Will Not Affect Geophysical
Exploration That\'s Conducted as Part of a Lease Operation or on Behalf
of a Lessee.

Barnett: Thank You. There\'s One Followup. Where Does That Money Go?

Albano: the Fair Market Value Fee Is a Fee That Will Be ‑‑ There Will Be
an Account Set up for That Collected at the Local Field Office Level.
And Then That Fee Is Distributed 50% to the Treasure, 50% to the State
and I Don\'t Know at this Time If it Will Be the 50% Will Be to the
State or at a More Local Level like the County Level. It Could Go Either
Way.

Barnett: I Wanted to Thank You for the Fax from Colorado. And Jim, You
Were Talking about Clarifying Authorizations for Surface Use.

Albano: Yes. That\'s Another Change That Will Be in this Regulatory
Package. In 1995, There Was a Proposed Rule to Modify the Operating
Regulations to Clarify BLM\'s Responsibility on Forest Service Lands.
This Is Basically to Fully Implement the Requirements of the Reform Act
That Gave the Forest Service Responsibility for Surface Use. So,
Basically What We\'ve Done Here Is Made a Plain English Conversion of
What Was in the Proposed Rule in 1992. Ok. The next Item the Change in
the Drilling Section Is Something We Received Many Comments On. The
Onshore Team Received Comments on This, Also. That Is the Extension
Period for Approved Apds. The Onshore Number One Team Extended this
Period. We Initially Used the Period That They Came up with and We Got
More Comments That it Wasn\'t Enough Time. It Didn\'t Provide Enough
Flexibility to Field Offices So Now This Is up to Two One‑year
Extensions. So We Hope this Is Going to Be a Long Enough Period for the
Field Offices to Work with. And Finally, We\'re Incorporating Policy to
Process Apds and Apd Associated Rights of Ways at the Same Time to Use
the Apd Package as the Right‑of‑way Application. And this Is Something
That Will Help Streamline Activities and Reduce Paperwork. Filing
Requirements.

Abing: Also Within Subpart 3145, Regulations That Deal with Technical
Drilling Standards. This Would Basically Replace the Minimum Standards
for Drilling That Are Contained in the Current Onshore Order Number Two.
We Reorganized in Wordsmith the Questions and Answers to Tighten Things
up in a Bit in Response to a Lot of Field Comments. We\'ve Developed
Sections on Well Control and a Section on Well Design and Construction.
In Both of These Sections, There Are a Mix of Performance Based
Standards and Essential Elements. In Response to Field Comments, We Put
Back in the Following as Required. An Assumed Pressure Gradient for Wild
Cat Wells. A More Use of Bop That Can Completely Close the Well Bore. We
Put in Test Standards, We Will Require Use of Centralizer at Least the
Bottom Three Cases and We\'ll Require Waiting on Cement Times for
Compressor Strength. We Took out Language Og Used Casing. Well Design
and Construction Section Will Detail BLM\'s Performance Standards for
the Well. And it Will Be up to the Operator to Show That Their Casing,
Whether it Is New or Used, Can Meet the Performance Standard. In the
Section Regarding Pressure Testing of Casing, We Simply Stated When but
Not How That Testing Would Occur. And Instead, We\'ve Offered a
Performance Standard That Says the Casing Test must Demonstrate
Mechanical Integrity. In Response to Field Comments, We Got Very
Specific as down to The Section on Our Api References When We Use Them
in the Rule. We Used Api References in Sections on Well Control, Air
Drilling, Drill Stem Testing and Hydrogen Sulfite Operations. When it
Came to the Requirements for Hydrogen Sulfite Drilling Operations, We
Didn\'t Change Much from Order Six Other than We Split out the
Requirements for Production Operations in an H2s Environment and Put
Them into the Section on Production Storage And Measurement. But the
Other Thing We Did Change Was That the by Use of Api References, it
Allowed Us to Substitute Those for a Lot of Detail That Was Presently in
Order Six on Public Protection Plans, H2s Safety Training and
Respiratory Protection Equipment. Immediately Following the Technical
Well Standards Is the Proposed Sections on Additional Well Operations.
These Two Have Been Revised in Part Due to Field Comments and And
Attempt to Produce a Performance‑based Approach. The Sections Worthy of
Discussing Here Is the Question That Deals with What Additional Well
Operations Require Prior Approval from BLM. Now What We\'ve Done Here Is
Provide a List of Big Ticket Surface And down Hole Operations That must
Always Have BLM Approval. But the Section Also Provides a Performance
Standard That\'s to Be Used to Evaluate Everything Else That Is Not on
the List. And That\'s That Standard Is Worded as Such That If the
Activity Will Affect Valuable Hyrdrocarbon and Minerals, Production
Accountability, Usable Waters or Public Health and Safety, it Must Have
Prior Approval from BLM. Now this Performance Standard Was Developed in
Response to Some Field Comments That the List That We Had for Additional
Well Operations in the April Draft of the Regulations Was Not All
Inclusive. We\'re Hoping That this Standard Will Pick up Anything That
We May Have Missed. The Question Immediately after That Deals with What
Additional Well Operations Do Not Require Prior BLM Approval? And this
Is a List of Little Ticket Surface and down Hole Activities That Always
Will Not Require BLM Approval. And It, Too, Provides a Performance
Standard That\'s Worded Similar to the Standard in the Approval Question
but Just Says That If These Activities Do Not Affect the List of
Resources, Then Prior Approval from BLM Is Not Needed. Now, It\'s Worth
Noting for this Question That We\'ve Added a Definition for Routine Well
Maintenance and You Should Take a Look at That Before You Read this
Section. Jim, You Might Also Want to Mention How We Defined Better the
Term Surface Disturbance on How It\'s Used from Well Operations.

Albano: That Term Is Tied to Both Needing an Approval and Needing a
Surface Use Plan in the Existing Regulations. And it Did Cause Some
Confusion or Does Cause Some Confusion in Certain Situations or Maybe
Different Interpretation. What We\'ve Done Is We\'ve Changed this to
Describe the Activities That BLM Would Need Approval for and We\'ve Used
a Standard for This and We\'ve Also Described Some Specific Activities.
One of Those Being Mediation or Other Methods Used to Reclaim
Contaminated Areas. And the Other Standard That We Use Is We Talk about
What Type of Situations That Surface Disturbance Is Occurring under. In
Other Words, Disturbing off of on Existing Access Road or Well Pad or
Something like That.

Abing: Thanks, Jim. After Additional Well Operations Are Completed,
We\'ll Require The Operator to Submit the Usual Stuff, Being a Well
Completion Form, a Drill Log and Testing Data. But Here\'s the
Performance‑based Twist. We Will Require a Subsequent Report of
Operation in Two Instances. The First Being If the Activity Will Alter
the Existing Well Bore Configuration and the Second Instance Being If
BLM Requests It. Now, Instance Number One Should Take Care of All the
Engineers Concern That We Need to Get Information to Maintain a Complete
Well Record. And Item Number Two Should Give Us Some Flexibility to
Decide If We Want a Subsequent Report for Everything Else. And Jim,
There May Be Some That Could Apply to the Surface Use Aspects.

Albano: Yeah. I Think That this Does Give Us the Option in Situations
Where We Feel We Do Need a Subsequent Report and It\'s Something That We
Feel Is Going to Be Flexible Enough and Easy Enough to Implement By
Changing the Form, Adding a Checkoff Spot on the Form or Just Requiring
it as a Condition of Approval. This Should Be Fairly Easy to Implement
for People.

Abing: I Want to Give an Example of How this Would Work. Let\'s Take a
Submission of a Proposal to Install a Casing Patch. Now this Needs
Approval as a Casing Repair. Under the Proposed Rule, an Engineer Could
Use Discretion to Decide Whether the Performance Standards Are Triggered
or Not. If Not, He Would Not Necessarily Require Prior Approval but
Regardless, a Subsequent Report of Operations Would Be Required Because
the Existing Well Bore Configuration Is Altered. Another Change We Have
in Here Is That Additional Well Operations must Comply with the Drilling
and Surface Use Standards Contained in the Apd and Technical Drilling
Standards Section. And this Makes the Connection That Was Intended by a
Proposed Order Number Eight on Completions, Workovers and Abandonments.
And Another Change from the Existing Procedures Would Be That Oral
Approvals Would Be an Option for Any Additional Well Operation. And Not
Just for Drilling Abandonments and Emergencies. Jim Has Another Pretty
Good Example of How this Could Be Applied.

Albano: in the Case of Produced Water Disposal, There\'s Oftentimes
Operators Will Use a Single Facility for Many Wells. And BLM May Have
Already Reviewed the Use of One Facility. It\'s Repeated in Use. It\'s
Already Been Reviewed. BLM Could Then, in this Case, Grant an Oral
Approval.

Abing: I Guess We Would Always Have Our Usual Methods of Documenting
These Approvals Available to Us Being That We Could ‑‑ If it Was Real
Simple, I Would Think That We Could Use Just a Simple Telephone
Documentation and Put That in the File as One Way. And of Course,
There\'s Always the Option of If We Grant ‑‑ at The Usual Option, If You
Grant an Oral Approval, Within Five Days after That, You\'ll Send in a
Notice Describing What Was Agreed To. But the Bottom Line with this
Section Is That There\'s Room for Interpretation. We Wrote this Section
with the Intent to Reduce Workload. And We\'ve Provided Flexibility to
Approve the Things We Need to Be Approving and Get Information We Need
to Do Our Job. Ok. The next Section Is on 3151, Production Storage and
Measurement. This Subpart Is a Compilation of Requirements on Venting
and Flaring, Commingling, Offlease Measurements, Operations and H2s.
Anything That Related to Production Operations That Didn\'t Necessarily
Fit in Other Subparts Also. Changes We\'ve Made to this Proposed Subpart
Are\... We Will Not Charge Full Value for Gas Vented or Flared after BLM
Orders it to Be Captured. There Was No Specific Statutory Authority to
Charge Full Value. It Was Inferred from Our General Mandate to Prevent
Waste. Now, this Does Not Mean That We Condone the Waste of Gas. It Just
Means That If BLM Wants Gas to Be Conserved, They Can Use the
Enforcement Tools Available to it Such as Written Orders, Shut‑in
Notices, Assessments and Civil Penalties. Another Change We Propose Is
to Eliminate Federal Oil Wells That Are Producing Ten Mcf per Day or
less from Having to Obtain Approval to Vent or Flare. The Only
Requirement Would Be the Wells must Vent or Flare in a Safe Manner
According to Applicable Laws, Regulations and Practices. We must
Emphasize That this Provision Does Not Apply to Wells on Indian Lands.
Those Still must Be Handled on a Case by Case Basis. Other Change Is
That We Propose a New Reporting Threshold of 20 Parts per Million for
H2s. Operators must Notify BLM in 10 Days If it Shows 20 Parts That\'s
Present in the Vapors or in the Air at the Production Facilities. This
Concentration Coincides with BLM\'s Draft H2s Protection Policy That
Says Our Inspectors must Start Wearing Breathing Apparatus at 20 Parts
per Million. And as in the Drilling Section, the Production Requirements
in An H2s Requirements Are Similar to Order Six Except, Again, the Use
of Api References Allowed Us to Eliminate a Lot of Detail Associated
with the Preparation of Public Protection Plans. And That Takes Us on to
the next Subpart Which Is 3152 on Site Security. Now, Some of You Will
Recall My E‑mail Message Where I Was Kicking Around Some Ideas on Seal
Requirements a While Back. And to Which the Majority of Responses Were
the Electronic Equivalent of Having My Head Bit off. But I must Add That
There Was Some Expressions of Needing Some Flexibility in Some of the
Messages That I Got Back. But Anyway, this Is What We\'ve Come up with.
There Will No Longer Be a List of Valves That must Be Sealed or Not Be
Sealed. Instead, We Offer a Performance Standard That Will Require That
Operators must Seal Valves or Production Accountability Will Be
Adversely Affected If They\'re Not Sealed. We\'ve Deleted the
Requirement That Each Unsealed Valve Constitutes a Violation. This Was
in Response to a Field Comment That Gives Inspectors ‑‑ And it Gives
Inspectors Some Discretion to Issue a Single Link For a Tank Not Being
Sealed Properly. There May Be a Couple or Three Valves on the Tank That
Don\'t Have Seals but They Could Issue One That Would Cover All Three
Valves, Unsealed Valves. Another Change We Propose Is That By‑passes Can
Be Allowed If They\'re Approved by BLM. Now this Softens the Absolutely
Not Language That\'s Contained in The Current Regulations. There May Be
Situations Where By‑passes Are Appropriate P and If We Are Trusting of
Seals, Let\'s Use Them on Valves and By‑pass Lines. Another Change Is
There Will Be No Site Facility Diagrams Required on Single Tank, Oil
Condensate Facilities That Serve as A Single Well. We Didn\'t Think
There Was a Complicated Enough Set‑up to Require A Site Facility
Diagram. BLM\'s Ability to Account for Production Should Not Be Impacted
By this Proposed Change. This Takes Us into Subpart 3153 on Oil
Measurement. And Changes in this Section Include There Will Be Many,
Many, Many Reference to Api Manuals. And What We Would like to Get Some
Feedback from You All on Is Do We Want to Start Referencing Individual
Sections Within These Manuals or Are You Comfortable with Referencing
the Entire Document. Another Change Is That the Accuracy of Automatic
Custody Transfer Meters or Lacts Will Be Established by Our Current
Standards for Repeatability During Proving and in the Meter Factor
Variance Between Provings. There Would No Longer Be a Required Range for
the Meter Factor To Fall into as There Is in the Existing Regulations.
The Proposed Regs Also Contain Procedures to Follow If Repeatability
Can\'t Be Achieved. What this Procedure Amounts to Is You Get Your Five
Best Runs, Determine a Malfunction Factor and Then Repair or Replace the
Meter. We Also Propose Semiannual Provings of Lacts That Measure less
Than 10,000 Barrels of Oil per Mon. The Current Regulations Have Two
Classes of Proving. Monthly for Lacts That Measure over 100,000 Barrels
and Quarterly for Lacts That Measure under 100,000 Barrels per Month. We
Propose the Third Class of Proving Frequency for under 10,000 Barrels
per Month Because We Think There\'s less Risk for Royalty Than There Is
for the Quarterlies at Higher Provings. Another Change Is That the
Proposed Regs Would Require Portable Tank or Pipe Provers to Calibrated
Every 36 Months and Stationary Tanks to Be Calibrated Every 26 Months.
Another Change Is That Reporting of All Volume Errors Would Occur on the
next Monthly Report of Operations after the Error Is Discovered. Now,
this Is a Real Recent Idea We\'ve Come up with and We Really Haven\'t
Had a Chance to Discuss the Feasibility with Mms Interesting Idea to
Reduce Paperwork for Both Industry and the Government by Not Having to
Amend Individual Mros. Next Subpart Is on 3154, Gas Measurement. In this
Subpart, We Went Entirely to Performance Based Standards As to What
Kinds of Gas Measurement Systems Are Stepped on the Federal and Indian
Lands. Gas Measurement Systems must Meet the Following Performance
Standards. They must Have an Established Industry Standard That Covers
the Installation and Operation of the Meter. They must Achieve an
Overall Meter Uncertainty of plus or minus 3% and this Is Not to Be
Confused with the plus or minus Allowable Meter Error That Is Currently
Required Between Calibrations of Pressure and Temperature Allowance.
Meter Uncertainty Cannot Be Directly Measured out of the System. Another
Performance Standard Is That the System must Record and Display
Necessary Data at Frequent Enough Intervaals to Ensure Accurate Volume
Calculations. The Last Performance Standard Is That the System must Be
Able to Be Calibrate and Proved with Equipment Traceable to National
Standards. And Because Orifice Metering Is Still the Predominant Way of
Measuring Gas on Indian Lands, We\'ve Retained the Orifice Meter
Requirements with the Following Changes. We\'ll Cite Api Standards, Not
the American Gas Association. We\'ve Included Requirements for
Electronic Flow Measurement. We Expanded the Recording Requirement for
Difference Pressure From Tracking in the Outer 2/3 of the Chart to the
Outer 80%. And We Give a Break on this Requirement to Wells with Erratic
Flow Patterns. We Also Require Continuous Temperature Recording That
must Be Used to Determine Flowing Gas Temperature on All Meters
Measuring over 100 Mcf per Day. We Have ‑‑ for Meters Measuring under
100 Mcf a Day, We Have Low Volume Exemptions. They\'ll Be Exempted from
the Tracking Requirement. They Can Use Any Reasonable Method to
Determine Gas Flowing ‑‑ Flowing Gas Temperature and They must Be
Calibrated and Have Their Orifice Plate Inspected at Least Once a Year.
Another Change Is That We Propose Reporting All Volume Errors on The
next Mro after Discovery. This Is the Same Idea We Introduced in the Oil
Measurement Section and Again, We Emphasize That this Is a Recent Idea
and We\'ll Need to Get Together with the Minerals Management Service To
Discuss the Feasibility. But an Idea That We\'re Still Thinking about Is
in the Gas Measurement Section on Eliminating the Requirement That
Production Reports Be Amended Only When the Meter Calibration Error Is
Greater than plus or minus 2%. Instead, Go to a Standard That Will Say
That All Volume Errors Are to Be Reported on Mro. If We Are in the
Business of Ensuring Accurate Measurement, and We Want to Know a Volume
Error, Why Shouldn\'t it Be Reported? Some Proposed Changes We Made to
the Gas Quality Determinations Are We\'ve Deleted Any Reference to Btu
Determinations. Before Some of You Field Engineers Go Berserk Thinking
We Ignored Your E‑mail Messages to Us on the Need for That Data, We Have
since Discovered That Minerals Management Service Requires Semiannual
Testing of Btu in Their Regulations. You Remember the Ground Rule on
Eliminating Dup Ligation? So That Is Why That Is No Longer in Our Rule.
We Propose Annual Testing to Determine Specific Gravity. And We Will
Propose That Gas Sampling must Be Taken at the BLM Approved Measurement
Point. And We\'ll Require That Samples must Be Collected and Handled in
Accordance with the Cited Api Reference. There Were Some Good Field
Comments on this Issue and I Wish That Those Folks Would Get a Hold of
That Api Reference and Take A Look at it and See If it Does Address the
Concerns You Guys All Brought Up. So, Jim, You Can Go onto the next
Section.

Albano: Ok. Thanks, Tim. Produce Water Represents the Largest Volume of
Waste Generated By E and P. Statistics from 1991, 14 Barrels of Produced
Water Were Produced With Oil and Gas. It Also Represents an Area Where
BLM Completes a Lot of Approvals. Of All Approvals on Record, We Have
over 20,000 for Produced Water and about 60% of Those Are for Disposal
Pits. Some of the Changes We\'ve Made in this Section Include a ‑‑
We\'ve Established and Hopefully Clarified When Approval Is Needed and
When Approval Is Not Needed for Disposal Produced Water. One of the
Things We\'ve Done along with this Is We\'ve Expanded The List of Items
Where Produced Water Disposal Does Not Need Approval. Currently, If
There\'s an Enhanced Approved Recovery Project and Injection Is into the
Same Formation, There\'s No Need for Separate Approval for Disposal of
Produced Water. We\'ve Expanded this to Include Simultaneous Injection
or Disposal of Produced Water Within the Same Well Bore. A Technique
That Never Brings the Produced Water to the Surface, Contains it Within
the Same Well Bore. We\'ve Also Expanded this to Include Approval If an
Approved Disposal Facility on the Same Federal or Indian Lease Is Going
To Be Used. These Are Both Actions Where BLM Would Be Involved with
Another Type of Approval and We Felt There Was No Need to Have a
Separate Approval for Disposal of Produced Water. The Performance We\'ve
Developed ‑‑ We\'ve Developed Performance Standards for Disposal Pits.
This Is an Area Where Onshore Number 7 Has a Prescriptive List Of
Requirements. We Feel That These Will Apply to Both Location, Design and
Construction and Operation of the Pits. This Is Something That We Think
Will Simplify the Criteria for Using an Unline Pit and We Have Also
Retained the Enforcement Provisions in Onshore Number 7 Within These
Standards and Also Within the Notification and Report Section That I
Spoke of Earlier. Those Two Notifications Would Be for Installation of a
Leak Detection System and Also Completion of Produced Water Pit. We\'ve
Clarified When a BLM Right‑of‑way Is Required. And this Is One of Those
Areas Where There\'s Numerous Permutations to Try to Determine When a
Right‑of‑way Would Be Needed. And Quite Frankly, I Think It\'s an Area
Where We Don\'t Quite Have the Language Tight Enough and We\'re Going to
Be Looking at It in the next Couple Months to Clarify it Even More.
We\'ve ‑‑ Number 7 Has a Separate Section for Permanent Emergency Pits.
This Is Something That We Still Need to Approve These Types of Actions
but Is Not Included in this Section Because It\'s Contained Within the
Standard for Additional Well Operations. And That Is Constructing New
Pits or Enlarging Existing Pits. The next Section Is on Spills and
Accidents. This Is a Section That Replaces the Existing Ntl 3 a and
We\'ve Made Some Additions to the 24‑hour Reporting Requirements. The
First Addition Is for Major and Life Threatening Injuries. This Is
Something That Was Required Within 15 Days and the Existing Ntl, It\'s
Something We Feel Is Important to Get Within 24 Hours. We\'ve Also
Included Reporting Quantities of Hazardous Substances. This Replaces a
Term That Was Used in Ntl 3 A, Toxic Fluids. And We Think That There Is
a Potential for Hazardous Substance Releases. It\'s Something That BLM
Should Also Be Notified Although this Will Not Alleviate Somebody from
Reporting under Other Regulations. One of the Other Things That We\'ve
Also Reported Are Spills of Greater than 100 Barrels Within a Contained
Area. We Think That this Is a Large Enough Quantity That it Should Be
Reported Immediately. It Could Result in Effects to Shallow Groundwater
or Migratory Birds. If It\'s Contained Within a Large Area, It\'s
Synonymous with Oil In a Pit, That Type of Situation. So We Want
Immediate Reporting for this. We Modified Information That Needs to Be
Submitted in the Reports. Some of These Modifications Include Whether
Sensitive Areas Would Be Affected. The Direct and Indirect Causes, the
Use of Emergency Pits and Plans for Reclaiming and Remediating Areas
That Are Affected. One Thing We\'ve Also Done Is Add an Approval Process
for Remediating and Reclaiming Affected Areas. This Is Something That
BLM Will Have an Option to Determine When A Reclamation Plan Should Be
Submitted. This Depends on the Type of Response That\'s Been Taken. If
It\'s under the Control of Another Agency, the Area That\'s Affected and
the Size of the Spill. We\'ve ‑‑ the Last Thing We\'ve Done Here Is
We\'ve Eliminated Reporting Lost Volumes on the Mro to the Mineral
Management Service. For Those Small Volumes, Because this Is Something
That the Mms Already Requires and it Would Be Duplicating Their
Regulations. If the BLM Determines That There Is an Avoidable Loss, Then
We Would Notify the Operator That It\'s Something That Needs to Be
Reported on the Sale and Volume Report.

Abing: Before We Leave That, I Want to Say That Jim Should Probably Get
a Medal for Eliminating the Phrase Undesirable Events. We Move onto the
next Session Section Which Is Subpart 3159, Well Abandonment. The
Numbering Isn\'t off Because Engineers Because They Don\'t Know How to
Count. There Were Two Sections That Got Shifted into the Royalty Section
So We\'ll Take Care of the Numbering but Just Pay Attention to That at
Some Point. Proposed Changes to Well Abandonment. Subpart Are That
We\'ve Included Language to Implement the Review To Increase Bonding for
Wells That Pose a Liability Risk. The Amount of the Bond Increase in the
Conditions When it Was to Be Applied Was Discussed by Pam this Morning
in the Bonding Section. But this Would Mean That Increased Bonding Would
Be a Condition Of Continuing a Well in a Temporary Abandoned Status or
Delaying Permanent Abandonment. This Subpart Has Also Been Edited to Be
More of a Mix of Performance‑based Criteria and Mandatory Requirements
We Feel Are Important to Ensure Proper Well Abandonment. In Response to
Field Comments, We Put Back in a Requirement That 10% Excess Cement must
Be Used per Thousand Foot of Depth for Each Plug Placed in a Well. We
Put Back in That a Minimum of 25 Sacks of Cement for Any Plug Placed
Through Tubing Except the Surface Plug. We Got Specific in Our
References to Api Bulletin E‑3 Which When You Read It, You\'ll Find it
Contains Many Standards Similar to The Current BLM Standards for
Abandonment Contained in Order Number Two. The Subpart Would Also
Require Abandonment Operations to Be Conducted According to the Surface
Use and Drilling Standards of The Apd and Technical Drilling Standard
Section. We\'ve Retained the Notice of Intent to Abandon and the
Subsequent Report of Abandonment Process but We\'ve Made Submissions of
a Final Abandonment Notice Conditional on Whether Or Not the Report
Contains a Reasonable Schedule to Complete Recontouring and Reclamation
Procedures. And That Is the Actual Conclusion of the Operating
Regulations, Sherry. I\'ll Turn it Back to You.

Barnett: Thank You. So Far, We\'ve Covered the Major Changes in
Drilling, Production And Reporting and Other Operations. In this next
Segment, We\'re Going to Address Enforcement Issues. John, Do You Want
to Start Us off on That?

Duletsky: Yes. This Old Dinosaur Is Alive. He\'s Not Frozen in Time.
What We Did Is in the Enforcement Section, We Dropped the Reference to
Major and Minor and Eliminated That from the Enforcement Section. A
Violation Is Now a Violation. The Severity of the Violation Will Dictate
the Abandonment ‑‑ I Mean the Abatement Period. The Lease Cancellation
Provision Has Been Moved after the Civil Penalty Provision. This Is to
Ensure That We Do Use All of the Administrative Procedures That We Have
Available to Us Prior to Terminating Leases. Under Assessments, We
Eliminated the Tiered Classification of Minor and Major and There Will
Be Only One per Day Dollar Amount And It\'s Referenced up to \$250. This
Provides the BLM Some Flexibility to Adjust the Dollar Amount Depending
on the Severity of the Violation. Tim?

Abing: Ok. Another Change to the Assessment Regulations Is That the
Current Regulations Cap Assessments at \$500 per Lease, per Operator,
per Inspection for the Minor Regulations and Caps the Majors at \$1,000
per Day per Operator. This Is One of the Self‑regulating Items I Talked
about and Violates One of Our Ground Rules. We Proposed No Limits to the
Amounts per Day or the Total Amount Assessed. The Proposed Rule
Continues to Give BLM Discretion to Reduce Amounts as a Check and
Balance. Let\'s Let Experience and Common Sense Work for Us and Levy
Assessments That Are Befitting the Violation.

Duletsky: the Immediate Assessment Section ‑‑ We Fixed Dollar Amounts up
to Provision to Provide for Adjusting the Dollar Value to the Severity
of the Violation. The Dollar Value of the Assessments Has Been
Increased.

Abing: We\'ve Also Expanded the List of Violations That Are Subject to
Immediate Assessments and the next Slide Will Lead Us Into What Those
Are.

Albano: the First Change Includes a Modification of What Currently
Exists. We Currently Have an Assessment for Disturbing Indian Lands
Prior to Approval. We Have Incorporated BLM\'s Responsibility and
Authority to Regulate Surface Disturbing Activities Pursuant to Any
Lease Issued under the Act and this Change Will Include an Immediate
Assessment for Disturbing the Surface, Regardless of the Surface
Ownership. The Most Concise Language on Our Responsibility Is Found in
the Reform Act Where it Dictates Us to Regulate All Surface Disturbing
Activities and Determine Reclamation and Other Actions as Required in
the Interest of Conservation of Surface Resources.

Duletsky: It\'s Proposed That the Same Violation Occurs by the Same
Person on the Same Lease, it Will Result in an Automatic Assessment.
Additionally What We Propose Is Any Commingling Without Approval Of the
Bureau of Land Management Will Result Also in an Automatic Assessment.
That Means Combinations of Production from Leases, Cas, Units, Unit Pas
or Any Combinations Thereof.

Abing: the Last Addition to the Violation List Is Failure to Notify BLM
of the 20 Part per Million H2s Concentration We Mentioned in the
Production Measurement and Storage Section. There Were Field Comments
That Expressed Concerns Operators Were Neither Timely for Consistently
Providing BLM Notice of H2s Concentrations as Currently Required by the
Regulations. So, for Concern for the ‑‑ the Implications of Public
Health and Safety and the Implications to Our Own Inspectors, with He
Included this as Something That Would Be for Immediate Assessment. This
Will Lead Us into the next Subpart. That\'s 3164 That Deals with Civil
Penalties. In Response to Field Comments, the Proposed Civil Penalty
Section Undergone Substantial Edit from the Version You Saw Last April.
The Proposed Section Now Closely Follows the Assessments in Fogrma for
Civil Penalties. The Proposed Regs Would Not Have Any Cap on the Amount
of Civil Penalties We Assess per Day or the Total Amount of Civil
Penalties Assessed per Violation. This Section Will Propose Two Notices
Given to the Operator After the Initial Incident of Noncompliance and
Abatement Period Are Established. In the Regulations, this Is Referred
to as the First Notice. If a Violation Is Not Corrected Within 20 Days
or Longer If BLM Approves It, after That First Notice Is Sent, We Will
Send a Second Notice, Informing the Operator They\'re Liable for
Proposed Civil Penalties. The Second Notice Will Describe the \$500 per
Day Phase, the \$5,000 per Day Phase and the Associated Time Frames That
Apply To Each. If the Violation Continues to Go Uncorrected, a Third and
Find Notice Will Be Sent to the Operator Assessing Proposed Civil
Penalties and Informing the Operate They\'re BLM Will Initialize Lease
Cancellation Procedures. These Are Minimum Notification Procedures and
BLM Is Allowed to Use Additional Notices If Circumstances Dictate. A
Final but Minor Change That We Made Was to the Section in the Existing
Reg Line. It Says BLM Will Revoke a Transporter\'s Authority to Haul
Oil. And BLM Can\'t Revoke Something That it Doesn\'t Give in the First
Place. But What We\'ve Done Is Modify the Language to Say That BLM Could
Order Operators in the Area to Not Use the Services of That Particular
Oil Transporter. The Last Slide Deals with Other Changes in Lease
Operations. And the First of Which Just Worth Noting Here Is That the
Definition Section Wasn\'t a Subpart We Had Covered but There Have Been
Additions, Deletions and Changes to the Words Contained. Don\'t Assume
the Current with a Term Is Defined Is How It\'s Proposed in the Rule.

Duletsky: We\'re Going to Address Changes in the Sliding Scale And the
Step Scale for Well Count. We\'ve Done this to Try to Eliminate the
Problems That People Encounter in Assessing or Determining the Royalty
Rate. The Proposed Changes to Count All Wells, If They Are Eligible
Wells and the Definition for Eligible Wells Is Found in 3106.40.
Regardless of the Number of Days the Wells Produce or Are in Service,
What We\'ll Be Doing Is Taking the Total Production for The Production
Month, Dividing it by the Number of Wells That We\'re Producing, Status
or in Service, Times the Total Number of Days That the Entire Number of
Wells Were Producing to Give Us The Barrels of Oil per Well per Day to
Determine the Royalty Rate. The Schedule B and C Are Those That Relate
to the Step Scale Leases and Schedule D Relates to the Sliding Scale
Leases. Sorry about That.

Abing: Another Change Worthy of Mentioning to the Operational People Is
the Business about the Stripper Oil Property Royalty Reduction. This Was
Pretty Much a Matter of Converting it to Plain English. We Had Early
Input from Mms on the Conversion. And They Gave Us Some Suggestions
Based on Their Experience with Implementing a the Program. One Change
That They Suggested and Was Adopted Was to Clarify When Oil Is Oil and
When Oil Is Condensate. That Was to Determine Whether a Property Would
Qualify for the Royalty Reduction Which, of Course, Condensate Does Not.
Another Topic\... Worthy of Discussing Here under the ‑‑ for the
Operational People Is Actual Drilling Operations for the Purpose of
Getting A Two‑year Drilling Extension. Now, as You Recall, in the
Existing Regulations, it Says If You Re‑enter an Existing Well, You must
Drill to One Formation That\'s Newer and Deeper. And We Should Some
Great Field Comments to Say What about the New Technology in Horizontal
Drilling. Someone Could Go into a Zone That\'s Been Produced and
Horizontally Drill and Establish Production. And We Agree with this
Comment. And We\'re Going to ‑‑ It\'s One of the Many Things I Guess We
Need to Go Back and Work in That Language in the Regulations. Another
Topic That Was Brought Up. We\'re Still Discussing It, Was the Issue
That Was Brought out in A Recent Decision That Came out of New Mexico
about a Company That Was Plugging a Drill to Dry Hole and Was Conducting
Abandonment Operations over the Expiration Date of the Lease. New Mexico
Made the Correct Decision in That Instance. They Were Upheld by Ibla but
Some of the Judges Were Dissenting In the Decision on it Saying That
They Believe That it Was the Intent of the Law Is to Not Give Drilling
Extensions to People For Just Going Through the Motions. And They
Thought That Abandonment of a Dry Hole Was Certainly Not Someone Going
Through the Motions. And We Would Be Interested in What Some of the
Field Comments Are on this Particular Issue as to Whether We Could
Expand the Definition of What Constitutes Actual Drilling Operations to
Include Plugging That Is Done Immediately after the Drilling of A Dry
Hole.

Duletsky: I Would like to Take You Back to the Royalty Rate Leases. This
Was Not Just Done under Our Own Motion. There\'s Been Cooperation with
Mms on this Particular Aspect and I Think Tim Can Elaborate on It.

Abing: Yeah. We Did ‑‑ Because it Was Such a Drastic Change to What We
Have Existing on Variable Royalty Rate Leases, Is That We Did Run it By
‑‑ Run the Idea by Mms. We Just Simply Took the Approach That It\'s a
Procedure to Determine Average Daily Production Similar to What\'s Use
in the The Stripper Well Program. And We Thought Well, If It\'s Good
Enough to Lower Your Royalty Rate, That\'s a Simp Procedure. It Should
Be Good Enough to Raise Your Royalty Rate. And Mms Ran Some Studies on
it and They Came Back and Their Initial Feedback on it Was That the
Proposal Was Royalty Neutral. And Which Sounded Good. But I Think That
it Still Is Important for Those Offices out There That Have Variable
Royalty Rate Leases and the Production That Can Kick it up to a Level
Where We Get an Increase Royalty Rate to Take a Look at the Procedure
and Work Some Examples to See If Indeed We Are at a Royalty Neutral
Position on this. Because When We Introduced It, the Idea Was to
Simplify Things And Not Ace the Government out of Royalty Money It\'s
Got Coming.

Barnett: I Would like to Interrupt for a Second. We\'ve Gotten Faxes in
from Colorado and Oklahoma. One of Their Areas of Concern That They
Would like to Talk about A Little Bit Is Immediate Assessments. In
3163.2, Immediate Assessments Are Cited for the Same Type of Violations.
The Question Is Why Not, Instead Do it by Operator Instead of by Lease
and Why Not over X Number of Years Instead of Four Times In a Year?

Duletsky: the Reason Is We Tried That Once as a Proposal to Do it over a
Period of 24 Months. It Never Did Fly Through the Administration or the
Department. And That Was Kicked out for That Particular Reason. And What
We\'re Looking at Is Each Lease Is a Separate Entity. You Can\'t Spread
it from One Lease to Another. Compliance on One Lease Doesn\'t
Necessarily Mean You\'re Not in Compliance on Another. This Was Proven
to the Fact Where One Engineer at One Time Denied Approval of an Apd
Because of Not Cleaning up a Lease on The Operator the Operator Operated
on Before and That Went Through an Ibla Decision. It Was Clearly Stated
Each Lease, Each Unit ca Is a Separate Entity So You Can\'t Combine it
All. We Also Tried One Time to Incorporate That for the Area under The
Jurisdiction of Any One BLM Office and That Went Flat, Too. So That\'s
Why it Is on a Lease Basis, Unit Basis, ca Basis.

Barnett: it Sounds like a Reasonable Idea but If We\'ve Tried It and
Can\'t Get it Through, We\'ll Go Back to this Way. This Is a Complicate
the One. Is on the Automated Assessments. Basically, What Was the Basis
for It? How Widespread Were the Issues? What Criteria Did You Use? And
How Did You Determine What Violations Would Be Facing the Automatic
Assessment?

Duletsky: Most of the Automatic Assessment Items Are There. They\'re Old
Items on There. What We Added Was the Commingling and We Added to the
Not Reporting 20 Parts per Million of the H2s. And We Also ‑‑ What Was
the Third One?

Albano: Third One We Added Was for Disturbing Surface on Other Lands
Besides Federal. And We Do Have Some Pretty Good Information That Shows
That this Is Occurring Where Operators May Be Building a Pad on Private
Surface. Before They Ever Get an Apd or Notice of Staking Submitted with
Us.

Barnett: Ok. I Have a Question on How the Civil Penalties and the
Assessments Might Work on Specifically on Reductions. Will We Be
Developing Policy That Provides for Some Kind of Consistent Assessment
Reductions or Forgiven Mitigation Measures Or Will Each Office Be
Allowed to Set Their Own?

Duletsky: Each Office ‑‑ up to the 250 per Assessment Relate It to the
Severity of It. That Doesn\'t Preclude Somebody Going to Civil
Penalties. However, Many Offices Just Went Directly from an Assessment
to a Civil Penalty in the past Years. Net Not Utilize All of the
Administrative Procedures We Had Available to Us. When You Go to Civil
Penalties, That\'s a Very Severe Violation Enforcement. So They Can Take
Shut‑in Action. For Instance, If You Have a Berm That\'s Not Tall
Enough, We Can Go Ahead and Repair That and Charge Them 25% in Excess to
Doing The Work. We Felt That it Ought to Be Spelled out That They Will
Go Through All of the Assessment Procedures Available. And There Will Be
an Instructional Memo Going out to That Effect.

Barnett: I Think That Will Help. There\'s Also ‑‑ it Seems to Be
Confusion Between How the Process Flows from Ink Through Civil Penalties
If the Violation Isn\'t Corrected. Could You Step Us Through the
Process.

Duletsky: They\'re Going to Be Given Another Notice and Another
Assessment but as Tim Explained, in That Particular Assessment Value, it
Will Be Spelled out That Civil Penalties Are Also There and Will Go into
the Civil Penalties on the Time Frame Without Any Additional Notices.

Barnett: Ok. And I Have One More. It\'s a Comment on How You Define
Knowingly and Willfully. It Would Suggest That We Include Those
Operators Who Know They Have a Federal Administered Lease and They
Choose to Ignore the Requirement to Obtain an Approval Before Commencing
Operations.

Duletsky: this Is One Item We\'ll Have to Take Back up to the
Solicitor\'s Office. It Had Been Discussed Previously When it Was Put
into the Regulations When Fogrma Came out. The Language Was Provided to
Us and Sanctioned Because it Wasn\'t Fogrma. We Were Also Advised That
It\'s Very Difficult to Prove Knowing And Willful. And People Are
Usually Inadvertently Omitting Something. So, We\'re Going to Have to
Take That up with Them to See If Continued Violations of the Same Kind
by an Operator Cannot Be Considered as Knowing and Willful. And Go into
That Process.

Barnett: I Know That in New Mexico, They Have Been Successful In
Prosecuting Operators Who Have Knowingly and Willfully, for Example,
Underpaid Their Royalties and under Those Situations, We Do Collect
Triple Damages.

Abing: Is That Only in Stern States That Triple Damages Are Collectable?

Barnett: I Think It\'s a Federal Statute, Collected under the Federal
Statute.

Duletsky: We Have the Knowing and Willful Violation That Could Cost You
\$25,000 If You Don\'t ‑‑ If You Are Knowingly and Willful.

Barnett: That Concludes Our Operational Segment of the Program. Thanks,
Guys. We Encourage People Interested in the Changes That We Just
Discussed to Call Us or to Fax Us with Your Comments During the Formal
Question and Answer Question. We\'ll Be Discussing All of These Issues
That Come up after the Next Break. You\'re Probably Wandering What the
Schedule Is Schedule Is for Getting the Regulation Package out. We
Intend to Publish it by the End of January. In Order to Do That, We\'ll
Need to Finish up the Environmental Assessment, the Determination of
Effects and the Information Collection Requirements. In Addition, We Are
Developing a Communications Plan That Will Address Both Internal and
External Outreach. We\'ll Cover How We Coordinate These Efforts with Our
Sister Agencies Who Will Be Impacted by Them. We\'ll Be Doing a Final
Edit Incorporating Any Comments and Is Suggestions from this Broadcast
That We Can, Particularly We Covered Several this Morning That We\'ll
Try to Fit In. After the Proposed Regs Are Published, There Will Be a
120‑day Comment Period. We\'ll Determine from the Comments We Receive
Where to Go after That. With Us Now Is Sue Stephens. Sue Works for the
Native‑american Office and She\'s Stationed in Santa Fe, New Mexico.
Welcome to the Program, Sue.

Stephens: Thank You. It\'s Nice to Be Here with You Today.

Barnett: Sue Is Going to Explain Some of the Changes in the Newly
Released Cooperative Agreement Regs. Sue?

Stephens: I Want to Speak about the Regulations. They\'re Final and Are
Not Part of Today\'s Broadcast. But I Would like to Take a Few Minutes
to Discuss Them with You. The Regulations Are Found at 43 Cfr 3190 and
3192. Original Reg Were Published in 1987 and 1991. Fogrma Was Silent on
the Amount of Funding for Cooperative Agreements and So BLM Decided to
Fund Them up to 50%. In 1996, BLM Made a Decision to Increase Funding up
to 100%. This Decision Somewhat Coincided with the Passage of the
Federal Oil and Gas Royalty Simplification and Fairness Act. Section 8 a
of That Act Eliminated Cooperative Agreements on Federal Lands. Another
Factor That Affected the Rewrite at the Time Was the Ongoing Effort to
Simplify Regulations and Write Them in Plain English. The Proposed
Cooperative Agreement Regulations Were Published in The Federal Register
on April 9, 1997. And They Incorporated the Following Changes. Funding
Was Increased up to 50% to up to 100%. Cooperative Agreements Were
Eliminated on Federal Lands and the Existing Regulations Were Converted
to Plain English. There Was a 30‑day Comment Period for the Regulations
and We Received Comments from Two Government Agencies and Two Tribes.
And All Four Were Favorable to the Increase Which Was No Surprise. There
Were Several Questions about Whether or Not Allotted Lands Were Included
in a Cooperative Agreement. And I Wanted to Take a Minute to Clarify
That for You. The Definition of Indian Lands and Fogrma Does Allow ‑‑
Include Allotted Lands So Yes, There Would Be ‑‑ Allotted Lands Could Be
Included in Cooperative Agreements. If You Would like to See a Complete
Discussion of the Comments And Our Responses, You Can See the Preamble
to the Final Regulations Published on September 22, 1997 and Were
Effective Immediately. That\'s All I Had about Co‑op, Sherry. Back to
You.

Barnett: How Many Co‑op Agreements Does this Actually Affect, Sue?

Stephens: Five at the Moment. We Have Five Existing Cooperative
Agreements with Tribes. None with States.

Barnett: Any in the Works That You Know about?

Stephens: I Think There\'s One in Wyoming That They\'re Starting to
Negotiate.

Barnett: Because You Were Able to Put this in Place Immediately, Have it
Effective Immediately, That Will Affect Funding for 1998, Won\'t It?

Stephens: Yes. Also for Parts of 1997.

Barnett: Does this Rule Making Only Apply to Prospect Ev Agreements or
Does it Apply to the Current Ones?

Stephens: to Existing Agreements. They Could Be Funded at up to 100%
Immediately.

Barnett: Does That Also Include Split of State Lands?

Stephens: it Depends on the Situation with the Split of State Lands, Who
Has the Mineral Interest. So, Yes, it Could.

Barnett: Ok. Thank You Very Much, Sue. If You Have Any Questions
Relating to Co‑op Agreements or Other Indian Issues, We\'ll Be
Addressing Those Later in the Show When Both Sue and Pete Aguilar Join
the Panel. I Don\'t Know about You All, but We\'re Ready for Another
Break. When We Return, We\'ll Hear from Dennis Daugherty. He\'ll Discuss
Another Proposed Rule Regarding Drainage and this Rule Addresses Who\'s
Going to Be Responsible for Drainage and Environmental Compliance. When
Dennis Is Finished, We\'ll Begin Our Second Question and Answer Session
So Now Would Be a Good Time to Start Faxing in Those Questions or Give
Us a Call Right after the Break. See You in 20 Minutes!

Barnett: Welcome Back to the Last Segment Our Program Today. We\'ll Be
Starting Our Discussion Session Shortly. But Before Introducing Our next
Panelist, I Would like to Mention Some Upcoming Ntc Telecasts. On
November 18th, Ntc Will Broadcast a Message from BLM Director Pat Shea.
On November 19th, Ntc Will Brought Cast a Seminar Oz Part of the Second
International Conference on Natural Resources and Cult Mural Heritage.
This Interactive Telecast Which Will Also Be Transmitted to Central and
South America Will Be Simulcast in Spanish. On December 3rd, BLM in
Association with the Forest Service and The Cellular Telephone Industry
Will Present a Telecast Discussing the Implementation of the
Telecommunications Act of 1996. And on February 5th, a Workshop on
Conflict Management in a Changing Work Force Will Be Broad Cast for All
Employees. Pete, Works in the Division of Energy and Minerals for the
Bia In Denver. Pete, It\'s Great to Have You Here.

Thank You.

Dennis Is Going to Be Discussing Another Rule Making That Will Soon Be
Proposed on Protecting BLM from Drainage Joint & Several Liability. And
Liability Assignees and Assignors.

We Will Be Talking about a Problem He\'s Faced the BLM for a Number of
Years. While We\'ve Expressed Lease Terms That Require Lessees to Take
Affirmative Action to Protect the Federal Landowner or the Indian
Landowner from Drainage, from Wells on Adjacent Properties, We\'ve Not
Had Regulations That Spelled out this in Any Detail. That\'s Fallen into
the Ibla Which Has Found That the BLM Has Not Proved That the Lessee Had
Constructive Notice or Notice That Drainage Problem Existed. We Try to
Develop That Through the Cases. That\'s Proved to Be an Ineffective
Method of Spelling out What Is Adequate to Give Notice to the Lessee.
And So, We ‑‑ the Rule Will, for Example, Require an Operator to Take
Several Steps to Inform Himself of the Existence of Drainage. First of
All, He Is to Monitor Records of New Completions, Sundry Notices,
Available Information with Regard in Production So That He Will Be Able
to Make Determinations. A Determination as to the Area That Will Be
Drained, the Volume Of Oil or Gas That Will Be Drained. And Then from
That, to Be Able to Determine Whether it Would Be Economic to Drill a
Protective Well. Finally, the Rule Would Require That If it Would Be
Economic That He Present a Plan for Protection from Drainage to the BLM
Within 60 Days. There Are Other Issues That Have Come up During Our
Cases. One Has Been the Economic Feasibility of Drilling That Well. What
Happens When There\'s Been Be a Assignment of the Lease. Ibla Cases Have
Provided That Economic Feasibility Will Be Determined for Each Operator,
the Time They Take Their Interest In the Lease. Our View Is That
Unfairly Allows an Operator to Cut off the Compensation, the Remedying
of this Loss of Resources to the Federal Government and We Would Provide
in the Rule That That Economic Feasibility Test Is to Be Performed Just
Once. And Then Finally, We Have the Question of Who Is Responsible for
Protecting Us Against Drainage. As You Know, That Is Addressed Both in
the 3100s and the 3160s, Both in Terms of Federal Leases and Then in
Terms of All Leases In Our Operational Regs. As You Know in Any Given
Lease, There May Be a Number of Co‑lessees Who Share Interest in That
Lease. Rule Will Make it Clear That Each of Those Co‑lessees Would Be
Responsible. Just as They Would Be Responsible for Drilling a Well, If
They Choose to Compensate Through the Payment of Compensatory Royalties,
If One of Them Is Bankrupt, That Problem Is Their Problem, We Will Be
Fully Compensated by the Remaining Owners. If, Instead, There Are
Operating Rights or If in Addition There Are Operating Rights Owners Who
Have Interest, the Regulations Would Provide That They\'re Responsible
for the Area to Which Their Operating Rights Apply and the Time Period
to Which Their Operating Rights Apply. Then the Regulations Will Go on
to Address the Question of Who Is Responsible in Context Beyond Just
Drainage and All Obligations. What Is the Responsibility of an Assignor
and an Assignee. In the Case of the Assignor, We All Know from the
Statute That The Assignor Continues to Be Responsible until the
Assignment Is Approved by BLM. But after Approval, What Are His
Responsibilities? The Rule Will Provide That If the Obligation\'s
Accrued Prior to The Assignment, He Will Continue to Be Responsible,
Perhaps He Won\'t Be the First Party That We\'ll Seek Performance from
but Ultimately, If We Need To, We\'ll Go Against the Assignor Who Was
The First Party to Incur this Responsibility, this Obligation.

Barnett:, So, How Does That Work for Plugging?

Daugherty: If There\'s Been a Well Drilled, the Obligation to Plug That
Well Accrues Immediately upon Drilling and Continues Through ‑‑ for
Those Who May Own That Well Before it Is Plugged. Until it Is Plugged,
it Is ‑‑ Each of Those Owners and Continues To Be the Responsibility of
the Assignor. Finally, the Rule Addresses the Responsibility of
Assignees. The Rule Would Provide That the Assignee Is Responsible, of
Course, for Everything That Occurs While He Holds the Lease and That\'s
True of Drainage and Royalties. He\'s Responsible for the Obligations
That Arise While He Holds His Interest but the Rule Would Clarify There
Are Certain Ongoing Obligations, Continuing Obligations for Which He\'s
Responsible Even If They Came into Being Before He Took the Lease.
Plugging ‑‑ We Were Speaking If the Well Was Unplugged When He Took
Interest in the Lease, He\'s Responsible for Having it Plugged. She\'s
Responsible for Reclaiming the Site. If There Are Problems on the Site
That a Knowledgeable Purchaser Would Have Been Aware of with Some
Diligence, Then He\'s Responsible for Remedying the Problems. We Don\'t
Believe That Those Should Become the Responsibility After Assignment of
the Taxpayers. And So this Is a Very Important Rule Making. It\'s One in
Which it Addresses Some of the Problems You Were Speaking of Earlier of
Unfunded Liabilities, of Perspective. Reducing the Potential Liabilities
of the Taxpayer and So We\'re Hopeful That There Will Be Comments Coming
in Soon on These Rules and We Can Put Them into Place as Indeed
Comparable Rules Have Been Put into Place for the Offshore Leasing
Program.

Barnett: Thanks, Dennis. That Concludes Our Presentation on Oil and Gas
Regulations and Brings Us to Our Last Comment and Discussion Segment. So
Now\'s the Time to Time to Fax or Call in with Any of Your Questions or
Comments You Have. All Right. We\'ve Got Several Faxes We Can Start
with. But Feel Free to Call in at Any Time. Let Me Start with One for
Pam. It\'s on Leasing. This Is from Becky in New Mexico State Office.
Pam, Once the Proposed Regulations Are Finalized, What Are the Impacts
of Renumbering the Regs, for Example, the Bonds Are Presently Identified
under 3104 and under the Proposed Regs, They\'ll Be 3107, Especially the
Forms and All That Stuff.

Lewis: Thanks, Becky. We Know There Will Be a Difference in the
Numbering Scheme Between the New Regulations and the Present Forms.
That\'s Going to Have to Be Worked out after this Rule Making Package Is
Finalized. I\'m Sure That You Would Love to Be on a Team of People That
Would Help Work on the Redesign of the Forms and Getting Those Form
Numbers Squared Away in Accordance with the New Numbering Scheme for the
Regulations. We\'re Very Concerned about it but We Will Work Through It.

Barnett: by No Means Does the Publishing These Proposed Rules Means
It\'s the End of the Rule That ‑‑ the End of the Work That Needs to Be
Done. We\'ll Have a Lot More to Be Done Before It\'s over.

Lewis: That\'s Correct.

Barnett: We Have a Question from Ron Bartell in Tulsa. This Is for Rick
Concerning Communitization Agreements. Ron Wants to Know Does a Simpler
Request Replace the Current 15 Section Model Form of the Communitization
Agreement Currently in Place?

Wymer: the Answer to That Question Is Quite Simple. Yes, it Does.
Although the Operator Can Submit it under the 15‑part Form If They Wish
To. Our Intent Was to Make it as Simple as Possible. Anything Would Be
Acceptable as Long as it Covers the Minimum Requirements. Thanks for the
Question, Ron.

Barnett: We Also Have a Call Right Now from Richard Hopkins In Great
Falls. And He Would like to Ask about the Apd Approval Process. Hi,
Richard.

Caller: I Had, Sherry.

Barnett: Thanks for Calling In.

Caller: I Would like to Share Concern I Have about the Regulation
Changes in the Apd Approval Process. I Guess My History with Oil and Gas
Goes Back to \'75. And at That Time, Before Ntl 6 Was Even Written, We
Came under Criticism in the Bureau Because We Didn\'t Have Consistent
Requirements and We Didn\'t Have Time Frames for Our Approval Processes.
And the Operators Would Submit an Apd and in One Office and They Would
Be Required to Do Certain Things and They Would Submit it To Another
Office and They Would Have Different Requirements. So the Complaint from
Industry Was Well, You Know, What Do You Guys Want? Tell Us What You
Want and We\'ll Comply with That. So When We Worked on Ntl 6 and Then
Order Number One, We Tried To Governor the Main Items That Were Always
Lacking in an Apd Approval Process. And We Worked That out in
Conjunction with the Industry and as a Part of That, We Built in Some
Time Frames for Our Own Organization That this Was the Other Complaint
That in Some Offices, You Could Get an Apd Approved in 30 Days. In Some
Offices, it Was Six Months. And I Guess My Concern Is That We Want to Be
Careful Not to Ever Get Back into That Situation and You Know One of the
Things the Managers I Guess Right Now I\'m Concerned about Doing Away
with The Time Frames, for BLM to Respond to Certain Things, You Know,
We\'re in a Decreasing, Downsizing, and Priorities Change. If We Don\'t
Have Some Kind of Time Frames on Ourselves or Understanding in
Management, Some Managers Are Going to Say Well, Oil and Gas Is Not My
Number One Priority and I\'m Going to Have to Put this Thing Aside
Because of Staff Available to Work On These Kind of Things. It Helped
Management, I Think, in Two Areas When We Realized We Weren\'t
Accomplishing the Approvals Within a Certain Amount of Time. You Know,
We Were Able to Justify Increases in Staff and We Did That in the Late
\'70s and Early \'80s to Increase Inspection Enforcement Staffs, Surface
Protection Staffs at That Time. And Now, I Guess ‑‑ I Don\'t Know That
Managers Would Have Those Kind of Tools to Justify ‑‑ We\'re Not Getting
Our Work Done So We Need Additional Help.

Barnett: Richard, Let Me Try to Respond to Some of Those Before We Go
Farther. Tim, Would You like to Address the Regulatory Aspects of That?

Abing: I\'ll Try and Maybe Jim Can Sure Add to the Thing but It\'s Just
a Matter Of, Richard, That We Felt That the Time Frames ‑‑ They Are
Self‑regulating and it Was One of the Reasons Why We Took Them out of
the Regulations. But I Don\'t Think That Necessarily Means That the Time
Frames Go Away Completely. We Just Felt That Time Frames Were More a
Matter of Internal Policy to Reflect Priorities Within the Organization
and Should Not Be Regulatory. I Fully Expect That, You Know, We Would
Still Set Some Type of Internal Time Frames Within Which We Would Do
Things. And Not Completely Do Away with Them. Do You Have Anything to
Add to That, Jim?

Albano: I Agree with You, Tim. I Think That That Probably Is the Intent
That the Emphasis Will Be Placed in the Highest Level of Management On,
You Know, Meeting These Time Frames. We\'ve Come under Criticism, Even
with the Regulatory Time Frames Of Not Processing Apds Timely and
That\'s a Pretty Recent Event That We\'ve Taken a Look At. And under
Where We\'ve Been in the Situation Where We Have Time Frames Built into
the Regulations. So, You Know, We\'re Hoping That Internal Policy, If
It\'s Driven That Way, it May Actually Be More Effective.

Barnett: I Certainly Share Your Concerns, Richard. You\'ve Brought up
Some Really Good Points. Is There Anything Else That You Would like to
Add or Discuss What Jim and Tim Have Said?

Caller: Maybe the Comment about Consistency. I Guess When I Talk about
Consistency among Offices, When We\'re Inconsistent on What Should Be in
an Apd, That Increases Your Time Frames. So, I Guess I\'m Concerned That
We Don\'t Lose the Consistency of What Different Offices Require. And a
Simple Example Might Be Apd May Be Submitted and You Don\'t Know Where
They\'re Going to Get Their Water Source or Something Like That. I Can
Remember Horror Stories over That. We Had to Delay and Back to the
Operator and the Bottom Line From the Operators Weren\'t That the Apds
Weren\'t Inadequate but It Was That BLM ‑‑ the Managers and Staff Needed
to Make an Informed Decision on Apd Approval. So I Guess I Just Hope We
Don\'t Lapse Back into These Kind of I Guess Controversies about Us and
Come under Criticism as an Agency for Being Inconsistent, Delaying and
on and On. And I Guess I See it Can Happen. But I\'m Willing to Try this
and I Think It\'s Going to Have to Be A Real Commitment of the Bureau
Managers That They Understand This and We Can Get Through this.

Barnett: You\'re Right, Richard. I Think it Really Does Take a Twofold
Approach, Both Fixing the Regulations like We\'re Doing Now Through this
Process and Some Management Emphasis. And We\'ll Be Doing That as Well.
Thank You for Calling.

Caller: You Bet.

Barnett: Bye. We Also Have Several Faxes. I Would like to Take One Now
from Joe and this Is about Co‑op Agreements. So, Sue, Could You Tell Us
What Are the New Provisions, If There Are Any, for Co‑op Agreements with
the Tribes If They\'re below The Performance Standards for Either the
Number of Inspections Or the Quality of Inspections. Can or Should the
Funding Be Reduced?

Stephens: There\'s No Specific Provisions in the New Regulations or in
the Changed Regulations for That. However, the Omb Circulars That Govern
That Do Have Provisions For Reducing the Funding. I Think That You Would
First You Would Need to Notify the Tribe That You Were Going to Do That.
You Would Have to Put Them on Notice That Their Performance Was Not up
to the Standard. And That You Were Going to Take this Action. And You
Could Work with Your Contracting Officer on That to Come Up with That.
But I Think That the First Thing I Would Try Would Be Maybe to Check
Around with Some of the Other Offices That Have Co‑ops and See If
They\'ve Had Similar Problems and What They\'ve Done to Fix Those
Problems. And I Think I Would Do the Reduction in Funding as a Last
Resort.

Barnett: Thanks for Your Fax, Joe. Sid Has ‑‑ in the Jackson District
Office ‑‑ I Guess the Jackson Field Office Now ‑‑ Has a Question for
Jim. He Says in the Jackson Field Office, We Have Several Cases Where A
Drill Pad Was Constructed Prior to Apd Approval. You Noted That
Immediate Assessments for Such Actions Will Be Expanded to Any Surface
Based Fogrma Action, I Guess. Does this Position Allow Us to Issue an
Assessment Now on a Private Surface Even Though Current Regulations Are
Specific to Federal Land?

Albano: That\'s a Good Question, Sid. And Your Interpretation of That Is
Correct. That Is the Intent. For this New Change. And You Know,
Partially Because We\'re Not Only Dealing with Private Service in Some
Cases. We May Also Have State Surface That Isn\'t Covered under the
Current Regulations and Some of These State Areas Owned by the State May
Be Pretty Critical Areas. Could Include State Parks or State Game
Management Areas. Wildlife Management Areas.

Barnett: Thank You. I Have Another Fax Here from the Colorado State
Office and They Have a Question about Sections 3129, 51 and 52. Are They
in Compliance with the Royalty Fairness Simplification And Fairness Act?
Those Two Sections, in Case You Don\'t Have Your Proposals ‑‑ the
Proposed Regs in Front of You Are the ‑‑ the Questions Are as Record
Title Owner What Are My Obligations and as Operating Rights Owners What
Are My Obligations. Think Dennis You Can Handle That. That\'s a Joint
and Several ‑‑

Daugherty: the Royalty Fairness Acts Deals with Monetary Obligations Be
it the Payment ‑‑ Royalties Rentals, Searle Penalties and Provides That
the Primary Party That Is Responsible for That Is the Operating Rights
Owner. Secondarily, the Record Title Owner. And So That Would Be ‑‑ I
Don\'t Recall Precisely What Language We Have in Our Regulations but We
Need to Reflect the New Formulation in the Law.

Barnett: Thank You, Dennis. I Have a Followup Question from Jeff\'s
Earlier Question about a Single Nationwide Bond. It\'s Who Handles the
Single Nationwide Bonds That Is If an Operator Has a Nationwide Bond but
Operates Strictly Within One State. Pam, Can You Follow up on That?

Lewis: Jeff, the Person Who Would Handle That Bond Is the State That
Accepted It. It Would Be Very Similar to the Same Method That We Use for
Name Changes. You File a Name Change with the State Office That Accepted
Your Bond and this Would Hold True in this Instance, Also.

Barnett: Ok. A Question from Farmington from Mike Wade. He Would like to
Know, Tim, What Production Accountability Records Are Currently Required
by the BLM? At this Time, I\'m Not Aware That Any Are and I Think It\'s
Only Possible to Resolve this by Defining Production Accountability.

Abing: I Think There\'s Plenty of Production Accountability Records That
Are Required Right Now. You Know, the Monthly Report of Operations,
Sometimes Proving Reports Are Required to Be Submitted. If We Request
It, We Can Get Copies of Gas Calibration Reports. So, I Think That
There\'s Certainly a Lot of Information That\'s Required to Be Submitted
and There Is a Requirement in That Particularly the Table That Jim Had
Described in 3103, I Believe It Is, Jim, That There\'s Other Production
Records That Are Listed up There That, You Know, Operators must Keep.
I\'m Sure There\'s a Statute of Limitations That Apply to How Long They
Keep Those Records but Those Records Are Always Available To BLM in
Carrying out the Mandate of Accounting for Production. So, I Guess Was
the Request That We Need to Make All of These Available? Because I Think
That They Are.

Barnett: I Think it Was Just Asking Four Some Clarification On What We
Meant by Production Accountability Records. If That Didn\'t Answer Your
Question Well Enough, Please Send in A Followup Question. We Would Be
Happy to See If We Could Address it or Call Us, You Have the Number in
Your Viewer Packet and Talk with Us and See If We Can Clarify That or
Make Sure We Can Understand What You\'re Trying to Suggest. I Have
Another Fax from the Reservoir Management Group in Wyoming. They Have a
Comment and a Question. The Reservoir Management Group in Wyoming Has
Only Designated ‑‑ They\'ve Designated More than 50 Units since the
Secretarial Order 3199 Came out Using That Model Form of the Une It\'s
Agreement. They Have Recently Designated a Unit Strictly Based on
Administrative Boundaries. But the Obvious Question Is Why They Haven\'t
Approved Any Other Units under this New Flexible Process. And Their
Conclusion Is That the Operators in Wyoming Believe That Model Form of
the Agreement Works Well in Wyoming. At this Point, They Really Don\'t
See Any Use for the Secretarial Order So They Would like to Know How
Many Units Have Been Approved under That Provision and If the New Unit
Regulations Are Eventually Approved, Can the Model Form of the Agreement
Be Used?

the Answer to That Question Is Not Very Many, Leo.

Wymer: There\'s One in the Jackson District. Now I\'m Wear of One in
Casper. Tulsa Was Working on One, Wasn\'t That True, Sherry?

Barnett: That\'s Right.

Wymer: We Might Have as Many as Three. There Doesn\'t Seem to Be a Lot
of Interest but I Don\'t Think We\'ve Gotten the Word out There Yet. We
Need to Promote the Word and Get it out on the Street and Hopefully
We\'ll Get More Interest Generated by It.

Barnett: Thank You. I Have a Question for Jim on Geophysical Operations.
This Comes from Alco, Nevada. Will Geophysical Operations Be Excluded
under Categorical Exclusion and If So, Which Categorical Exclusion or
Which Nepa Documentation Will Be Required Now or under the New Policy
and Regs. Jim?

Albano: this Regulatory Package Won\'t Change. That Particular ‑‑ it
Won\'t Affect That Particular Question. The Geophysical Exploration
Activities Are Currently an Action That May Be Approved with the Use of
a Categorical Exclusion Depending on the Circumstances. And the
Categorical Exclusion That Is Used Is One That\'s a Department of
Interior Exclusion. It\'s Not a Specific BLM Category. That\'s Been
Developed. The BLM and the Forest Service Are Working Jointly to Revise
Our Categorical Exclusion List and That\'s ‑‑ There Was a Telecast About
That Project Within the Last Two Weeks Ago, I Believe. I Haven\'t Had a
Chance to Review That Package in Detail. I Believe from What I\'ve Heard
That it Is Still Going to Allow The Flexibility Depending Again on the
Type of Geophysical Exploration Project That Is Proposed That There May
Be Tunes When a Categorical Exclusion Could Be Used. And as Far as I
Know, I Don\'t Believe There\'s Ever Been Anymore Than Any Document at a
Higher Level than an Environmental Assessment Prepared for a Geophysical
Exploration Project but ‑‑ So, at this Current ‑‑ Currently It\'s Either
a Categorical Exclusion or an Environmental Assessment. I Believe It\'s
Going to Remain That Way.

Barnett: We Have a Question on Indian Trust Responsibilities. Will These
Proposed Regulations Affect How Bia and BLM Work Together? Perhaps Sue
and Pete, You Would Both like to Address That?

Stephens: Through These Regulations, There\'s Really No Change In the
Sec Tear Rea Trust Responsibility to the Tribes. And I Don\'t Believe
That it Makes Any Change in the Way Bia and BLM Will Work Together.

Aguilar: I Need to Remind Your Field Offices in the BLM That The
Regulations We Have, the 25 Cfr 211s, 212s, the 225s Which They\'re the
Most Familiar With, Do Not Have Any Operating Regulations in Them. So,
We Have to Use the BLM Regs So it Does Not Alter Anything.

Barnett: Ok. John I Have One for You on Enforcement Actions. This Comes
from Steve Wells in Nevada. He Would like to Know for Enforcement Action
on Split Estate, Where the Surface Ownership Is Fee, Private and Surface
Disturbance Occurs Prior to Apd Approval. If the Owner the Land
Authorizes or Consents to the Activity Say Drilling a Water Supply Well,
Would an Inc Still Be Issued?

Duletsky: I Don\'t Think So. If There\'s an Agreement with the Surface
Land Own They\'re Prevails. Unless Jim Has Something to the Contrary.

Albano: I Would Say in the Example Given for Drilling a Water Supply
Well, That I\'m Assuming That That Well Is Also for the Use of the
Private Landowner. And You Know, That\'s One of Our Very Strict Policy
Calls Is That Even Though We May Have to Regulate Surface Disturbance on
Private Surface, We Don\'t Interfere with the Landowner\'s Rights Or
Actions That He Takes. This Is an Area Where There Is a Bit of
Contention, Even among BLM, about How Much Involvement We Should Have on
Private Surface. It Is Going to Take a Bit of Some ‑‑ Some of ‑‑ on Our
Part, to Be Involved with the Private Surface Owner So That We Are Aware
Of What Activities Are Planned and What\'s Going to Take Place. I Think
it Means That We Have to Be More Involved with the Operator and the
Private Surface Owner. And I Think It\'s One of Those Areas Where We May
Have to Use Some Discretion in Some Cases but in the Example Given, I
Don\'t Believe That There Would Be a Reason to Issue an Inc.

Duletsky: Usually Water Well Drilling under State on Private Lands Is
Done by the State Engineer. I Don\'t Know How We Would Get Involved in
it Sherry.

Barnett: That\'s Something We Would Stay out of Then.

Abing: Let Me Throw in Something That Our Immediate Assessment on
Disturbing the Surface Without Approval Prior to Drilling with an Apd
and I Guess Maybe That\'s ‑‑ Is the Caller Or the Question a Variation
on That, That Would this Be a Situation Where They Would Be Subject to
the Immediate Assessment. I Think What I\'m Hearing Is No It\'s No
Because the Drilling of The Water Well Even Though it May Be Supporting
the Apd Would Not Trigger That Violation Because It\'s Not Directly
Associated With the Drilling of the Well?

Duletsky: Yeah.

Albano: I Think It\'s a Little Bit Sticky Situation and There\'s Other
Cases Where a Private Landowner May Decide That He Wants an Access Road
to Be a Permanent Road. And He Basically Approves the Construction of
That Access Road For His Use. And Even in That Situation, Will We Know
That That Has Been Approved. I Don\'t See Why We Would Issue an Inc for
Immediate Assessment In That Case Either.

Barnett: Ok. I Just Realized I Had Missed Half of ‑‑ I Guess Leo\'s
Question On Units. He Asked If These Regulations Go Final as They\'re
Written for Units, Will the Operator Still Be Able to Used Model
Agreement Form as It\'s Currently Written?

Wymer: That\'s a Very Good Question. I Believe the Answer to That
Question Is No. The New Proposed Regulations, If They Go Final, Limit
the Number Of Terms to the Agreement to the Six I Mentioned Earlier. So,
the New Process and the Comments We Receive Are Going to Directly Affect
That Decision That Was Made in the Proposed Regulations. So, If There\'s
Comments out There to the Contrary, When They Come Proposed, It\'s the
Time to Get Them in There.

Barnett: Ok. Tim, I Have a Question for You from Ed Forsman. He Would
like to Know If an Operator Picks up a New Lease with An Existing Well
on the Lease, Would Workover Activities Be Considered Diligent Drilling
If They\'re Done over the Lease Expiration?

Abing: I Guess it Would Depend upon What Is Being Conducted With the
Actual Workover but Generally, I Would Say Not. That That Would Not
Apply.

Barnett: I Think That\'s Probably Fairly Straightforward.

Abing: I Would Think So.

Barnett: Pam, I Have a Question for You from Colorado. They Would like
to Know since the Balance of the Bonus Bid Payments, They Only Have to
Be Postmarked on or Before the Tenth Working Day after the Sale. So Is
There Any Kind of Cutoff for the Receipt?

Lewis: We Talked about That, Karen and Bob and I, How Long Would We Take
to Wait for Those Particular Payments. Think by Policy, We\'re Going to
Have to Come up with a Time Frame on That. Perhaps No Longer than
Waiting Another Ten Days Would Be the Maximum Amount of Time to See If
That Envelope with That Check Arrives in Our Office with That Balance of
Bone Us Bid Payment. Of Course You Know That on Lease Reinstatements, We
Run into Lots of Problems on Those. Think We Could Run into Some of the
Same Situations Here. We Would Deal with Those on a Case by Case Basis
but That\'s Really a Good Question and Something We Need to Think about.

Barnett: I Have Another Question from Colorado. This One Is for Tim. And
It\'s Pretty Specific So Let Me Read it to You. Has Mms Expressed
Concern about the Lack of Integrity and ‑‑ to ‑‑ Submitted by Operators.
Sufficient to Justify Further Regulation by BLM and Will Additional
Procedures Need to Be Implemented since Gas Gravity Is Not Reported on
Mms Form 3160. Maybe I\'ll Let You Handle Them One at a Time. What
Happened for the Btu Requirements. First One Is Have They Expressed
Concerns?

Abing: No.

Lewis: next Question.

Barnett: Do We Need to Do Anything Is since Gas Gravity Isn\'t Reported
on Mms Form 3160.

Abing: We Looked at the Existing ‑‑ it Doesn\'t Have a Time Frame for
Reporting Specific Gravity and it Just Says That it Will Be Determined
and the Frequency for Determining it Is Usually Specified in the Gas
Contract. We Just Kind of Pulled a Number out of Air and Thought
Annually Would Be a Good Approach to It. Again, That\'s Part of the
Proposed Rule. If Greater Frequency Is Necessary, If Field Offices Think
a Greater Frequency Is Necessary, by All Means, Comment on it and Let Us
Know.

Barnett: He Asks ‑‑ the next Is Will Mms Use a More Regulated Specific
Gravity. I Know That Mms Is Not Involved in Any Quality Issues but Would
You like to Address That?

Abing: Mms Is Involved in Quality Issues. That Answers the Part of the
Question about Where Did the Btu Value Go. They Have the Requirement for
Reporting of Onshore Gas to Conduct Btu Determinations on a Semiannual
Basis. And Because of That Requirement, We Didn\'t See the Need to
Duplicate it in Our Regulations. It Does Not Preclude If That Isn\'t
Frequent Enough for Some Offices for Whatever Particular Need They May
Have, Then They Always Have the Authority under ‑‑ There\'s Another
General Regulation Early on in the Proposed Rule That Says the
Authorized Officer Can Direct and Perform Serb Tests and Reports. So
There\'s Some Flexibility There That If What Is Available Through Mms Is
Not Enough, We Can Direct Additional Type Testing. And I Think You Had
Also Part of the Question There on to Specify Procedures as to How to Do
That. That Is a Good Point Because in the Proposed Rule, We Do Not. We
Just Say That It\'s Required on an Annual Basis. And That, Again,
There\'s ‑‑ it Would Be One of Many Things That As the Team Gets Back
Together and Takes a Look at the Comments We Received from this Telecast
and Things That We Just Know That We Needed to Fix to Begin With, We\'ll
Take a Look at That Issue As Well.

Barnett: I Have a Question Here for Rick from Colorado. And It\'s
Pertaining to Unit Agreements. Since the Unit Regs Only Require Four
Points to Be Covered for Unit Approvals, Does That Mean That All the
Other Provisions in The Contractual Obligations Are No Longer Required,
for Example, Unit Suspensions, Removal of Unit Operator, Preventing
Other Working Interest Owners Outside Pas from Drilling Wells? Rick?

Wymer: That\'s a Very Good Question. We Actually Got a Chance to Look at
That Question over During Our Break Period Is since it Came in Earlier.
And Generally Speaking, We\'re Looking to Another Agreement to Handle
Those Terms. Something That We\'re Not Privy to Within the Other
Interest Owners, Something like the Unit Operating Agreement or Whatever
It May End up Being Called since Our Agreement Changes. Everything
Within Our Regulation Does Apply as If It\'s Within The Agreement.
We\'re Hoping All These Other Terms Are Handle in the the Agreement That
We\'re Not Privy to and Don\'t Need to Know about In Many Cases.
Hopefully That Answers Your Question.

Barnett: We Have a Question on Using the Api Standards. From Dale
Manchester. Let Me Read It. Dennis, You Would Probably like to Address
this from a Legal Standpoint Then Perhaps Tim Can Talk about it from an
Operational Standpoint. Do You Think it Could Be Burdensome to Some
Operators to Be Able To Reference Api Standards. For Some Estimates, it
Could Cost over \$200,000 for All the Manuals and Could You Shed Some
Light on this Issue. Dennis, You Want to Talk about the Legality First?

Daugherty: Well, the Administrative Procedures Act Recognizes That We
Can ‑‑ an Agency May Adopt Documents Incorporated by Reference,
Documents That Are Not Publish in the the Federal Register. The Agency
Has to Have Those Available, to Specify Where They\'re Available BLM
Will Have Those Manuals, Those Api Standards and So Forth, If the
Operator Needs to Find Them. Needs to Read Them in Greater Detail but
Our Object There Is to Depend More on Industry, Give Them More
Flexibility in Defining How You Accomplish the General Standards We\'ve
Set Forth as Our ‑‑ That We\'re Seeking to Have Our Operators Meet.

Barnett: So, Having the Api Manuals Available at Our Offices. Then, Tim,
Do You Still Think That Might Be Burdensome for the Operators?

Abing: Well, I Suppose it Could but One of the Things You Gotta Think
About, Dale, Too, Is That Certain Operators Will Not Have to Acquire
Certainly All the Documents. That They\'ll Acquire Those That They\'ll
Need for Their Particular Operation. If They Don\'t Produce Gas, Then of
Course They Don\'t Need All The Stuff Relating to Gas Measurement. If
They Don\'t Have a Lact Unit, They Don\'t Have to Acquire the Stuff
Relating to Lact Units. So the Cost per Operator Is Going to Vary. And
Most Certainly, There Is Going to Be an Initial Cost Associated with
That. Then Not Only to Industry but to Us as Well. I Know a Lot of
Offices Do Not Have Complete Sets of the Api Documents. One of the
Things That Struck Me in Going Through this Effort And Having to Review
the Api Publications Is That They\'re Very, Very Good References. And
Certainly the BLM Offices Would Not Be a Wasted Expense, I Think, for
BLM Offices to Acquire Complete Set of the Api Manuals. But it Certainly
Will Be an Increased Cost to Some Operators. It Will Vary from Operator
to Operator but Even Some Conversations with Api ‑‑ We\'re Not Alone in
Making These References to Api Standards Because in Discussions with the
People at Api, They Cited a Figure like 40 Percent to 50% of Their
Regulations Are Referenced by Various Governmental Agencies as Standards
So They\'re Used to Having Their Publications Used as Regulatory
Standards.

Barnett: Jim, Think You Had Something to Add to That as Well.

Albano: That\'s One Thing That Will Be Taken into Consideration When We
Prepare the Determination of Effects for The Rule Making. And I Think
Tim Has Prepared Some of Those Figures Although We Can\'t Recall What
We\'ve Determined the Average Cost Would Be but One Thing That We Have
Done in the Generation Is We\'ve Reduced The Number of Api Documents
That Are Being Referenced. That Determination Effects Will Also Consider
the Cost to the Federal Government for Purchasing Those Api Documents.

Barnett: Dennis, I Know That What\'s Been Referenced or Some Questions
That Have Been Asked Before That the Api References Could Change at Any
Time and We Don\'t Have Any Control over Those. So What Have We Done to
Make Sure When the Standards Change That That Operators Have an
Opportunity to Review These Before They Become Standards for Them?

Daugherty: No Industry Standard Itself Is Going to Have the Force and
Effect of Law Without a Decision by BLM for Proposal, Noticing Comment
Rule Making to Adopt That New Standard. At the Same Time, We Are
Responding to a Long‑standing Industry Call, as I Understand It, to Be
More Flexible, to Let Them Use Their Own Best Practices and It\'s
Reasonable ‑‑ We\'re Responding To Their Request to Be Given the
Opportunity to Accept More Responsibility for Setting the Standards in
this Area. And Part of That Responsibility Is the Cost of Keeping Track
of What Is Happening. What Are the Best Practices in the Industry.

Barnett: Ok. That Was a Great Question. Thank You Very Much, Dale. I
Have a Question on Bonding for Pam. From the Rawlins District. They
Would like to Know Have We Considered Using the Oil and Gas Bond to
Cover the Apd Related Rights of Way. Since We\'re Using the Apd as the
Application it Seems Logical to Use the Bond Attached to the Apd as
Well. Pam?

Lewis: No. We Have Not Considered That in this Present Rule Making and
Perhaps Dennis Can You Speak to the Legality of That? Using That Bond
for That Purpose?

Daugherty: I Don\'t Know That We\'ve Given Any Consideration to That but
Certainly It\'s a Consideration ‑‑ There\'s No Reason That I Know of
That We Could Not ‑‑ If It\'s Sound to Do So, That We Couldn\'t Allow a
Single ‑‑ to Serve as Security for Several Different Purposes as Long as
the Amount Was Adequate for Our Needs. But Think We Probably Ought to
Look at That More Carefully. To Look Specifically to the Provisions of
Section 28 of the Act Relating to Rights of Way Before We Give You a
Final Answer on That.

Barnett: That\'s a Good Suggestion. I Would like to Remind You We\'ve
Got about 12 Minutes Left. We Still Have a Few Faxes to Go Through.
You\'re Still Welcome to Call at Any Time and Continue to Fax in Your
Questions. If We Are Unable to Get to All of Your Questions Today,
We\'ll Either Be Calling You Back Today to Discuss it with You or Get
Back to You next Week If We Have a Name and a Phone Number on Your Fax.
I Would like to Go Ahead with Another Fax from Rawlins District. They
Would like to Know, Rick, about Units. Who\'s Going to Process New
Units? Is since this Came from Rawlins, They Would like to Know Whether
It Would Be the Field Offices or Centralized Location?

Wymer: the Processing of Unit Agreements Is Going to Be Where They\'ve
Always Been Whether It\'s in Your State Office, Your Individual Field
Office, or in Some Rare Cases, All the Way down To Resource Area Offices
If There Are Such Animals These Days. At Least There Are a Few Lingering
in New Mexico. So, No Changes as Far as I Know.

Barnett: Basically Comes down to a Management Decision.

Wymer: Absolutely.

Barnett: Ok. And These Regulations Really Don\'t Change Those Management
Kinds Of Decisions to Be Made. I Have a Question for Jim or Tim and this
Comes from Farmington, New Mexico. They Say That Presently Leak
Detection Systems Are Not Required For above Ground Storage Tanks. For
Saltwater Disposal, Does an above Ground Steal or Fiber Glass Tank Need
a Leak Detection System? And Steel Tanks Are Required to Have Leak
Detection Systems in Item Number 7. Jim?

Albano: I Would Say That That\'s Going to Have to Be a Call That\'s Made
on a Case by Case Basis. If, for an above Ground Tank, What ‑‑ My
Experience in That Area Is That I Have Not Seen That Required Either by
the BLM or States. The Only Time it Is Required Is like Was Mentioned in
the Fax, Is When it Is a Buried Sealed Tank. It Doesn\'t Seem That You
Would Run into a Situation Where You Would Require a Leak Detection
System Because it Should Be Pretty Apparent If There Is a Leak from an
above Ground Type of Storage Tank.

Barnett: Ok. Thank You. Tim, I Have Here a Note from Your Boss and He
Says You\'re Doing A Great Job. \[ Laughter \]

Lewis: and Don\'t Come Back.

Barnett: He Used That to Soften the Blow. He Has a Question for You.
Given That the Regulations Are More Performance Oriented and This Gives
Rise to a Concern about Consistency. What Steps Does Washington Intend
to Pursue to Issue Internal Guidance ‑‑ External Guidance to Operators
and Beef up Training To Maintain a Reasonable Degree of Consistency.
Particularly with the Operating Portions of the 3160s O 3100 Regs.

Abing: That\'s a Good Question, Really. A Doubt, There\'s Going to Be
Without a Doubt, the Subject of Consistency Is Going to Come Up. Late
Face It. How Consistent Are Oil and Gas Operations Around the Country.
Do We Want the Same Kind of Standards in Western States as We Have in
Eastern States? Or in the Southeast. So, That Is Going to Be a Potential
Short Coming of the Performance Standard\'s Approach but it Should Be a
Good Thing If Used Properly, it Can Be a Good Thing to Take into Account
the Various Circumstances That We Deal with Around the Country. In Terms
of the Training Aspects of It, That Is Something That\'s Been in the
Back of My Mind Certainly as We\'ve Gone Through this That I Think in a
Lot of Areas, What Comes to Mind Is the Area Of Gas Measure Number
Particular Where We Went to Performance Standards. That I Think the
Bureau\'s Training Right Now Has Been Primarily Focused on the Use of
Orifice Meters. With the Performance Standard Approach, That Many
Different Types of Metering Is Systems Will Be Acceptable on Federal
Lands. It Will Be Incumbent upon Us to Start Instructing Our People on
The Various Standards That Are Industry Standards That Are out There for
Use in Operation of Those Types of Meters. And Then Again, Too, Is the
Whole Idea of Incorporating by Reference the Api Publications. Think
That We May Have to Do Some Reorientation of Our Training Programs Now
to Take into Account Content of Those. So, That\'s Going to Be a Hidden
Cost Certainly Associated with Implementing a Performance‑based Approach
to Things.

Barnett: Now, Tim, I Know When We First Started this Process, We Had
Envisioned Some Sort of Set of User Guides. You Want to Elaborate on
That?

Abing: That\'s Right. We Figured a Set of User Guides to Offer Some
Guidance as to What Types of Actions Would Take the Operator down the
Path to Meeting the Performance Standards. To Give Them Some Ground
Rules to Meet the Performance Standards. They Have Not Been Developed as
of Yet. That Will Be a Subject for Another Pretty Comprehensive Group of
Individuals to Develop the User Guide. And I Do Think That the User
Guide, as Time Goes On, and We Gain Some Experience with a
Performance‑based System, That Is If the Rules Get Finalized, That
Experience Will Start Weening People Away from the User Guides and That
They Will Know What We Want And Expect and Know What it Takes to Meet
the Meet the Performance Standard. The User Guide Is Still Work That
Needs to Be Done Should the Regulations Go Final.

Barnett: and Chris Asked about the Washington Office Role on That. And
Even Though Implementation of These Proposed Rules Is Quite Aways down
the Road Because at this Point We\'re Only Looking to Publish Proposed
Rule Making. Even So, John, this Will Probably Fall a Lot in Your Area.
Do You Wap to Address What Washington Will Do to Address the
Consistency.

Duletsky: Washington Will Do Whatever the Group Administrator Tell Us.
And When She Tells Us What We\'re Going to Do, We\'ll Let You Know.

Barnett: I Knew I Shouldn\'t Have Asked Him. \[ Laughter \]

Duletsky: That\'s Called Passing the Buck, Sherry.

Barnett: I\'ll Let it Stop Right Here and We Really ‑‑ Consistency Is a
Concern. We Know That These Changes in the Regulations Will Require
Better Management of Our Program Internally. I Intend to Make Sure That
That Happens. And It\'s Good to Hear That John Is Going to Do Whatever
it Is The Group Administrator Tells Him to Do.

Duletsky: I Hear Retirement Calling. Again.

Barnett: I\'ll Ignore That One and Move along to Our next Question. This
Is for You, Dennis. Will the Proposed Drainage Regulations Be Sent to
the Field Offices for Comment Before They\'re Published in the Federal
Register and What Is the Timing You Expect on Those?

Daugherty: Sherry, You Would Be a Better Able to Address What Your Plans
Are for Sending Them to the Field. They\'re Currently in Departmental
Review Which Should Soon Be Completed. I Presume Which Still Need to Go
Through the Omv Bill. Because of the Urgency of Getting Our Liability
Issues Addressed Consistently and Clearly, That These Would Be on a
Faster Track Than Perhaps the Comprehensive Package. So, We Would Very
Much like to Get the Input of Field Staff and I Hope That Between Your
Internet and Other Means, That They\'ll Be Available Soon to the Field
Offices If They\'re Not Available Now.

Barnett: That\'s a Good Idea, Dennis. We Haven\'t Put Them on the
Internet. I Hope You Were All Able to Pull up the Proposed Regulations
in Their Entirety as They Exist Right Now That Are on Our Internet Page.
I Don\'t Have That Internet Address for You but It\'s on the Internet
BLM Home Page in the Fluid Section of That System.

Duletsky: Sherry, under Minerals, Realty and Protection.

Barnett: under Minerals, Realty and Protection.

Duletsky: You Can Click to Any One of the Items, it Will Bring up the
Screen and You Can Select Any Section You Want.

Barnett: Dennis Said We Probably Need to Add the Drainage Regulations as
Well. Those Regulations Are Farther along in Our Comprehensive Package.
That Whole Package Actually Is Ready to Go. All of the Determination of
Effect and Information Collection And the Ea, All of That Stuff We\'ve
Talked about We Still Need To Do Has Been Completed and We\'ve Also Got
Solicitor Surname on That So That\'s Quite a Bit Farther along in the
Process. Hopefully You\'ll See That out Very Shortly. I Have Another
Question for Jim That Comes from the Platt River Resource Area. And the
Question Is When an Operator Deviates from the Approved Apd, Do They
Need to Get Prior Approval If the Change Exceeds The Minimum Standard.
For Example, If They Decide to Use Bigger, Stronger, Better Casing than
What Was Originally Submitted?

Albano: Are You Going to Get That, Tim?

Abing: Particularly on the Casing Issue. It Depends on the
Circumstances. That If You Do Get Bigger Casing, of Course, That Could
Affect Other Operations down in the Well Bore by Changing the Thickness
Of the Casing Wall, Ok. And Also the Possibility We Would Have to Look
at Is Reviewing The Cement Program Again. So It\'s One of Those Things
and Again, We Would Hope We Have the Flexibility For, You Know, Local
Engineers to Deal with Those Circumstances That, You Know, If a Cursory
Review Says That Not Much Action Is Required on It, Maybe It\'s a
Circumstance Where An Oral Approval Noting the Change for the File Could
Be Appropriate in this Instance. But You Know, It\'s Just a Matter of
Whether Taking a Look at the Thing and the Individual Circumstances and
If You Know More Detail Analysis Is Necessary, You Conduct It. If a
Review Says That Is Not the Case, Then Do Whatever Minimum Documentation
Is Necessary to Take Care of the Matter. I Don\'t Know, Jim, Is There
Something like That Maybe as Far as Surface Use Standards Go? Where
Changes to Surface Use Plans on a Apd?

Albano: this Is ‑‑ When We Went Through That Additional Well Operation
Section, at One Time, We Had Language in There That, You Know, If They
Deviated from a Plan, it Would Require Approval Is So this May Be
Something That We Need to Take Another Look at to Make Sure That We Have
this Adequately Covered. It\'s a Good Point Because it Brings up Some
Real Situations That We Need to Throw Around and See If We Need to Fold
Something Like That Back In.

Barnett: Unfortunately We\'re Not Going to Be Able to Get to The Rest of
Our Faxes Today. We Will Be Answering Those as Soon as We Can. We\'ll
Either Be Calling You If We Have an Address for You or Doing Something.
Perhaps We\'ll Post it on Our Internet Page. I\'ve Really Enjoyed Having
this Opportunity to Go Through All of These Changes That We Proposed and
Actually Discuss with You Your Comments on it and I Appreciate All of
the Participation You\'ve Given. I\'d Particularly like to Thank All of
You Viewers Who Have Called in and Faxed in and I Would Also like to
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a General Basis So I Appreciate the Work You\'ve Done Here. I Would like
to Remind Our Downlink Coordinators That to Have All Viewers Sign the
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Call Ntc at 602‑906‑5500 or Visit the Home Page. So Long. Thanks for
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