1. Unbundling Keep Whole Agreements
PASO-2017 Federal/Indian Compliance Workshop
Presented by:
Morris Miller, President
Miller Energy Consulting LLC C:

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Agenda
Walk-through Keep Whole Example
ONRR’s UCAs – Consider Unbundling Theirs Too
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3. Objectives – in less than fifteen minutes…
General understanding what ONRR may require under new regulations related to reporting plant products for gas sales under a Keep Whole sales agreement.
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Disclaimer
Obtain legal advice first. The intent of this presentation is to identify the components of Keep Whole agreements for discussion purposes only.
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My First Work Cubical
Lead Dispenser
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6. ONRR Response to Public Comment - KeepWhole
To aid lessees in their effort to
properly compute royalties for gas
processed under a keepwhole contract,
we published a reporter letter dated
November 21, 2012 (Reporter Letter).
The Reporter Letter provided guidance
on how to report keepwhole contracts,
including instructions for situations
where the lessee receives no NGL
volume or value data. It is important to
note that, in most cases, this
requirement does not increase the
royalties that a lessee pays because the
lessee may include the difference in
value between the gallons of NGLs that
the plant recovered and the MMBtuequivalent
of the NGLs returned to the
producer in its processing allowance.
ONRR Response: Our regulations
require lessees to base their royalties for
gas sold after processing on the values
of condensate, residue gas, and gas plant
products resulting from processing gas
produced from a Federal lease. Lessees
sell gas processed under keepwhole
contracts after processing, and,
therefore, lessees should value their gas
as such. This requirement also protects
the public from hidden processing
deductions that the lessee takes that
may exceed the 662⁄3 percent limit of the
value of the NGLs. Additionally,
numerous entities rely on and scrutinize
our data, making accurate reporting
essential.
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11. Report FL&U as PC15 – Excluding shrink from Drip Condensate
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12. Example from ONRR KW Letter
Mcf Shrink at = 2,833
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13. Checklist of Information Required
WH Gas Analysis
WH Production Data
Sales Prices
Residue Gas
NGL Prices (OPIS) C2 C3
IC4
NC4
IC5
NC5
C6+
Drip/Scrubber Condensate
Tariff(s) – NGL Pipeline
Fractionation Fees
UCAs
Gathering
Processing
Fees Allowed
Agreements
Transportation (Post Processing)
Gathering Fuel
Plant Fuel
Inlet Compressor
Heaters
Residue Compressor
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14. Plant Statement Calculations – Gross NGL
Gathering fuel from gathering invoice. L&U for illustration. Under KW reporting can assume no L&U when unable to determine plant inlet.
In this example Drip Condensate (PC05) is zero because time constraints. If PC05 is reported adjust the Pentanes on the plant statement.
Gas Analysis – Wellhead
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Calculate Residue
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16. Assumed UCA’s for Gathering and Processing
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17. The New KW Royalty Report
PC03
Allocate $ to all products.
Royalty Rate = 12.5%:
- PC07 “Proc Allowance” includes the $ processing fee plus $ NGL Fractionation.
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Summary – KW Reporting
Plant data is not available – create a plant statement from what’s available
ONRR Requires royalty on Residue and Plant Products
Calculate theoretical plant statement from
Well volumes
Well gas analysis
Pricing requires
Residue sales price
OPIS NGL Prices
NGL Tariffs
NGL Fractionation
Keep Whole Plus – future topic
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19. Other Unbundling Considerations
Variations in Gas Analysis
Distances to Plant (Pressure of Systems)
Inlet compression may not be used.
Gas Bypassing NGL Extractor – lean gas likely bypasses expander
Sales Point (Sold to end-user at lower Pressures)
i.e. Pressure of gas at tailgate could be higher than pressure where gas is sold.
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20. End of Keep Whole Presentation
Next topic – Watson Millican and Associates
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