NM Oil Conservation Division Presentation To The

Legislative Finance Committee June 15, 2016

• Current Industry Activity

• Plugging Activity & the Reclamation Fund • Bankruptcies • FY-16 Inspections & Violations • Spill & Leak Data • Roswell Ground Water Basin Update • New Enforcement Efforts

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9/18/2014 12/27/2014 4/6/2015 7/15/2015 10/23/2015 1/31/2016 5/10/2016

Num

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PD's

Date

Applications to Drill: Jan 1, 2015-April 1, 2016

NMOCD LFC Presentation Current Activity

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

Bar

rels

of O

il

Month

Oil Production: January, 2014-March, 2016

Latest Production: March, 2016 12,482,289 Barrels of Oil

NMOCD LFC Presentation Current Activity

2014 2015 2016

OIL RECLAMATION FUND & FEDERAL GRANT

PLUGGING EXPENDITURES

FY-14 FY-15 FY-16

NUMBER OF WELLS PLUGGED

45 23 25-State 10-Federal

PLUGGING EXPENDITURES

$1,529,215 $774,891 $778,472-State $318,295-Federal

NMOCD LFC Presentation Plugging Activity & Reclamation Fund

NUMBER OF ORPHANED/ABANDONED WELLS ON OCD’S ACTIVE PLUGGING PROGRAM

(CURRENT LIABILITY)

• Wells on State Land: 97 • Wells on Fee Land: 61 • Wells on Federal Land: 43

• Total: 201

NMOCD LFC Presentation Plugging Activity & Reclamation Fund

Bureau of Land Management Plugging Grant

• OCD Submitted an Application for a BLM Federal Plugging Grant in 2015

• OCD was Awarded Grant on 10/1/2015 • Total Grant Award is $5.0 MM • Grant Duration is 5 Years, with $1.0 MM to be Disbursed

to OCD on an Annual Basis • Funds are to be Utilized to Plug and Abandon Orphaned

Oil & Gas Wells on Federal land • In FY-16, OCD has Plugged 10 Wells and Spent $318,

295.00

NMOCD LFC Presentation Plugging Activity & Reclamation Fund

Bankruptcies

• OCD Has an Interest in 10 Active Bankruptcies Across the United States (4 in Texas, 2 in Delaware, 1 in Colorado, 1 in New York, 1 in New Mexico)

• OCD Does Not File Any Sort of Claim or Track Bankruptcies in New Mexico in Which an Operator Only has Federal or Tribal Lease Wells (e.g. Priority Energy, LLC Filed for Bankruptcy in May)

• OCD has Taken Measures to Reduce Potential Liabilities by Being Proactive in all Bankruptcies

• As Noted by State Land Commissioner, Oil Conservation Division, Senator Papen and Others, Increased Federal Regulations Will Result in Additional Costs to Producers.

NMOCD LFC Presentation Plugging Activity & Reclamation Fund

$0.00

$100,000.00

$200,000.00

$300,000.00

$400,000.00

$500,000.00

$600,000.00

$700,000.00

4/1/2012 10/18/2012 5/6/2013 11/22/2013 6/10/2014 12/27/2014 7/15/2015 1/31/2016 8/18/2016

Dep

osit

Am

ount

Date: Month/Year

NMOCD LFC Presentation Plugging Activity & Reclamation Fund

Reclamation Fund Monthly Deposit

Inspection Statistics by Inspection Type For the Period from 7/1/2015 thru 5/26/2016

Inspection Type Performed Violations

Complaint Response 2 0 Compliance Verification 10 0 Drill / Deepen /Re-Entry 381 0 Final Restoration 238 0 Initial Incident Inspection 517 124 Inactive Well Verification 4 0 Bradenhead 4,269 6 Pressure Test 1,442 2 MIT Witnessed - Other 173 4 File and Compliance 332 0 Plug / Plug Back 746 0 Pit Closure 43 0 Phone call 107 0 Plugging Witnessed 99 1 Rig 12 0 Routine/Periodic 36,713 650 Plugged Well Surface 255 1 Work Over 22 0

State Totals 45,365 788 ___________________________________________________________________ District I District II District II District IV (Hobbs) (Artesia) (Aztec) (Santa Fe) No. of Inspectors: 7 8 7 1

200

180

160

140

120

100

80

60

40

20

0 6/1/2014 9/29/2014 1/27/2015 5/27/2015

Date 9/24/2015 1/22/2016 5/21/2016

Monthly Reported Releases Statewide

NMOCD LFC Presentation Leak & Spill Data

20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

Crude Oil

Reported Spilled (bbls)

Produced Water

Reported Spilled (bbls)

6/1/2014 9/29/2014 1/27/2015 5/27/2015

Date 9/24/2015 1/22/2016 5/21/2016

Mon

thly

Vol

ume

(bbl

s)

Monthly Volume of Spilled Liquids

NMOCD LFC Presentation Leak & Spill Data

State of New Mexico Energy, Minerals and Natural Resources Department

Oil Conservation Division 1220 South St. Francis Dr.

Santa Fe, NM 87505

UNAUTHORIZED RELEASE Statistics Summary Report

1/1/2016 thru 3/31/2016

(1st Quarter of 2016)

Release Totals and District Breakdown

Month Days Releases Releases per day District 1 District 2 District 3 District 4

Volumes of Material Involved

January 31 128 4.1 53 54 20 1

February 29 185 6.4 112 50 23 0 March 31 89 2.9 42 27 20 0 Total 91 402 4.4 207 131 63 1

Month NGLs Reported

Spilled (bbls)

NGLs Reported

Recovered (bbls)

NGLs Reported

Lost (bbls)

Crude Oil

Reported Spilled (bbls)

Crude Oil Reported

Recovered (bbls)

Crude Oil

Reported Lost

(bbls)

Produced Water

Reported Spilled (bbls)

Produced Water

Reported Recovered

(bbls)

Produced Water

Reported Lost

(bbls)

Natural Gas

Reported Released

(mcf) January 157 0 157 1406 1014 392 4666 3694 972 67933

February 468 75 393 2405 1284 1121 18375 5763 12612 208282 March 222 10 212 1100 814 286 3495 2571 924 233609 Total 847 85 762 4911 3112 1799 26536 12028 14508 509824

NMOCD LFC Presentation Leak & Spill Data Quarterly Report Posted on OCD Website

ROSWELL GROUND WATER BASIN (RGWB)

• Large Area Defined by the Office of the State Engineer • Approximate Area: 120 Miles North to South 66 Miles East to West • Within a Portion of the RGWB There Exists Two Fresh

Water Aquifers. Shallow Aquifer: 450’ & Deeper Artesian Aquifer: 1200’-1400’ • Remaining Portion of RGWP: Deeper Aquifer Only • OCD Initially Contacted by Representative Townsend • Initial Reports Indicated Possible Water Contamination • OCD Attended 2 Public Meetings with Pecos Valley

Conservancy District, Office of the State Engineer & Various Legislative Members

• At Issue is Whether a Single Casing String Set Through Both Aquifers Provides Adequate Protection

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NMOCD LFC Presentation Roswell Ground Water Basin Map

ACTIONS TAKEN BY OCD

• OCD’s Primary Concern: Protection of Fresh Water • All Approved Applications To Drill Within the RGWB

Suspended by Emergency Order E-42 dated 4/25/16. Extended by E-42-A dated 5/4/2016

• Hearing to Extend APD Suspension Held May 10th. • Drilling is Allowed Within the RGWB Provided that OCD

Approves Revised Casing Programs • OCD is Conducting a Hearing in August to Establish:

• A Clearly Defined Area for the RGWB • A Casing/Cementing Program for Oil & Gas Wells That

Will Provide Protection of the Shallow Aquifer & Deeper Artesian Aquifer & Prevent Communication Between These Aquifers

NMOCD LFC Presentation Roswell Ground Water Basin

New Enforcement Efforts

• Working to Train Law Enforcement • Work with District Attorneys • Financial Assurance Compliance Enforcement • Prioritizing Enforcement Cases • Working with Operators out of Inactive Well

Compliance

NMOCD LFC Presentation Enforcement

David Catanach Director, NMOCD Energy, Minerals and Natural Resources Department David.Catanach@state.nm.us (505) 476-3468 OCD Website: http://www.emnrd.state.nm.us/ocd OCD Well Information and Operator Data: https://wwwapps.emnrd.state.nm.us/ocd/ocdpermitting/Data/Wells.aspx