BLM Presentation 10/19/2016 API Fall Meeting Final Regulations 43 CFR Part 3170 October 19, 2016
BLM Presentation Legal Disclaimer 10/19/2016 This presentation is not an official statement of policy by the Bureau of Land Management (BLM). This summary presentation was prepared for informational purposes only and does not in any way limit or modify the regulations described herein. Interested parties should not rely on the contents of this presentation and should take care to review the official text of the regulations at 43 C.F.R. subparts 3170, 3173, 3174, and 3175.
A Readers Guide… BLM Presentation 10/19/2016 Subpart 3170 : Definitions, recordkeeping, bypass and tampering, variances, appeals, enforcement Subpart 3173 (Onshore Order 3): Site security, FMP, Commingling, Off-lease measurement Subpart 3174 (Onshore Order 4): Oil Measurement Subpart 3175 (Onshore Order 5, Statewide NTLs for electronic flow computers): Gas Measurement
43 CFR Part 3170 BLM Presentation 10/19/2016 Subpart 3170 : Definitions, recordkeeping, bypass and tampering, variances, appeals, enforcement Subpart 3173 (Onshore Order 3): Site security, FMP, Commingling, Off-lease measurement Subpart 3174 (Onshore Order 4): Oil Measurement Subpart 3175 (Onshore Order 5, Statewide NTLs for electronic flow computers): Gas Measurement
BLM Presentation 43 CFR subpart 3175 10/19/2016 Preamble Procedural Matters Regulation
Implementation Time Frames BLM Presentation 10/19/2016 >10,000 Mcf/month, >100 bbl/month FMP #s Lease, CA, or PA basis 1,500 – 10,000 Mcf/month, 10 – 100 bbl/month (Existing meters) <1,500 Mcf/month, <10 bbl/month >100 bbl/month 3174 Compliance Lease, CA, or PA basis 10 – 100 bbl/month (Existing FMPs) <10 bbl/month High and Very High 3175 Compliance FMP basis Low (Existing FMPs) Very Low 3173/74/75 Compliance (New FMPs) GARVS All gas FMPs Approved Equipment (PMT) All FMPs 1 2 3 FR Publication Years Effective Date
BLM Presentation 3170 - Recordkeeping 10/19/2016 Proposed rule • Records would have to be retained for 7 years on Federal leases; 6 years on Indian leases • Applies to purchasers and transporters • All records would have required the FMP number Final rule • No change to the records retention requirements • Still applies to purchasers and transporters FMP number is no longer required - lease, CA, or • unit PA number and unique meter ID
BLM Presentation 3170 – Production Measurement Team 10/19/2016 (PMT) Proposed rule • Would establish a PMT to review new technology and procedures Final rule • No changes • Delay implementation for 2 years
BLM Presentation 3170 - Appeals 10/19/2016 Proposed rule • Referenced standard appeals process (State Director Review and IBLA) Final rule • Adds special appeal process for decisions made based on PMT review
BLM Presentation 10/19/2016 Subpart 3173: Site Security, FMP, Commingling, Off-lease Measurement
BLM Presentation 3173 - Commingling 10/19/2016 Proposed rule • The BLM would approve commingling only if: • No royalty impacts from allocation method • Properties are “low volume” • Overriding considerations such as environmental impacts and maximum ultimate recovery • All existing commingling approvals would be reviewed for compliance with new requirements and modified/terminated if they were not in compliance
BLM Presentation 3173 - Commingling 10/19/2016 Final rule (new commingling requests) The BLM will approve commingling if the request: • Has no royalty impacts from the allocation method • Involves properties that are “marginally economic” • Includes Indian leases that have been authorized for commingling by tribal law; • For surface commingling, includes properties that have production rates less than 100 bbl/mo or 1,000 Mcf/mo; • For downhole commingling, includes properties that are in basins where the BLM has determined commingling is necessary for maximum economic recovery or resource conservation; • Has overriding considerations such as environmental impacts and maximum ultimate recovery
BLM Presentation 3173 - Commingling 10/19/2016 Final rule (existing commingling requests) The BLM will grandfather commingling if the approval: • Is for surface commingling, and the properties have production rates less than 100 bbl/mo or 1,000 Mcf/mo; • Involves downhole commingling If the existing approval is not eligible for grandfathering: • The approval will be renewed if it meets the requirements for a new approval • The approval will be rescinded or modified if the existing approval does not meet the requirements for a new approval
BLM Presentation 10/19/2016 3173 - Commingling Proposed 3173 • “Low-volume property” meant that the capital necessary to achieve non-commingled production would yield less than a 10% ROR before taxes, or • Cost of achieving non-commingled measurement exceeded the NPV of royalty Final 3173 • “Economically marginal” means that the capital necessary to achieve non-commingled production would yield less than an 18-month payout after taxes • Cost of achieving non-commingled measurement exceeded the NPV of royalty
BLM Presentation 10/19/2016 3173 - FMPs Proposed 3173 • Operators would have to submit FMP applications over a 27- month period, based on average monthly flow rate. • FMP application would have required equipment serial numbers and manufacturer’s specifications Final 3173 • FMP application period extended to 36-months; operators can continue to produce as long as application was submitted • Serial numbers and manufacturer specification no longer required • For properties that have not produced in the past 12 months operator must submit FMP application prior to producing
BLM Presentation 10/19/2016 3173 – Site Facility Diagrams Proposed 3173 • Would have required updated site facility diagrams within 30 days of getting an FMP number • Would have required equipment serial numbers and manufacturer specifications • Operators would have to sign/certify site facility diagrams Final 3173 • Only need updated site facility diagrams if a facility is modified or there is a change in ownership • Reduces informational requirements –serial numbers and specifications are not required • Signed certification statements are not required
BLM Presentation 10/19/2016 3173 – End-of-Month Inventories Proposed 3173 • Would have required operators to measure and record inventories at the end of every month Final 3173 • Inventories may be done within 3 days of the end of the month through measurement or by estimation based on production and sales data • Explicitly allows the use of automatic tank gauging
BLM Presentation 10/19/2016 Subpart 3174: Oil Measurement
BLM Presentation 10/19/2016 3174 – Prescriptiveness Proposed 3174 • Included detailed procedures Final 3174 • References API standards where appropriate
BLM Presentation 10/19/2016 3174 - Proposed Uncertainty Requirements If the monthly volume averaged The overall volume measurement over the previous 12 months or uncertainty must be within: the life of the FMP, whichever is shorter, is: ≥ 10,000 bbl/month ±0.35 percent > 100 bbl/month and < 10,000 ±1.0 percent bbl/month < 100 bbl/month ±2.5 percent
BLM Presentation 10/19/2016 3174 - Final Uncertainty Requirements If the monthly volume averaged The overall volume measurement over the averaging period is: uncertainty must be within: ≥ 30,000 bbl/month ±0.50 percent < 30,000 bbl/month ±1.5 percent
BLM Presentation 10/19/2016 3174 - Final Uncertainty Requirements Averaging Period means the previous 12 months or the life of the meter, whichever is shorter. For FMPs that measure production from a newly drilled well, the averaging period excludes production from that well that occurred in or before the first full month of production. (For example, if an oil FMP and a gas FMP were installed to measure only the production from a new well that first produced on April 10, the averaging period for this FMP would not include the production that occurred in April and May of that year.) Note: This definition applies to both 3174 and 3175
BLM Presentation 10/19/2016 3174 – Industry Standards Proposed 3174 • References numerous industry standards published as of August, 2015 Final 3174 • Includes new/revised standards published as of July, 2016
BLM Presentation 10/19/2016 3174 – Gauging Accuracy Proposed 3174 • Would have required strapping table and gauging accuracy to ± 1/8 inch Final 3174 • Requires strapping table and gauging accuracy to ± ¼ inch for tanks 1000 bbl and less Retains ± 1/8 strapping table and gauging accuracy • for tanks greater than 1000 bbl
BLM Presentation 10/19/2016 3174 – Tank Gauging Proposed 3174 • Only allowed manual tank gauging Final 3174 • Includes tank gauging options of manual or automatic tank gauging equipment • Incorporates API standards 18.2
BLM Presentation 10/19/2016 3174 – Proving Proposed 3174 • Would have required proving every 50,000 bbls or quarterly, whichever comes first • No standards for master meter proving Final 3174 • Requires proving every 75,000 bbls or quarterly, whichever comes first, but no more frequently than once per month • Incorporates standards covering master meter proving
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