BLM approves final NPR-A rules

The U.S. Department of the Interior’s Bureau of Land Management published a final rule amending its National Petroleum Reserve-Alaska oil and gas regulations in the Federal Register Feb. 4.

The changes make oil and gas administrative procedures in NPR-A consistent with the Energy Policy Act of 2005, amending the procedures for transfer, consolidation, segregation, suspension and unitization of federal leases in NPR-A. The proposed rule changes were published in May 2007.

Among the changes is addition of a provision allowing BLM to waive, reduce or suspend rental payments, or reduce the royalty rate on an NPR-A lease to promote development.

BLM can require additional bonding under certain circumstances and make NPR-A bonding regulations consistent with federal oil and gas leases outside of NPR-A. Bonds are currently $300,000, compared to a State of Alaska requirement for a $700,000 bond for multiple oil wells and Minerals Management Service bonding of $3 million for offshore development.

BLM can extend leases beyond the primary term as long as oil or gas is being produced or drilling or reworking operations are under way. The agency said this rule adds a new condition allowing lease extension where BLM “has determined that oil or gas is capable of being produced in paying quantities from the lease.” The rule also adds a provision, required by the Energy Policy Act of 2005, stating the NPR-A leases expire on the 30th anniversary of original issuance unless the lease is under production.

Ten-year lease renewals may be granted for a lease with a discovery well, allowing the lessee another 10 years to explore and develop the lease. A 10-year renewal may be granted if the lessee “has diligently pursued exploration that warrants continuation of the lease with the intent of continued exploration” or if all or part of the lease is part of a unit agreement.

Previously BLM’s regulations did not allow for lease renewal, only for extensions if there was production or drilling or reworking operations are being conducted. The rate for renewals is $100 per acre. BLM estimated the cost to obtain a lease in a subsequent sale — if the lease was not renewed — at $70 per acre.

The rule adds a new section requiring consultation with a Native regional corporation or the State of Alaska if a unit contains tracts where the regional corporation or the state owns the mineral estate.

The rule also allows a change in methodology for allocating production to tracts in a unit. Previously allocation was by surface acreage. That has now been amended: If a unit includes non-federal land, the methodology for allocating production “must take into account reservoir heterogeneity and area variation in reservoir producibility.”

—Kristen Nelson