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Federal Oil & Gas Leases
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© 2015 Steptoe & Johnson PLLC . All Rights Reserved.
Today’s Presenters
Melissa Munson The Woodlands, TX
Rick Steeno The Woodlands, TX
Federal Oil & Gas Leases
Big Picture • 46,183 leases • 34,592,450 acres leased • 1,157 new leases in ‘14 • 1,197,852 acres leased in ‘14 • 23,657 producing leases • 12,690,806 producing acres • 3,769 APDs approved • 2,544 wells spud
Basic “Need to Knows”
• Bureau of Land Management (“BLM”) • Office Of Natural Resources Revenue
(“ONRR”) • Resource Management Plan (“RMP”) • Environmental Impact Statement
(“EIS”)/Environmental Assessment (“EA”)
Quick History
• Mining Law of 1872 • Mineral Lands Leasing Act of 1920 • Minerals Leasing Act for Acquired Lands
of 1947 • Federal Onshore Oil and Gas Leasing
Reform Act of 1987 • Oil and Gas Leasing Reform, 2010
Resources • BLM RULES
– http://www.ecfr.gov/cgi-bin/text-idx?SID=58f2e664dca34f39fde42822cc24eb2f&tpl=/ecfrbrowse/Title43/43cfrv2_02.tpl#0
– BLM FEES are at 43 CFR §3000.12 • BLM FORMS
• http://www.blm.gov/noc/st/en/business/eForms/og.html • BLM ORG. CHART
– http://www.blm.gov/style/medialib/blm/wo/Business_and_Fiscal_Resources.Par.33189.File.dat/blm_org_chart.pdf
• BLM OFFICES – http://www.blm.gov/wo/st/en/info/directory.html
Choosing The Land
• 3100.0-3(a) Public domain lands • 3100.0-3(b) Acquired lands • 3101.2 Chargeability
The Leasing Process
Competitive Leasing 43 CFR 3120
• 3120.1-1 Lands available for competitive leasing
• 3120.3 Nominations • 3120.4 Notice of competitive lease sale • 3120.5 Competitive sale and auction
The Leasing Process
Non-Competitive Leasing 43 CFR 3110
• 3110.1-1 Lands available for non- competitive leasing
• 3110.2 Priority • 3110.4 Requirements for offer • 3110.5 Description of lands
Lease Terms and Conditions Fees, Rentals and Royalties • 3103.1 Payments • 3103.2 Rentals • 3103.3 Royalties • 3103.4-1 Royalty reductions Term • 3110.3-1 Lease duration (non-competitive) • 3120.2-1 Lease duration (competitive)
Continuation and Extension • 3107.1 Extension by drilling • 3107.2 Production • 3107.3 Extension for terms of unit plan • 3107.4 Extension by elimination • 3107.5 Extension if segregated by
assignment
Lease Terms and Conditions
Relinquishment, Termination, Cancellation • 3108.1 Relinquishment • 3108.2 Termination by operation of law • 3108.3 Cancellation
Lease Terms and Conditions
Reinstated Lease Terms
Reinstatement 3108.2-2 Class I Reinstatements 3108.2-3 Class II Reinstatements 3103.2-2 Rentals for reinstated leases 3103.3-1 Royalty for reinstated leases 3107.6 Extension of reinstated leases
Assignability
Record title ownership v. operating rights • 3106.4-1 Transfers of record title and
operating rights • 3106.4-2 Transfers of other interests • 3106.8-2 Change of name • 3106.8-3 Corporate merger
• 3181 Application for Designation • 3186 Model Forms
– Unit Agreement (UA) – Unit Operating Agreement (UOA) o Form 1- Undivided Interest o Form 2- Divided Interest
• Unit Contraction • Unitization resources-
http://www.blm.gov/mt/st/en/prog/energy/oil_and_gas/reservoir_management/unitization
Exploratory Units
Communitization Agreement
• 3105.2 Communitization agreements • 3105.2-3 Requirements
Royalty Rates • Step-Scale and Sliding-Scale Royalty Rates:
http://www.onrr.gov/ReportPay/PDFDocs/stepscale.pdf
• 43 CFR 3162.7-4 • Identifying what schedule royalty your lease is
subject to: http://www.blm.gov/pgdata/etc/medialib/blm/mt/blm_programs/energy/oil_and_gas/leasing/handbooks/3103.Par.12749.File.dat/part4.pdf
Permitting Application for a Permit to Drill (APD) 43 CFR 3162.3-1(d)
– Drilling plan – Surface use plan of operations – Evidence of bond coverage – BLM form 3160-3 – Operating certification – On-site inspection – Payment
Permitting BLM’s Assessment of APD Processing Time
Points to Takeaway • Leases on Federal lands may be obtained through competitive and
non-competitive processes; make sure you know the details and rules of each when seeking to submit successful bids
• Federal lands may be subject to a variety of “Stipulations” that affect when and how lands may be used
• For leases issued prior to December 22, 1987, specific lease terms will vary considerably
• There is a distinction between two-year extensions and two-year guarantees
• Inclusion in a federal exploratory unit impacts leased lands both inside and outside of the unit
• There are mechanisms in place to reinstate canceled leases and to suspend leases while waiting on the BLM
Thank You!
Melissa Munson [email protected]
(281) 203-5765
Rick Steeno [email protected]
(281) 203-5764
March 25, 2015 Energy Webcast
Practical Application of Division Order Title Opinion’s in
Oil and Gas Development
These materials are public information and have been prepared solely for educational purposes to contribute to the understanding of energy and oil and gas law. These materials reflect only the personal views of the authors and are not individualized legal advice. It is understood that each case is fact-specific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the authors and Steptoe & Johnson PLLC cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the authors or Steptoe & Johnson PLLC. While every attempt was made to insure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed.
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