Finally – A Policy to Streamline the BLM Communization Agreement Process – IM 2015-124

Dated and effective July 17, 2015, the Bureau of Land Management (“BLM”) issued Instruction Memorandum 2015-124 (“IM-2015-124”). This BLM guidance significantly changes the way federal Communization Agreements (“CAs”) are administered and, for the most part, eliminates some of the cumbersome issues for operators applying for CAs. CAs are used to combine isolated or small federal mineral and/or tribal parcels with fee minerals to form a spacing or proration unit that complies with state law and allows for development of tracts that could not be independently developed or operated on their own.

In addition to attempting to “clean-up” the CA Process, IM-2015-124 addresses some questionable jurisdictional issues. Before IM-2015-124 was issued, there were concerns by industry that the BLM was attempting to expand its management beyond its authorized jurisdiction over federal minerals to fee minerals. For example, in some instances, the language in approved CAs appeared to require the operator to account to the BLM not only for federal minerals but for all minerals, including fee. However, IM-2015-124 now limits the CA responsibilities of the BLM to federal minerals and the Bureau of Indian Affairs to tribal minerals. We note that many of the jurisdictional issues the IM attempts to clarify were called into question by the BLM’s recently proposed rule modifying Onshore Oil and Gas Order No. 3. For more information on these inconsistencies, see Western Energy Alliance’s comment letter on the proposed changes to Onshore Order No. 3:

http://cdn.westernenergyalliance.org/sites/default/files/FINAL%2010.9.15%20OO3%20comment%20letter.IPAA_.WEA_.pdf

In any event, until the changes proposed in Onshore Order No. 3 are made final, the components of IM-2015-124 will govern. Some of the notable changes to the CA process in IM-2015-124 include:

1. An operator may self-certify that the necessary signatures have been obtained (working interest owners and record title owners in the Federal and Indian leases). Rather than submit all of the necessary signatures, an operator can submit the certification statement, word for word from IM-2015-124, to the BLM with its CA, and the BLM will rely on that statement;

2. CA: Exhibit A – the operator may identify all non-Federal/non-Indian interests as a single tract;

3. CA: Exhibit B – An operator may aggregate all of the non-Federal/non-Indian interests into a single entry entitled “Other Interests,” with total aggregate acreages; and

4. CA: Exhibit B – Due to the revisions to non-Federal/non-Indian interests in Exhibits A and B, an operator does not need to provide the lease information for those interests.

The BLM’s goal is to have all CAs in place prior to the date of first production. In fact, the BLM has required applicants appearing before the Colorado Oil and Gas Conservation (“COGCC”) to include specific language in spacing orders that addresses CAs and timing for the operator to apply and comply with the CA process. The COGCC order language usually requires an operator to submit a CA concurrent with the filing of an APD or at least 90 days before the anticipated date of first production.

Any operators actively submitting CAs to the BLM should be well-versed in the changes addressed in IM-2015-124 affecting BLM Manual 3160-9 and be prepared to submit a CA prior to production of a well affecting Federal or Indian interests.

IM-2015-124 can be found at:  http://www.blm.gov/wo/st/en/info/regulations/Instruction_Memos_and_Bulletins/national_instruction/2015/IM_2015-124.html