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86 Cards in this Set
- Front
- Back
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Mineral Leasing Act of 1920
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Basis of all regulation
Didn't authorize unitization Allowed gov. to collect mineral revenue (revenue/rentals/bonuses) Created BLM to handle all federal onshore leases |
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BLM
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Bureau of Land Management
Manages surface (grazing/recreation/timber) acres and mineral (OGL) Gives final approval for federal exploratory units |
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MMS
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Minerals Management Service
Responsible for collecting mineral revenue, leasing, and regulation of outer continental shelf until BP spill Split into ONRR after BP spill and BOEM and BSEE |
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ONRR
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Office of Natural Resource Revenue
Collect all revenue impacting onshore and offshore OG/renewables and Native Americans (royalties/rentals/bonuses/damages/fines) |
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BOEM
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Bureau of Ocean Energy Management
Handles offshore leasing and development |
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BSEE
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Bureau of Safety and Environmental Enforcement
Responsible for regulation and safety Creates standards Inspections/enforcement Issues permits |
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Types of Lands (7)
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Relinquishment Act, University Lands, State School Boards Lands, Tribal Lands, State Lands, Fee Lands
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Mining Law of 1872
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Federal gov. didn't have anything in place before this
Result of 1849 Gold Rush If you find something, you're entitled to it Used "placer claims" |
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Mineral Leasing Act of 1920 as Amended in 1947
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2 most important acts for onshore federal drilling
Gave federal gov. power to lease Gave federal gov. power to manage exploitation of minerals Gave federal gov. power to accept royalties Demand for OG was growing (cars, WWI) |
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Federal Oil and Gas Royalty Management Act
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Didn't do a lot
Primarily focused on revenue collection Made collection more aggressive |
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Federal Onshore Oil and Gas Leasing Reform Act
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Required that leases go through the competitive leasing system before noncompetitive leasing system
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CFR
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Code of Federal Regulation
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Types of Federal LANDS (2) and Definitions
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Public Domain- those that have always been owned by the federal government (i.e. land taken from tribes)
Acquired Lands- those acquired through purchase, condemnation, gift, or exchange (i.e. military base) |
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Lease Qualifications (4)
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Must be 18
Must be US citizen Aliens can only hold interest through stock ownership Municipalities, associations, and citizens can own leases |
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Types of Federal LEASES (2)
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Competitive and Noncompetitive
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Competitive Leases
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Must be bid out before it goes noncompetitive
Sold through oral bids at the state land office Minimum of $2/acre 10% of lease, 10% of bonus, and admin cost due up front Have to pay the rest within 10 days |
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Noncompetitive Leases
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For tracts that don't get picked up through competitive process
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Informal Expression of Interest
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Company says they would like to see a tract entered into the sale
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Bureau Motion
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Includes tracts that have been terminated, released, relinquished, etc.
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Chargeability
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Max amount of acreage that a company can hold in each state
Prevents companies from having a monopoly in that state |
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Ways to Get a Bid on a Federal Lease (3)
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Expression of Interest
Bureau Motion Competitive Process |
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Federal Lease From Terms (PT, RI, Rentals)
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PT of 10 years
RI of 12.5% Rentals of $1.50/acre for first 5 years, $2 for next 5 |
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How to Extend Federal Leases Prior to 1947 (4)
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Actual drilling operations
Production Exploration Force Majeure Unit becomes effective prior to expiration of the primary term (HBU) Enters communitization agreement If part of a federal lease is cut out, that area has an expiration date 2 years past the creation of the unit If federal lease would have expired before the unit terminates, federal lease has a two year extension past the termination date |
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Acceptable Force Majeure in Federal Leases (2)
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Suspension of Production and Suspension of Operations
You have to file a form immediately following cause of force majeure and return as soon as possible |
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Communitization Agreement
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Pooling of at lease one federal lease for he establishment of a proration unit
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18.75%
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3/16
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1/32
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3.125%
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1/16
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8.25%
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1/6
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16.667%
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Mile vs. Nautical Miles (in feet)
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5,280 (mile) vs. 6,070 (nautical mile)
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Truman
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Proclaimed all natural resources in the subsea and sea beds were owned by the US
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Submerged Land Act
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Granted coastal states the rights to natural resources out to 3 miles, except Texas got 10 miles
Reaffirmed federal ownership further out |
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Outer Continental Shelf Act
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Created federal responsibility to lease and manage over OCS lands
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Outer Continental Shelf
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The gently sloping undersea plain between a continent and the deep ocean. An extension of the continent's landmass under the ocean. The waters of the continental shelf are relatively shallow compared to the open ocean which can be thousands of meters deep.
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US Exclusive Economic Zone
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Extended US rights up to 200 nautical miles
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USGS
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US Geological Survey
First agency to control leasing |
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Relinquishment Act
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Gives surface owner right to lease
Government reserves minerals State and surface owners split bonuses/rentals/royalties Lease form nonnegotiable GLO or surface owner can take in-kind if they don't like price |
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Permanent School Fund
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GLO is responsible for it
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Permanent University Fund
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Revenues of OG, sulfur, water royalties, gains on investments, rentals, money from sales
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University Lands Advantages (5)
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Large, contiguous blocks
One single owner Clean title Well and production data collection Competitive lease terms |
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University Lands Office Roles (2)
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Manage the surface (collect damages)
Lease for agricultural purposes |
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University Lands Lease Terms (4)
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1/4 Royalty
PT 3 years, no kickers $25/acre rental pre paid Sealed bid lease sale |
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Damages Schedule
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Pad size is dependent on depth of the well
Reentry isn't as expensive because you've already built the pad $50/rod of caliche road |
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Rod
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16.5 feet
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Farmouts based on ______________ Interest
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leasehold/contractual
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Term Assignments based on _______________ interest
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mineral
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Farmout Premises (3)
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Lands, depths, leasehold interest which are being farmed out
Contract acreage |
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Ways to Earn Interest (Assignment) in Farmout (2)
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Drill to earn
Produce to earn (most common) *Subject to certain obligations |
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Reasons to Farmout (13)
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Lack of funds
Expiring acreage Want acreage tested Spread risk due to high costs Well information Lack of rig availability Unwilling to take the risk of drilling Small acreage position Far removed from company's operations Better opportunities elsewhere Allows for new acreage position Allows evaluation of offsetting acreage Prior development doesn't show enough economic potential |
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Key Considerations of a Farmout (9)
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Farmout Premises
Location and depths of the wells Interest retained by farmor Interest earned by farmee Continuous development What logs do you want run Call on production Financial information JOA if necessary |
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Call on Production vs. Take In-Kind
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CoP- You have the right to buy at market price in the field, happens in farmouts (i.e. if you're farming out 50% you are able to buy 50% of minerals at fair market value)
TIK- you're taking it in place of a royalty, happens in OGLs |
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Retained Interest (5)
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Deep rights
Checkerboard Earn acreage outside of proration unit ORRI Back-in |
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Ways to Increase Retained Interest (4)
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Option to increase ORRI
Convert ORRI to WI/back in Keep ORRI in first well with option to participate in the future Promoted deal |
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Promoted Deal (i.e. 1/3 for 1/4)
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I don't have any interest but want in, so I pay 1/3 of the cost for 1/4 of the interest
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__________ wants copies of title opinions because it's worth money
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Farmor
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You want ______________________ date tied to the date of the __________________________
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continuous development/release of the drilling rig
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Advantages of a Farmout (8)
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Terms are confidential
Stronger provisions Allows more complex trades More control with ability to acquire well data Shorter time period because of continuous development Earned assignments specifically describe what acreage and depths have been earned Performance is required to complete an assignment More control when farmee is entering bankruptcy |
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Disadvantages of a Farmout (5)
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Generally a shorter time frame
It's a historic preference No public notice Usually no bonus Greater administrative burden in the preparation of assignments |
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Advantages of a Term Assignment (5)
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Gives public notice
Gives bonus money Shorter and less complicated Single agreement, no need to prepare multiple assignments Potential advantage to the assignee holding title if you have a spill, blowout, fatality, etc. |
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Disadvantages of a Term Assignment (4)
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Less overall control
There could be a cloud on title if not released May require additional title work if release is not obtained Less control to insure receipt of data and other information |
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Contributions (4)
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Dry Hole Contribution (A gives B the data but if A drills a dry hole then B pays $X/foot
Bottom Hole Contribution (A gives B the data for $X/foot) Acreage or Cash Contribution (A gives B X acres or $X for data) Tax Partnership Agreement |
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Communitization Agreement
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Pooling of one federal lease for a proration unit
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Unit Agreement
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Turning multiple leases into one lease, based on geology
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Participating Area
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Proration unit or a state spacing unit
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Unitized Land
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Covers land and specific formations
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Types of Units (3)
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Federal Exploratory Unit
Secondary/Tertiary Recovery Unit Working Interest Unit |
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Federal Exploratory Unit
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Primarily in the Rockies
Away from existing production |
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Secondary/Tertiary Recovery
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Secondary (waterflood) recovers 15% to 20% of total hydrocarbons
Tertiary (CO2 injection or steam flood) |
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Amendment of 1987 (Public Interest Clause)
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If you don't commence initial test well within six months the unit agreement then the unit becomes null and void
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Types of Federal ACREAGE (2)
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Public Domain
Acquired Acreage |
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Public Domain Acreage
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Lands federal government has always owned (i.e. LA Purchase)
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Acquired Acreage
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Lands obtained through eminent domain, purchase, etc.
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Chargeability
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Max amount of acreage that company can hold in each state
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US Exclusive Economic Zone
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Protected the US's right to explore, exploit, and conserve living and nonliving resources out to 200 nautical miles
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Benefits of Unitizing (6)
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Build a new acreage position
Spreads cost amongst several parties Allows the management of leases and operations Protects correlative rights/prevents waste Extensions of the leases Manage chargeability per state |
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Ways to Nominate for Federal Lands (3)
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Expression of interest
BLM nominates Offer for noncompetitiveness |
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Classifications of Ownership Within a Unit (5)
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Lessess of record
WIO Leased basic royalty interest Unleased basic royalty interest Any royalty interest owner |
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Lessees of Record
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Own record title
Have responsibility to pay rentals, and right to relinquish record |
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Working Interest Owner
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Operating rights
Owns contractual interest Has right to enter lease to conduct drilling operations |
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Leased Basic Royalty Interest
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MIO that have granted an OGL
Entitled to receive royalty |
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Participating area is equal to _________________________
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Proration unit
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Types of JOAs for Federal Units
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Divided Type vs. Undivided Type
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Divided Type JOA
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Percentage of WI ownership dependent on drilling blocks
Typical in the Rockies You can interest in the east side of the unit but not the west side |
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Undivided Type JOA
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WI spread throughout the unit
Everybody who has a WI is going to pay their proportionate share on all wells drilled |
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When presenting a unit containing federal acreage to the BLM, you must give them __________ and ___________
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Area and depth
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Considerations When Forming Units on Federal Lands (5)
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Environmental restrictions (flood plains)
Drilling restriction (elk habitats) Lease expiration Preexisting unit wells Need 100% WIO approval and 85% of other owners |
