American Oil and Gas Reporter - May 2015 - 21

IndustryDigest
For bats in areas of the United States
affected by white-nose syndrome,
USFWS says the interim 4(d) rule
exempts takes resulting from specified
activities, including forest management
practices, limited expansion of
transportation and utility rights of way,
removal of trees and brush to maintain
prairie habitat, and limited tree-removal
projects. By restricting such tree-removal
activities, USFWS says the bats'
breeding opportunities will improve.
Comments may be submitted:
* Electronically through the federal
rule-making portal at
http://www.regulations.gov (In the
search box, enter FWS-R5-ES-20110024, the docket number for the rule
making, and click on "Comment
Now.") and;
* By hard copy through the U.S.
mail or hand-delivery to Public
Comments Processing, Attn: FWS-R5-
ES-2011-0024; Division of Policy and
Directives Management; U.S. Fish &
Wildlife Service; 4401 N. Fairfax Dr.,
MS 2042-PDM; Arlington, Va., 22203.
USFWS says white-nose syndrome
has not yet been detected throughout the
bat's range, and predicts will not affect
the entire range for some time. The
species appears stable in areas not yet
affected by the disease, mainly in the
western part of its range, the service adds,
pointing out the bat also persists in some
areas impacted by the syndrome, creating
uncertainty as to the timing of the
extinction risk posed by the disease.Ì

BLM Proposes Raising
Onshore Royalty Rates

WASHINGTON-The U.S. Bureau
of Land Management has issued an
advance notice of proposed rule making
on changing the way in which it
assesses royalties on oil and gas
production from federal lands, as well
updating annual rental payments,
minimum bids and bonding
requirements, and whether it should
remove the caps on the maximum civic
penalties that may be assessed under the
Federal Oil and Gas Royalty
Management Act.
"It is time to have a candid
conversation about whether the
American taxpayer is getting the right
return for the development of oil and
gas resources on public lands," stated
Interior Secretary Sally Jewell when she

announced the ANPR on April 17.
BLM points out that both the
Government Accountability Office and
DOI's Office of Inspector General have
expressed concerns that BLM's existing
rules "lack flexibility and could be causing
the United States to forego significant
revenue to the detriment of taxpayers."
The agency notes that at present, the
royalty rate for competitive oil and gas
leases is fixed at 12.5 percent of the
value of production. The ANPR seeks
comments on whether that ought to be
changed to a different fixed rate, a
sliding-scale rate structure based on an
index of oil and gas prices suggested by
GAO, or whether BLM should consider
establishing different royalty rates or
schedules by region, state, lease sale,
formation, resource type, etc.
The ANPR also seeks comment on
the adequacy of BLM's bonding
requirements of $10,000 for a leasewide
bond, $25,000 for a statewide bond or
$150,000 for a nationwide bond,
observing those amounts were
established 50 years ago. In addition to
the amount of financial assurance, BLM
asks respondents to consider whether
BLM should add a royalty bond "to
address issues related to unpaid
royalties."
The ANPR asks for input on whether
BLM ought to increase its minimum
acceptable bid of $2.00 an acre, as well
as its annual rental payments of $1.50
an acre for the first five years of a lease
and $2.00 an acre for years five through
10 with the goal "to incentivize diligent
development of leased areas."
BLM director Neil Kornze calls the
ANPR "another step in the most
ambitious reform agenda in the
department's history." He specifically
mentions DOI's rules to strengthen
drilling and emergency response
standards for offshore operations and the
BLM's rule for hydraulic fracturing on
public lands. In addition, President
Obama's proposed budget for fiscal 2016
seeks new BLM inspection fees totaling
$48 million (AOGR, March 2015, pg. 51).
The Independent Petroleum
Association of America quickly blasted
the idea of increasing onshore royalties
and assessments. "At a time when the
price of oil has dropped 50 percent . . .
and coupled with new federal
regulations, the Obama administration's
proposal to increase onshore royalty
rates ultimately will result in fewer

American jobs, less energy production,
and hurt our nation's energy security,"
declares Dan Naatz, IPAA senior vice
president of government relations and
political affairs.
A 45-day comment period on the
ANPR was to commence on its
publication in the Federal Register the
week of April 20. Ì

PAW Backs Marathon
In Landowner Lawsuit

CASPER, WY.-The Petroleum
Association of Wyoming is supporting
Marathon Oil Corp. in an appeal of a
legal action involving one of the
company's former subsidiaries. Several
landowners sued the subsidiary,
alleging it violated a surface damages
agreement and failed to pay required
fees.
Marathon purchased Pennaco Energy
Inc. in 2000, acquiring its coalbed
methane wells in the Powder River Basin
of Wyoming and Montana, and then sold
the company five years later. PAW
President Bruce Hinchey says when
Marathon sold the Pennaco properties, it
assigned all rights and liabilities to the
purchaser, High Plains Gas Inc., which
continued to produce the wells until it
declared bankruptcy. The landowners
sued the purchaser for not paying them
the surface use agreement fees.
"The landowners then went back to
Marathon (in an attempt to get) their
money," Hinchey says.
Fourth Judicial District Court Judge
William Edelman heard the jury trial in
early February in Buffalo, Wy.
"He ruled that Marathon had to
compensate the landowners," Hinchey
says. "His decision was based on a case
adjudicated in Texas a number of years
ago. The difference is the Texas case
was decided on joint operating
agreements, not surface use agreements.
Those are completely different."
Hinchey says in conjunction with
Marathon's appeal to the Wyoming
Supreme Court, PAW has filed an
amicus brief, asking to be allowed to
explain how Edelman's decision affects
the state's oil and gas industry.
"This could have far-reaching effects
because any time someone sells
something, he could be held responsible
later on if the other person didn't make
the payments," he worries. "This would
MAY 2015 21
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American Oil and Gas Reporter - May 2015

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