**Proposed Rule for**

**Oil and Gas 3100 Regulations**

A Telecast Originating from the BLM National Training Center

January 28, 1999

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

It may contain errors and omissions in transcription.

Announcer: the Bureau of Land Management Satellite Network Presents Live
from the BLM National Training Center in Phoenix, Arizona, the Proposed
Comprehensive Oil and Gas Rule. And Now, the Host of Your Program, Del
Fortner.

Fortner: Good Morning, Everyone. And Welcome to the Show. It\'s Our
Pleasure to Be Here Today. We Would like to Thank You for Taking Time
out of Your Busy Schedule to Join Us. The Purpose of this Telecast Is to
Explain How the New Proposed Oil and Gas Regulations Will Work, to Give
You Some Background Behind the Changes, and to Give You an Opportunity
to Ask Questions or Voice Your Thoughts and Concerns. This Is Not a
Forum for Official Comment. We must Use the Comment Procedures Outlined
in the Preamble of The Proposed Regulations. To Assist Us in Our Efforts
Today, Many of Our BLM Offices Are Hosting Open Houses. If You\'re
Viewing from One of These Sites, You Can Follow along In the Viewer
Packet Provided. If You\'re Viewing this Broadcast at Another Location,
You May Obtain a Viewer Packet by Accessing the Training Center Home
Page at www.ntc.blm.gov. And Follow the Download Instructions. Before We
Begin, I Would like to Introduce Our Panel. We Have Bob Anderson, Deputy
Assistant Director for Minerals, Realty and Resource Protection. Thanks
for Taking Time out of Your Schedule Today, Bob.

Anderson: Del, Thank You So Much. It Is Good Seeing You Again. It Has
Been Especially Thankful to Work with the Blue Crew Here Today, this
Crew of Experts from BLM. I\'m Surrounded by Oil and Gas Experts. That
Makes Me Feel Good to Try to Answer the Questions That I Know Are
Coming.

Fortner: Pam Lewis Is Joining Us from the Wyoming State Office. Pam Is
Chief of the Leasable Minerals Program in Wyoming and Has Been Heavily
Involved in the Rewrite of the Leasing Portions of The Proposed
Regulations. Welcome to the Show, Pam.

Lewis: Thanks, Del. I\'m Happy to Be Participating Today and Want to
Thank Everyone Out There Who Took Time out of Their Schedules to Watch
Us Also.

Fortner: Duane Spencer from the Farmington, New Mexico, Field Office Is
Here to Explain Some of the Proposed Changes to the Reservoir Management
Regulations, Including the New Unit Procedures. Duane Is the Petroleum
Management Team Lead. Glad You Could Join Us Today, Duane.

Spencer: Thanks, Del. I\'ll Tell You, Sitting Here under the 400 Degree
Lights Makes Me Question My Sanity for Being Here, but in All Honesty, I
Really Wanted to Participate Firsthand in the Question and Comment
Period.

Fortner: Well, I\'m Glad You Volunteered and We\'re All Volunteers. Also
with Us Today Is Jim Albano, Mineral Resource Specialist From the
Montana State Office. Jim Will Discuss Some of the Exploration and
Production Modifications That Have Been Proposed.

Albano: Good Morning, Del. I\'m Really Glad this Day Is Finally Here,
and I\'m Looking Forward to Answering Any Questions That May Help Our
Viewers Examine the Proposed Regulations.

Fortner: and Completing Our Panel Today Is Tim Abing. Tim Is a Petroleum
Engineer from the Milwaukee Field Office.

Abing: Del, Pleasure to Be Here. I Know the Proposed Rule Is Quite a
Lengthy Document. And the Review and Comments Will Be Collectively a Lot
of Work. I Just Hope Today\'s Telecast Helps.

Fortner: I Would like to Mention That It\'s Important for Us To Have a
Record of Everyone Who Watches Today\'s Show. We Would like to Ask All
BLM Downlink Coordinators to Have All Viewers Sign the Roster Provided
in the Viewer Packet and Please Fax it into the NTC at the End of
Today\'s Broadcast. Or You Can Use NTC\'s New Electronic Reporting
System at the Training Center Web Site at www.ntc.blm.gov/satnet. We
Would Also like to Know How Many of You Are Watching from Your Own
Office or Another Site. Please Fax Us a Listing of Everyone from Your
Company or Organization Who Participates Today. Go Ahead and Fax Those
into Us at Any Time. We\'d Really Appreciate It. Today, We\'re Going to
Be Given a Synopsis of the Major Changes To Existing Regulations That
Have Been Incorporated into the Proposed Rule and We\'ll Explain to You
How the Comment Process Will Work. To Be Successful, We Need Your
Participation. Throughout the Program, You\'ll Be Able to Communicate
with Us by Phone or Fax, Using the Numbers Provided in the Viewer
Packages. We\'ve Asked the BLM State and Field Offices to Host Open
Houses For this Broadcast in an Effort to Promote Dialogue. You Can Send
Us a Fax at Any Time Using the Form Provided in the Viewer Packet. If
You Don\'t Have the Form, Use Any Blank Sheet of Paper. Don\'t Forget to
Include Your Name, Organization, and a Telephone Number Where You Can Be
Reached. We\'ll Also Have a Formal Question and Answer Session, but If
You Would like To, You\'re More than Welcome to Call Us at Any Time
During the Show. Our Operators Are Standing By. Since We Would like to
Talk Directly with You, We\'ll Go to Our Calls Before Answering Faxes.
If We Get More Faxes than We Can Handle During the Time Allotted We\'ll
Post a Response on the BLM Home Page at Www.blm.gov. And That Will Be
Within a Week. Please Be Sure to Put Your Name and Phone Number on Your
Fax in Case We Have Any Questions. With That Said, I Would like to Have
Bob Anderson Provide with Us BLM\'s Management Perspective. Bob, Could
You Tell Us Why We Need this Rule?

Anderson: Yes, Del. As You Recall, in the Early \'90s, Vice President
Gore Had an Effort Initiative He Called a National Performance Review.
This Is an Initiative to Reinvent Government, in Other Words to Make it
More Effective and Streamline. As a Spinoff to That, the Bureau of Land
Management Also Had its Review and it Was Called a Bureau Performance
Review. Out of That Review, We Had 25 Recommendations. Seven of These
Recommendations Would Require Changes in Our Current Oil and Gas
Regulations. One of the Most Important Recommendations to Come from the
Review Was the Recommendation That We Have a Comprehensive Rewrite of
Our Oil and Gas Regulations. Another Component of this National
Performance Review Was a Release of Executive Order 12866 Signed by the
President in 1993. And That Document Ordered All Federal Agencies to
Examine Existing Regulations to See If We Needed to Make Change to See
If We Could Make Them More Effective and Also Ordered Us to Make Them
Easy and Simple to Read and Understand. Del, with That, I Hope We\'ve
Done That with Our Regulations.

Fortner: Well, I Hope So, Too, Bob. The Assistant Secretary of Lands and
Minerals Requires a Balanced Approach to Regulations. Could You Explain
this Approach to Us and How this Rule Fits Into That?

Anderson: Yes, Last Year the Assistant Secretary Wanted to Know What MMS
and BLM Were Doing in Their Oil and Gas Initiatives. And Come to Find
Out, When We Got Them All Inventoried and Reviewed, We Had 40 of Them
Between MMS and BLM. And What We Wanted to Do Was Before We Implemented
These Initiative, We Wanted to Make Sure That We Had a Balanced
Approach. So, in Approaching These Initiatives, We Wanted to Make Sure
They Met Certain Goals. And Let Me Just Enumerate the Goals a Little Bit
for You. And They Can Be Found in this Booklet That Was Released Last
Year Called a Balanced Approach. For a Small Donation of \$25 ‑‑ Just
Kidding. Actually, It\'s Free. If You Don\'t Have One, Make Sure You Let
a BLMer Know or Call Us In Washington D.c. and You Can Have One. This
Articulates and Enumerates All of the Initiatives and Those Four Goals
That I Mentioned, and I Would like to Go over the Four Goals If I Could,
Del. The First Is the Number One Priority to Protect the Environment, To
Ensure Safety of Operations, and to Conserve Resources. Second, We Want
to Facilitate Energy Production That Strengthens The United States
Economy. Third, We Want to Ensure That All Americans Get Fair Value for
Their Resources. And Last, Create a More Efficient Customer‑oriented Oil
and Gas Program. And Del, in Summary, I Think What We\'ve Done with Our
Proposed Oil and Gas Regulations Will Meet These Four Overarching Goals.

Fortner: Thank You, Bob. This Proposed Rule Reorganizes and Consolidates
BLM\'s Oil and Gas Regulations into a Single Package. This Is for the
First Time. Could You Elaborate on This?

Anderson: Yes. What We\'re Doing Is ‑‑ in 1982 as You All Recall, Usgs
Conservation Division Was the down Hole Supervisor on Operations And
BLM, of Course, Had the Leasing and Surface Management. And at That
Time, the Gs Had What They Called Was Notice to Lessees, and These Had
Full Force in Effective Regulations and Of Course BLM Had its
Regulations as Well. After the Merger in 1982, We Converted Some of
Those Ntls to Onshore Orders, So We Still Had Some Ntls Left over as
Well. So We Had BLM Orders, Ntls and Onshore Orders. So, We Felt it
Would Be Best If We Consolidated All of These Worse‑than‑effect Type
Rules into One Document and That\'s What We\'ve Done Here with These
Regulations. The Other Reason Is That Regulations Are Printed Every Year
and Without Consolidating the Ntls and the Onshore Order in Those
Regulations, We Have an Update of the Regulations, but We Don\'t Have an
Update of the Ntl and the Onshore Orders.

Fortner: Thanks, Bob. There Are Certain Areas of the Oil and Gas Program
Not Addressed In the Proposed Rule. For Instance, the Drainage Rule,
Which Was Originally Published January 13, 1998 ‑‑ That\'s Been Reopened
for Comment. What Should We Know about the Drainage Rule at this Point?

Anderson: Well, That\'s Right. In 1998, the Regulations on Drainage Did
Go out and We Asked the Question in There How Should These Drainage
Regulations Apply to Indian Lands? And We Only Had One Comment Back on
That Question and None from The Indian Community. So, What We Would like
to Do Then Is Reopen this Comment Period Just to Address the Indian
Lands. And We ‑‑ BLM Is Currently Developing Plans on Consulting with
The Indian Tribes and Outreach and Del, We\'re Going to Take Those
Comments until April 5. So it Is Basically a 60‑day Extension.

Fortner: Been Extended 60 Days.

Anderson: Yes.

Fortner: Speaking of Extensions, Bob, BLM Has Received a Number of
Letters Regarding the Comment Period on this Proposed Rule, and How Will
That Be Addressed?

Anderson: as a Matter of Fact, 15 Letters Asking for Comments Or Asking
for Extension for Comments on Our Regulations. And We\'re Pleased Today
to Announce That We Will Extend Our Comment Period for 60 Days. So Now
We Will Have Comments to June 4, I Think it Is. So We\'re Happy to
Announce That and We Trust That That Will Give Industry and the
Nongovernment Organizations Time to Get Their Substantive Comments into
Us.

Fortner: Thank You, Bob. I\'m Pleased You Were Able to Make this
Broadcast and Make the Announcements We\'ve Heard Today. Do You Have Any
Other Announcements You Would like to Make?

Anderson: Almost Forgot to Talk about Workshops. So, Yes. We Are Going
to Hold Workshops and They Will Be in Albuquerque, Denver, Billings,
Bakersfield, New Orleans, and Washington D.c. And We Can\'t Tell You Yet
about the Format on These or the Timing, but We Hope to Have Them Early
on So the Industry and Everybody Else Will Have Time to Comment after
the Workshops to Get Your Questions Clarified at the Workshops and Then
Send in Your Comments. So Hopefully March, Early April, We\'ll Try to
Have Those Workshops Set Up.

Fortner: Ok. Thank You Very Much. Those Are Two Very Important
Announcements. Next, Pam Lewis, Who Is Responsible for the Largest
Leasing Program in the BLM, Will Discuss Leasing and Bonding. Pam?

Lewis: Thanks, Del. Those of You Who Have Worked in the Oil and Gas
Business for a Long Time Realize That There Have Been Many Changes to
the Mineral Leasing Act of 1920. Perhaps the Most Substantial Change
Came with the Reform Act in 1987 Which Changed the Way Our Leasing
Program Operates. We\'ve Been Leasing under Those Provisions since They
Were Published in the Federal Register in June of 1988. In the Proposed
Regulatory Package, What We\'ve Tried to Do Is Clarify Where We Needed
to in the Existing Regulations and We\'ve Also Made Some Changes to the
Regulations. And Today, I\'m Going to Go over the Most Significant
Changes That Have Occurred. First, What We Have Done in the Proposed
Regulation Is Eliminated the Formal Nomination Process. The Regulations
at 43 Cfr 3120.3 Have Always Given the Director The Discretion to Ask
for a List of Lands That You Could Formally Nominate for Inclusion to a
Competitive Oil and Gas List. However, He Has Never Exercised That
Discretion. And in an Effort to Meet the Ideas Behind Executive Order
12866 And the National Performance Review, We Have Removed Those
Regulations in Their Entirety from the Proposed Regulations. Another
Change That We\'ve Made Is Eliminating Presale Offers. The Intent of the
Reform Act Was Truly to Emphasize the Competitive Leasing Process, and
We Feel That Presale Offers Undermine That Process. By Eliminating
Presale Offers, it Will Streamline the Leasing Process and it Will
Reduce the Bureau of Land Management\'s Costs. Also, it Will Save You in
the Industry Money Because You Will No Longer Have to Pay \$75 Filing
Fees and Lose Those Moneys When You Are Not the Successful
Noncompetitive Lessee. We Feel this Also Encourages Competitive Leasing.
The next Change Was Requiring That the Parcel Integrity Remain For the
Entire Two Years after the Last Day of the Competitive Sale. In the
Proposed Regulations, You Could Still Combine Parcels for More than One
Lease Sale. However, You Would Have to Take All of the Land as It\'s
Configured in Those Particular Parcels. By Doing This, it Will Eliminate
Anymore Legal Land Description Mistakes That the Public Makes and Will
Cause You to Not Lose Priority of Your Offer and Also to Not Lose Your
Filing Fees. Another Change That We Made Was Reducing Some of the Filing
Requirements. Today, When You File a Noncompetitive Lease Offer, You\'re
Required to Give Us Three Copies. The Proposed Regulations Have a
Requirement That You Need to Only Give Us Two Copies of That Document.
Generally, the Third Copy That We Get in Is for the Use of Surface
Management Agencies. If BLM Needs to Send a Copy of That Document to a
Surface Management Agency, We Will Make That Copy, and Thereby Reduce
That Administrative Burden from You. The next Change That We Made Deals
with Rental Deficiencies. Today, There Are Two Portions of the
Regulations That Deal with Rental Deficiencies and Really Cause a Lot of
Confusion. One That States That a Rental Deficiency Can Be Cured If
It\'s 5% Or \$100, Whichever Is Less. And a Second That Says It\'s 10%
or \$200, Whichever Is Less. Today, We\'ve Taken a More Lenient Tact and
Decided to Make That A Uniform Deficiency Amount of 10% or \$200. Also,
We\'ve Tried to Come up with a New Approach to Help You Qualify for
Class I Reinstatements. Today, If You Make a Rental Payment to Minerals
Management Service and It\'s Nominally Deficient, They Will Send You a
Notice Telling You That You Have to Make Those Additional Payments
Within 15 Days. However, If You Fail to Make That Payment Timely, Your
Lease Is Still Considered to Have Terminated. Under the Proposed
Regulations, What We Would like to Do Is Give You an Opportunity to Make
Nominal Rental Deficiency Payments to Minerals Management Service. And
Hopefully We Will Be Able to Figure out Exactly What Timeframe Would Not
Be Considered Too Late to Qualify for a Class I Reinstatement. And We
Ask for Your Assistance in Some Guidelines on That. One of the Other
Changes We Made Is in the Balance of Bid Payments. The Regulations Today
Say That Balance of Bonus Bid Payments Have to Be Submitted Within Ten
Business Days after the Sale. We\'ve Interpreted That to Mean That We
Have to Receive That Payment Within Ten Business Days. The Proposed
Regulations Have New I.d. In There That Says If You Have Submitted Your
Payment to Us in an Envelope Postmarked On or Before the Tenth Business
Day, We Would Consider Your Payment to Be Timely Paid and Therefore, You
Would Not Have to Run the Risk of Losing All of the Money That You Paid
on the Day Of the Sale and Not Having a Lease Issued to You. Perhaps the
Most Contentious Part of the Leasing Regulations Deals with Bonding. The
New Regulations Have Made Some Provisions Requiring That Individual
Lease Bonds Be Increased from \$10,000 to \$20,000 and That Statewide
Bonds Be Increased from \$25,000 to \$75,000. It Also States That We
Would Retain Nationwide Bonds at its Current Level of \$150,000. Bonds
Have Not Been Increased since 1960, and We Feel That the Current Bond
Amounts Really Do Not Adequately Protect Us When it Comes to the Cost of
Plugging and Abandoning Wells, Doing the Reclamation Work, and Any
Outstanding Royalties That Are out There. We Have Also Provided in the
Regulations That this Increase Would Not Be Immediate. It Would Be
Phased in over a Two‑year Period. The Only Way it Would Be Immediate Is
If You Had Filed a New Apd Or a Change of Operator. If You Do That, Then
You Would Have to Meet the New Bonding Requirements. We\'ve Also
Provided for a New Type of Bond in These Regulations. And It\'s a Bond
That Deals Strictly with Inactive Wells. If You Have an Inactive Well
and We Have Defined That as Being a Well That Has Not Produced for the
Last 12‑month Period, You Would Be Required to Give Us an Additional
Bond of \$2 per Foot Per Total Depth of the Well or a \$100
Nonrefundable Holding Fee. The Nonrefundable Fee Would Go into an
Account That Would Be Used for Plugging Any Wells That Could Be
Considered Orphan Wells in the Future. If You Hold ‑‑ If You Pay into
the \$100 Holding Fee, You Could Only Do That for a Period of Six Years.
At the End of Six Years, If Your Lease Was Still in an Inactive Status,
You Would Have to Then Provide the Additional \$2 per Foot Bonding.
Another Change We Made Was to Allow for Bond Reductions. The Current
Regulations Allow for Us to Do a Phased Release of Your Bonding
Requirement. However, in the Proposed Regulations, We Are Going to Allow
You An Opportunity to Provide Us with Information as to Why Your Bond
Does Not Have to Meet the Minimum Requirements. And You Could Give Us
That Information, Show Us That You Feel That Your Liabilities Are Not at
the Level That the Bond Is. And We\'re Asking You to Also Provide Us
Information on What You Think Would Be Good Guidance to Use When Trying
to Implement That Portion of the Proposed Regulations. And Finally,
We\'re Going to Allow for Bonds to Be Cancelled. This Is an Entirely New
Approach That the Bureau Is Taking. In the Past, We Have Always Simply
Terminated the Period of Liability of a Bond. However, We\'ve Never Been
on a Level Playing Field Between How We\'ve Treated Surety Bonds and How
We Have Treated People Who Have Put up Personal Bonds. When We
Terminated the Period of Liability of a Personal Bond, We Always
Returned the Collateral for That Bond. With a Surety Bond Though,
However, We\'ve Always Held You Basically in Involuntary Servitude. With
this New Proposal, We Would Allow You to Have Your Bond Cancelled Once
We Were Assured That the Well Was Properly Plugged, All the Reclamation
Requirements Had Been Met, and That Minerals Management Service Had
Concurred That There Were No Royalties Due. Those Are the Major Changes
That Have Occurred in the Leasing Program and I Look Forward to
Answering Any Questions You May Have on Those or Any Other Portions of
the Proposed Regulations.

Fortner: Thank You, Pam. Duane Spencer Who Is Responsible for Reservoir
Management for The Farmington Field Office Is Now Going to Explain the
Proposed Changes in the Reservoir Management Program. Duane?

Spencer: Thanks, Del. The Reservoir Management Portion of the Proposed
Regulations Contain a Lot of Information and a Lot of Details That You
Can\'t Find in the Current Regulations. They Cover Well Spacing and
Agreements and They\'re Ultimately Going to Include the Drainage
Regulation That It\'s out for Separate Comments. For Those of You Who
Want to Follow Along, They\'re Found in the 3130 Section of the Regs.
The First Subject Covered Is Well Spacing. We\'re Going to Continue to
Work with State Agencies with Setting Spacing on Federal Lands, However
the Regulation Does Clarify That BLM must Approve Indian Spacing. This
Isn\'t a New Policy but Merely Emphasizes That BLM Has a Trust
Responsibility. The Bulk of the New Regulations Are Devoted to
Agreements. This Includes Communitization Agreements, Development
Contracts, Subsurface Storage Agreements, Drainage Compensation
Agreements And Exploratory and Enhanced Recovery Units. In Order to
Condense My Time, I\'ll Be Discussing Three of These Agreements Which
Are Communitization Agreements, Development Contracts and Exploratory
Agreements. Those of You Who Work with Communitization Agreements Know
That The Current Regulations Have Very Little Detail. In Writing the New
3133 Regulations, BLM Included a Lot of Details and Information in Order
to Streamline the Process, Condense the Agreement, and Focus in on What
Data BLM Needs. So, Specifically, There\'s No Agreement Format. You Have
to Describe the Separate Tracts and the Formation That Comprises the
Communitization Agreement. You Self‑certify Commitment of the Lease
Interest. You Provide an Allocation Schedule. And You Name the C.a.
Operator and Provide Evidence of Adequate Bonding. In Response to
Industry Suggestions, We Also Allow Multiple Operators in
Communitization Agreements. In Order to Use this Process, You Have to
Define the Responsibilities of Each Party, the Bonding, and the
Consequences If One or More Party Defaults. We Also Streamlined the
Communitization Agreements Successor Operator Process by Allowing You to
Self‑certify That All the Various Lease Communitization Interests Have
Committed to this Or Operator Change. Subpart 3133 ‑‑ 3135 ‑‑ Excuse Me,
Covers Development Contracts. This Proposal Implements Existing Policy
and Regulations and Contains No New Policy or Proposals. To Summarize
What\'s in the Document, the Development Contract Must Promote
Conservation of Resources. It must Contain at Least One Federal Lease.
It May Be Renegotiated If Conditions Warrant, and You Can Carry Over
Excess Expenditures. The Biggest Change to the Agreement Process Has to
Do with Unit Agreements. BLM Developed an Entirely Different Process to
Address Industry Concerns That the Existing Agreement Process Was Too
Inflexible. This Was Originally Undertaken as Part of the BLM\'s
Performance Review in Reinventing Government Initiatives. BLM Was
Granted Approval to Use this Process in 1996 By Secretarial Order 3199.
We Were Trying to Really Focus in on Achieving Unit Development Versus
Focusing All the Attention on the Agreement Details. Specifically, the
New Regulations Cover Both Exploratory and Enhanced Recovery Units Which
Were Never Previously Discussed. A New Twist in the Heart of the
Proposal Is That BLM Will Negotiate with You on All Terms. Once Again,
There\'s No Specific Agreement Format Required. And You Also Are Allowed
to Self‑certify Commitment of Lease Interest. As I Stated Earlier,
There\'s No Specific Agreement Format but There Are, However, Three
Mandatory Terms. You must Define the Unit Area, You must Define the
Initial and Continuing Development Obligations, and You must Define the
Productivity Criteria and Participating Areas. In Addition, the Mineral
Leasing Act of 1920 Requires Two Standard Provisions. One, That BLM May
Modify the Quantity Rate and Location of Development and That Agreement
Modification Can Occur with 100% Of the Committed Interest Agreement. In
Addition to the Mandatory Terms, There Are a Very Limited Number of
Optional Terms. Once Again, in Response to Industry Suggestions,
Multiple Operators Are Allowed. In Order to Utilize this Feature, You
must Define under What Conditions It\'s Allowed, the Responsibilities of
Each Party, the Respective Bonding and the Consequences of Default. You
Can Limit the Agreement to Certain Formations. If this Provision Is Not
in the Document, the Unit Will Cover All Formations. In Addition, You
Can Provide for Agreement Modification with Less than 100% of the
Committed Interest Agreement. These Optional Terms Will Only Be Allowed
If They Promote Additional Development. Development Obligations Are a
New Term That BLM Developed. They\'re Intended to Promote Timely
Development of the Unit Area. You Will Negotiate a Development Rate and
Frequency for Both Initial Obligations and Continuing Obligations. BLM
Anticipates That this Should Exceed the Nonunitized Development Rate.
You Will Define the Time Between Each Development, and You Will Contract
to the Participating Area When You Don\'t Meet a Continuing Development
Obligation. Another New Twist by BLM Is That Paying Well Determinations
Are Being Replaced by Productivity Criteria. Productivity Criteria Are
Intended to Indicate the Potential to Pay for the Cost of Drilling,
Completing, and Operating Just as Now, and You Define the
Characteristics of a Well to Include in A Participating Area. You Define
These Criteria Upfront for Each Formation. This Should Reduce Delays in
P.a. Decisions. And the Goal That We\'re Focusing in on Is to Be Able to
Easily Identify What Wells Belong in a P.a. by Eliminating Delays and
Conflicts Associated with Paying Well Determinations. The Purpose of
Participating Areas Remains Unchanged. They\'re Still for the Allocation
of Unitized Production. What Has Changed Is the Way in Which They\'re
Established. Once Again, You\'ll Negotiate with BLM to Define the Size
of the Initial P.a. for Each Formation Up‑front. You\'ll Also Negotiate
The Size of Each P.a. Revision for Each Formation. Once Again, We Hope
the Goal of this Is to Reduce Delays and Uncertainty in P.a. Decisions.
So, Del, That Kind of Wraps up a Summary of All of the Proposed Changes
since That Regulation Has Been out for over Two Years And BLM\'s Had the
Flexibility to Use It. We\'ve Heard a Lot of Comments from Industry and
Other Folks on What They Don\'t Like, But I Hope They Submit Some
Comments on What Will Make it Work As Well as What\'s So Bad about It.

Fortner: Ok. Thank You, Duane. Jim Albano and Tim Abing Will Discuss
Production and Compliance. Tim, I Believe You\'re Going to Start Things
Off.

Abing: That\'s Right, Del. As Bob Anderson Alluded to Earlier, the
Proposed Exploration Take the Existing 43 Cfrs, 7 on Onshore Orders,
Elements of 4 Proposed Onshore Orders Around 2 National Notice to
Lessees and Consolidates Them into a Single Document And Actually about
That Much of the Proposed Rule. Now, a Prudent Person Might Look at this
and Say, \"Holy Slimfast, Batman, That Kind of Reduction in Volume must
Translate to a Free‑for‑all in Federal and Indian Leases.\" I Want to
Make it Clear That the Proposed Rule Is Not a Lessening of BLM
Standards. Don\'t Make the Mistake of Assuming That the Lack of a Lot of
Regulatory Detail Translates to an Inability to Manage. So, You Probably
Are Wondering What\'s the Big Deal If the Requirements Haven\'t Changed
All That Much? Well, the Big Deal Is We Think That We\'ve Made the
Regulations a Lot less Overwhelming While at the Same Time Improving Our
Ability to Manage Resources and Paperwork. But Don\'t Get Me Wrong. As
Stand‑alone Documents, the Onshore Orders and Ntls Are Really Great
Regulatory Tools. They\'ve Gone a Long Way to Help Both BLM and Industry
Understand Just What it Is That We\'re after on Federal and Indian
Lands. But Picture Yourself as a Small, Independent Operator about to
Make Your First Venture on to Federal or Indian Lands. You\'re Starting
from Virtual Regulatory Scratch. So, You Call up the Closest BLM Office
and You Ask What Do I Need to Know to Explore and Produce on Federal and
Indian Lands? I\'ve Gotten These Kind of Calls And, You Know, I\'ll Pull
Together the Regulations and Depending on Where You\'re At, All Of the
Onshore Orders and Ntls and Drop Them to You in the Mail. Now, Our Bet
Is That You\'ll Have an Easier Time Understanding The Requirements from
this Document than You Will from All of These. And When You Get Right
down to It, That\'s Really What It\'s All About. If You Understand the
Requirements Better, That Should Save You And Us a Lot of Time and Money
in the Long Run. So, How Were We Able to Accomplish this Amazing Feat of
Regulatory Reduction? Well, One Way Was by Incorporating Industry
Standards by Reference. And the Proposed Rule References 26 Specific
Editions ‑‑ Specific Edition of Api Publications to Help Regulate
Exploration and Production. You Can Look upon this as an Indirect Form
of Self‑regulation. You, Industry, Would Be Regulated by
Industry‑generated Standards. Now, There\'s Another Way That We Use
Performance Standards to Help Streamline the Regulations and I Think Jim
Is Going to Go Over That for You.

Albano: Consistent with the Guiding Principles of the 1993 Executive
Order on Regulatory Planning and Review, These Regulations Increase the
Use of Performance Standards. That Is, it Prescribes Performance
Objectives Rather than the Behavior or Manner of Compliance That
Regulated Parties must Adopt. Many of the Prescriptive Requirements That
Are Currently Found In the Regulations and More Significantly in the
Onshore Orders Have Been Replaced with Performance Objectives. This
Approach Presents the Required Standards Up‑front, the End Use Up‑front
Provides ‑‑ Needed Flexibility and Is Also Another Thing That Results in
the Reduction of the Regulatory Volume. Before We Take a Look at Where
We\'ve Increased Performance Standards in the Regulations, It\'s
Important to Note That as Twisted as it May Sound, this Is a Part of the
Regulations That Tim and I Are Pretty Fired up About. Fired up Enough to
Be Looking Forward to Your Comments on the Proposed Performance
Standards That Have Been Used and Also If There Are Places Within the
Regulations Where it Would Be Appropriate to Consider Performance
Regulation ‑‑ or Performance Standards. Most of the Surface ‑‑ the
Performance Standards Are Related to Surface Use Activities Are Found in
the Drilling and Additional Well Operations Sections. Existing Onshore
Number One Includes Several Categories That Have Prescriptive
Requirements for Completing a Surface Use Plan And Also to Handle
Surface‑disturbing Activities. These Requirements Could Be Applied to
Additional Well Operations That Would Normally Occur after a Well Is
Completed. The Proposed Rule, on the Other Hand, Focuses on Performance
Standards That Need to Be Addressed to Adequately Protect the
Environment During Drilling and Additional Well Operations. It Still
Includes Standards to Provide a Description of the Proposed Project, but
it Also Includes Performance Standards for Mitigating on and Off‑site
Impacts, the Timing and Success of Reclamation, Waste Minimization and
Management, and the Protection of Cultural, Biological, and Physical
Resources. I\'ve Emphasized the Surface Use Performance Standards and
Tim\'s Going to Continue with Some of the Other Performance Standards
That Apply to the Drilling and Additional Well Operation Sections.

Abing: That\'s Right, Jim. Also in the Proposed Drilling Regulations
You\'ll Find Performance Standards for Things like Casing Design
Criteria and Mud Program Requirements. And in the Section on Additional
Well Operations We Use the Performance Standards to Evaluate Which
Activities Need Prior Approval from BLM Before You Begin Them.
Performance Standards in the Proposed Gas Measurement Regulations Would
Transform Our Current Approach of Recognizing Orifice Meters as the Only
Measurement System That Can Be Used Without Approval on Federal and
Indian Leases to One Where Any Measurement System Can Be Used Without
Prior Approval as Long as It Meets Certain Performance Standards. In the
Proposed Site Security Regulations, a Performance Standard Would Replace
the Lengthy List of Vows That Either Are Or Are Not Subject to BLM\'s
Seal Requirements. Jim Will Cover How Performance Standards Apply to
Produced Water Disposal Pits Which Is Pretty Important When You Consider
That There Are over 12,000 Disposal Pits on BLM‑administered Lands.

Albano: Disposal Produced Water Is an Operation That Occurs After Well
Completion, Therefore, the Surface Use Standards That I Previously
Described Would Also Apply to this Type of Activity. In Addition, the
Proposed Rule Replaces the Prescriptive Requirements That Are Found in
Onshore Number 7 for Pits with Performance Standards for Both Lined and
Unlined Pits. These Performance Standards Would Cover the Siting,
Design, Construction, and Management of These Pits. Of Course, the Use
of Performance Standards Is Not Without Boundaries, Especially When
Public Health and Safety, the Environment, and Production Accountability
Are at Stake. Tim\'s Going to Continue Now with a Review of Some of the
Places Where You Can Find Minimum Compliance Standards in the
Regulations, Places Where We Did Not Want to Jeopardize These Critical
Management Objectives.

Abing: That\'s Right, Jim. You Know, Blowouts Have the Potential to Be
Catastrophic to the Environment. They Threaten Public Health and Safety.
They Waste Both Natural and Financial Resources, and They Generally
Cause the Rig Crew to Have a Bad Day. So, to Help Avoid the Occurrence
of Blowouts Occurring on Federal Lands, We\'ve Retained Some of the
Minimum Standards from Onshore Order Number Two in the Area of Well
Control. Similarly, Public Health and Safety Concerns Led Us to Keep
Some Minimum Standards for Drilling Wells, Workovers, and Production
Operations When Being Conducted in a Hydrogen Sulfide Environment. And
in Both the Oil and Gas Measurement Sections, We\'ve Kept Minimum
Standards for Things That We Felt Were Particularly Important to Achieve
Accurate Measurement. Particularly, Those Standards That Deal with Just
How Accurate We Expect Measurement to Be. Those Are Things That Are
Really Contractual in Nature and Are Not Addressed in Any Industry
Standard. And Lastly, Minimum Standards Will Help Ensure the Protection
of Usable Water and Other Valuable Mineral Resources When Wells Are
Plugged and Abandoned. I\'ll Leave the Topic of Minimum Standards for
Awhile and Mention Notable Changes to the Gas, Vending and Flaring
Requirements. First We Propose to No Longer Charge Full Value for Gas
That Continues to Be Vented or Flared One Year after BLM Orders it to Be
Captured. This Existing Full Value Provision Is a Penalty for Wasting
Gas. When We Thought about the Complexities of Enforcing this Provision
in Terms of Determining the Actual Volume Lost and the Value of That
Gas, We Figured We Have Other Less‑complicated Means to Enforce Gas
Conservation Measures. And Another Proposed Change in the Vending and
Flaring Requirements Is That Federal Oil Wells That Produce less than 10
Mcf of Gas per Day Would Be Exempt from Having to Get Approval To Vent
or Flare That Gas. Now, this Change Would Not Apply to Wells on Indian
Lands Which Still must Undergo a Case‑by‑case Application and Review
Process To Evaluate the Economics of Marketing Gas. And as Long as I\'m
on the Subject of Low Volume Gas Production, The Proposed Rule Would Add
More Exemptions for Measurement Requirements for Orifice Meters That
Measure less than 100 Mcf Of Gas per Day. The Cost to Comply with the
Exempted Standards Would Generally Exceed the Value of the Additional
Federal or Indian Royalty That Would Result from the Marginal Increase
in Accuracy. Now, These Kinds of Exemptions Continue BLM\'s Philosophy
of Preventing the Premature Abandonment of Reserves. By Exempting You
from These Requirements, We Should Lower Your Operating Cost, Lower the
Economic Limit of Your Well or Lease, And Ultimately Result in the More
Resource Recovery. Now Jumping Topics but Still a Change to the
Operational Regs, Jim\'s Going to Cover a Change in Geophysical
Regulations.

Albano: Well, BLM Currently Levies a Fair Market Value Fee For the Use
of its Lands. Such Fees Do Not Normally Apply to Mineral‑related Actions
Because Mineral Leases Include an Inherent Right ‑‑ Surface Use Right.
One Exception to this Rule Is Geophysical Exploration Activity Which Can
Occur Without an Oil and Gas Lease. Now, this Is One Area Where BLM\'s
Received a Bit of Encouragement on More than One Occasion to Change its
Regulations. The Rule Establishes a Fair Market Value Fee for
Geophysical Exploration If Operations Occur on BLM Surface, and They\'re
Not Conducted as Part of a Lease Operation. The Actual Fee Scale or Rate
Is Not Included in this Proposed Rule. It Will Be Determined Before the
Rule Is Finalized. So Far, We\'ve Discussed Changes That Influence the
Operations. Now, Tim Is Going to Shift Gears Again and Start Our
Discussion Of Changes to the Enforcement Provisions.

Abing: That\'s Right, Jim. An Important Change Being Proposed in the
Enforcement Regulations Is the Elimination of the Major and Minor
Classifications of Violations. And this Includes Eliminating the
Corresponding Penalties of \$250 Assessment for Minor Violations and a
\$500 per Day Assessment for Major Violations. In its Place, We Propose
That Violations Not Corrected after a Specified Period of Time Would Be
Subject to an Assessment of up To \$250 per Day. The Seriousness of a
Violation Would Be Determined by the Amount Of Time We Give You to
Correct It. This Change Will Greatly Simplify BLM\'s Enforcement
Regulations And Make Clear the Consequences of Noncompliance. Another
Enforcement‑related Change Would Be to Eliminate the Caps That Presently
Exist on the Amount of Assessments and Civil Penalties That Can Be
Levied per Day and the Total Amount of Civil Penalties Levied per
Violation. The Caps and Monetary Fines Are Not Required by Law and They
Complicate Our Present Enforcement Regulations. And When We Looked at
the History of BLM Enforcement Actions Since the Enactment of Fogrma, We
Found Very Little Use of this Cap Provision. Voluntary Compliance, the
Rate at Which Assessments and Civil Penalties Escalate as it Is, and
Other Administrative Checks and Balances Resolve the Problems Before the
Cap Provision Was Ever Invoked. So, We Don\'t Think That Eliminating
Caps or Eliminating the Ceiling on Penalties Should Be Something That
Should Cause a Lot Of Industry to Be Concerned About. But Jim, Haven\'t
We Also Made Some Changes to Our Enforcement Regs with Regarding
Immediate Assessments?

Albano: Yes, We Have, Tim. The Existing Regulations Deal with Violations
That Are Serious Enough to Cause Direct Action by Imposing Immediate
Assessments. These Are the Type of Violations That Should Never Occur.
In Reality, We Still See Violations of this Nature, and There Is Still a
Need to Impose Immediate Assessments. However, the Process for
Determining the Amount Changes under This Rule. The Assessment ‑‑ the
Existing Regulations Determine this Amount By a Dollar per Day Figure
That Leads to a Maximum for Certain Immediate Assessments, and These
Days Can Be Retroactively Counted Back to the Day the Violation Existed
Before it Was Ever Discovered. Instead, the Proposed Rule Will Have a
One‑time Fixed Amount for The Immediate Assessment. And this Fixed
Amount Represents an Increase of Some of the Maximums That You\'ll Find
in the Existing Regulations. While I\'m on the Subject of Immediate
Assessments, it Is Equally Important to Note That this Rule Includes
More Violations under This Category. Four Different Actions Are Included
as Immediate Assessments. The First Change Is Actually a Modification of
Existing Regulations. Right Now, an Immediate Assessment Is Triggered If
There Is Surface Disturbance Without Approval on Indian or Federal
Surface. But We Have Adjusted this Provision to Make Sure BLM Approval
Is Received Before Surface Disturbing Activities Are Started to Develop
Federal or Indian Leases and Regardless of the Surface Ownership. Of
Course, this Would Only Apply Where BLM Has the Authority to Approve the
Action. Next, an Immediate Assessment for Situations That Keep on Going
And Going and Going like the Energizer Bunny and at Some Times Can Be
Just as Irritating. If Continue Violations of the Same Type Occur on the
Same Lease, On Any Given Lease Year, the Fifth Infraction Would Trigger
the Immediate Assessment. The Importance of Accurate Production
Accountability Is Emphasized by Including Commingling Without Approval
to the List Of Immediate Assessments and Finally, the Importance of
Notifying the BLM of Reportable Hydrogen Sulfide Concentrations And Is
Included as an Item with Serious Consequences. And These Notification
Requirements Are Detailed in Section 3151.20 of the Regulations. Now, We
Have a Couple More Changes That Are Worth Mentioning Today and Tim\'s
Going to Get Us Started on These.

Abing: from the Odds and Ends Department, the Proposed Rule Would
Simplify the Way to Determine the Correct Royalty Rate on Sliding and
Step‑scale Leases. This Amounts to a Pretty Benign Change Because One,
There Aren\'t Too Many Variable Royalty Rate Leases Still in Production
and Two, of Those Leases That Are Still in Production, There Aren\'t Too
Many That Have a Production Rate That Is Enough to Bump the Royalty Rate
above the 12.5% Minimum. And Three, the Change Would Be Royalty Neutral.
That Is, the Government Ends up with the Same Amount of Royalty Under
Either Method. So, We Think this Is Pretty Much a No‑brainer. It Was an
Easier Way to Get the Same Result. And Jim Has One Least Change
Concerning Our Friends in the Forest Service.

Albano: That\'s Right, Tim. Another Change Worth Mentioning Is ‑‑
Involve\'s BLM\'s Responsibility When Oil and Gas Operations Occur on
National Forest System Lands. Now, this Change Is Included to Implement
the Requirements of The 1987 Federal Onshore Oil and Gas Leasing Reform
Act. This Proposed Rule Will Make it Clear That a Surface Use Plan of
Operations Approved by the Forest Service Would Be a Precondition to the
Approval of the Apd, Not a Part of the Apd. Now, We\'ve Reviewed the
More Important Changes That Exist in the Regulations. There Are Numerous
Changes That We Have Not Discussed Today. However, the Preamble Includes
a Section That Talks about the Important Changes and Includes All the
Important Changes and Also a Section‑by‑section Discussion Which Will
Point out the Differences Between BLM\'s Existing Regulations and the
Proposed Rule. I Encourage Everybody to Review the Preamble as a Way to
Enhance Your Understanding of the Regulations.

Abing: I Just Might Add That the Proposed Changes That Jim Refers to Are
Going to Be Shown on Your Television Screens During the Break. Be Sure
to Watch for That. And Del, That Covers the Operational Things, and
I\'ll Throw it Back to You.

Fortner: Thanks a Lot, Guys. I Think That Really Helps Explain Many of
the Proposed Changes In the Operational Regulations. We Do Have a Little
Bit of Time Before We Go off to Break Though, Jim and Tim. Got a
Question Here from Frank in New Mexico. Why Are the References to the
Api Standards and Practices Tied To a Specific Date and Edition? As
Technology Improves, the Standards Will Be Updated, Therefore, the
Reference Should Be to an Api Standard of Latest Edition. That\'s
Frank\'s Question.

Abing: Well, Frank, the Reason for That Is Because That Was a Function
of the Rule‑making Process. We Had to Establish ‑‑ We Reviewed the
Existing Api Documents That We Did Reference and Had to Settle Upon, You
Know, Put Those Through Because They Are Becoming Regulations. They Had
to Go Through the Rule‑making Process. Any Updates to the Api Documents
Then Because They Would ‑‑ Before They Can Become Regulation, Would Have
to Also Go Through The Rule‑making Process. If There Is Improved
Technology That Comes out And, You Know, We All Know the Rule‑making
Process Takes Some Time. As New Technology Comes out and the Api
Documents Are Updated, BLM Will Probably Handle Those by Approving ‑‑ If
it Meets or Exceeds the Intent of the Existing Regulations, We Would
Handle Those by Approving a Variance. But Then to Avoid Having to Do
Variance after Variance after Variance, We Would Probably Look at That
Updated Api Document And Put it Through the Rule‑making Process and Then
Incorporate It into the Regulations.

Fortner: Thanks, Tim. And Thank You for Your Question, Frank. At this
Point in the Program, We\'re Going to Take a Short Break. Now Would Be a
Good Time for You to Phone Us or Fax Us. When We Come Back in Ten
Minutes, We\'ll Start Answering Your Questions.

Fortner: Well, We\'re Back. Before We Get to Your Questions, I Wanted to
Briefly Discuss the Comment Procedures for this Rule. The Proposed
Regulations Were Published on December 3, 1998. Written Comments must Be
Now Submitted by June 4, 1999. That Includes the 60‑day Extension.
Comments Can Be Submitted Electronically, by Mail, or Hand‑delivered to
the Washington Office. And Please Refer to the Preamble in the Federal
Register Notice For the Specific Instructions. There\'s Also Comment
Submission Information in Your Viewer Packet. Anonymous Comments Will
Not Be Recognized, However, We\'ll Consider Confidentiality If You Ask
for it for Your Name and Address. All Comments Received Will Be Posted
on the BLM Web Site after The Comment Period Has Ended and That Internet
Address Again Is www.blm.gov. With That Said, Let\'s Get Started by
Addressing Our First Question. We Have a Caller. Manuel, in Utah, Has a
Question Regarding Bookkeeping. Manuel, You\'re on the Air.

Caller: Yes, Thank You for Taking My Call. I Have a Question Regarding
the Seven Years Change in the Record Retention. I\'m Referring to
Section 3102.11.

Fortner: Ok.

Caller: and Is That a Change from the Old Regulation of the Six Years?

Abing: I Assume You\'re Referring to the Part Regarding Retention of
Records on Indian Lands?

Caller: Well, on Section A, it Says If You\'re a Record Title Holder or
a Designee for the Federal Lease, You must Keep Accurate Complete
Records That Pertain to All Federal Lease Operations for Seven Years.

Abing: I See That.

Caller: under the Old Regulations, in the Old Onshore Order Number Five,
it Stated Operator Shall Keep All Test Data Meter Charts or Recordings
or Similar Records for Six Years.

Abing: Manuel, That\'s One Where I Can\'t Answer That Question Right
Now. We\'ll Have to Get with Someone and Get Back to You on That.
Somebody Will Take Your Name and Number and We\'ll Check with the Actual
Regulatory Requirements or the Statutory Requirements on Records
Retention. I See What You Mean. I Thought it Was Six Years, Myself.

Caller: That Could Be Quite Burdensome for Companies That Are Keeping
All of this Efm Data and You Talk about Megabytes of Data We\'re Trying
to Store Now. It Could Be Very Burdensome for a Company.

Abing: That\'s Right. I Have to Apologize for Not Being up on That
Particular Timeframe, but We\'ll Get Back to You on It.

Caller: Thank You.

Fortner: Thank You for Your Call, Manuel. If You Hold On, We\'ll Take
Your Name and Phone Number and Someone Will Get Back with You with a
Response to That Question. Ok, Our next Question Is Going to Be a Fax
Question. It\'s Addressed to Tim, and the Question Is from Ruth Ann
Hofford. What Is the Magic of Five Days Instead of Another Number of
Days To Report the Return of a Production of a Well That Has Been Shut
in or T.a.ed Longer than 90 Days?

Abing: Well, Ruth Ann, the Magic to the Five Days Is Because It Said So
in the Federal Oil and Gas Management Act and No Other Magic Beyond
That. That\'s One of the Ground Rules That, of Course, Is Laid out to Us
in Writing. The Proposed Reg Is That Statutory Language ‑‑ If it Says it
in The Law, We Can\'t Go Ahead and Change That by Regulation. So,
That\'s Where That Five‑day Reporting Requirement Came From.

Fortner: Thank You for Your Question, Ruth Ann. Next Question Is a Phone
Question from Ellen in Casper. Ellen, You\'re on the Line.

Caller: Hi, There. Yes, this Question Is for Pam.

Lewis: Hi, Ellen.

Caller: Hi, Pam. How Are You?

Lewis: Good.

Caller: What I\'m Calling about Is, You Know, We Have a Lot of Old
Individual Leases Where They Have Bonds That Were Stated That They Were
Only \$5,000. And Will These Bonds Be Increased to Match the New Amounts
or Will They Still Remain at the \$5,000?

Lewis: No. Once These Regulations Become Final, Those Bonds Will Have to
Be Increased to the Minimum Amounts. And They Could Ask for a Decrease
in That Bonding Amount If They Could Show That Their Liabilities Are Not
as Great as What the Minimum Bonding Amounts Are.

Caller: Ok. You Say in Liabilities. What about If They Are Considered ‑‑
Operator That Has Been a Troublesome Operator, Put it That Way.

Lewis: Well, the Current Regulations Already Provide for Increases in
Bonding on Operators That Have Been in Violation With Us. So, You
Already Can Take Care of That under the Regulations in Existence Today.

Caller: Ok. Thank You Very Much, Pam. I Will Talk to You Later.

Lewis: Ok, Bye.

Fortner: Thank You for Your Question, Ellen. Next Question Is a Fax
Question for Duane. Duane, the Questioner Is Chuck. And His Question Is
What Is the Reason the New Regulations Fail To Recognize State Spacing
Regulations?

Spencer: Chuck, I Don\'t Think They Fail to Recognize State Spacing. I
Think It\'s ‑‑ We Work Real Well Hand‑in‑hand with State Agencies Right
Now to Set Spacing for All Practical Purposes. It Is a Seamless Process
on Federal Lands. We Have Very Few Conflicts. However, You Gotta Realize
That These Regulations, the Proposed Regulations, Are Written to Cover a
Wide Variety of Situations. And in Order to Take That into Account, You
Need to Include That Option. In Addition, this Point Was Driven Home in
Oklahoma a Number of Years Ago Where a District Court Judge Ruled That
Unless BLM Accepted the Spacing, it Didn\'t Apply to the Communitization
Agreement for Allocation of Production. So, I Think We Recognize That
the States Do a Great Job of Setting Spacing, and We\'ll Continue to
Work with Them Where We Can. But We Need to Preserve the Option If They
Don\'t Set Spacing We Need to Undertake the Responsibility.

Fortner: Thank You, Duane and Chuck for Your Question. Next Question Is
Also a Fax Question and this Is for Bob. Bob, We Would like to Have
Workshops with the BLM Prior to the Comment Deadline to Discuss Proposed
Rules. Could You Go Ahead and Elaborate on It?

Anderson: Yes. As Previously Stated, We\'re Extending the Comment Period
for 60 Days, Taking it out to June 4. We Think it Will Be Beneficial to
the Public If We Had Early Workshops So You Get Your Questions Clarified
So You Can Have More Meaningful Input into Comments. We\'ll Be Working
on That Starting Today, Trying to Organize the Workshops and Pull a Date
That Will Be Convenient for You.

Fortner: Thank You, Bob. That Question Was from Frank and We Have
Another One from Frank For Jim. Jim, What Information Will Be Required
by BLM in Determining Fair Market Value for the Geophysical Feat?

Albano: Frank, the Information That We\'re Going to Want to Get to
Determine That Fee, It\'s Described in General Terms in The Regulations
and That Would Include Whether or Not That Operation Is Being Conducted
for the Benefit of the Lease and The Length of the Line or the Area, the
Geographic Area That\'s Covered by the Geophysical Exploration Project.
Number of Acres That May Be Affected and If It\'s a 3‑d Type Operation
Which Is Becoming More and More Commonplace.

Fortner: Thank You, Jim. And Thanks to the Questioner. We Have a Fax
Here from Dave from Cody, Wyoming, and It\'s Directed to Duane. The
Question Resolves Around Unitization Changes, Duane. Dave Says Flexible
Terms Are Welcome, However, We Currently Have A Uniform Unit Agreement
Which Is Accepted by BLM and Industry. Who Will Prepare the Approved New
Unit Agreements and How Long Will it Take the BLM to Approve the
Newly‑drafted Language for Each Individual Unit Agreement?

Spencer: Well, as Always, the Industry Representative Will End up
Preparing the Unit Agreement Just like They Do Now and You\'ll Continue
to Meet with BLM to Negotiate Terms Before You Prepare That Agreement
Just like You Do Now in the Designation Process. We Anticipate That Once
You Reach Agreement on Development Obligations and Productivity Criteria
and Participating Areas, We\'re Talking a Real Small Document, Including
the Optional Terms. And You Should Be Able to Get That out Real Fast
Because the Key Issues We\'re Trying to Focus in on Is Eliminating a Lot
of That Language That Nobody Ever Uses, at Least as Far as BLM Is
Concerned.

Fortner: Thank You, Duane. And Thanks to the Questioner, Dave. Next Fax
Question Is from Kurt and It\'s for Tim. Tim, with Respect to
Incorporation of Api Standards, by Reference, If Some Production
Equipment Currently in Use Does Not Meet Api Standards, Will it Be
Grandfathered in or must it Be Replaced or Upgraded?

Abing: Well, I Think We Would Have to Take a Look at the Specifics of
That, Kurt. A Lot of the ‑‑ and Again, You Get into the Language of the
Api Documents. Well, Let\'s Just Put it this Ay, Kurt, Is That the
Regulations Still Allow for Variances under Particular Circumstances.
And Not Knowing the Specifics of the Equipment That You\'re Using And
the Circumstances under Which It\'s Being Used, I Can\'t Directly Answer
That Question. But I Just Say That We Would Review That on a
Case‑by‑case Basis And Make a Decision There.

Fortner: Thank You, Tim. I Think a Follow‑up to That for Kurt Is If So,
under What Timeframes, If There Is a Grandfather ‑‑ Is That Also the
Same Kind of an Answer, We Gotta Take a Look at It?

Abing: Well, I Believe ‑‑ I Thought There Was in the Gas Measurement
Regulations, There Was Some Provisions for Grandfathering Gas
Measurement Systems under the Old Api Documents or Aga 3 Report. But I
Think That Would Be the Case. Again, You Know, it Would Vary from Case
to Case. That\'s Part of the Beauty of Using the Industry Standards and
That Is That They Recognize That There Is Different Conditions Out There
in the Field and Hopefully We\'ll Make a Decision Based On What Best
Fits the Situation and Still Addresses BLM\'s Concerns.

Fortner: Thanks, Tim. And Thanks, Kurt, for Your Question. And If We\'re
Not Answering Your Questions or We\'ve Misunderstood Your Question, Feel
Free to Call in at the Number Provided to You at the Beginning of the
Show, and We\'ll Try to Get Clarification to You. The next Fax Question
Is for Jim, and It\'s from Bryan in Wyoming. Under Proposed Regulation
3145.14 B, Describe in Detail Who Would Make the Final Determination of
Surface Use and Valuation Of Surface Improvements, Crops, and Other
Surface Uses.

Albano: That\'s a Section That Describes Some of the Requirements When
Operations Are Conducted on Split Estate. Bryan, That Determination ‑‑
BLM Would Have to Make the Determination of Whether the Bond Is Adequate
to Cover Those Improvements and Surface Features. And If You Look at the
Stock Raising Homestead Act Regulations, It Describes a Process That\'s
Used for Those Determinations Which Gets into Appeal Rights That Either
an Operator or the Surface Owner Would Have of a Determination That We
Make. And Based on Case History, the Oil and Gas Lease Bond Has Been
Sufficient in Itself with Riders, If Necessary, to Cover Those
Improvements. And It\'s Not Necessary to Get a Brand New Bond
Specifically for Those Surface Uses.

Fortner: Thank You, Jim. And Thanks, Bryan, for Your Question. The next
Fax Question Is for Pam, and It\'s from an Anonymous Person Here. What
Happens to Sdrs? And What Happens to Full Force and Effect under this
New Regulation?

Lewis: Well, That Really Isn\'t ‑‑ I Don\'t Know. I Don\'t Work with
Sdrs and Full Force and Effect. I Really Think That Needs to Be an
Operations Question.

Abing: What Was the Question Again?

Fortner: the Questioner Wants to Know What Happens to Sdrs And Full
Force and Effect under the New Regulations?

Albano: I Can Answer That Question.

Fortner: Ok, Thank You, Jim.

Albano: There Is a Separate Rule on the Appeal Provisions and That Rule
Was Issued as a Proposed Rule at One Time and it Did Not Include the Sdr
Process, and Then We Did Receive Quite a Bit Of Comment on That Change.
And It\'s Being Reconsidered but it Has Not Been Proposed Again Yet. But
the Last I Heard, There Was Still Going to Be That Preliminary Process
Included. And it Would Retain the Full Force and Effect Provisions That
Currently Exist.

Abing: Even If It\'s Put Back into the Regulations, You Won\'t Find it
in the Oil and Gas Regulations. It Will Be in Part 1840, I Believe it
Is.

Lewis: Yes.

Abing: You Would Go to That One to Find the State Review Provisions.

Fortner: Thank You. Next Question Is from Robert in Rock Springs,
Wyoming. Will These Proposed Rules Replace All of the Existing Rules,
Ntls, and Onshore Orders, Including Those Rules and Orders Not Yet
Finished? Jim, I Believe this Question Is Directed for You.

Albano: Sure. Robert, the Assumption Is Correct That When We Took the
Full Package That BLM Currently Has Now, We Included Those Onshore
Orders That Had Been Issued as Proposed Onshore Orders Including Onshore
Number One in \'92, Four and Five Were Reissued as Proposals for
Updates. Number Eight Was Issued as a Proposed Rule. So, All of Those
Were Considered and Provisions That Those Were Meant to Cover Have Been
Addressed and Would Be Covered by These Regulations.

Spencer: One Clarification Point, Del, Is That They Won\'t Include Local
or Statewide Ntls. Those Will Still Stay in Effect.

Anderson: Del, Could I Just Break In. Could I Ask Jim or Tim, Back to
the Last Question from Bryan. Would it Make Sense If We Do Reincorporate
the State Direct Review, to Put it in These Regulations Before They Go
Final?

Abing: Well, Bob, There\'s a Cross‑reference to Appeals of BLM Decisions
in the Regs. And, You Know, Again with the Streamlining Approach, We
Wanted To Limit it Just to That Because it Was Just That State Direct
Review Was All Part of the Review of Decisions and Appeals and So All of
Those Regulations Were Grouped Together and Rather Have Redundancy in
Regulations, That\'s Why They All Ended up There. There\'s Just the
Reference Now. And Maybe That\'s Something Industry Should Comment on Is
Whether, in Some Instances, You Would Prefer Some Redundancy. Maybe
Particularly in Areas like State Directory Reviews.

Albano: I Have Another Comment on That, Bob. It\'s Possible That the One
Thing That We Would Include in the Final, If the Appeals ‑‑ Hopefully
the Appeal Regulations Would Be Final by Then ‑‑ Would Be the Full Force
and Effect Provisions Might Go Back into this Section. That Would Make
Sense to Include Those in the Parts Where They Do Apply.

Anderson: it Seems like If We\'re Trying to Have a One‑stop Shop in
Terms of Documents, it Might Pay. But That\'s Something That We Would
like to Hear from You All On.

Fortner: like to Thank the Questioner Again, Robert, from Rock Springs.
Next Question Is for Pam. Pam, this One Is at What Point must the BLM
Ask the Operator for A Bond for a Communitization Agreement?

Lewis: No. At this Time We Do Not Bond If You\'re Just Going to Be in a
Communitization Agreement Because There\'s Already a Bond in Place out
There. C.a.s Could Include State Lands, Fee Lands and Federal Lands
Altogether So Wherever the Well Has Been Located, That\'s Where The
Bonding Takes Place. So, It\'s Not Always Protecting Our Federal
Interest If the Well Was Being Drilled on State Land. There\'s a State
Bond in Place Instead, and We\'ve Just Committed Our Lands to That C.a.

Fortner: the Questioner Has a Follow‑up on Here, Also, about Indian Land
Involvement. Is There Anything You Would like to Add?

Lewis: I Think Duane Could Answer That.

Spencer: as the Rule States, Indian Land Is to Be Committed To a
Communitization Agreement. That\'s Got to Be Approved by the Bureau of
Indian Affairs. But as Far as the Bonding Requirements, Pam, They Don\'t
Apply to Indian Lands.

Fortner: I\'d like to Thank the Questioner. It Would Really Help If You
Did Put Your Name and Your Organization on These So If We Don\'t Answer
Your Questions and We Have a Chance to Get Back with You, We Could Get
Back to the Person That Asked the Question. Next, We Have a Call from
Bryan in Buffalo. He Has a Question for Jim. Bryan, Are You on the Line?

Caller: Hi. Ok, Jim, We Were Confused by the Answer You Gave Us on
Proposed Reg Number 3145.14 B. I Understand You Referred to the Stock
Grazing Homestead Act. But Who ‑‑ Not Agency ‑‑ It\'s Obvious it Would
Be Us ‑‑ but Who In the Agency Did You Think Would Be Doing the
Valuation Process? Are We Going to Hire a Bunch of Appraisers or the Nrs
Specialists or Who Would Do That? Because We\'re Looking at Projects out
Here That Could Be 4,000 To 7,000 Wells and Approximately 3,000 to 4,000
Miles of Pipeline.

Albano: Bryan, I\'ll Try to Follow up on That and Hopefully Clarify That
a Little Bit More. The Existing Regulations Include the Same Provisions
and I\'m Not Sure That it Does Come up on a Case‑by‑case Basis and I
Know That in Buffalo There, You Have Dealt with Some of These Cases. It
Seems like with a Big Project That You Have, it May Be Worthwhile to
Have Some of That Type of Information Researched Up‑front and to Get the
Appraisal Staff Involved with Some of That. I Don\'t Think That There\'s
Normally a Formal Appraisal Done for Those Determinations But, I Think,
Depending on How Critical the Issue Becomes That May Be Necessary.

Caller: I Guess I\'m Still Not Quite Catching On. Are You Talking about
Some Process in the Future to Establish an Appraisal Group or What?

Albano: No. I Think That, You Know, this Is Not Something That the Fact
That Somebody Would Question or Not Agree to an Oil and Gas Company
Operating on its Surface. That Situation Doesn\'t Get Pushed to the
Point Where We Have to Even Make That Determination of Whether the Bond
Is Sufficient Or Not in Very Many Cases. And When it Does, I Guess, That
We Have to Take a Look at it and See If It\'s Complicated Enough to Get
Other Specialists Involved That Can Make That Determination or If It\'s
‑‑ If it Is a Situation Where It\'s Pretty Clear, You Know That the Bond
Covers That, Those Improvements. There\'s a Couple of Cases, Ibla‑type
Cases, That Deal with this Issue. And It\'s up to BLM And, I Guess, If
It\'s Ultimately Pushed, the Courts Would Make That Decision.

Caller: Right. I Understand What You\'re Saying about Bond Evaluation.
We\'re Talking about an Appraisal Process Here, Valuation of Service
Improvements. It Says Somebody in the BLM Will Do That. You Really Have
Us Curious Here.

Albano: like I Said, That\'s Been There. I Don\'t Know How Many Times
We\'ve Had to Go Through That Process. I Know in Montana, We\'ve Never
Had to ‑‑ as Long as I\'ve Been There, Anyhow, We\'ve Never Had to Go
All the Way Through the Process to Make That Determination. Normally
Those Things Get Worked Out. And If it Comes down to It, BLM Is Going to
Have To, That\'s Right.

Caller: Thank You.

Anderson: If I Could, Just for a Minute. I Think We Need to Be
Reasonable on That. And We Need to Document What Is out There for Sure.
Are There Surface Improvements? Is it Simply Rangeland? Is it Cropland
or What? As Long as We Have Good Documentation in the Case File,
Photographs Which Are Really Important to Do, I Think If it Ever Comes
to a Conflict as to What the Bond Should Be, We\'ll Have That
Determination. I\'m Not Sure That It\'s All That Cost Effective to Go
out and Do Appraisals on All of These Surface Improvements at the Time
of Application or at the Time of the Operations.

Fortner: Thank You, Bryan, for Your Call and Also for the Dialogue That
It\'s Generated. My next Question Is for Tim. Tim, this Is from Allen.
Changing the Current System of Assessing Penalties for Serious
Violations from \$250 to \$500 per Day to a Substantially Increased
One‑time Amount per Violation Without Guidelines or Penalty Matrix in
the Rule Makes this Change Vague and Potentially Subjective. The
Question Is Are These Guidelines for the One‑time Penalty in The Rule or
Will They Be Published and Workshopped Before the New Regulations Are
Adopted?

Abing: Allen, Are You Referring to the Immediate Assessments Or Not?
Does it Say?

Fortner: Changing the Current System of Assessing Penalties For Serious
Violations to a Substantial Increase One‑time Amount.

Abing: Guidance for That. The Existing System, You Know, Called for a
Penalty per Day and Up to a Maximum Amount. And We Went to the Increased
Amount for a Couple of Reasons in That it Simplified Things. And Two, it
Created More of a Deterrent. In Jim\'s Presentation, as He Mentioned,
the Violations That Show Up in the Serious Violations There That Are
Subject to These Immediate Assessments Are ‑‑ Are Those Things That Are
Serious Enough That We Think They Should Never Occur. As Far as Guidance
as to How to Implement Them, No, There Would Not Be ‑‑ I Don\'t Foresee
Us Issuing Any Guidance on That Really Because of the Fact That They Are
Serious Enough That Those One‑time Increased Amounts Would Be Levied.
But There Are Provisions in the Regulations, You Know, to Petition State
Director for Reducing Penalties If There Is Justification to Do So.

Fortner: Thanks, Allen, for Your Question. Next Question Is from Steve
from New Mexico. Duane, I Believe this One\'s for You. Regards Units and
C.a.s with Multiple Operators. How Will the Production Reports Go to MMS
Overall Using Same Unit or C.a. Number or Separate and How Will it Be
Tracked?

Spencer: I Anticipate They\'ll Still Be Reported Just as They Are Now
under the Case Number. As You Know, in the Tracking System, There\'s a
Mechanism for Putting Who\'s the Approved Operator of a Specific Well.
So, Beyond That, I Really Can\'t Come up with Any Difference That This
Will Make. I Don\'t Know If That\'s All of the Question or Not.

Fortner: That\'s All the Question. I Hope That Answers Steve\'s
Question.

Spencer: I\'m Sure He\'ll Get with Me.

Fortner: Jim, I Think this Is a Follow‑up Question on the Fair Market
Value on Geophysical. It\'s from Kurt. Possibly We\'ve Already Answered
This, but I Did Want to Pass it On. What Is the Fair Market Value for
Geophysical Operations? If I\'m Trying to Shoot a 3‑d over 20 Square
Miles, I Need to Record Some Data Surrounding the 20 Square Miles Just
to Get Coverage of the Edges. If the Area Outside of the 20 Miles Is
Unleased, Will this Fee Be Required?

Albano: Kurt, That\'s Correct. If It\'s Not Leased or If You\'re Not
Conducting That Geophysical Exploration for the Benefit of Your Lease,
for Directly Benefit Of Your Lease, Then Yes, it Would Be Required. Like
I Said, the Fee Is Not in Here, but That\'s Something That We\'re
Working with the Forest Service On. They Actually Have a Fee Established
Right Now and it Dates Back To the Time When Conventional Geophysical
Shot Line Operations Were the Norm and They Need to Take a Look and They
Want to Take A Look at Establishing a Fee That Better Fits Today\'s 3‑d
Seismic Operations. That\'s Something That We\'ll Be ‑‑ When We Come up
with Those Fees, That\'s Something That Will Be Published for Comment.
And Most Likely Right Now It\'s Something That Will Come up Before It\'s
Final and Will Be Published as a Policy Direction For Both the BLM and
the Forest Service.

Fortner: Bob, Are We Working with the Forest Service on this Issue?

Anderson: Yes, We Are, Del. We\'re Working in Right‑of‑way Area with
Right‑of‑way People from The Forest Service and Been Quite Active with
the Forest Service And They\'ve Been Cooperative with Us in Trying to
Get Common Regulations and Common Fees.

Fortner: Ok. Kurt, I Hope That Answers Your Question Completely. Next
Question Is Directed to Tim. Tim, Actually There Are Two Questions Here
‑‑ It\'s from John. I\'ll Read You the First One. We\'ll Go Through
That. At the Front of Every Api, under Policy, it States That Five Years
after its Publication Date, it Will No Longer Be in Effect. How Are We
to Enforce This?

Abing: Well, John, We Would Still, Regardless of Api\'s Administrative
Procedures for Withdrawing Them after a Period of Time or Not Renewing
Them, That it Still Referenced in the Regulation That Specific Edition
Is ‑‑ Regardless of What Api Does with It, it Would Still Be the
Regulation.

Fortner: Ok. Before I Get to John\'s Second Question, Another One Just
Came in From Linda Regarding This, Also for You. Excuse Me, this Is for
Jim, Excuse Me. There\'s No Reference to Any Api Environmental Guidance
Documents. Were These Documents Considered for Incorporation?

Albano: Linda, That\'s Correct. There Aren\'t Any Specific Environmental
Documents Referenced. We Did Consider Those. The Nature of Most Those of
Those Documents, We Felt, Were Too General to Incorporate as Reference
Material for These Regulations.

Fortner: Ok. Thank You, Linda, for Your Question. Now to Proceed with
John\'s Second Question, Tim. Api Rp‑53 Recommended Practices, How Will
We Enforce This? And How Would We Enforce Should?

Abing: You Look at the Recommended Practices. Api Uses the Word Should
and Shall Throughout the Documents for The Different Practices That They
Have in There. Again, That\'s Where We Think We Want to Give Some Field
Offices Some Flexibility to Deal with Local Conditions. I Guess I Can
Just Say, You Know, a Lot of the Things That ‑‑ There\'s an Awful Lot of
the Use of the Word \"Should\" and as Api Defines It, That Says That
There May Be Alternative Practices Available to Meet the Standard or the
Practice That They Have Mentioned There. I Guess, in the Spirit of
Letting Field Offices Make Decisions That Best Reflect Local Conditions,
I Just Say That I Would Hope That BLM Offices Would Err on the Side of
Protecting the Environment, Production Accountability and Public Health
and Safety on Determining Whether a Practice Should or Shall Be Applied
to a Particular Situation.

Fortner: I Would like to Thank John for His Question and Your Response.
Like to Remind You the Phone Opportunities for You Here, but We Do Have
More Fax Questions to Get To. I Know No One Is Shy and We Would like to
Hear from You So Please Give Us a Call and We\'ll Try to Be Responsive.
My next Question Is for Duane. This Is from Donna in Billings. Will You
Please Explain the Difference Between Productivity Criteria and Paying
Well Determination?

Spencer: Well, They\'re Fairly Similar, but They\'re Substantially
Different. There\'s a Good Answer for You. But Productivity Criteria ‑‑
What You\'re Really Trying to Do Is Nail down Some Characteristics of a
Well That Seem to Indicate That it Will Be Paying Production. For
Example, Let\'s Say it Produces a Week at 500 Mcf a Day Against the
Pipeline Pressure and Was Drilled 3,000 Foot. Everybody That\'s Looked
at Other Wells May Say Yes, All of Those Wells That Have this Have Been
Paying Well So What You\'re Really Trying to Do Is Nail down Some
Characteristics That Show You That That Well Is Paying, So to Speak, but
You Don\'t Have to Go Through the Rigorous Paying Well Determination Nor
Do You Have To Do the Delays That Are Typically Associated with That ‑‑
Why Everybody Gets Enough Data to Do It. So That\'s Really What We\'re
Trying to Nail down Just Some Quick, Easily Observable Characteristics
That You Can Get it into a P.a., If it Deserves It.

Fortner: Thanks, Duane. Thanks Donna for Your Question. Next Question Is
for Pam from Rosita from Cheyenne. It Regards Subpart 3129. How Will BLM
Handle Operating Rights? Will We Start Adjudicating to Track Title?

Lewis: No, Rosita. The BLM Is Going to Continue to Handle Operating
Rights as We Have since 1985. We Looked at Readjudicating Operating
Rights in 1996 When the Royalty Fairness and Simplification Act Was
Passed and it Was Decided Then That it Was Entirely Too Burdensome and
We Were Unable to Go Back and Ever Try to Cure the Chain of Title to
Those Leases. So We Will, in this Proposed Regulatory Package, Continue
with Our Current Practice of Having You File Those Documents with Us,
Approving Those but Not Adjudicating Them.

Fortner: Thanks, Rosita, for Your Question. And Thanks, Pam, for Your
Response. Next Question Is from Frank from New Mexico. Tim, I Believe
this May Fall into Your Area. Was There a Study Done to Determine If
this Comprehensive Rule Is Not a \"Significant Regulation\" and That\'s
in Quotation Marks And Does Not Have an Impact on Small Businesses as
Stated on Pages 66864 and 66865. And Follow‑up Question Is Where Can We
Get a Copy of That Study?

Abing: Frank, There Was Such a Study Done and in the Preamble, it Kind
of Discusses the Basic Gist of the Analysis That Was Done for That. In
Reading That, They Had Identified That the Bond Increase Was Principally
the Major Economic Impact to Small Businesses. And There Are Certain
Criteria the Small Business Administration Has Set up to Evaluate
Whether it Really Constitutes Being a Significant Impact to Small
Businesses or Not. And That Analysis in Comparing ‑‑ in Summing up the
Costs Associated with the Increased Bonding Provisions and the Inactive
Well Bonding Provisions, They Did Determine That it Fell below That
Threshold as Being Significant. I Understand That BLM Did Send That
Study to the Small Business Administration for Them to Be Reviewed. I
Guess We Had Not Had Response Back from Them on That, as Far As
Obtaining Copies of That Study, Frank, We Get Your Name and Address, We
Can Make That Available to You.

Fortner: Thanks, Tim. Thank You, Frank, for Your Question. Next Question
Is Directed to Jim. Jim, What Format Will the Apd Take? Will We Still
Use the Drilling Plan and Surface Use Plan Just as Before? This Question
Is from Dallas, First Name, and He\'s from Rock Springs, Wyoming.

Albano: Hi, Dallas. The Apd Will Still Include a Surface Use Plan and a
Drilling Plan and ‑‑ Unless It\'s on a National Forest System Lands. I
Don\'t Want to Go into That in Too Much Detail Answering Your Question.
But We\'re Not Doing Away with the Surface Use and Drilling Plan. We\'ve
Just Changed the Components of Those Plans a Little Bit From Existing
Onshore Number One to What You See in the Regulations Right Now.

Fortner: Thank You. Thank You, Dallas, for Your Question. Another
Question for You, Jim, from Vince from New Mexico. By Combining Ntls,
Onshore Orders, 43 Cfr into a New Regulation, Does this Action Do Away
with District, State Ntls. Do District Offices, Field Offices, and
States and Do They Still Have Authority to Do Local Ntls?

Albano: the Combining All of These like We Said Earlier, Would Not
Include the Individual State or Regional Local Type Ntls. But on the
Same Hand, it Would Not Eliminate Those Ntls. The Earlier Sections in
the Proposed Rule Talk about Ntls as Another Method for BLM to Further
Define Requirements Found in The Regulations. And I Expect That That\'s
Going to Continue and the Existing Ones Would Continue, as Long as
They\'re Applicable.

Fortner: We Have a Call from Ron in Tulsa. Want to Thank You for Your
Question, Vince. Ron, You\'re on the Air. Do You Have a Question?

Caller: Yes, I Do Have a Question. I Would like a Specific Answer
Concerning the Drilling Without Approval on Indian Lands in Oklahoma.
What Would Be the Specific Penalty for That?

Abing: Duane, Would That Be the Amount Listed in Here?

Spencer: I Think it Would, Tim.

Abing: So That Specific Answer to That ‑‑ I Believe the Penalty Is
\$10,000 for Drilling Without Approval on Federal and Indian Lands.

Right.

Caller: That Would Be a One‑time Incident. In Other Words, the Situation
Where You Would Have a Repetitive Occurrence by One Operator Would Not
Apply. But If a Given Operator Did Drill Without Approval on Indian
Lands, He Could Be Assessed in Accordance with the New Regulations
Immediately?

Abing: That\'s Correct.

Caller: Oh, Ok. Thank You.

Albano: I Might Add Something to That, Ron, That the Situation You
Described Sounds like That Might Also Involve Disturbing the Surface
Prior to That Drilling Activity Without Approval.

Caller: Right.

Albano: So That Assessment Would Also ‑‑ Would Also Occur Here. And
It\'s Possible That the One Assessment for Disturbing the Surface Would
Be Found Before the Drilling Activity but Then Again, It\'s Possible
That it Wouldn\'t. So Both of Those Could Apply.

Caller: Right. I Appreciate Your Answer. Thanks.

Fortner: Thank You for Your Call, Ron. We Have a Question for Pam from
Jerry out of Montana on Bonding. Does an Apd Trigger New Bonding Limits
on Just the Well Requested in Apd or in All of the Wells Already on the
Operator\'s Bond?

Lewis: No, an Apd Would Require That You\'re Going to Give Us A New Bond
So If You\'re Trying to Drill One Well and Put up a Personal Bond,
You\'re Going to Have to Meet the New Requirement Of \$20,000. And If
You\'re Going to Try to Drill More than One Well and You Want to Put out
a Statewide Bond, You\'ll Have to Meet the New Requirement of \$75,000.

Fortner: Okay, Thank You, Jerry, for Your Question. Next Question Is for
Jim or Tim Also from Dallas from Rock Springs. The Time Periods That BLM
Would Respond to in the Apd Process Is Being Eliminated in the Proposed
Rules. Only the 30‑day Nepa Posting Period Is Staying in Place. What
Assurance Can a Proponent Have That Apds Will Be Handled in A Timely
Manner?

Albano: I\'ll Take That One. BLM ‑‑ We\'ve Decided We\'re Not Going to
Self‑regulate Ourselves But at the Same Time There\'s No Intent to
Deviate from Those Time Frames That We\'ve Already Established for
Ourselves. And It\'s Being Conducted, Now, Through Internal Processes
And, In Effect, That\'s an Item That Is Directly Tied to Our Budget
Process Now. It Has Received Pretty Critical Review That We Do Approve
Those Things or Go Through Them Timely. So, I Don\'t Know If Bob Wants
to Discuss this Anymore or Not.

Anderson: I Think You Covered It. I Think You Nailed It.

Fortner: Again, Thank You, Dallas, for Your Question. This Question Is
Maybe for Bob, and It\'s from Frank in New Mexico. In the Format of
Plain English, I Guess That\'s Plain Language These Days, What Happens
If Your Questions Do Not Show up in the Rule?

Anderson: Well, We Have ‑‑ Just a Little Background on the Plain
Language. We Thought That by Using the Question and Answer ‑‑ and Some
Folks Don\'t like That ‑‑ We Acknowledge That, but a Lot of People Do ‑‑
That it Would Lead BLM into a Logical and Sequential Progression of the
Regulations, Allows it to Flow From Leasing to Operations and So On. If
You Take One Particular Part, You Could Come up with 50 Questions There.
So, What We Tried to Do Is Broaden Those and Generalize Those Questions
into Key Component Parts. So, If You Feel That We\'ve Missed a Real
Important Question, Let Us Have That in Your Comments and We\'ll Take
That into Consideration.

Fortner: Well, That\'s All of the Faxes We Have Today and We\'re Not
Getting ‑‑ We\'ve Got Not a Lot of Phone Calls Coming In Here. We Would
like to Encourage Everybody That\'s out There Watching This, Feel Free
to Give Us a Call. I Do Have Another Question. It Just Came in Also from
Frank in New Mexico and We Need to Have a Comprehensive Table of
Contents to Guide the User Through The Rule. Does BLM Plan to Produce
Such a Table of Contents?

Lewis: I Guess I Would Say Yes, We Agree, Frank, That There Is a Need
for a Comprehensive Table of Contents and That Is One Of the Things
We\'ll Be Working on at the Time the Rule Comes out In Final. So That
You Do Have a ‑‑ There\'s Really No Reason That We Can Think of Why We
Didn\'t Do it in this Proposal. It Is Just an Oversight. I Think What We
Did Was We Put These Regs Together Exactly as We\'ve Always Put Regs
Together, and We Will Work on That When We Come out with the Final
Version.

Fortner: Ok. Thank You, Pam. Thanks, Frank. Question from Dale for Tim,
with Regard to Variance Approvals in The Current Regs, We Currently Have
a Number of Pending Approvals to Consider Regarding Gas Measurement.
What Would You Recommend, an Officer‑operator Do in this Instance Where
the Required Variance Approval Would Become Unnecessary under the
Approved Regs?

Abing: Don\'t Wait for These Things to Come Up, Dale. I Guess That\'s My
Advice, Dale Is You Can\'t Wait for the Things To Become Final Because
the Rule‑making Process, as We\'re All Learning, Is a Very Arduous One
and it Does Take Time. You Know, the Intent Is Here to Make Things More
Flexible for Our Offices. And, You Know, it May Very Well Be That When
the Rule Becomes Final, That You Wouldn\'t Need to Do a Lot of the
Variances That You\'re Working on Now. But Again, We Gotta Work under
the Existing Regulations until They Change and So, I Guess I Can\'t Cut
Your Workload Short.

Fortner: Thanks. Another Question. What Is the Status of the Extension
Requests That Have Been Filed? Bob?

Anderson: as We Stated Earlier in the Broadcast, We Are Extending the
Comment Period to June 4. That\'s a 60‑day Comment. So Looking Forward
to Industry and the Nongovernment Organizations and Government Agencies
to Give Us Some Real Good Comments.

Fortner: Thank You, Bob. This Question Is from Don to Pam. Is a
Statewide Bond Required in Each State You Operate In?

Lewis: Yes. If You Want to Deal with the Statewide Bond, You Have to
File One in Each State That You\'re Going to Operate In. But You
Probably Are Far Better to Go Ahead and Give Us a Nationwide Bond If
You\'re Going to Be Operating in More than Three States. It Would Be
More Economical to Give Us One \$150,000 Bond than to Give Us Three
\$75,000 Statewide Bonds.

Fortner: a Question for Duane from Ernie. Duane, How Does the BLM
Propose to Work with Existing Spacing Rules on Indian Lands When the
Tribe Desires a Well Density Change, and Operators Are Not in Agreement?

Spencer: Well, Ernie, the Process Now Is Essentially Divided Up on a
State‑by‑state Basis and Can Be Almost Separated out to A Tribal Basis.
But Let Me Give You an Example, in New Mexico, We\'ve Got an Mou With
the State, New Mexico Oil Conservation Division, and We Have a Process
in Place Where We Work Together to Establish Those Spacing Changes. I
Think You Can Rest Assured That under Our Trust Responsibility, We\'re
Going to Review Any Proposal Closely to See If a Spacing Change Is
Needed and If it Is, We\'ll Work Together with the State to Implement
That. If We Disagree with the Proposal, We\'re Obviously Not Going to
Take it Forward. But I Think If We Can Continue to Work Together like We
Have Been and Everything Will Work out Great on It.

Fortner: Thanks. Next Question Is from Kurt. The Increase in Bonding
Requirements Will Put a Huge Burden on Small Independents During this
Period of Very Low Product Prices. This Action May Cause a Big Increase
in the Number of Wells That Are Orphaned and Then Have to Be Plugged by
the Public. Sounds like a Comment but I Believe the Questioner Has a
Point Here with the Low Oil Prices. Would Anyone like to Take That?

Anderson: Well, Let Me Just Take a Cut at this and Pam Dive In Here
Because You\'re the Expert on Bonding. But We Recognize That the Oil
Industry Is Not in a Good Situation with the Low Oil Prices. And Let Me
Just Tell You That We Have Some Things in Washington That We\'re Talking
about to Perhaps Give Some Relief and It\'s in Deliberations Right Now.
We Realize That There Will Be an Additional Burden for Bonding. I\'m Not
Sure How We\'re Going to Deal with That at this Time. It\'s One Thing
That We\'ve Been Considering Is this Additional Bonding Versus the Low
Oil Prices in the Situation That You\'re In out There. So, We\'re Going
to Consider to Talk about That, but as it Stands Right Now, this Is Our
Proposal. We Would like to Have Your Comments on It, and I Know It\'s
Not a Good Answer for You, Kurt. But Hopefully We Can Get Through this
Together, and I Think We Have to Consider Ourselves Partners as We
Develop Our Oil and Gas Resources on Public Lands. So, I Think We Need
to Be Reasonable as Well. So, Pam, Do You Have Anything to Offer?

Lewis: No, Other than That I Think We\'ve Taken on More and More Concern
about the Liability That\'s Taking Place out There On Federal Lands, and
We Want to Ensure That That Liability Is Not Always Borne by the
American Taxpayer. That it Really Is Borne by the Operator out There.
And That We Feel That this Bond Increase Is Really Minimal When You Take
a Look That It\'s Been 40 Years since These Bonds Have Been Increased.
You\'re Still Not Going to Be Putting up a Bond That\'s Great Enough to
Take Care of All of Those Concerns and We\'re Still Running a Great Risk
with the Bond Amounts in Case You Were to Default and Walk Away from
Those Particular Wells. So, in this Situation, I Guess We Really Feel
That this Is Almost a Win/win. We\'re Each Taking on a Share of the
Responsibility. But We Do Feel That the American Taxpayers Do Need to Be
Protected at All Times.

Fortner: Thank You. Thank You, Kurt for Your Fax. I Think That Was a
Good Fax. Thank You Very Much. We Have a Person on Line One, Eileen from
Texas. Hello, How Are You?

Caller: Fine, Thank You. How Are You, Del?

Fortner: Good. Do You Have a Comment for Us?

Caller: Yes, I Do. In the Procedural Section, it Talks about Fair Market
Value Determinations That Will Be Made at a Later Date. And We Are
Wondering If We Will Be Able to Have an Opportunity To Comment on this
Section and There Are Other Sections Dealing With B.i.a. Issues That Are
Not in the Proposed Rule at this Time but Will Be in the Final. Will
Industry Have an Opportunity to Comment on This?

Fortner: Jim, Bob?

Anderson: Eileen, We Need Your Input. We Need to Be Reasonable in Our
Approach. We\'re Working with the Forest Service. They Do Have Some Set
Fees Now. We\'ll Be Looking Closely at Their Fees and with Your Input,
We\'ll Hopefully Have the Right Schedule Set up Ultimately When We Put
These Things in Place.

Fortner: Did You Have Anything to Add to That?

Albano: I Think the Only Thing Would Be If Eileen Feels She Would like
to Comment on That ‑‑ on That Particular Point at This Time, I Think
That Would Be Certainly Something That We Would Consider in Putting
Together ‑‑ Working on That Fee Schedule.

Fortner: Ok. Thank You, Eileen.

Caller: Thank You.

Fortner: next Question Is for Jim. Jim, this Is from George in Wyoming.
Is There Any Way to Charge an Oil Company for an Approved Apd in Which
They Do Not Drill the Well?

Albano: George, That\'s ‑‑ We Don\'t Have an Application Fee For Apds,
and So I Would Say at this Point There Is No Way to Cover That Cost.

Lewis: Does the Cost Recovery Rule Look at That at All?

Albano: Well, the Cost Recovery Rule Is Looking at Specifically at the
Cost to Process Applications, but I Can\'t Answer Where That Rule Is at
this Time.

Lewis: Ok.

Anderson: Why Don\'t I Take a Stab at it since You Brought it Up, Pam,
Thanks. We Are Working on Cost Recovery for Many of the Minerals
Programs Right Now. And We\'re Not Where We Want to Be or Should Be
Right Now. And You Won\'t See Them Anytime in the near Future, but We
Are Working on Them and That\'s about All I Can Say about Them Right
Now. I Don\'t Know about ‑‑ There\'s Nothing Set up for That as Far as I
Know. But If We Do Have Cost Recovery, it Would Include the Cost of
Processing and Nepa Documents and So On. But Again, That\'s Still ‑‑
We\'re Still in the Working Phase on Those Cost Recovery Regulations.

Fortner: Ok. I Would like to Thank George for His Question. We Have a
Call from Frank in Texas. Hello, Frank. Are You There?

Caller: Yes, I\'m Here.

Fortner: Do You Have a Question for Us?

Caller: Yes, Sir. I Would like to Ask ‑‑ There Are 16 Sections in this
Rule That Do Not Have a Discussion in the Preamble. Some of These Are
Very Important Such as 3101.17 on Page 66882. This Has Very Serious
Requirements and We Need an Explanation to Why They\'re Included. When
and Where Can We Get Explanations for These Undiscussed Items in the
Preamble?

Lewis: Well, Anything That Is Not Discussed in the Preamble Is Because
It\'s Already in the Existing Regulations. All We Have Done Is Taken Our
Existing Regulations, Put Them Into the Plain Language Format, and They
Are Now in this New Subpart of this Particular Regulatory Package. And
Unless it Was a Major Change from the Existing Regulations, There Was No
Discussion about That in the Preamble to this Regulatory Package. So, Is
There Something in Here That You Think Is Extremely Different from What
Is in the Current Regulations?

Caller: Yes. 31.01.17 Requires That ‑‑ or States That You Can Tell Us
How Many Wells to Drill and What Is Production That We Should Produce
from a Lease. And this Is Certainly Not Ever Been a Possibility of Years
Before.

Lewis: Well, That Is in the Existing Regulations at ‑‑ I Think It\'s
3162. I Would Have to Get the Exact Site for You, and It\'s Also a Part
Of Every Existing Federal Lease. It\'s a Term. I Think It\'s Term Four
of Every Federal Existing Lease. So, That\'s Not a Change from Our
Current Lease Form or from or From Our Current Regulations. It Might Be
Something You Just Had Never Noticed Before.

Caller: Have You Actually Ever Determined How Many Wells Somebody Was
Going to Have to Drill and Enforce That?

Lewis: Tim, Have You Ever Had to Do That?

Abing: No, Frank. If You Just Read it and Realized Hey, Is That a New
Requirement, No, as Long as the Years That I\'ve Been in BLM, I Haven\'t
Been Aware of Anybody That\'s ‑‑ It\'s a Diligence Requirement. And I
Haven\'t Been Aware of BLM Exercising That Authority.

Lewis: I Think It\'s a Right That We\'re Reserving unto Ourselves and it
Is Just Reiterated.

Caller: If We\'ve Never Used It, Why Don\'t We Get Rid of It?

Lewis: Because It\'s a Right That ‑‑ It\'s Part of the Lease Terms and
So We Want to Ensure That We Always Reserve That Right Unto Ourselves If
You Aren\'t Developing Your Lease in a Prudent Manner.

Abing: and Again, Frank, it Might Be a Statutory Requirement As I
Alluded To, Earlier. If It\'s in the Law, We Can\'t Just Arbitrarily
Take it out of the Regulations. So, I Don\'t Know Specifically If That
Language Is in Statute. There Are a Lot More Knowledgeable People on
Statutory Requirements than Me Behind the Scenes. We Can Check with Them
on That and Get Back to You on It.

Caller: Could I Ask Another Question While I Got the Line?

Lewis: Sure.

Caller: I Would like to Know If the Api Has Bought into Using Their
Documents as Standards. Api Could Have Some Liability Associated with
These Standards If Failure Occurred after Being Required to Use Their
Standards.

Abing: Well, Frank, Api Has Quite a Bit of ‑‑ I\'ve Read a Lot Of These
Documents That We Do Reference and They must Have a Swarm of Lawyers
Looking at Their Stuff, Too, Because There\'s All Kinds of Disclaimers
on the Front of it about Use of Their Publications. So, I Think from a
Legality Standpoint, They\'re Covered. As to Whether They Buy into it or
Not, They\'re Well Aware That The Extensive Use of Their Documents Being
Used by Regulatory Agencies. BLM Has Referenced Them in the past in Our
Existing Onshore Orders. There Are a Lot of References to Api Documents.
The Minerals Managment Service and Their Offshore Program Has Just a
Tremendous Amount of Api References. So, It\'s Not Anything New to Api.

Caller: Ok, Thank You.

Fortner: Frank, Thank You for Your Call. I Would like to Thank All of
the Callers Today. Even Though We\'re Running up to the End of Our
Telecast, We Do Have a Couple More Questions and We\'ll Go over a Little
Bit If That\'s Ok with the Audience. There\'s a Question Here for Bob
from John. When Do You Anticipate the Regs Will Become Final, Given That
The Comment Period Will End June 4th?

Anderson: John, I Would Anticipate That We Could Target Probably the End
of this Year Optimistically So, plus or Minus, I Would Say the End of
the Calendar Year.

Fortner: the Final Question Is for Pam. Does the New Bonding
Requirements Require Pending Apds Before These Regs Are Approved?

Lewis: No. The Question Is ‑‑ Does it Apply to Pending Apds?

Fortner: Does the New Bonding Requirements Require Pending Apds Before
These Regs Are Approved.

Lewis: I Guess, If Your Question Is Do These New Regulations Apply to
Pending Apds, No, They Do Not. You Would Not Have to Meet These New
Bonding Requirements until This Proposed Regulatory Package Is
Finalized.

Spencer: I Think They\'re Also Asking, Pam, What Implements That Change.

Lewis: If That\'s Your Question, Yes, That Is What Would Begin The
Process of Increasing Bonds Once These Regulations Are Finalized Is Your
Filing a New Apd or Change of Operator. You Would Have to Meet These New
Bonding Requirements at That Time.

Fortner: Ok. Well, That Was Our Final Question. I Would like to Ask the
Panel If There\'s Any Closing Comments They Would like to Make Regarding
the Regulations?

Lewis: We Just Want Everyone to Send Their Comments In. We Really Do
Want Help with Whatever Parts They Feel Need Additional Work on Them.

Fortner: Please, this Is the Opportunity to Do That. During this Comment
Period Is the Chance to Help Us Out. Well, Our Time Is Just about Up. We
Really Appreciate All of the Questions and Comments We Have Received
Today. If You Faxed in a Question and We Didn\'t Get to it During Our Q
And a Segment, We\'ll Post Responses in the Upcoming Week on the BLM
Home Page at www.blm.gov. I Would like to Again Remind All Sites to
Please Fax in an Attendance Roster of All of the Viewers If You Haven\'t
Already Done This. Or You Can Report Your Viewer Information by Going to
the BLM Training Center Satellite Network Web Site at
www.ntc.blm.gov/satnet. Transcripts of this Program Will Be Available on
the BLM National Training Center Home Page. NTC\'s Internet Address Is
www.ntc.blm.gov. I Would like To, Again, Thank Our Panel and Would
Especially Like to Commend the Viewers That Took the Time to Participate
in This Program. Good‑bye from Phoenix and Thanks for Watching.