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ONRR General UPDATES ONRR General UPDATES

ONRR General UPDATES - PowerPoint Presentation

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ONRR General UPDATES - PPT Presentation

ONRR General UPDATES copas spring 2019 meeting Kimberly Jackson Royalty Valuation Team A The Fine Print Our Disclaimer Please note that the statements or opinions expressed in this ONRR presentation at the 2019 Spring COPAS Meeting do not necessarily represent the views of ONRR or the Departmen ID: 768152

royalty onrr 2016 valuation onrr royalty valuation 2016 rule gas gov amp 2019 reporting removed federal indian transportation management

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ONRR General UPDATEScopas spring 2019 meeting Kimberly Jackson Royalty Valuation, Team A

The Fine Print(Our Disclaimer) Please note that the statements or opinions expressed in this ONRR presentation at the 2019 Spring COPAS Meeting do not necessarily represent the views of ONRR or the Department of the Interior. 2

A Huge Grand PASOThank You! We appreciated the opportunity to participate! We valued the feedback that we received from those who participated! Suggestions for ONRR focused topics for 2021 session are welcomed!The sooner the better, as it gives us time to prepare and line up speakers!! 3

David Bernhardt was confirmed by the U.S. Senate on April 11, 2019, taking office the same day.David Bernhardt is the 53 rd Secretary of the U.S. Dept. of the Interior. Mr. Bernhardt replaces Ryan Zinke, who resigned in December of 2018.Interior’s New Secretary 4

ONRR Leadership 5 Director Greg Gould Deputy Director Jim Steward Strategic Resource Management Larry Schock Information & Data Management Judy Wilson Infrastructure & Digital Services Patricia Damon Coordination, Enforcement, Valuation and Appeals Indian Trust, Outreach & Coordination Heidi Badaracco Analytics & Risk Management Mike DeBerard Royalty V aluation John Barder Enforcement Appeals & Regulations Bonnie Robson Revenue Reporting and Compliance Management Kimbra Davis Financial Management Esther Horst Reference & Reporting ManagementLee‐Ann Martin Compliance ManagementJennifer Goldblatt Western Federal Audit Jud ith Clark State and Indian Audit Pat rick Milano Audit ManagementJeff Carlson Southern Federal Audit Shawna Schimke

Royalty Valuation Staff!(We’ve Got NEW Folks!!) Royalty Valuation Team A Jahed Nabiyar (Geologist) Tanyi Tanyi (Petroleum Engineer)Christine Thomas (Geologist)Royalty Valuation Team B Kelsey Zabrusky (Petroleum Engineer) Royalty Valuation Team C Meghan Trujillo (Chemical Engineer) 6

Royalty Policy Committee The Charter for the Royalty Policy Committee lapsed on April 21 st , 2019With this lapse, the Royalty Policy Committee has officially ceased operating at this timeAll Subcommittee and Working Group meetings and activities will stop 7

Royalty Valuation is actively working on revising our Payor Handbook. Two separate versions: federal valuation Indian valuation Created to allow for more timely updates that can be accessed electronically!Active content is already published and ready: https://www.onrr.gov/ReportPay/Handbooks/index.htm Payor Handbook Updates 8

2016 Consolidated Rule(It’s Back….Right Now!) 2016 Consolidated Oil and Gas Rule IS CURRENTLY IN EFFECT, retroactive to January 1 st, 2017!The suit by CA and NM that challenged the repeal of the 2016 Rule was decided by U.S. District Court (N.D. Cal.) on March 29, 2019. Both parties have sixty days to appealIf this takes place, the appeal goes to the Ninth Circuit Court (CA) Industry will be given six months to implement changes to comply with the rule. We are actively planning on rule training sessions for Industry. Stay tuned! 9

Reach Out To Us! If you have questions, please feel free to contact us via our Royalty Valuation Mailbox!! RoyaltyValuation@ONRR.gov 10

Royalty Valuation topics Amy Lunt, Supervisor Royalty Valuation Team A

The Fine Print(Our Disclaimer) Please note that the statements or opinions expressed in this ONRR presentation at the 2019 Spring COPAS Meeting do not necessarily represent the views of ONRR or the Department of the Interior. 12

April 25, 2019 What we know TODAY: As of March 29, 2019, the 2016 Rule is in effect ONRR will comply with the Court’s Ruling DOJ and SOL have 60 days to appeal Information and guidance is forthcoming Training is forthcoming 13

2016 Rule Key Changes Changes to both oil and gas Consolidated definitions Added, modified, and removed some definitions Rescinded Deep Water Policy Instituted default provision Transportation Disallowed pipeline loss in non-arm’s-length transportation All transportation costs reported as allowances (no “transportation factors”) Removed provision allowing lessees to exceed 50% limit Adjusted Standard & Poor’s BBB bond rate multiplier from 1.3 to 1 Clarified guidance and determination practices 14

2016 Rule Key Changes Changes to gas only Removed gas non-arm’s-length valuation benchmarks - value is now based on: Affiliate’s first arm’s-length sale or Index-based option Expanded application of processed gas valuation and reporting Removed provision allowing lessees to exceed the 66 2/3 % processing-allowance limit Removed extraordinary processing allowance provision Removed accounting for comparison 15

What Didn’t Change? Some regulations didn’t change, or didn’t change much: Few changes to federal oil Indian oil and gas regulations – no changes Marketable condition requirements – no changes Unbundling requirements for arm’s-length gas dispositions – no changes 16

Resources District Court Case: See Order re Cross-Motions for Summary Judgment, Dkt No. 72, California v. DOI, Case No. C 17-5948 SBA (N.D. Calif.). 2016 Rule Regulatory Language: DO NOT USE eCFR (yet) or 2017 or 2018 Book DO see 81 FR 43338 (July 1, 2016) DO see that the Final Rule is available on ONRR’s website: https://www.onrr.gov/Laws_R_D/FRNotices/PDFDocs/43338.pdf 17

Resources Dear Reporter Letters (high-level information): Federal Oil and Gas Lessees (September 13, 2016) https://www.onrr.gov/about/PDFDocs/20160913.pdf Federal and Indian Coal Lessees (October 5, 2016) https://www.onrr.gov/about/PDFDocs/20161005.pdf 18

Negative Index Prices in the Permian Basin No negative royalty reporting: OGOR reporting won’t change Form ONRR-2014 reporting depends on your specific situation You cannot report zero or a negative sales value Contact Royalty Valuation royaltyvaluation@onrr.gov with specific questions 19

Reporting Royalties on Liquefied Natural Gas (LNG) Usually reported as PC 03, in MMBtu and Mcf Eligible for transportation allowances To be determined: Can liquefaction costs be deducted? If so, how? What is marketable condition for LNG?

In-field NGL Extraction(JT Skids, MRUs, etc.) Small units that recover NGLs from one or several leases Technology qualifies as “processing” under ONRR rules RefrigerationJ-T valve coolingCommon in the Bakken because of flaring rules 21

In-field NGL Extraction(JT Skids, MRUs, etc) Challenges: Guidance is contract specific and design specific Poor measurement of NGLsUsually short termService contracts become sales contractsBLM approval backlog 22 This is a great time to email RoyaltyValuation@onrr.gov!

Questions Anytime RoyaltyValuation@onrr.gov ? 23