American Oil and Gas Reporter - July 2018 - 102

ConventionSection: Independent Petroleum Association of New Mexico
Chase suggests efforts to ban drilling
across a wide swath of Northwest New
Mexico is part of a larger effort by tribal
leaders and their allies in the environmental
community to severely restrict oil and gas
development in that corner of the state.
"I cannot think of a single oil and gas
company that wants to drill within the
Chaco Canyon National Historic Park,"
she relates. "The opposition creates this
emotional response by getting people to
think they will visit a sacred site and find
a drilling rig 500 feet away. That is simply
not the case."
In the meantime, IPANM leaders say
the group will keep a close eye on the
controversy surrounding development on
the San Juan Basin's federal lands, and
will take issue if proposed drilling bans
call for excessive buffer zones. "Chaco
Canyon is one of several topics we are
watching these days," Winchester says.
Increased Blanket Bond
The association has taken notice of a
bill that passed the legislature this year
and was signed by the governor to update
the state's well plugging bond requirements.
Sponsored by Senator Richard Martinez, D-Española, SB 189 directs the
state to increase a company's well plugging
bond "to an amount not to exceed

$250,000." Current regulations set the
maximum bond at $50,000, according to
a fiscal report attached to the bill.
Winchester notes that the current bill
declares an operator's financial assurance
obligation can be satisfied with a blanket
bond. This differs from language in a
similar bill that failed to pass in 2013,
which sought to require progressively
higher bond amounts according to the
number of wells a company operated.
Industry "understands and appreciates
why there is a need for an operator's financial assurance that abandoned wells
will be plugged," Winchester assures.
"We disagree with how large those bond
levels should be."
He says the association has submitted
comments to the New Mexico Oil Conservation Division and is participating in
a rule-making hearing on the bill this
month. "We don't want to see onerous
and burdensome bond amounts that tie
up smaller operators when the money
can be used more responsibly," he adds.
Horizontal Rules
Winchester notes that another issue
examined by the OCD this spring concerns
revisions to the state's horizontal drilling
rules.
The OCD issued a draft in January
that would revise rules to Title 19, Ch.15

IPANM Annual Meeting - Albuquerque, N.M.
Wednesday, July 25

Friday, July 27

3-5 p.m. Board of Directors Meeting, Hotel
Chaco
Board Members Only
6-8 p.m. Welcome Reception, Hotel Albuquerque, Outdoor Pavilion & Gardens

8:30 a.m. Awards Breakfast, Hotel Chaco
Speaker: Myron Ebell, Director of the
Center for Energy and Environment,
Competitive Enterprise Institute
IPANM Business Matters for Members
IPANM "Wildlife in the Oil Field" Photo
Contest Award Presentations
Golf Awards Presentations
Member of the Year Presentation
IPANM President Transition
10:15-11:35 a.m. General Session
Aubrey Dunn, New Mexico State Land
Commissioner
An Update from the U.S. Bureau of Land
Management, New Mexico Office
Heather Riley, Division Director, New Mexico Oil Conservation Division
Butch Tongate, Cabinet Secretary, New
Mexico Environment Department
11:45 a.m. Keynote Luncheon, Alvardo
Ballroom
Speaker: Taya Kyle, widow of U.S. Navy
Seal Chris Kyle, American Sniper
1:15-2 p.m. New Mexico Candidate Forum
3-5 p.m. Skyview Happy Hour, Level 5, A
Rooftop Experience

Thursday, July 26
7 a.m. Buffet Breakfast, Hotel Chaco
8:30-11 a.m. General Session
Governor Susana Martinez
Claire Chase, IPANM President
An Update from the U.S. Department of
Interior
Ryan Ullman, Director of Government Relations and Political Affairs, Independent
Petroleum Association of America
Jim Winchester, IPANM Executive Director
Noon-5 p.m. Golf Tournament, Albuquerque
Country Club
Noon-5 p.m. Family Outing, Explora Museum,
Gelato Party at Hotel Chaco Pool Following
6-8 p.m. President's Reception, Casa Escencia

102 THE AMERICAN OIL & GAS REPORTER

(2-16) defining horizontal wells as distinct
from directional wells and establish standard horizontal well spacing rules, among
other issues. The bill also sets minimum
setback distances for horizontal wells
from spacing unit boundaries.
IPANM supports "99 percent of the
rule," Winchester declares. However, he
allows, "We do have some concerns about
language in the section on compulsory
pooling."
A hearing on the draft proposed revisions was held April 17 in Santa Fe and,
Winchester indicates, the association and
state regulators failed to agree on how
the rules define an infill horizontal well.
OCD proposes a definition such that "the
completed interval of which is located
wholly within the horizontal spacing unit
dedicated to a previously drilled or proposed horizontal well in the same pool
or formation."
Winchester advises that the addition of
the qualifier "or proposed" potentially
may allow a large operator to drill simultaneous wells within a single track all at
once. "That raises the question of how a
smaller interest or lease holder in the
single well unit can be charged a risk
penalty under compulsory pooling on each
well, even though there was no production
data from an initial well," he observes.
OCD left the language unchanged
after IPANM met with division officials
and they failed to arrive at a mutually
agreeable solution, he adds. As a result,
New Mexico Energy, Minerals and Natural
Resources Department Secretary Ken
McQueen formed a small industry working
group to be led by Bill Carr, who Winchester describes as "an industry legal
veteran." He adds that IPANM will be
represented on the panel by past presidents
Tom Mullins and Larry Scott.
"Risk penalties for lease holders who
are compulsorily pooled can be as much
as 200 percent. That is too high for many
of our members. The risk profiles for
many horizontal wells drilled into source
rock are considerably different from historic vertical drilling," Winchester concludes.
IPANM also has weighed in on an
OCD proposal to revise the state's spill
response rules under Title 19, Ch. 15.29.
The proposed rules define a major spill
as entailing at least 25 barrels, and a
minor release as spills between six and
25 barrels. The proposal obligates a responsible party to notify the state of a
spill within 24 hours of discovery.
American Oil and Gas Reporter - July 2018

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