Storm Water Permitting Slide 2 Oil And Gas Operator Concerns
Impacts of Storm Water Permitting on Operators who do business
primarily On Privately Owned Lands Lost Leases Lost Access to Rigs
Compliance Issues Lost Production and Reserves Slide 3 Oil And Gas
Operator Concerns: Leasing The following illustrates leasing
complexities along with a current and live example of a typical
exploration project: Slide 4 Complex Leasing Issues Split Estate
Mrs. Barksdale has 20 Grandchildren 30 Great-grandchildren 55
G-G-grandchildren 19 G-G-G- grandchildren Numerous individually
negotiated leases on tracts of land with numerous undivided
interest owners Numerous individually negotiated leases on tracts
of land with numerous undivided interest owners Slide 5 Small
Operator Leasing for an Exploration Prospect 3 Year Prospect (320
Acres) Leased Partial Leased Held by Production Slide 6 Tract 1
Lease Program 12 12 Leases expire by 6-16-06 Unless prior
commencement of drilling Slide 7 Tract 1 Continued Researching
title & locating heirs. Leasing for Tract 1 has taken years.
(Bottom 8 owners are heirs of the estate of James S. who were
located from cousin Irene living in Chicago. Heirs live in N &
S Carolina. Now attempting to lease.) Slide 8 Tract 2 Lease Program
No Will (Intestate) Heirs Determined by Probate Court (3-5 Mos)
James T. died intestate (James T. had no will). Attempting to find
all known heirs. Will then offer leases. May need to go through
court for receivership (3-5 Mos) (If permitting delays cause
receivership leases to expire, additional court proceedings
required) Slide 9 Tracts 3-a & 3-b Lease Program Leases on
Tracts 3a&b held by production from outside operator. To obtain
this kind of lease, a farmout is required. Typical farmouts have 6
month (or less) drilling requirements. Company approval process may
take 2-5 months or longer. Storm Water Permitting delays may cause
loss of farmout. Slide 10 All Tracts Drill site, if known, is kept
confidential until leasing is finalized due to Outside competition
for leases Compromising mineral owner negotiations Estimated
completion of leasing close to 6-16-06 expiration date. NO TIME FOR
PERMITTING DELAYS. Drilling and permitting must commence after
leasing/farmouts acquired and prior to their expiration. Slide 11
Oil And Gas Operator Concerns: Risk Of Losing Leases Exploration
projects have numerous individually negotiated leases with short
timelines that may easily be derailed by delays If leases are lost,
then reserves and production are lost due to abandoned exploration
project Costs Lost Forever - geological, seismic, exploration,
engineering, project financing, lease acquisition, title work,
legal work, permitting, and environmental workCosts Lost Forever -
geological, seismic, exploration, engineering, project financing,
lease acquisition, title work, legal work, permitting, and
environmental work Slide 12 Oil And Gas Operator Concerns: (cont)
Risk Of Losing Rig Rig will commit to other jobs if Operator cannot
keep on schedule once the rig is lost, the risk of losing leases
and abandoning the exploration project is compounded 4 to 6 months
to acquire or re-acquire a rig Rig mobilization costs $70,000 to
$100,000 (depending upon rig size) Drilling is required after final
lease acquisition and prior to lease terminations Lease clauses
require continuous drilling to hold additional acreage (60 90 day)
Slide 13 Oil And Gas Operator Concerns: (cont) PROPOSED STORM WATER
PERMITTING COMPLIANCE ISSUES COMPLIANCE ISSUES FOR ALL OPERATORS
Timing - On the ground compliance cannot begin until lease
acquisition is finalized due to confidentiality concernsTiming - On
the ground compliance cannot begin until lease acquisition is
finalized due to confidentiality concerns Substantial delays
associated with proposed permitting processSubstantial delays
associated with proposed permitting process Leases on privately
owned land do not allow for permitting delayLeases on privately
owned land do not allow for permitting delay Need for user friendly
guidelines such as RAPPSNeed for user friendly guidelines such as
RAPPS COMPLIANCE ISSUES FOR ALL OPERATORS, BUT ESPECIALLY SMALLER
OPERATORS Storm Water Permitting CostsStorm Water Permitting Costs
3 rd party consultants3 rd party consultants COMPLIANCE ISSUES
MAINLY FOR SMALLER OPERATORS Due to financial constraints, unable
to compete on Federal landDue to financial constraints, unable to
compete on Federal land Unlike Federal leases, leases on privately
held land do not allow for permitting delayUnlike Federal leases,
leases on privately held land do not allow for permitting delay
Slide 14 Conclusion Proposed Storm Water permitting requirements
will cause delays, lost opportunities, and lost production Delays
cause lost leases and rigsDelays cause lost leases and rigs Lost
leases and rigs cause abandoned exploration projectsLost leases and
rigs cause abandoned exploration projects Abandoned exploration
projects cause lost reserves and production for the USAbandoned
exploration projects cause lost reserves and production for the US
Lost US reserves and production will result in: Lost Jobs More
Imports Larger US Trade Imbalance More Energy Dependency on Foreign
Countries Higher Consumer Prices Less Federal, State, and Local Tax
Revenue Less Clean Burning Natural Gas (87% of US drilling for nat.
gas) Implementation of the RAPPS document is a better alternative
as compared to the proposed storm water permitting requirements
RAPPS is user friendly & addresses storm water runoff concerns
RAPPS avoids delays and cost impact issues
