American Oil and Gas Reporter - September 2015 - 147

motes reusing and recycling flowback
and produced water through Oil Conservation Commission Rule 34, Foster noted.
Dave Martin, secretary of the New
Mexico Energy, Minerals and Natural
Resources Department, expressed concern
that the BLM's requirement for 500barrel tanks would interfere with the
state's desire to recycle and reuse produced
water. BLM has offered a work-around
in the form of Onshore Order No. 7,
which provides operators with two alternatives to steel tanks, Martin told IPANM
during an Aug. 7 plenary session.
Likely the most workable option, he
suggested, requires a plan for transporting
produced water to recycling facilities not
located on federal lands. Operators would
submit the disposal plan along with their
application for a permit to drill, frac plan
and surface plan, as well as compile an
environmental assessment, Martin said.
Under a second option, operators could
file a sundry notice to include a frac
plan, surface use plan and disposal plan
after submitting an APD and performing
the environmental assessment, he added.
Onshore Order 7 enables operators to
take advantage of NMOCC Rule 34,
which Martin said should help reduce
freshwater consumption. Rule 34 authorizes either stationary or mobile recycling
facilities that can treat water for drilling,
hydraulic fracturing, or other operations,
he explained. Aboveground pits must be
double lined with leak detection, and the
facilities are approved by the department's
district offices through a permit by rule
instead of in Santa Fe, Martin said. Registration is effective for five years.
Martin said the state also was asking
anyone responsible for a recycling project
to track water volumes in and out of the
facilities. "That is important to show how
much produced water we are recycling
and the freshwater reductions," he said.
"That is positive public relations."

Mancos Shale
On another public lands issue, Foster
said the BLM's Farmington office was
being hamstrung by a lawsuit from environmentalists, claiming the agency failed
to complete a required resource management plan or do appropriate environmental
assessments before issuing 239 drilling
permits in a region mostly in San Juan
County.
The WildEarth Guardians, San Juan
Citizen's Alliance, Dine Citizens Against
Ruining our Environment, and the Natural
Resources Defense Council claim drilling
in the Mancos Shale would threaten air,
water, fish, wildlife, the nation's progress
in reducing greenhouse gases, and sig-

nificant landscapes in the Chaco Culture
National Historic Park, Foster said.
Their lawsuit contends the permits
were issued illegally because the BLM's
more than 10-year-old resource management plan was insufficient in that it underestimated the number of wells likely
to be drilled, and did not adequately address the impacts of modern completion
technology.
The lawsuit refers to the greater Chaco
Canyon area, but there is no such legal
entity, Foster observed. "They have taken
the Chaco Canyon area, including the
historical culture resource, and (drawn
a) 20-mile radius to claim that whole
area as the greater Chaco Canyon," she
said.
Intervening in the case are the American Petroleum Institute, WPX Energy
Production LLC, Encana Oil & Gas Inc.,
BP America Production Company, ConocoPhillips Company, and Burlington Resources Oil & Gas Company LP, she
listed.
Foster said BLM's Farmington field
office was expected to release a draft of
an amended RMP and accompanying environmental impact statement this fall.
The lawsuit has been reassigned to U.S.
District Judge James Browning in Albuquerque, she mentioned, who is the same
judge who deemed Mora County's ban
on oil and gas operations unconstitutional.
(Editor's Note: On Aug. 14, Judge
Browning declined to issue a preliminary
injunction against additional drilling,
pending a ruling on the merits of the
lawsuit. See story page 18).

Public Lands
Aden Seidlitz, acting state director for
BLM's New Mexico state office, told
IPANM that litigation and processing
Freedom of Information Act requests had
redirected work away from processing
APDs in Farmington. "It takes time for
our folks that I would like to see devoted
to higher priority work, but they have to
gather records, address attorneys' questions, and so forth to get us prepared to
respond to the litigation," Seidlitz said.
"It's a tremendous workload, but it's
something we have to do."
Agency employment is down across
the state, he said; the Carlsbad office had
almost 40 vacancies earlier this year, including some critical to permitting. BLM
was issuing 38 APDs a month from Carlsbad earlier in the year, but Seidlitz said
after hiring and training personnel, the
office approved more than 100 APDs in
July and hoped to average at least 90 a
month.
Foster reported IPANM forwarded a
letter in June supporting an amendment

The New Mexico Oil Conservation Commission's Rule 34 promotes reusing and
recycling flowback and produced water,
and should help operators comply with
the federal Bureau of Land Management's
proposed hydraulic fracturing regulations, New Mexico Energy, Minerals and
Natural Resources Secretary Dave Martin
tells IPANM.

to the Department of the Interior, Environment and Related Agencies Appropriations Act offered by Congressman
Steve Pearce, R-N.M., that Foster said
would bar using funds to increase royalty
rates on federal land. She said IPANM
opposed BLM's advance notice of proposed rule making announced in April to
increase royalty rates for federal leases,
as well as increase bonding requirements,
annual rentals, and penalties on producers.
Only Congress has the authority to
raise royalty rates, she insisted, adding
that with producers now unable to deduct
most of the cost of transporting and
treating gas to make it marketable, the
effective royalty rate already is closer to
14.2 percent than the nominal 12.5 percent.
Possible rate increases come on top
of the growing challenge for IPANM
members to deal with the federal Office
of Natural Resource Revenues, Foster
reflected, which members report is unresponsive and unwilling to communicate
on differences.
The ONRR publishes on its website
the allowable deduction percentages for
each gas processing plant after operators
have unbundled gathering and treating
costs, Foster explained. However, operators
must apply adjustments retroactively for
up to seven years, the period for which
the agency can audit royalty payments.
That procedure, she held, potentially
can require operators to pay additional
charges and face civil or criminal penalties
for knowingly and willfully misreporting
past information that was based on different assumptions.
SEPTEMBER 2015 147

American Oil and Gas Reporter - September 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - September 2015