New Mexico EnergyPlex Conference New Mexico EnergyPlex Conference BLM – New Mexico New Mexico EnergyPlex Conference Amy Lueders, BLM New Mexico State Director June 28, 2017

BLM-NM Onshore Oil and Gas Management Program Overview BLM – New Mexico BLM-NM Onshore Oil and Gas Management Program Overview BLM-NM manages: One of the largest oil and gas programs in the Bureau Over 45 million acres of mineral estate Over 2 million acres of Native American (Indian) mineral estate BLM-New Mexico has one of the largest oil and gas programs in the Bureau The four-state area has over 45 million acres of mineral estate and over 2 million acres of Native American (Indian) mineral estate

BLM-NM Onshore Oil and Gas Management Program Overview BLM – New Mexico BLM-NM Onshore Oil and Gas Management Program Overview Onshore oil production on federal lands (2014) Onshore gas production on federal lands (2014) 2015 statistics not posted on the ONRR website until late July/early Aug. In 2014: Oil NM largest producer of oil. Followed by Wyoming and North Dakota. 39% of the oil produced from federal lands came from NM. Gas 2nd largest producer of gas. Proceed by Wyoming and followed by Colorado. 22% of the gas produced from federal lands came from NM. Source: Office of Natural Resources Revenue. It does not include Indian lands.

Disbursements to State of New Mexico FY 2007-2015 BLM – New Mexico October 3, 2016 – NMOGA Annual Meeting Disbursements to State of New Mexico FY 2007-2015

Statewide Oil and Gas Lease Summary BLM – New Mexico Statewide Oil and Gas Lease Summary 2016 New Mexico Lease Summary: 7,881 Leases (total) 6,619 Producing Lease (84%) The Carlsbad Field Office manages: 3,005,350 acres of Federal minerals 1,852,959 acres are currently leased (61.6%) Since Sept. 2015: ~1% increase in “leases”. Roswell had largest increase. ~1% increase in “producing leases”. ~1% decrease in “leased acres”. ~1% increase in “producing leased acres”.

BLM Pecos District Statistics BLM – New Mexico BLM Pecos District Statistics Includes Roswell & Carlsbad Field Offices and Hobbs Field Station FY16 Lease Sale Summary October sale for Carlsbad, withdrew parcels in Farmington. 14 Leases issued in Carlsbad. April sale for TX/OK/KA, ~32parcels in TX deferred. Parcel near lake around Dallas and USFS withdrew consent. Bureau or Reclamation and US Army Corp. parcels also removed. 11 parcels in OK and KA went up for bid, money received, but parcels pending issuance. Sept sale scheduled for Roswell, ~36 parcels Since Sept 2105: Number of sales the same. Bonus Bids in NM down by $41,813,639 or ~59%

Multi-Pay Development BLM – New Mexico Some operators are estimating 60 horizontal wells per section Marathon Oil Company, North American Shale Magazine

BLM – New Mexico 70% leased for oil & gas 84% held by production Looking at this map I would like to point out that a portion of Chaves County is in the west side of the field office, Eddy County is in the middle and Lea County lies in the east. One challenge we do face is the extent of federal acreage that is currently leased. You will note that looking at this map, there is not much that is not leased. The Permian Basin is an old oilfield that has been in existence since the 1920’s. Due to all this leasing, our Resource specialists will have to rely heavily on implementation level decisions, made after the Record of Decision is signed, to accomplish goals and objectives set forth in the new RMP. Many of these implementation level decisions are included in an appendix to the DEIS. Such decisions include drilling mitigations in cave/karst areas and environmental protections for frack ponds and tank batteries, to name a few. 1,930,358 ac of federal oil & gas leases Leaves 605,883 acres of federal surface unleased for oil & gas 70% leased for oil & gas 84% held by production ~25% of Federal onshore oil production comes from CFO CFO processed 26% of APDs submitted BLM-wide (2016)

Approved APDs by Field Office FY 2007-2017, YTD (*June 21, 2017) BLM – New Mexico Approved APDs by Field Office FY 2007-2017, YTD (*June 21, 2017)

APD Statistics for FY 2017, YTD (as of June 21, 2017) BLM – New Mexico APD Statistics for FY 2017, YTD (as of June 21, 2017) San Juan Basin Reason for more APD’s now than at beginning of year: Received 1 additional APD since start of FY APD’s on Indian lands require more steps and increase processing times.

Roswell Area Renewables BLM – New Mexico Roswell Area Renewables Major project on the radar: Corona Wind Test Project Application has been filed by Cowboy Mesa Wind LLC. 200,000 acres total (BLM, State and Private lands) Planned to connect to the SunZia Transmission Line Estimated 1500-1750 MW of energy generation NEPA analysis is currently underway prior to issuance of right-of-way for wind testing.

National BLM Priorities BLM – New Mexico National BLM Priorities Making America Safe Through Energy Independence Making America Great Through Shared Conservation Stewardship Making America Safe Restoring Our Getting America Back to Work Serving the American Family

Current BLM Initiatives BLM – New Mexico Current BLM Initiatives Hydraulic Fracturing (HF) Rule June 17, 2017 – Proposal to rescind HF Rule Office of Management and Budget (OMB) Currently under review by OMB Timeline March 2015 - BLM issues final regulations. June 2015 - U.S. District Court in Wyoming issues a preliminary injunction of the hydraulic fracturing rule. Notes Court ruled that the BLM does not have the authority to establish rules over fracking on federal and Indian lands. The court ruled solely on statutory authority, basically reiterating the points made in the preliminary injunction ruling.  U.S. District Judge Scott Skavdahl said Congress had not granted the BLM that power, and had instead chosen to specifically exclude fracking from federal oversight. EPA maintains the authority to regulate hydraulic fracturing operations involving the underground injection of diesel fuel. The court also reiterated its narrow view of the authority BLM has under the Mineral Leasing Act and FLPMA. The BLM filed an appeal to the Tenth Circuit Court of Appeals. simmonsandfletcher.com

Current BLM Initiatives BLM – New Mexico Current BLM Initiatives Waste Prevention Rule June 9, 2017 – Federal Register Notice published postponing (2 yrs) future compliance dates due to pending litigation Timeline Published Federal Register Notice on Feb. 8, 2016 Comment period closed April 22, 2016 Status We received more than 330,000 comments, of which approximately 1,000 were unique (250 from organizations/750 from citizens). A contract has been awarded to Abt & Associates to assist in comment review and analysis.  The contractor extracted specific comments and categorized them into discrete topics for the BLM V&F Team.  The BLM V&F Team have had several meetings with the ASLM, most recently on June 30, to discuss potential policy changes based on their continuing review of the substantive comments.  The V&F Team is meeting every day to work through technical changes in response to comments and queue up proposed policy changes requiring decisions by management.  Purpose Reduce waste of natural gas Clarify when produced gas lost through venting, flaring, or leaks is subject to royalties or royalty free The Mineral Leasing Act of 1920 (MLA) requires the BLM to ensure that lessees ‘‘use all reasonable precautions to prevent waste of oil or gas developed in the land . . . .’’ 30 U.S.C. 225. Venting, flaring, and royalty-free uses of oil and natural gas on BLM administered leases are currently governed by NTL–4A, which was issued by the U.S. Geological Survey on December 27, 1979, before the BLM assumed oversight responsibility for onshore oil and gas development and production. NTL–4A prohibits venting or flaring of gas well gas, and it prohibits venting or flaring of oil well gas unless approved in writing by the ‘‘Supervisor.’’ Both prohibitions are subject to specified exemptions for emergencies, certain equipment malfunctions, certain well tests, and vapors from storage vessels. Over the past 36 years since NTL–4A was issued, technologies and practices for oil and gas production have advanced considerably. Outreach & Public Concerns We conducted a series of Outreach meeting pairs (Tribal in the morning/Public in the afternoon) at four locations including Farmington, NM, on February 16, OK City, OK, on February 18, Denver, CO, on March 1 and Dickinson, ND, on March 3.  All public sessions were well attended with approximately 700 participants in Farmington, 200 in Denver and Dickinson, and 100 in OK City.  Major feedback seems to be 1) what is perceived as an overwhelming cost and impact of the leak detection and repair (LDAR) portion of the regulation, primarily in gas-producing basins like Farmington with many low producing wells; 2) the lack of timely ROWs processing leads to associated gas production that can’t be captured in a timely manner; and 3) of course more regulation is not needed, especially given the market conditions.

Current BLM Initiatives BLM – New Mexico October 3, 2016 – NMOGA Annual Meeting Current BLM Initiatives Idle Well IM Status WO priority is on wells >25 years Statewide, there are currently 645 idle wells (7 to >25 years) Field offices will be sending out notices for the operators to plug or produce these wells

Current BLM Initiatives BLM – New Mexico October 3, 2016 – NMOGA Annual Meeting Current BLM Initiatives AFMSS2 Sundry/Well Completion Modules Status AFMSS 2 has been implemented nationally Currently working to refine AFMSS 2 APD module Full implementation of all modules anticipated January 2018

Pecos District Challenges BLM – New Mexico Pecos District Challenges Recruitment and Retention of Staff Increased Permitting Workload APDs Sundries ROWs Completion of Resource Management Plan (RMP) AFMSS 2 Implementation NOS Received since May 2016 1,175 Average 98 per Month APD’S Approved 2016 CFO 910 Average 76 Per Month APD’S Received 2017 CFO 471 Average 59 Per Month APD’S Approved 2017 CFO 379 Average 47 per Month 658 Pending Applications for Rights-of-Way Seven(7) Proposed Category VI projects ( Cost Recovery requiring 50+ working hours) 4-Communication Sites (Oil &Gas related)

BLM – New Mexico Overcoming Challenges- Current and Ongoing Pecos District Office Initiatives Commingling Agreements Working with industry to increase efficiencies in processing and approval AFMSS II Industry Training Working with AFMSS 2 contractor to improve functionality Rights of Way (ROWs) Working with Operators and 3rd party water contractors to improve communication and processing times for fresh water and produced water temporary pipelines ROWs 65-70 % of APDs submitted by industry are incomplete. Working to reduce that number

Overcoming Challenges -Assistance BLM – New Mexico Overcoming Challenges -Assistance Vernal, Oklahoma and Farmington BLM Offices are assisting with permitting Carlsbad receives priority in hiring new positions

Overcoming Challenges- Partnerships BLM – New Mexico Overcoming Challenges- Partnerships Permian Basin Programmatic Agreement 2012 Secretarial Potash Order Implementation of 43 CFRs Permian Basin programmatic agreement BLM worked closely with IPANM, SHPO, Advisory Council, and others on the most recent cultural programmatic agreement. Helps industry – quicker cultural clearances, reduces APD processing times. Helps BLM accomplish cultural surveys in a proactive manner. 2012 Sec. Potash Order Many folks in the oil and gas industry in NM have and continue to be involved in finding solutions to implement the order. Industry has been particularly key in the development of drill islands and the establishment of development areas. 3173: Site Security 3174: Oil Measurement 3175: Gas Measurement

Overcoming Challenges-Support BLM – New Mexico Overcoming Challenges-Support Pecos District Office is receiving support from all levels: City, Counties and State BLM Nationally Oil and Gas Industry

RMP Updates Carlsbad Resource Management Plan (RMP) Revision BLM – New Mexico RMP Updates Carlsbad Resource Management Plan (RMP) Revision Fall 2017 (September) - 90-day public comment period begins November 2017 through August 2018 - Public comment analysis and revisions (which includes Preliminary Proposed RMP/Final EIS preparation and a subsequent internal review and comment) September 2018 - Proposed RMP/Final EIS Publication begins  May 2019 - ROD signed 

BLM – New Mexico Questions?

75% of O&G revenue from Federal minerals in NM (2015) $614.8M in revenue (2015); half went to the State The Carlsbad Field Office is located in the extreme southeastern corner of New Mexico. Within the field office boundary, there is a substantial amount of both Private and State Trust lands, as well as a National Park, a National Forest, two State Parks, Bureau of Reclamation lands, and the Waste Isolation Pilot Plant, run by the Department of Energy. So as you can see, given land tenure alone, we work within an area containing multiple constraints on our decision space. The Field office includes over 10 cities and towns, ranging in population from a few hundred to over 60,000. The two top employers, the potash mining and oil and gas industries, both operate to a great extent on public lands. 20% of all jobs in Eddy and Lea counties are within these industries. The management of BLM lands in SE NM plays heavily into the areas economics. We have over 15,000 active wells producing federal minerals in the area and this contributes a large amount of royalty payments to both the State of NM and the Treasury. 25% of all Federal onshore oil production and 75% of the nation’s potash supply comes from our field office. However, not only does the CFO support these valuable extraction industries, we also manage some amazing other resources such as world class cave and karst areas, sensitive special status species habitat, three river systems, great expanses of sensitive soils, a healthy livestock industry, and rapidly growing recreation areas, to name a few. In addition, through our Restore New Mexico program and in cooperation with our partners we have worked on brush control and legacy oilfield reclamation projects to restore over 1.4 million acres in southeastern NM since 2005. The CFO is currently operating under the 1988 Carlsbad RMP, with the 1997 amendment for Oil and Gas, and the 2008 amendment for Special Status Species. Booming oil and gas, new technologies, a growing interest in recreation opportunities, and rapid area population growth are just a few reasons that CFO is in need of a new, comprehensive, Resource Management Plan. In today’s briefing, you will see a broad range in the alternatives. This broad range allows comments from the public to assist in decision making as well as providing for a more defensible document. We hope to move forward in order to not further delay oil and gas leasing and provide certainty for public land users in their business planning. We would like to note that as we worked on these final items our alternatives in the draft plan did not change. 2.1M acres Federal surface 2.8M acres Federal minerals 1M acres reclaimed/restored