OIL and GAS MANUAL - New Mexico State Land …

1 OIL and GAS MANUAL Oil, Gas, and Minerals Division New Mexico State Land Office Santa Fe, New Mexico JULY 2014 OIL AND GAS MANUAL NEW Mexico State LAND OFFICE Oil, Gas, and Minerals Division (505) 827-5748 Fax (505) 827-4739 310 Old Santa Fe Trail Santa Fe NM 87501-2708 Box 1148, Santa Fe NM 87504-1148 Publication Note Beginning with the May 1, 2002 publication, references to seismic were replaced by geophysical. i TABLE OF CONTENTS OIL AND GAS STAFF ACCESS MAPS ..3 MISSION DEFINITIONS ..7 RULES AND REGULATIONS FOR OIL AND Part 100 Relating to Oil and Gas Part 17 Geophysical Exploration on Unleased State Trust Lands.

2 54 Application for Permit ..58 Permit to Conduct Geophysical Exploration on Unleased State Part 20 Relating to Construction, Maintenance and Reclamation of Cultural Properties Act ..66 OIL AND GAS A Brief History of New Mexico s Oil and Gas Leases ..72 Oil and Gas Lease Prefixes, Numbers, and Royalty Rates ..73 Sample Oil and Gas Lease Forms ..74 LH Type 10 Year Term, 1/8 Royalty Exploratory Form ..75 VA Type 5 Year Term, 1/8 Royalty 5 Year Exploratory Form ..79 V0 Type 5 Year Term, 1/6 Royalty Discovery Form ..83 VB Type 5 Year Term, 3/16 Royalty Development Form ..87 VC Type 5 Year Term, 1/5 Royalty Development OIL & GAS LEASE SALE PROCESS.

3 96 Procedures for Monthly Sales of Oil and Gas Leases ..97 Instructions for Wire Transfer of Funds ..98 How to Make a Fedwire Deposit ..99 Guide to Filling Out the Bid Application Bid Application Form ..103 Nominations of Tracts for Sale ..104 FORMS USED TO MODIFY Procedures for Approval of Assignments and Miscellaneous Instruments ..106 Assignment of Oil and Gas Lease ..109 Request for Change of Annual Rental Payer ..111 General Relinquishment, Release and Quitclaim Stipulation ..113 Waiver and Consent ..115 Change of Address Official Notice ..116 ii BONDING AND SURETY REQUIREMENTS .. 117 Instructions for Filing Bonds ..118 Addresses That Must Be Used for Remitting Bond Forms.

4 119 NM State Law Pertaining to Oil and Gas Lands NM State Land Office Rule Pertaining to Bonding Part Bond and Surety Sample Single Lease Multi-Lease Blanket Surface Improvement Damage Assignment of Cash Collateral ..130 Irrevocable Letter of Credit New Mexico Bank ..132 Irrevocable Letter of Credit Foreign Bank ..134 Request Waiver for Bond to Protect Surface ..136 Surface Owner/Lessee Waiver of Bond Requirement ..137 PROVISIONS FOR EXTENDING LEASES BY Sample Letters ..139 SHUT-IN ROYALTY Shut-In Royalty Due Dates Illustration ..148 Lease Date > 90 Days after Shut-In ..148 Lease Date < 90 Days after Shut-In ..148 Guidelines for Shut-In Royalty Shut-In (SI) Royalty Payment Shut-In Gas Royalty Payment Form.

5 152 REDUCED ROYALTY RATE FOR MARGINAL OIL NMAC Amendment of Lease to Lower Royalty Rate for Oil Wells under Certain Application for Reduced Royalty Rate for Oil Application COMMINGLING OF PRODUCTION FROM State TRUST The State Land Office Rules Pertaining to Commingling ..163 Commingling and Off-Lease Storage of Oil and Gas on State Trust Fees for Application ..163 Commingle Pre-Application ..164 COMMUNITIZATIONS AND Communitizations Explained ..166 Termination of Communitization Agreements ..167 Samples of Communitization and Consolidation Forms ..168 Consolidation of State Oil and Gas Leases.

6 187 Short Term Communitization Agreement ..189 CO2 or Helium Communitization iii UNITS AND Information about Units ..205 Requirements for Preliminary Requirements for Final Suggested Geological Sample Unit Agreement State /Fee/Exploratory Unit ..211 State /Federal/Fee Exploratory Unit ..221 State /Fee Waterflood Unit ..237 State /Federal/Fee Waterflood Unit ..253 Commonly Asked Questions Regarding I. General II. Role of the Oil Conservation Division III. Extension of State IV. Segregation of State V. VI. Drilling VII. Commercial VIII. Production IX. Plans of X. Subsequent 1 NEW Mexico State LAND OFFICE OIL AND GAS STAFF DIRECTORY Website FAX (505) 827-4739 Mailing address: NEW Mexico State LAND OFFICE OIL GAS AND MINERALS DIVISION P O B 1148 SANTA FE NM 87504-1148 Shipping, street address: New Mexico State Land Office Oil, Gas, and Minerals Division 310 Old Santa Fe Trail Santa Fe, New Mexico 87501-2708 (Note: Royalty Management Division Phone 827-5772, Fax 476-0480) Aubrey Dunn, Commissioner of Public (505) 827-5760 Patrick Padilla, Assistant Commissioner, Mineral (505) 827-4489 Terry Warnell , Director, Oil, Gas, and Minerals.

7 (505) 827-5745 Chuck Sandoval, Office Manager, Oil, Gas, and Minerals ..(505) 827-5744 Ed Martin 827-5746 Anchor Holm Reduced Royalty ..(505) 827-5759 Sue Keelin Units ..(505) 827-5783 Pete Martinez Units and 827-5791 Niranjan Khalsa Communitizations 827-6628 Dr. Stephen Wust Geology, Nominations and Geophysical 827-5774 Kenda Montoya Oil and Gas Leasing 827-5749 Rubel Salazar Shut-ins, Expiration, Cancellations, ..(505) 827-5730 Ramona Marcus OGRIDs, Bonds, Assignments, Misc. (505) 476-0378 RELATED AREAS: Lease Payment Inquiry Accounting Rights of Way Melissa Lease Files, Copies Records Salt Water Disposal Nick Caliche permits Hobbs office.

8 392-8736 or 392-3697 Business Leases Jeanette 2 ACCESS ONLINE You can download oil and gas forms from the State Land Office s website The forms are available in Adobe Acrobat. You are able to enter required information directly onto the electronic forms, Save As into your computer, print out and sign the form, have it notarized if necessary, and mail it to the State Land Office. We plan to be able to receive your electronic signatures soon, although if the form needs notarization, that would require you to print your form. We hope you find that the ability to enter information directly into a computer form will ease your office s workload. The State Land Office staff continues to make available to the public electronic information that is useful in doing business with us.

9 We have worked with New Mexico Tech in Socorro to have available information from the State s Oil and Natural Gas Accounting and Revenue Database, better known as ONGARD. Members of the Industry Service and Outreach Group at NM Tech s Petroleum Recovery Research Center are translating ONGARD tables into user-friendly internet screens. If you need assistance with the websites, call our Chief Geologist, Stephen Wust at 505-827-5748. There are two sites that you can access for different kinds of information: Updated bi-weekly. This takes you to NM Tech s GO-TECH site. At this site you can obtain information made available through the work done by NM Tech s Petroleum Recovery Research Center (PRRC) that provides the public information about statewide land and lease status.

10 You can find information on leases by entering company names, you can search land ownership throughout the State , you can find contact information on operations, you can identify terms for particular leases, and you can find information on Communitizations. Once you are at the GO-TECH homepage, click on State Land Office Data in the header menu. This will take you to a page listing all the different searches you can perform. Updated in real time. This takes you directly to the State s ONGARD system. At this site you find information for oil and gas development. On the homepage, click on the Industry Access button, and then go to the Trust Land Lease Inquiry.