Table Of Content

on ee ae et Oe a eaet e es SF — 88077004 EE ee y > w oe: —Ff, ep ~ D ; a hice I ooy e Roane ete faa Sethed ae l a Utes atesea e Se pate ly Ren ARES : =; = pais ” ne . 3 a7 hs see BLM IDrary 3v2: ~ ) SeDr enver-Fedeé ralaa:a piCons a[noet eher. :s ae 3idg, BO;G O-O21= 22 or: enue i MU2L L is ; TAKE Unit; ed States Department of the Interi; or APRIDEM IN pSep e RET Sema CE eeee es — a BUREAU OF LAND MANAGEMENT California State Office IN REPLY REFER TO: 2800 Cottage Way, Room F-2845 3100 Sacramento, California 95825-1889 CA-920/MT-920 MAR 27 1995 Memorandum To: Director, WO-100, MIB, Rm. 5660 Through: Oil and Gas Bureau Performance Review Coordinator (Del Fortner) Through: Assistant Director - Resource Use and Protection, WO-300, MIB, Rm. 5627 From: Co-Leaders, Bonding/Unfunded Liability Team Subject: Final Report - Bonding/Unfunded Liability Review - Oil and Gas Program This is the final report of the Bonding/Unfunded Liability Team. With the submittal of this report, the objectives of the charter authorizing this review have been met. The Decision Document associated with this report will be submitted to you in a separate package, but, it is also included in Attachment L for your information only. |4 i TrsFohielnecau oltmrliyome,nec sno odmuaamrn tedinr odecnachstoa imnomganeses ns da araptesap icroakendasmsgei ennt,ia sttatsr ieamnmtocpidetv eeerdtlah yte teroe,s ibimebspu tlva ee rwcyeoa rsrt kmapiaionbns dlsfeiau bmlloa eup.opn frt o Wtaheocefh pfdrtueeorpc taethrnheired oeuibnssecs leuine esav.tf eur roetm Wh aettoh anteia t t ttirhseee m cipfmotepmedomderr etantaldo n atgk toeitveooep n rc ntohmnteeos insdttuhe egr g heantesshx tetes.td eo ensure reasonable protective measures without unduly burdening industry or affecting the ultimate recovery of oil and gas reserves. We made an attempt to involv> the publics that are affected by these issues, including the general public, industry, | reengvairrdo,n maesn twaelll garso uap sn,u msbuerert ieosf, oaust rweealclh asm eesttaitneg sa,n d (aontdh ero fffeerdse raolf oatgheenrcsi)e.s . ByO vaenrd 6l0a0r gem atihlei nrgess pwoenrsee dfornoem tthweiscee piunb ltihciss was somewhat minimal, and not entirely uniform as to their suggested solutions. | We urge the highest priority be given to the implementation of these recommendations. We are available to provide interpretive and technical assistance to those assigned implementation responsibilities. CZu)t At Audurdou AreedL OCs honme Howard Lemm Robert M. Anderson Deputy State Director, Energy and Minerals Fluids Branch Chief Montana California BLM Library Denver Feder ai Center Bldg. 50, OC PO. Box 250o rSi d 4 Denver, CO 80225 9077004 68077004 2, 243! 4H3 9? oe TABLE OF CONTENTS TWO PAGES «60s wicca es e's e082 8 5818 EXECUTIVE SUMMARY PAGES 16 6 eve % slate leite ola isle) cence chee BONDING/ UNFUNDED LIABILITY COMMITTEE REPORT... ATTACHMENT A, 1 PAGE......---- DEFINITIONS ATTACHMENT B, 10 PAGES......- DEEPPOCKETS REPORT ATTACHMENT C, 1 PAGE.....---- STEERING COMMITTEE MEMBERS ATTACHMENT D, 3 PAGES.....-.-- PRELIMINARY OBJECTIVES SENT TO CUSTOMERS ATTACHMENT E, 32 PAGES......-- FINAL OBJECTIVES, ACTION PLAN AND ALTERNATIVES SENT TO CUSTOMERS ATTACHMENT F, 55 PAGES....:.- COMMENTS FROM CUSTOMERS AND BLM OFFICES ATTACHMENT G, 26 PAGES......- SOLICITORS GUIDANCE ON JOINT AND SEVERAL ATTACHMENT H, 4 PAGES.....-- . SOLICITORS GUIDANCE ON BONDING AUTHORITY ATTACHMENT I, 1 PAGE.....---- PPI INFLATION FACTOR OF 1960 BOND AMOUNTS ATTACHMENT J, 1 PAGE.....--- . SAMPLE LETTER TO MINIMIZE DUPLICATE BONDS ATTACHMENT K, 2 PAGES......-.-- SEGMENT OF NATIONAL PETROLEUM COUNCIL REPORT ON ABANDONED AND IDLE WELLS ATTACHMENT L, 6 PAGES......-- . DECISION DOCUMENT aayat e Ar sige Wee Ls i. Ae cay Aw " } ? ‘2 Wan 7 af bh! : x << 7 = ii ; yy 7 7 “ 7 ’ a ‘ feri: 4 | = § ro ; td a Re sey 7 agea | . Bi rit ee | P Be Megha in gu Oe a8 at A aad ‘ } Wd a mg os Chae a al te 7 YAAMMOe at IT es ) 15 . oa 7 Fy f ) eal, * aa x ; as ' ot a YTRITAALS date \oicaNoK thane pa eman nes un ee na at. oat ‘ = “- 4) enorrinciae eyeo s Soe ve eM y at L¢ ‘tom 21axooiseRa ee miata 2A16MaM SITTIMMOD oMidaETSs cease A r O° Tae: J y ‘STOLL NAAMIMTIIAT ., aie 2:4 OT TWa2 esV QUA MAIY WOLTOA PEVETOSCRO et x MId GUA exsMoreus nose STHAMMO: ee to % wet metre 4s rtp > |" ee - - . ty p< Ae 7S uhid may _ OMA TAIOL ie) SONACIVO | SHOTTOLIOR . . amy »e i 2e4 a0Ke c aaae gwen , an : Lat : oMtanod Mo souaarye erorrai ; Ri J \ ¥ or x) omy ¥ tay wes} : a iee h cs i ‘yTY aa a; e,' ay ara e QuOd Osel IO AOTIAD fornasaut ra Lie,f f s DA yea eh nk t . oS yp ‘ 5 ai Re’ 1: a7 a oir sos si sbeai Le STADIIIUG SS IMIMIM, ae. He ee _ p, > Late eo eS by, “a Pepe T “ shee ‘g P » lta ietsh e iatb eh ttt ,i aeone aged? : mys7 y lhe na ag Pan 7 ree a atl BUREAU PERFORMANCE REVIEW--OIL AND GAS PROGRAM BONDING AND UNFUNDED LIABILITY REPORT EXECUTIVE SUMMARY MARCH 1995 Empirical data indicates a need for significant improvement in BLM's bonding policy and the way Orphan wells are managed. There are over 300 wells on BLM and FS lands to be abandoned ‘with no accountable operator or sufficient bonds. There are about 6500 temporary abandoned wells and about 11,000 shut-in wells, both categories of which could lead to more orphan wells. In the last 4 years, taxpayers have paid $1.6 million to abandon 131 wells. Minimum bonds should be raised from $10,000 to $20,000 for individual bonds, and from $25,000 to $75,000 for Statewide bonds. The Nationwide bond of $150,000 would not change. To complement the increase in individual and statewide bonds, operators with temp. abandoned wells would be required to supplement their current bonding obligations, as follows: After 2 years in approved temporary abandoned status, operators would agree to plug wells on aé_e schedule acceptable to the field office-- and either increase the bond in place by $2.00 per foot of depth per well, or agree to pay a yearly fee into a BLM managed account that would be established to help offset the cost of abandoning orphan wells. This fee would be $100 per well per year, and would not be refundable. Personal bonds, such as Cash, CD'S, Letters of Credit, etc., woulda continue. BLM will retain collateral for 3 years. Accountability for failure to comply with oil and gas lease terms would be "joint and several". That is, multiple "record title owners", “operating rights owners", or "operators", are liable for 100% of the costs associated with non royalty lease obligations. An assignor continues to be responsible for obligations that accrued while it held the lease (including G@rainage and re- plugging of defective abandonments). BIM will hold responsible the party who failed to comply with the lease terms. An assignee assumes responsibility for mitigating existing environmental problems including the plugging of any unplugged wells, regardless of whether it uses those wells or contributes to the problem. This is consistent with MMS' offshore practice. MMS proposes to treat royalty liability onshore as proportional, however. ni tnemevoigml snsoitingla 20% been s B2 -hepsism ois allew nadqzO yaw ed? bag foq pert benebasds ad ot abast 24 os MIG co allow Pov ers exeni? ‘:abnod treinliiue to sots | nivjuca 000, £2 Jveds bas allew banob “ dsigzte\ stom of bssl Bigot doldw to est nokif{im.3.£2@ Sieg .eved AIBYSEGXS? ,Bisey pte som9 tot 000,082 of 000,052 moxt Boales ad shiwejss& xO 000,eve oF 000,469 mozd baw -spnasdo gon bluow COO 0288 30 Brod ebl' .2abnod sbiwsdsga baa fsubivibal at easesonl 6a Slatin on ot betiupez ed biluew eliew benobneds que? aie sasoeees sawollot ss ,anoistspiido patbned. tastes «leds * eutsta benobnseds yresoqied beverages aL mt sliubetoa s no allew guiq of sexpe Bileew eft sesetoat szedtte bas .=-eofttie bis 4 ent of. to flew teq diqeb. to Jost seq 00.69 yd anal tert Jnvooos hbepsasm Mid s otal est yisgey a ote to Jeo> of5 Jeatto glet oF haotelideges flew 139¢ ore ed bivow ee% ald? . .siley mao + -eldsbaules sd aan bivuow o3@ ,tibez> to exetgelt ,2'd9 cleat ‘cien et BIROY £ rot Lervessiios nbetex {Lie gasol asp bas Lio ttkw yigeos of emstie® 3 broves" olgtitoum .el teat oe 2 : sis ."aetotetseqo" to ,"etenwe sesel ytlsyoy mon tlw heseiovess 8: tens sncisaebtes 10% oldianeqeet “92 bois openis1b ' blot iiiw Mid uetnobnsd 2982 ire? eesel edt dtiw yignos or” naea e i ont paitepliim wor ystt y-ray psrebeinlaal yne to paipeueld?g pn, wm Lon | } xo allew enons usew tL “36 Sea Baie tre Lotte rae ‘aMM dttw Leto | ali T \ilidsll yiiseyor Fae igh qo" ' é + ia oF /eak ee we ; | " - 4 Seek a one time funding source to address orphan well abandonment. Ask the IRS to allow deductions for payment into well abandonment escrow accounts, provided that such accounts would follow the lease upon assignments. In-house directiont o review assignments, raise bonds beyond the minimum, when warranted, review shut-in status and develop data base for such, are also recommended. There are also recommendations that would reduce federal and state bonding duplication and to work more closely with the Forest Service. - ILlow ‘ana fiew ognt tnomysq. toti oe bluow etnvesoe dove sdcaas heblvoiy ,3 art yom woa erie é ‘ Aik, ms bnoyead sbrroc waked \ndnemipless wol% vear x i. be _a oe eageab ta éese pPpteeoar yB e qoleveb bas autete aietoda waiver, bein: oels ats oes! .bebtammpver. oale eis a.* e7 n ae ee eh Ik. ome nner priirod ststa bag Leyebe? soubor er ones * « cs 4 pa; o oe O| R he - ne .eoivie’ teetcl ofd atiw ylewslo exo Deiat a8 io Jeodiqub $+ ee panty) ba: lead ems n mix;r i o m a ma SS ee a v7 =