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Santa Fe NM 87501

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Statement regarding Emergency Amendment

Re:      Emergency Amendment of New Mexico State Land Office Rule 19.2.100.71 NMAC, “Temporary Shut-In of Oil Wells Due to Severe Reduction in the Price of Oil”

The Commissioner of Public Lands intends to file an emergency amendment to a New Mexico State Land Office Rule pertaining to oil and gas leases, 19.2.100.71, New Mexico Administrative Code (NMAC).  Previously, the rule expired automatically pursuant to Section 19-10-6 NMSA 1978, but remains codified in the NMAC.  This amendment will be filed on an emergency basis, in accordance with Section 14-4-5.6 NMSA 1978 and 19.2.16.14 NMAC, in order to avoid imminent peril to the public health, safety or welfare in light of the public health emergency declared by the Governor and Department of Health, and other circumstances related to the COVID-19 global pandemic.  Specifically, the Commissioner intends to exercise her authority to allow the temporary shut-in of oil wells in response to a severe reduction in the price of oil and is doing so on an emergency basis to (i) respond to a sudden, severe and unexpected drop in price; and (ii) allow lessees under State Land Office oil and gas leases to shut in wells temporarily without expiring their leases, thereby discontinuing operations that might endanger public health, safety or welfare.

  1. The Commissioner’s authority to allow temporary shut-in of oil wells.

Under statutory State Land Office oil and gas leases, the lease remains in effect for a certain term to allow the lessee time to explore for oil and gas and bring the lease into production.  After the expiration of the “primary” and “secondary” terms of the lease, the lease remains in effect so long as oil and/or gas is produced in paying quantities from the lands covered by the lease.  See Sections 19-10-4.1 through 19-10-4.3, NMSA 1978. 

Under Section 19-10-6, NMSA 1978, if, after notice and public hearing, the Commissioner finds that because of a severe reduction in the price of oil the beneficiaries of state trust lands are ultimately better served if oil wells are allowed to be temporarily shut in rather than produced at a low price, the Commissioner may promulgate a regulation which allows such wells to be shut in without expiring the lease where the well is located. (The lease includes an analogous provision allowing the lease to remain in effect where there is a gas well capable of producing in commercial quantities which is shut in due to the inability of the lessee to obtain a pipeline connection or to market the gas.). 

  • Sudden, severe and unexpected drop in the price of oil.

Under statutory State Land Office oil and gas leases, the lessee/operator pays as royalty the cash value of the oil or gas produced and saved from the leased premises and marketed or utilized, such value being the net proceeds derived from the sale of such gas in the field.  The benchmark price for the sale of oil produced under State Land Office oil and gas leases is the price for West Texas Intermediate Crude Oil (WTI). 

When markets closed on December 30, 2019, the WTI price was $63.05/barrel. The WTI price dropped throughout the month of January, so that the closing price on February 3, 2020 was $50.32/barrel.  After a slight uptick in the price in the first half of February, the WTI price began a sudden, severe and unexpected drop that largely has continued to the present.  On March 30, 2020, the WTI price closed at $20.09/barrel, roughly one-third of the price just a few months before on December 30, 2019.  The drop in the price has been attributed to a price war between the Organization of Petroleum Exporting Countries (OPEC) and Russia, exacerbated by a significant decline in demand associated with the worldwide outbreak of COVID-19 and a severe slowdown in economic activity associated with efforts to contain the disease.  It is unknown how long the price war and the decline in demand will persist.

The sudden, severe and unexpected drop in the price of oil presents a situation where lessees/operators under State Land Office oil and gas leases may wish to act quickly to temporarily shut in oil wells without causing the expiration of their lease.  The Commissioner has determined that the beneficiaries of state trust lands will be better served by allowing oil wells to be temporarily shut in on an emergency basis rather than producing at the currently prevailing extremely low price.

  • COVID-19 public health emergency.

On March 11, 2020, the Governor of the State of New Mexico declared in Executive Order 2020-004 (“EO 2020-004”) that a Public Health Emergency exists in New Mexico under the Public Health Emergency Response Act in response to the COVID-19 pandemic.  On March 12, 2020, the Secretary of the Department of Health issued a Public Health Emergency Order to Limit Mass Gatherings Due to COVID-19, which limited certain public gatherings.  On March 23, 2020, the DOH Secretary, declaring that the further spread of COVID-19 in the State of New Mexico poses a threat to the health, safety, wellbeing and property of the residents in the State due to, among other things, illness from COVID-19, illness-related absenteeism from employment (particularly among public safety and law enforcement personnel and persons engaged in activities and businesses critical to the economy and infrastructure of the State), potential displacement of persons, and closures of schools or other places of public gathering, issued an amended order further limiting public gatherings and directing that businesses, except those entities identified as “essential businesses”, to reduce the in-person workforce at each business or business location by 100%. The amended order allows “essential businesses” to remain open provided they, among other things, (i) minimize their operations and staff to the greatest extent possible; and (ii) adhere to social distancing protocols and maintain at least six-foot social distancing from other individuals, avoid person-to-person contact, and direct employees to wash their hands frequently.

While the amended public health emergency order identifies oil drilling, oil refining, and natural resources extraction or mining operations as “essential businesses,” those operations are still subject to the restrictions set forth.  As a result, lessees/operators under State Land Office oil and gas leases are subject to certain restrictions that may impair their ability to explore for and produce oil and thereby cause their leases to expire.  For example, the labor-intensive work of drilling of an oil well involves more than 10 people working at times in close proximity, as does hydraulic fracturing of the well and other well completions and recompletions.  On-site work as part of day-to-day production includes inspection of centralized tank batteries and well maintenance.

Recognizing the public health restrictions on lessees/operators and wanting to encourage compliance with them, the Commissioner is exercising her authority under Section 19-10-6 NMSA 1978 on an emergency basis to allow the temporary shut-in of oil wells to allow lessees/operators under State Land Office oil and gas leases to shut in oil wells temporarily without expiring their lease and thereby discontinue operations that might endanger public health, safety or welfare.

For the reasons addressed above, the Commissioner intends to amends Rule 19.2.100.71 NMAC via emergency rulemaking, in accordance with NMSA 1978, § 14-4-5.6 and 19.2.16.14 NMAC.  This emergency amendment is temporary, and will remain in effect for 30 days, unless within that time the Commissioner commences proceedings to adopt the rule under the normal rulemaking process, in which case the emergency rule will remain in effect for up to 120 days.

State Land Office Initiates Emergency Rulemaking Process to Allow Temporary Shut-In of Oil Wells

NM State Land Office logo

Stephanie Garcia Richard, Land Commissioner

State of New Mexico

FOR IMMEDIATE RELEASE:

April 3, 2020

Contact:

Angie Poss, Assistant Commissioner of Communications

505.470.2965

aposs@slo.state.nm.us

State Land Office Initiates Emergency Rulemaking Process to Allow Temporary Shut-In of Oil Wells

SANTA FE, NM – Today the State Land Office announced that it would initiate emergency rulemaking processes to allow oil lessees to temporarily stop producing without penalty for at least thirty days, with a possible extension up to 120 days when Commissioner Garcia Richard initiates a longer-term rule change process.  

“The COVID-19 pandemic brought home, almost overnight, the risks of our dependence on oil and gas. This was compounded by Russia and Saudi Arabia’s relentless price war intended to bankrupt American producers. Here in New Mexico, the ripples of this situation hits hard, not only when thinking about the state budget, but within communities where people rely on the boom for jobs to support their families,” Commissioner Garcia Richard said. “Due to these factors, I’ve determined that it is in the best interest of the beneficiaries of state trust land – our public schools, hospitals, and universities – as well as the employees dependent on this industry, that we allow companies to apply for these temporary shut-ins until we can better predict the future of the Permian Basin.”

The overproduction of oil in the world market has not only drastically reduced the price of oil, but it has also created a situation where some U.S. companies are being forced to scale back production because pipelines and storage facilities are at holding capacity.  

Public comment is encouraged and will be accepted for two business weeks, until Friday, April 17, 2020.

A tele-hearing to discuss the rule and hear further public comment will take place Friday, April 17, 2020 at 1:00 pm.

Click here for details of the tele-hearing and to read the emergency rule draft.

Oil, gas, and mineral production, ranching and farming, and commercial development on State Trust Lands support public schools, seven universities, New Mexico Military Institute, New Mexico School for the Deaf, New Mexico School for the Blind and Visually Impaired,  three hospitals, correctional facilities, water conservation projects, and public building construction and repair.  In fiscal year 2019, the State Land Office collected $1 billion from lease payments, oil and gas lease sale earnings, rights-of-way, permits, interest, fees, and oil, gas and mineral royalties.

TEMPORARY SHUT-IN OF OIL WELLS DUE TO SEVERE REDUCTION IN THE PRICE OF OIL Tele-Hearing on 4.17.2020

Contact: Angie Poss, Assistant Commissioner of Communications, aposs@slo.state.nm.us

The State Land Office will hold a tele-hearing to discuss consideration of Emergency Rule 19.2100.71 and to hear comments from the public:

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

TELE-HEARING INFO

WHEN: Friday, April 17th from 1:00 PM to 2:30 PM

WHERE: ONLINE

Please join my meeting from your computer, tablet or smartphone.
https://global.gotomeeting.com/join/294630917

You can also dial in using your phone.
United States: +1 (571) 317-3122

Access Code: 294-630-917

New to GoToMeeting? Get the app now and be ready when your first meeting starts:
https://global.gotomeeting.com/install/294630917

WHO: State Land Office Office of General Counsel, Assistant Commissioner of Oil Gas and Minerals, and YOU, members of the public that would like to provide comment on the emergency rule.

PARTICIPANTS ARE ENCOURAGED TO SUBMIT QUESTIONS OR COMMENTS AHEAD OF TIME AT https://www.nmstatelands.org/public-comment/

View the draft emergency rule change in advance of the hearing:

https://www.nmstatelands.org/wp-content/uploads/2020/04/Rule-100.71_-2020-04-03.pdf

February Monthly Oil and Gas Royalty Revenue Tops $100 Million for First Time

FOR IMMEDIATE RELEASE

March 6, 2020

Contact:

Angie Poss, Assistant Commissioner of Communications

505.470.2965

aposs@slo.state.nm.us

Monthly Oil and Gas Royalty Revenue Tops $100 Million for First Time

SANTA FE, NM – The New Mexico State Land Office has broken yet another revenue record after receiving $108,916,517 in royalty payments for oil and gas operations on state trust land in the month of February. Revenue received from royalty payments are distributed from the State Land Office to the State Investment Council for investment in the Land Grant Permanent Fund.

“As projected, the Land Office is on track to raise another billion dollars this year for our public schools, hospitals, universities, and other public institutions. For the first time in history, our monthly royalty revenue will be near or over $100 million for four months in a row,” Commissioner Garcia Richard said. “The money that we receive in this office is vital to all New Mexicans – whether that money is from royalty payments from oil and gas, outdoor recreation permits, renewable energy, or rights of way easements – almost every penny goes to making our state a better place all while saving taxpayers money that would otherwise be needed to pay for our public institutions.”

The State Land Office’s Royalty Management Division reports royalty revenue three months after production. The $108,916,517 royalty revenue reported for the month of February, 2020 is royalty paid on production from November, 2019.

Melrose Woods – Trash Removal and Trail Creation Project

Contact: Angie Poss, Assistant Commissioner of Communications, aposs@slo.state.nm.us

The State Land Office will hold a tele-town hall to hear feedback from residents regarding a proposed project to remove trash from the Melrose Woods recreational area and create a trail for birdwatchers and other recreationists.

TELE-TOWN HALL INFO

WHEN: Thursday, April 9th from 3:30 to 5:00 PM

WHERE: ONLINE

Via the web, use Google Chrome to visit this address:https://app.gotomeeting.com/
Enter meeting ID: 870-358-245

Via the GoToMeeting app, join the meeting from your computer, tablet or smartphone.
https://global.gotomeeting.com/join/870358245
You can download the app here: https://global.gotomeeting.com/install/870358245
You can also dial in using your phone.
United States: +1 (872) 240-3212

Access Code: 870-358-245

WHO: State Land Office Surface Resources Division Staff and YOU, members of the public that would like more information or would like to provide feedback or expertise regarding the removal of trash and creation of a trail at Melrose Woods

PARTICIPANTS ARE ENCOURAGED TO SUBMIT QUESTIONS OR COMMENTS AHEAD OF TIME AT https://www.nmstatelands.org/public-comment/

View the potential project plans in advance of the meeting:

Melrose Woods Trash Removal and Trail Creation Proposed Project

Statement from NMSLO Tribal Liaison regarding Pueblo, Tribal visitation during COVID-19 Health Emergency:

Contact: Rachael Lorenzo

rlorenzo@slo.state.nm.us.

Guwaadtzii ho’baa (hello, everyone!)!

We know that these are uncertain times and we are concerned for the health and wellbeing of everyone in the world, especially those who have contracted COVID-19, their loved ones, and those who have passed on as a result of COVID-19. At the New Mexico State Land Office, we are following the Center For Disease Control’s guidelines for social distancing, frequent handwashing, and cleaning frequently touched surfaces often. As many of you know, many other state agencies in New Mexico are following these same guidelines and 95% of our staff are working remotely from home to follow Governor Lujan Grishams recent “stay at home” order for the entire state.

On March 21, 2020, the All Pueblo Council of Governors released a statement, requesting for the public to temporarily refrain from entering Pueblo reservations and nearby recreational areas. As the Tribal Liaison, I want to urge the public to heed the sovereign Tribes’ and Nations’ ask to not seek refuge on reservations or nearby recreational areas. There are seemingly healthy people who may be carriers of COVID-19 and may unintentionally pass it to tribal community members.

Our Indigenous elders are holders of traditional and cultural knowledge and more than ever, it is of the utmost importance to protect them the best we can, given these circumstances. Tribes across the country, not just in New Mexico, do not have all the supplies needed to address this pandemic and the increase of visitors poses additional health risks to Indigenous peoples when there are severe health disparities that are unique to Indigenous peoples, both on and off reservations. More than 70% of Indigenous peoples live away from their respective reservations or tribal land base and many of these people still rely in Indian Health Services (IHS) for healthcare.

“In Cochiti Pueblo, we have seen an overcrowding of recreationalists from outside our communities coming here and to surrounding areas to hike, and while we would otherwise welcome visitors to our lands, we are worried for the more vulnerable demographics of our community and the lack of resources to address this national health emergency. Our elders, who are invaluable traditional knowledge keepers and beloved members of our community, are particularly susceptible to this virus and we must fulfill our responsibility to ensure their safety and well-being.” – Governor Charles Naranjo, Cochiti Pueblo (from the All Pueblo Council of Governors statement)

Commissioner Stephanie Garcia Richard affirms the position of New Mexico’s tribal leaders, “Now, more than ever, it is vital that we respect the sovereignty of the tribal nations within our borders and support our tribal leaders as they implement distancing measures to keep members of their communities safe and healthy.”

-Rachael Lorenzo (Mescalero Apache, Laguna Pueblo)

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