N.M. Admin. Code § 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.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.