Rental for Produced Water Injection Facilities and Wells

2806/2920 (921Wrigley) P
January 22, 2013
EMS TRANSMISSION: 1/31/2013
Instruction Memorandum No. WY-2013-019
Expires: 09/30/2014
To: District Managers
From: Deputy State Director, Division of Minerals and Lands
Subject: Rental for Produced Water Injection Facilities and Wells
Program Area: Lands and Realty, and Oil and Gas Management.
Purpose: This Instruction Memorandum (IM) establishes Wyoming Bureau of Land
Management (BLM) policy for oil and gas related water disposal rental rates and schedules.
Policy/Action: The regulation at 43 CFR §2801.9 specifies when the oil and gas operator must
obtain a Right-of-Way (ROW) grant on land managed by the BLM. A ROW grant is required to
authorize disposal facilities (injection wells, evaporation pits) when the disposed water is
produced off-lease or off-unit. A ROW grant for the disposal facility is not required when the
disposed water is produced on-lease or on-unit.
Current Washington Office BLM policy does not establish a rental schedule for produced water
disposal facilities authorized under a ROW. It is the responsibility of each state to establish a
rental schedule. Rent, as specified at 43 CFR §2806 is appropriate for disposal site facilities.
The rental schedule for disposal site facilities in Wyoming will consist of two components:
(1) an annual site-rental of $1,200 for disposal facilities up to three-acres in size, or the appraised
value for disposal facilities that are three-acres or larger in size (disposal facilities located in
Campbell, Johnson, Laramie, Sheridan, and Teton Counties will always require an appraisal,
regardless of size; refer to IM No. WY-2009-017); and (2) a $0.05 per barrel rate for
non-commercial disposal or a $0.10 per barrel rate for commercial disposal. In addition, if there
are linear features associated with the disposal site, such as roads and pipelines, use the national
linear fee schedule to determine the rent amount (refer to the Federal Register, dated
October 31, 2008, Update of Linear Right-of-Way Schedule, Final Rule).
United States Department of the Interior
BUREAU OF LAND MANAGEMENT
Wyoming State Office
P.O. Box 1828
Cheyenne, Wyoming 82009-1828
IN REPLY REFER TO:
2
For oil and gas operations, a non-commercial disposal facility is defined as an injection well or
evaporative pit operated by a single operator and only disposes water produced by the single
operator. A single operator is defined as a single entity and does not include associations such as
a subsidiary, affiliate, division, or spin-off. A non-commercial disposal facility would be
charged the annual site-rental and the non-commercial per barrel disposal rate of $0.05 for any
disposed water that is produced off-lease or off-unit. Again, a ROW grant is required to
authorize disposal facilities when the disposed water is produced off-lease or off-unit. Any
disposed water that is produced on-lease or on-unit is not subject to the disposal fee. The
authorized officer will need to monitor disposal volumes when the disposed water is produced
both on-lease (on-unit) and off-lease (off-unit).
For oil and gas operations, a commercial disposal facility is defined as an injection well or
evaporative pit that disposes water produced by more than one operator. A commercial disposal
facility would be charged the annual site-rental and the commercial per barrel disposal rate of
$0.10 for any disposed water that is produced off-lease or off-unit. Again, a ROW grant is
required to authorize disposal facilities when the disposed water is produced off-lease or off-unit.
If the commercial disposal facility is operated by the lease/unit operator, any disposed water that
is produced on-lease or on-unit by the lease/unit operator is not subject to the disposal fee. The
authorized officer will need to monitor disposal volumes when the disposed water is produced
both on-lease (on-unit) and off-lease (off-unit).
A commercial facility is also defined as a disposal facility independently created for the sole
purpose of accepting for payment produced water for disposal. This type of commercial facility
would be charged the annual site-rental and all disposed water is subject to the commercial per
barrel disposal rate of $0.10. The authorized officer will need to monitor all disposal volumes.
Billing shall be made annually and is not subject to multi-year intervals. BLM Wyoming will
not back-bill previous years for existing produced water disposal facilities to incorporate the
rates established in this IM. The advance rental will consist of the annual site-rental. The annual
site-rental for the first year will begin on the first of the month following the issuance of the
ROW grant and end at midnight on December 31 of that year. The rent for partial years is
prorated based on 12 months. Ensuing years correspond with the calendar year.
The ROW holder may choose to submit quarterly payments or annual payments for the actual
number of barrels disposed of which shall accompany the next years’ billed annual site fee. The
holder will provide the total number of barrels disposed of each year to the BLM and these totals
are subject to BLM review for compliance. Compliance checks are a realty billing action and are
not subject to field inspections by the lands and realty or minerals programs. If the validity of
the number of barrels disposed of by a holder is in question, the BLM may request additional
information from the holder, such as run tickets. If a disposal well is not used during the year,
the holder still would be charged the site-rental for the year.
The non-commercial and commercial per barrel disposal fee may be adjusted every 5 years or
sooner, as determined by the Wyoming State Office, to reflect changes in the fair market value.
3
Most existing grants include a rental clause that states the authorized officer, whenever
necessary, can update the rental fee to reflect changes in the fair market rental value, in
accordance with comparable commercial practices. As long as this type of rental clause is
included in the ROW grant, updating the rental fee is not an appealable decision. However, new
grants issued with a Rental Determination Decision are appealable decisions.
Attachment 1 contains approved stipulations to be used with the produced water disposal ROW
grant.
Finally, Onshore Order No. 7, Disposal of Produced Water, specifies the requirements that
should be contained in the application for approval of the disposal of produced water; the design,
construction, and maintenance for an acceptable disposal facility; and identifies violations,
corrective actions, and normal abatement periods when the operator does not comply with the
subject order.
Timeframe: This IM is effective when issued.
Budget Impact: The implementation of this IM will reduce the number of appraisal requests to
the Office of Valuation Services and will result in an overall savings to the program Statewide.
Coordination: This rental policy was coordinated with the Washington Office of the Solicitor;
the Washington Office Branch Chief, Rights-of-Way (WO-350); the Washington Office Division
Chief, Fluid Minerals (WO-310); State Realty Program Leads in Montana, New Mexico,
Colorado, and Utah; the Wyoming State Office of Communications (WY-912); and the Branch
of Fluid Mineral Operations, Lands, and Appraisal (WY-921).
Contact: If there are any questions related to this IM, please contact Janelle Wrigley at
307-775-6257.
Signed by: Authenticated by:
Donald A. Simpson Sherry Dixon
State Director Secretary
Distribution
Director (350), 20 M Street, SE 1(w/atch.)
Field Managers 1(w/atch.)
Program Leads 1(w/atch.)
CF 1(w/atch.)
1 Attachment
1 – Approved Stipulations for Produced Water Injection Well ROW Grants (1pp)