1. ONRR General UPDATES copas spring 2019 meeting
Kimberly Jackson
Royalty Valuation, Team A

2. The Fine Print (Our Disclaimer)
Please note that the statements or opinions expressed in this ONRR presentation at the 2019 Spring COPAS Meeting do not necessarily represent the views of ONRR or the Department of the Interior.

3. A Huge Grand PASO Thank You!
We appreciated the opportunity to participate!
We valued the feedback that we received from those who participated!
Suggestions for ONRR focused topics for 2021 session are welcomed!
The sooner the better, as it gives us time to prepare and line up speakers!!

4. Interior’s New Secretary
David Bernhardt was confirmed by the U.S. Senate on April 11, 2019, taking office the same day.
David Bernhardt is the 53rd Secretary of the U.S. Dept. of the Interior.
Mr. Bernhardt replaces Ryan Zinke, who resigned in December of 2018.

5. ONRR Leadership Director Greg Gould Deputy Director Jim Steward
Coordination, Enforcement, Valuation and Appeals
Revenue Reporting and Compliance Management
Kimbra Davis
Audit Management
Jeff Carlson
Financial Management Esther Horst
Strategic Resource Management
Larry Schock
Indian Trust, Outreach & Coordination
Heidi Badaracco
Southern Federal Audit Shawna Schimke
Reference & Reporting Management
Lee‐Ann Martin
Information & Data Management
Judy Wilson
Western Federal Audit Judith Clark
Analytics & Risk Management
Mike DeBerard
Compliance Management
Jennifer Goldblatt
Infrastructure & Digital Services
Patricia Damon
State and Indian Audit Patrick Milano
Royalty Valuation John Barder
Enforcement
Appeals & Regulations Bonnie Robson

6. Royalty Valuation Staff! (We’ve Got NEW Folks!!)
Royalty Valuation Team A
Jahed Nabiyar (Geologist)
Tanyi Tanyi (Petroleum Engineer)
Christine Thomas (Geologist)
Royalty Valuation Team B
Kelsey Zabrusky (Petroleum Engineer)
Royalty Valuation Team C
Meghan Trujillo (Chemical Engineer)

7. Royalty Policy Committee
The Charter for the Royalty Policy Committee lapsed on April 21st, 2019
With this lapse, the Royalty Policy Committee has officially ceased operating at this time
All Subcommittee and Working Group meetings and activities will stop

8. Payor Handbook Updates
Royalty Valuation is actively working on revising our Payor Handbook.
Two separate versions:
federal valuation
Indian valuation
Created to allow for more timely updates that can be accessed electronically!
Active content is already published and ready:

9. 2016 Consolidated Rule (It’s Back….Right Now!)
2016 Consolidated Oil and Gas Rule IS CURRENTLY IN EFFECT, retroactive to January 1st, 2017!
The suit by CA and NM that challenged the repeal of the 2016 Rule was decided by U.S. District Court (N.D. Cal.) on March 29, 2019.
Both parties have sixty days to appeal
If this takes place, the appeal goes to the Ninth Circuit Court (CA)
Industry will be given six months to implement changes to comply with the rule.
We are actively planning on rule training sessions for Industry. Stay tuned!

10. Reach Out To Us! RoyaltyValuation@ONRR.gov
If you have questions, please feel free to contact us via our Royalty Valuation Mailbox!!

11. Royalty Valuation topics
Amy Lunt, Supervisor
Royalty Valuation Team A

12. The Fine Print (Our Disclaimer)
Please note that the statements or opinions expressed in this ONRR presentation at the 2019 Spring COPAS Meeting do not necessarily represent the views of ONRR or the Department of the Interior.

13. April 25, 2019 What we know TODAY:
As of March 29, 2019, the 2016 Rule is in effect
ONRR will comply with the Court’s Ruling
DOJ and SOL have 60 days to appeal
Information and guidance is forthcoming
Training is forthcoming 13

14. 2016 Rule Key Changes Changes to both oil and gas
Consolidated definitions
Added, modified, and removed some definitions
Rescinded Deep Water Policy
Instituted default provision
Transportation
Disallowed pipeline loss in non-arm’s-length transportation
All transportation costs reported as allowances (no “transportation factors”)
Removed provision allowing lessees to exceed 50% limit
Adjusted Standard & Poor’s BBB bond rate multiplier from 1.3 to 1
Clarified guidance and determination practices 14

15. 2016 Rule Key Changes Changes to gas only
Removed gas non-arm’s-length valuation benchmarks - value is now based on:
Affiliate’s first arm’s-length sale or
Index-based option
Expanded application of processed gas valuation and reporting
Removed provision allowing lessees to exceed the 66 2/3 % processing-allowance limit
Removed extraordinary processing allowance provision
Removed accounting for comparison 15

16. What Didn’t Change?
Some regulations didn’t change, or didn’t change much:
Few changes to federal oil
Indian oil and gas regulations – no changes
Marketable condition requirements – no changes
Unbundling requirements for arm’s-length gas dispositions – no changes 16

17. Resources District Court Case: 2016 Rule Regulatory Language:
See Order re Cross-Motions for Summary Judgment, Dkt No. 72, California v. DOI, Case No. C SBA (N.D. Calif.).
2016 Rule Regulatory Language:
DO NOT USE eCFR (yet) or 2017 or 2018 Book
DO see 81 FR (July 1, 2016)
DO see that the Final Rule is available on ONRR’s website: 17

18. Resources Dear Reporter Letters (high-level information):
Federal Oil and Gas Lessees (September 13, 2016)
Federal and Indian Coal Lessees (October 5, 2016) 18

19. Negative Index Prices in the Permian Basin
No negative royalty reporting:
OGOR reporting won’t change
Form ONRR-2014 reporting depends on your specific situation
You cannot report zero or a negative sales value
Contact Royalty Valuation with specific questions 19

20. Reporting Royalties on Liquefied Natural Gas (LNG)
Usually reported as PC 03, in MMBtu and Mcf
Eligible for transportation allowances
To be determined:
Can liquefaction costs be deducted? If so, how?
What is marketable condition for LNG?

21. In-field NGL Extraction (JT Skids, MRUs, etc.)
Small units that recover NGLs from one or several leases
Technology qualifies as “processing” under ONRR rules
Refrigeration
J-T valve cooling
Common in the Bakken because of flaring rules

22. In-field NGL Extraction (JT Skids, MRUs, etc)
Challenges:
Guidance is contract specific and design specific
Poor measurement of NGLs
Usually short term
Service contracts become sales contracts
BLM approval backlog
This is a great time to

23. Questions Anytime ? 23