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Federal Oil And Gas Law Essay

1741 words - 7 pages

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Federal Law

- Federal Leasing

In order for the Department of Interior (DOI) to decide which public lands will become available for oil and gas leasing the Bureau of Land Management (BLM), an agency within the DOI must conduct a Resource Management Plan (RMP) guide the BLM in deciding how to best use federal lands. An employee of the BLM known as the “Field Manager” is tasked with preparing the plan. The steps to create and finalize a RMP are:

* Use input from the public, Federal agencies, State & local governments and Indian tribes to identify potential issues.
* Develop the criteria for the plan, which the BLM will make public before ...view middle of the document...

- Federal Environmental Laws

The “petroleum exclusion” can be found in 42 U.S.C.A. § 9601 ¶ 14.
One substance, which you may encounter as an operator or lessee, which would be covered by the exclusion would be soil that has been mixed with petroleum products as well as unrefined and refined gasoline.
On the other hand, tank bottoms, the sediments and residues gathered at the bottom of storage tanks, are considered hazardous under CERCLA and thus are not covered by the petroleum exclusion.

- Federal Lease Royalty & The “Marketable Condition” Rule

The “marketable condition” rule as it applies to federal leases requires that royalties exclude the expenses for putting gas into a marketable condition. Putting gas into marketable condition includes such actions as gathering, processing, dehydrating and compressing.

There is an important distinction we need to make between gathering and transporting. As an industry term “gathering” is widely meant to mean physically moving gas from the ground to a point at which it is ready to be introduced into a commercial pipeline (usually a compressor). “Transportation” on the other hand is meant to mean bringing gas from the field and into market and eventually to the end user.

This is important because under these definitions gathering would be considered as an operation to bring the gas to marketable condition and thus would not affect royalties. Transportation though is seen as an “after the fact” operation and will provide for cost sharing.

Oil and Gas Transactional Law

- Operating Agreement (JOA)

- Purpose of Exhibit “C”

Exhibit “C” are the COPAS accounting procedures. From a more operational standpoint the main purpose of the COPAS is to lay out the responsibilities and obligations of each of the parties to the Operation agreement, more specifically it outlines how the operator may charge non-operators for costs incurred during the joint venture and what costs are able to be charged. From a pure accounting standpoint the main benefit is that COPAS standardizes most of the accounting procedures thus making analyzing and auditing quicker and easier.

Some important provisions that you may want to investigate would be:
* Section III.1(a) – be aware first, of how the technical services will be charged. If the option remains I recommend choosing Alternative 2 which will allow technical services to be covered by the overhead rate rather than charged to the Joint Account
* Section III.1(b)-(c) – These provisions will determine how the overall overhead will be charged, either or a fixed rate per well per month or on a percentage of cost basis. If the option remains I advise the fixed rate which will leave you with a predictable expense schedule and will protect against unexpected costs.

- Purpose of Exhibit “E”

Exhibit “E” is the gas balancing agreement who’s purpose is to put in place procedures for keeping track of gas production and settling...

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