CHAPTER 4 OVERVIEW OF THE BLM DRAINAGE PROGRAM

• Jurisdiction: United States

Federal Drainage Protection & Compensatory Royalties
(Mar 1994)
CHAPTER 4
OVERVIEW OF THE BLM DRAINAGE PROGRAM
Michael Madrid
Wyoming State Office Bureau of Land Management
Cheyenne, Wyoming

TABLE OF CONTENTS

SYNOPSIS

Bureau of Land Management Organizational Structure

Bureau of Land Management, Minerals Management Service and Bureau of Indian Affairs Responsibilities

Office of Hearings and Appeals Organizational Structure and Regulations

Bureau Offices with Drainage Protection Responsibilities

History of the BLM's Drainage Protection Program

Statutory and Regulatory Authority

Interior Board of Land Appeals [IBLA] Drainage Decisions [Abstract]

IBLA Drainage Decisions

Assistant Solicitor, Onshore Minerals Solicitor's Opinions

Bureau of Land Management Drainage Protection Policy [procedures]

Washington Office Instruction Memorandum 93-287 Application of the Statute of Limitations to Oil and Gas Drainage Cases

Bureau of Land Management Drainage Protection Manual

Bureau of Land Management Drainage Protection Handbook

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BUREAU OF LAND MANAGEMENT ORGANIZATIONAL STRUCTURE

Organizational Chart

Omitted From Electronic Version

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BUREAU OF LAND MANAGEMENT, MINERALS MANAGEMENT SERVICE, AND BUREAU OF INDIAN AFFAIRS RESPONSIBILITIES

Responsibility

A. The Director and Deputy Director have responsibility for the overall management of Bureau programs, including management of drainage protection within the oil and gas programs.

B. The Assistant Director for Energy and Mineral Resources is responsible for ensuring that Federal and Indian lands are adequately protected from drainage.

C. The State Director is delegated responsibility for:

1. Identify potential drainage situations.

2. Protect leased Federal and Indian lands identified as a potential drainage situation by requiring protective measures.

3. Protect unleased Federal lands through leasing with subsequent protective measures, or through compensatory royalty agreements or other agreements.

4. Notify the Bureau of Indian Affairs when unleased Indian lands are identified as potential drainage situations and recommend protective action.

5. Determine whether drainage is occurring or has occurred and determine a drainage factor [quantify the amount of drainage].

6. Determine if the record title owner can drill an economic protective well.

7. Issue demand letters to the appropriate record title owner, advise them of their responsibility to protect the lease from drainage and request a plan for doing so.

8. When compensatory royalty is to be assessed, establish the date compensatory royalty is to begin and the date or conditions upon which the assessment will end.

9. Notify the record title owner of the authorized officer's decision to assess compensatory royalty and advise the record title owner of his rights to request a review or appeal.

10. Provide the Minerals Management Service with appropriate data to set up compensatory royalty accounts.

11. Provide guidance and assistance to District and Resource Area Managers if delegated any of the above responsibilities.

12. Ensure quality control of the drainage program.

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D. The District Manager may carry out any or all of the responsibilities delegated by the State Director.

E. The Resource Area Manager may carry out any or all of the above responsibilities delegated by the District Manager.

Minerals Management Service

In accordance with the existing BLM/MMS/BIA Memorandum of Understanding [MOU], dated February 13, 1987, the MMS is responsible for setting up and subsequently maintaining compensatory royalty accounts. This includes calculating the amount of compensatory royalty that may be due as a result of previous drainage, billing the responsible lessee, collecting the money, and performing periodic audits. If drainage is still occurring, the MMS will set up a compensatory royalty account in order to receive future payments.

Bureau of Indian Affairs

In accordance with the existing BLM/MMS/BIA MOU the BIA is responsible for leasing Indian lands, maintaining lease information, and executing compensatory royalty agreements, communitization agreements, and unit agreements when applicable.

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OFFICE OF HEARINGS AND APPEALS ORGANIZATIONAL STRUCTURE AND REGULATIONS

Organizational Chart and Regulations

Omitted From Electronic Version

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BUREAU OFFICES WITH DRAINAGE PROTECTION RESPONSIBILITIES

Headquarters
Washington Office
Main Interior Building	Bureau of Land Management
Bureau of Land Management	Alaska State Office
Attention: Erick Kaarlela	Attention: Chris Gibson
1620 L Street, N.W.	222 West 7th Avenue
Washington, D.C 20240	Anchorage, Alaska 99513
202-452-0340	907-271-3793
Bureau of Land Management	Bureau Of Land Management
Arizona State Office	California State Office
Attention: John Haas	Attention: Ken Chan
3707 North 7th Street	Federal Building
Phoenix, Arizona 85011	2800 Cottage Way
602-650-0222	Sacramento, CA 95825
916-978-4735
Bureau of Land Management	Bureau of Land Management
Caliente Resource Area	Colorado State Office
Attention: Nick Douglas	Attention: Paul Onsager
4301 Rosedale Highway	2850 Youngfield Street
Bakersfield, California 93308	Lakewood, CO 80215
805-861-4186	303-239-3748
Bureau of Land Management	Bureau of Land Management
San Juan Resource Area	Eastern States Office
Attention: Kent Hoffman	Attention: Dave Stewart
Federal Building, Room 102	7450 Boston Blvd.
701 Camino Del Rio	Springfield, VA 22153
Durango, CO 81301	703-440-1727
303-247-4082
Bureau of Land Management	Bureau of Land Management
Jackson District Office	Milwaukee District Office
Attention: John Duhon	Attention: Jeff Nolder
411 Briarwood Drive, Suite 404	310 W. Wisconsin Avenue
Jackson, Mississippi 39206	Suite 225
601-977-5420	Milwaukee, WI 53203
414-297-4409
Bureau of Land Management	Bureau of Land Management
Montana State Office	Great Falls Resource Area
Attention: Pasqual Laborda	Attention: Peter Ditton
Granite Tower	812 14th Street North
222 North 32nd Street	Great Falls, MT 59401
Billings, Montana 59107	406-727-0532
406-255-2862
4-8
Bureau of Land Management	Bureau of Land Management
Miles City District Office	Dickinson District Office
Attention: Chuck Laakso	Attention: Allen Ollila
Garryowen Road	2933 3rd Avenue West
P.O. Box 940	Dickinson, ND 58601
Miles City, MT 59301	701-225-9148
406-232-4331
Bureau of Land Management	Bureau of Land Management
Nevada State Office	New Mexico State Office
Attention: John Snow	Attention: Rick Wymer
P.O. Box 12000	1474 Rodeo Road
Reno, Nevada 89520	Santa Fe, NM 87502
702-785-6602	505-438-7411
Bureau of Land Management	Bureau of Land Management
Farmington District Office	Roswell District Office
Attention: Duane Spencer	Attention: Jim Pettingill
1235 La Plata Highway	1717 W. 2nd Street
Farmington, NM 87401	Roswell, NM 88201
505-599-6350	505-637-0272
Bureau of Land Management	Bureau of Land Management
Tulsa District Office	Utah State Office
Attention: Sherry Barnett	Attention: Assad Raffoul
9522-H East 47th Place	324 South State
Tulsa, OK 74145	Suite 300
918-621-4105	Salt Lake City, UT 84111
801-539-4041
Bureau of Land Management	Bureau of Land Management
Wyoming State Office	Casper District Office
Attention: Darryl Watts	Attention: Bob Chase
2515 Warren Avenue	1701 East E Street
Cheyenne, WY 82001	Casper, WY 82601
307-775-6195	307-261-7600

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HISTORY OF THE BLM's DRAINAGE PROTECTION PROGRAM

Background

The Conservation Division was established in 1925, placed within the United States Geological Survey [USGS], and given the responsibility to lease minerals, inspect field operations and collect royalties on Federal lands. With passage of the Taylor Grazing Act in 1934, Interior Secretary Harold Ikes gave the General Land Office [GLO] responsibility to lease minerals located within the newly created grazing districts. Over time, the GLO acquired the responsibility to lease minerals on all public lands [onshore]. In 1946, the GLO and the Grazing Service were merged to form the Bureau of Land Management [BLM]. Thus, the BLM assumed responsibility for all onshore oil and gas leasing [public and acquired lands]. The BLM also managed surface resources on the public lands and could veto USGS oil and gas actions if it felt sensitive resources would be endangered by exploration and development. The Conservation Division and the BLM did not always see eye to eye; the agencies had two different agendas: the Conservation Division encouraged oil and gas development while the BLM sought to protect the environment. In an effort to end the constant debates between the Conservation Division and the BLM, not to mention that the minerals industry was forced to deal with two agencies during leasing and development, the Department considered merging the two agencies. In February 1982 [Secretarial Order No. 3071, 47 Federal Register 4751], Interior Secretary James Watt removed the Conservation Division from the USGS and established the Minerals Management Service [MMS]. The MMS assumed responsibility for regulating all onshore and offshore oil and gas operations and collecting royalties on Federal lands. On December 3, 1982, James Watt [Secretarial Order No. 3087, 48 Federal Register 8983] transferred onshore mineral responsibilities [including drainage] protection] of the MMS to the BLM. The MMS remained responsible for offshore mineral leasing and operations [including drainage] and collection of all production royalties [onshore...