Current through Register Vol. 35, No. 18, September 24, 2024
A. Basis for
allowing shut in of oil wells: Pursuant to Section
19-10-6
NMSA 1978, the commissioner has determined that, because of a severe reduction
in the price of oil, the beneficiaries of state trust lands will be better
served if oil wells are allowed to be temporarily shut in rather than produced
at a low price.
B. Effective
period:
(1) Unless extended by the
commissioner after a subsequent notice and public hearing or terminated sooner
by a subsequent regulation of the commissioner after finding that the price of
oil is no longer severely reduced, 19.2.100.71 NMAC shall remain in effect for
a period of one year from the effective date of this rule.
(2) Any termination of 19.2.100.71 NMAC
before one year from the effective date of this rule shall not be effective
until 30 days after the commissioner has by certified mail sent notice of such
prospective termination to each lessee whose lease is being extended by the
operation of this section.
C. Any oil and gas lease issued by the
commissioner of public lands and maintained in good standing according to the
terms and conditions thereof and all applicable statutes and regulations shall
not expire if:
(1) There is at least one well
capable of producing oil located upon some part of the lands included in the
lease and all such wells are shut in because of the severe reduction in the
price of oil;
(2) The lessee timely
notifies the commissioner in writing, within 30 days of the date all oil wells
capable of producing have been shut in, with the following information: the API
(american petroleum institute well number), the well name and number, the lease
number, the date the well was shut in, and the date the last well on the lease
was shut in. Notice may be filed via electronic mail to
oilSIRnotice@slo.state.nm.us or may be mailed to the state land office. Said
notice shall be accompanied by a form C-103 filed with the oil conservation
division or other written oil conservation division approval of the shut-in for
each well shut in; and
(3) The
lessee timely pays an annual shut-in royalty within 90 days from the date all
wells capable of producing oil have been shut in and thereafter before each
anniversary of such date. Each payment remitted under this section shall
accompany a form made available by the commissioner which shall specify the
shut-in well, along with other applicable information. The amount of the
shut-in royalty shall be twice the annual rental due by the lessee under the
terms of the lease but not less than three hundred twenty dollars ($320) per
well per year, the fee established by the state legislature in Section
19-10-6
NMSA 1978. If the other requirements of this subsection are satisfied, the
timely payment of the shut-in royalty shall be considered for all purposes the
same as if oil were being produced in paying quantities until the next
anniversary of the date the well was first shut in; provided, that this
continues to be in effect.
(a) A state land
office lease may be maintained in effect by virtue of one or more wells located
within an area covered by a unit agreement where all such wells have been
temporarily shut in pursuant to this rule. For such shut-in wells located on a
state land office lease, the lessee of each state lease maintained in effect by
virtue of such wells shall pay royalty per well calculated by multiplying the
base shut-in royalty that would be due for that lease by the percentage of
acreage of that lease within the area; but in no event shall the lessee pay
less than three hundred twenty dollars ($320) per well per year.
(b) A state land office lease may be
maintained in effect by virtue of one or more wells located within an area
covered by a communitization agreement, or constituting a pooled unit or
cooperative area, where all such wells have been temporarily shut in pursuant
to this rule. The lessee of the largest state lease within the communitized
area shall pay the base shut-in royalty due for that lease; but in no event
shall the lessee pay less than three hundred twenty dollars ($320) per well per
year.
(c) If the date when a
shut-in royalty payment is due falls on a Saturday, Sunday or legal state or
federal holiday, the shut-in royalty may be timely paid if received on the next
calendar day which is not a Saturday, Sunday or holiday
(d) Under the standard business practice of
the state land office, the date that the state land office stamps or otherwise
marks the shut-in royalty payment or check establishes the date of actual
receipt by the state land office.
D. If the lessee fails to timely comply with
the requirements of Subsection C of 19.2.100.71 NMAC, no action by the
commissioner or the state land office may ratify, re-grant or revive the
expired lease or estop the commissioner from treating the lease as expired,
unless such relief is granted expressly in writing signed by the
commissioner.
E. Lessees utilizing
the temporary shut-in provisions of this rule, and assignees of any lease that
is maintained in effect by virtue of this rule, remain fully responsible for
compliance with all laws, regulations of the state land office and other state
agencies, and lease terms regarding operations on the leased premises,
including with respect to environmental protection. Lessees shutting in under
this rule, and assignees of any lease that is maintained in effect by virtue of
this rule, shall remain subject to all present state land office bonding
requirements, and shall be subject to any future bonding requirements upon
adoption. No lessee whose actions or omissions have caused expenditures to be
made from the state trust lands restoration and remediation fund may shut in
under the provisions of this rule until that lessee has reimbursed the state
trust lands restoration and remediation fund in the amount of the
expenditure.
F. Under no
circumstances will the commissioner refund any portion of the shut-in royalty
paid for a shut-in well up to the amount required by Subsection C of
19.2.100.71 NMAC.
G. Upon the
termination of 19.2.100.71 NMAC, automatically or by action of the
commissioner, a lease maintained in effect by payment of shut-in royalty shall
expire unless there is actual production in paying quantities within 90 days
thereafter, unless the time is further extended, in writing, on an individual
lease basis, upon request at the discretion of the commissioner; provided that
if the commissioner shortens the effective period of this rule to less than one
year pursuant to Subsection B of 19.2.100.71 NMAC, a lease maintained in effect
by payment of shut-in royalty shall expire unless there is actual production in
paying quantities within 120 days thereafter.
