N.M. Admin. Code § 19.2.100.71

Current through Register Vol. 35, No. 23, December 10, 2024

Section 19.2.100.71 - TEMPORARY SHUT-IN OF OIL WELLS DUE TO SEVERE REDUCTION IN THE PRICE OF OIL

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.

N.M. Admin. Code § 19.2.100.71

19.2.100.71 NMAC, Rn, SLO Rule 1, Section 1.072, 12/13/2002, Reserved by New Mexico Register, Volume XXVII, Issue 12, June 30, 2016, eff. 6/30/2016, Amended by New Mexico Register, Volume XXVII, Issue 20, October 31, 2016, eff. 10/31/2016, Amended by New Mexico Register, Volume XXXI, Issue 09, May 5, 2020, eff. 4/22/2020, Amended by New Mexico Register, Volume XXXI, Issue 15, August 11, 2020, eff. 8/11/2020