New Mexico State Land Office Right of Way and Water Resources Bureau Patrick H. Lyons, Commissioner of Public Lands GUIDELINES FOR SALT WATER DISPOSAL EASEMENTS SECTION I. INTRODUCTION AND PURPOSE The New Mexico State Land Office Right of Way and Water Resources Bureau (SLO), is pleased to provide you these Guidelines for Salt Water Disposal Easements (Guidelines) to assist you in understanding requirements of the Salt Water Disposal Easement (Easement) document under SLO Rule 19.2.11 NMAC, and as an aid in your preparation of Easement application documentation; should a discrepancy exist between these Guidelines and the rule, the rule shall supercede these Guidelines. For questions regarding these Guidelines or any portion of the Easement, please contact the SLO; contact information is located in Section IX. Land Office Contacts. These Guidelines provide general requirements for application and operation of the easement property. Each Easement is unique and will have requirements particular to the Easement. We have included guidelines Table of Contents on page 2 for your use. In addition, we have included a Glossary of Terms in Section XI. These Guidelines provide specific information meant to be utilized in conjunction with the Easement concerning: How to apply for a new Salt Water Disposal Easement; Annual fee schedule; Requirements for a Salt Water Disposal Easement renewal; Requirements for Salt Water Disposal reclamation plans; and The process of ending an existing Easement; Please remember applicants are not permitted on state trust lands prior to receiving a signed Easement or Right-of-Entry. We hope the Guidelines answer most of your questions, but should you still have further questions, please contact us. We also welcome your comments on how the guidelines can be improved to better serve you. SECTION II. GUIDELINES APPLICABILITY These Guidelines apply to any individual or corporate entity, wishing to obtain or currently operating an easement to inject salt water on New Mexico State Trust Land, not covered by an oil and gas lease [19.2.11.8 NMAC]. Final 12/03/08 NM State Land Office
Guidelines for Salt Water Disposal Easements Page 2 of 11 TABLE OF CONTENTS SECTION I. INTRODUCTION AND PURPOSE...1 SECTION II. GUIDELINES APPLICABILITY...1 SECTION III. GENERAL INFORMATION ABOUT 19.2.11 NMAC SALT WATER DISPOSAL SITE EASEMENTS...3 A. New Easement...3 B. Easement Renewal...3 C. Permits and Clearances...3 D. Easement Issuance...3 SECTION IV. FEE SCHEDULE...4 SECTION V. SWD EASEMENT APPLICATION REQUIREMENTS...5 A. Overview of Requirements...5 B. Financial Assurance...5 C. Application Form...7 D. Fees and Payments...7 E. Reclamation Plan...7 SECTION VI. SPILLS PREVENTION, REPORTING, CORRECTIVE ACTIONS & INFRASTRUCTURE...7 A. Contamination Prevention Infrastructure...8 B. Spill Reporting & Corrective Actions...8 SECTION VII. OPERATING THE EASEMENT...8 SECTION VIII. ENDING THE EASEMENT...8 SECTION IX. LAND OFFICE CONTACTS...10 SECTION X. CONTACT INFO FOR OTHER AGENCIES...10 SECTION XI. GLOSSARY OF TERMS...11 Final 12/03/08 - - 2 - - NM State Land Office
Guidelines for Salt Water Disposal Easements Page 3 of 11 SECTION III. GENERAL INFORMATION ABOUT 19.2.11 NMAC SALT WATER DISPOSAL SITE EASEMENTS A. New Easement Before you prepare a new Easement application, please contact the Right of Way and Water Resources Bureau of the SLO at (505) 827-5842 and request information concerning: ownership of both the surface and subsurface estate of the tract desired for the Easement; whether the tract is open for use as a Salt Water Disposal Easement, obtaining a Right-of-Entry permit to perform requirements of the Easement application; and, the correct legal description of the desired tract. Land status can also be checked at http://octane.nmt.edu B. Easement Renewal If you wish to renew an Easement at the end of the term you must submit a new application package 90 days prior to the expiration of the current Easement. Instructions for Easement renewal applications are provided in Section V. SWD Easement Application Requirements. An Easement may be renewed with different terms and conditions than the existing Easement. C. Permits and Clearances It is the responsibility of the applicant to obtain all necessary permits and clearances for the Easement operation and to comply with all applicable state, federal, and local laws, rules, and regulations. For all Easements to be located on an existing oil and gas lease, the applicant must submit written permission from the current lessee [19.2.11.10 NMAC]. D. Easement Issuance Two originals of the Easement application package, including the Easement, Operational Plan, Reclamation Plan, and all other documents shall be signed and notarized by the applicant and sent to the SLO for approval. By signing the application package individual parts the applicant signifies acceptance of the Easement terms, and conditions in the Operational Plan, Reclamation Plan and all other documents. When the signed and notarized Easement package is delivered to the SLO, they are submitted to the Commissioner for his signature. Upon signature by the Commissioner, one original of the Easement application package is sent to the applicant, who is now the Grantee. Final 12/03/08 - - 3 - - NM State Land Office
Guidelines for Salt Water Disposal Easements Page 4 of 11 SECTION IV. FEE SCHEDULE There is an annual fee for each Salt Water Disposal Easement. The fees listed below are the minimum required fees. To the extent that this Easement is granted for non-commercial Salt Water disposal, the Grantee represents and warrants that (i) some or all of the Salt Water disposed of under this Easement is produced from oil and gas wells operated by the Grantee or in which the Grantee has an ownership interest, or the producer of the Salt Water has an ownership interest in the Easement Property; and (ii) the Grantee will not receive compensation for the disposal of Salt Water under this Easement for the purpose of generating a net profit from its operations under this Easement. Notwithstanding the foregoing, the Grantee may request that the Commissioner exempt some or all of its operations from the scope of that representation and warranty without reclassification of the Easement or payment of an increased annual fee or disposal fee, based on demonstrated need. A. Non-Commercial Salt Water Disposal Injection Well. Single or Multiple Oil and Gas Operators Produced water from any lands Disposal of produced water from lands of any ownership on a non-commercial Easement. Fees Annual Rental New or Existing Easement $2000.00/year Disposal Fee $0.02/bbl B. Commercial Salt Water Disposal Injection Well Fees Commercial Well Produced from any Lands Disposal of produced water from lands of any ownership on a commercial easement. Annual Rental New Easement $10,000.00/year Annual Rental Existing Easement 2008: $5,000.00; 2009: $7,500.00; 2010: $10,000.00; $10,000.00 every year thereafter. Disposal Fee New or Existing Easement $0.10/bbl Final 12/03/08 - - 4 - - NM State Land Office
Guidelines for Salt Water Disposal Easements Page 5 of 11 SECTION V. SWD EASEMENT APPLICATION REQUIREMENTS A. Overview of Requirements Incomplete Easement application packages will be returned to the applicant for corrections. A complete application package includes: Financial Assurance - bonding approved for reclamation. Application Form a properly signed and notarized application form with a correct legal description of the tract. Fees and Payments - the required fees and payments. Survey Plat. Relinquishment or Consent to Lease Land Currently Leased. Reclamation Plan (RP) - a proposed Reclamation Plan. Each element of the application package is described below. B. Financial Assurance The SLO requires financial assurance for each Easement. Financial assurance is required to protect the Grantor from violations of the Easement terms, including but not limited to failure to perform reclamation and remediation. The Grantee may provide financial assurance in the form of cash, surety bond, or an irrevocable letter of credit. The financial assurance options are as follows: The minimum financial assurance requirements are: 1. Total financial assurance value as determined by the SLO. 2. The market value of the financial assurance may be evaluated at any time, and in no case shall the market value of the financial assurance be less than the required financial assurance. In the event that the market value of the financial assurance is less than the required amount, the Grantee shall increase the financial assurance value to the required amount. 3. Original bonding documents must be submitted to the SLO and will remain on file permanently. Surety Bond The surety bond is an indemnity agreement in the amount of $10,000.00, payable to the SLO, executed by the Grantee as principal and which is supported by the performance guarantee of a corporation authorized to do business as a surety in New Mexico. The surety bonds shall be noncancellable during their terms. Megabond A $25.000.00 bond (megabond) covering obligations under multiple permits or other instruments pertaining to the use of State Trust Lands. Cash Bond - $10,000.00 Single Lease. A check or Money Order to be remitted to this office and will be held in a suspense account for the life of the lease or as long as it remains under the same name that the bond is under. Final 12/03/08 - - 5 - - NM State Land Office
Guidelines for Salt Water Disposal Easements Page 6 of 11 Irrevocable Letter of Credit The letter of credit is a form of collateral and is an indemnity agreement in the amount of $10.000.00 payable to the SLO, executed by the Grantee as principal and which is issued by a federally insured bank authorized to do business in New Mexico. The letters of credit shall be placed in the possession of, and payable upon demand only to the SLO. The letters of credit shall be automatically renewable or the operator shall ensure continuous bond coverage by replacing letters of credit, if necessary, at least 30 days before their expiration date with other acceptable bond types or letters of credit. The required bonds must be kept in force until the SLO has provided formal notice to the Grantee that the bonds may be released. Please contact the SLO to obtain a copy of the required bonding forms, or if you wish to change financial assurance during the term of the Easement. Financial Assurance Release Financial assurance is held by the SLO until the Grantee has complied with all terms of the Easement including, but not limited to, having successfully demonstrated that contamination on the Easement property has been remediated to acceptable levels, all structures are removed as required and revegetation of disturbed areas has achieved success standards.: Following the request by the Grantee, the SLO will approve or disapprove the request for financial assurance release in writing. C. Application Form The application shall be signed in ink, by either the individual applying for the Easement or a company official authorized to sign for the company applying for the Easement and should contain all the information requested [19.2.11.10 NMAC]. D. Fees and Payments The Easement application should be accompanied by a check or money order made payable to the Commissioner of Public Lands covering the following: Non-refundable application fee of $30.00, and appraisement fee of $60.00 Annual rental payment required according to the schedule in Section IV. Fee Schedule. If the Easement is not issued, the rental payment will be refunded. Details concerning the advance minimum royalty payment are found in Section IV. Fee Schedule, and in Section VIII. Operating the Easement. E. Survey Plat Survey Requirements: Plat of Survey must include an acreage breakdown by QUARTER QUARTER SECTION. If the acreage breakdown is by subdivision, the surveyed tract must also include a breakdown description of the quarter quarter section to meet the standards set forth by the State Land Office Records Division; A written legal description that matches the Plat of Survey. F. Relinquishment or Consent to Lease Land Currently Leased. Applicant must provide a fully executed Consent to Lease Land Currently Leased or General Relinquishment, Release, and Quitclaim Deed signed by the surface lessee of record. Final 12/03/08 - - 6 - - NM State Land Office
Guidelines for Salt Water Disposal Easements Page 7 of 11 G. Remediation, Reclamation and Revegetation Under the terms of the SWD Easement, the grantee must close and reclaim the site if the site is no longer being used for salt water disposal. Closure is defined in the easement: Closure. Upon termination of Grantee s disposal operations, and in the absence of an assignment of this Easement by Grantee or the continuation of disposal operations by another party, the Grantee shall comply with the reclamation standards and procedures set forth in NMAC 19.2.100.67. If the grantee is closing the site, it must relinquish the SWD Easement and obtain a right of entry for remediation, reclamation and remediation. Remediation, reclamation or revegetation shall not commence until a Reclamation Plan (RP) has been approved by the New Mexico State Land Office. The RP should include: Remediation of any and all contaminated materials (as defined by the NMOCD). Removal of improvements such as tanks, surface piping, concrete pads, ingress and egress caliche roads dedicated for access to the easement, and removal of caliche pad(s). Surface grading to match the surrounding topography. Preparation of the site for seeding. Seeding the easement. Seeding of the easement shall occur on all disturbed areas, unless otherwise approved by the SLO. The SLO will develop an RP for the easement and issue it to the Grantee. If an RP is not issued please contact the SLO Field Operations Division Environmental Engineer. The Grantee may submit an alternate RP for consideration by the SLO. The right of entry will be issued for 3 years. During the 3 year period the SLO will perform inspections of the reseeded easement to determine if revegetation is successful. If revegetation is successful the right of entry will be relinquished at the end of its term. In the event that revegetation is unsuccessful, the SLO will require the location to be reseeded prior to the 3 rd growing season. If reseeding is performed as required the right of entry will be relinquished at the end of its term. In the event that revegetation is not successful and the SLO suspects soil contamination (typically due to elevated salts) the Grantee shall sample the location. If contamination is verified via sampling activities the Grantee will be required to remediate the site, prepare the site for seeding and reseed. The right of entry will be required to remain in effect for 3 growing seasons from the date of reseeding following remediation. Final 12/03/08 - - 7 - - NM State Land Office
Guidelines for Salt Water Disposal Easements Page 8 of 11 SECTION VI. SPILLS PREVENTION, REPORTING, CORRECTIVE ACTIONS & INFRASTUCTURE The SLO requires the Grantee to use all reasonable necessary safeguards to prevent contamination of pollution of soil, surface waters, and groundwater. A. Contamination Prevention Infrastructure To prevent spills from contaminating soils and ground water, spill control infrastructure is required as listed below: Newly Installed Pumps, Motors and Tank Batteries Newly installed pumps and motors shall be placed within berms on an impermeable surface. If the well has not previously been used for Salt Water disposal or the Grantee at any time replaces all existing tank batteries, the Grantee shall place all newly installed tanks, drums and other vessels containing Salt Water or other liquids on a bermed impermeable surface. Trucking Hookup Infrastructure - All areas where the Salt Water is loaded or unloaded from a tank truck shall have a containment basin (such as a drum, barrel or a lined sump) of sufficient capacity to capture water released from transfer line. This containment basin shall be kept free of liquids. B. Spill Reporting & Corrective Actions The Grantee shall promptly provide the SLO all spill notices given to the NMOCD and following NMOCD requirements for corrective actions. SECTION VII. OPERATING THE EASEMENT Payment of Disposal Fees The number of barrels injected shall be calculated on a monthly basis. Payment of the disposal fee shall be due annually on or before March 1 for the prior calendar year (January 1 through December 31) or, if this Easement is relinquished, cancelled or expires, within 45th days following the relinquishment, cancellation or expiration of this Easement. To the extent that the payment reflects a claim of exemption on the grounds that stripper well Salt Water has been disposed of, the Grantee shall provide documentation showing the source and amount of stripper well Salt Water disposed of. Audits Financial Audits and Easement Terms and Conditions Conformance Audits may be performed by SLO staff at any time during the operation of the Easement. Improvements Only improvements listed in the approved Operational Plan to be installed on the Easement property are permitted. SECTION VIII. ENDING THE EASEMENT Final Audit Final 12/03/08 - - 8 - - NM State Land Office
Guidelines for Salt Water Disposal Easements Page 9 of 11 At the end of the Easement term, SLO staff will complete a final audit report. The Grantee may be requested to provide the following information: a summary report of the quantity of salt water injected during the Easement term; and a disposal fee report for each year of the Easement term. Final Inspection A Final Inspection will be scheduled by SLO to assess the condition of the Easement and determine what, if any, further work is necessary. If closure of the Easement is anticipated the SLO provide a Reclamation Plan and issue a reclamation right of entry. Expiration Notice Thirty (30) days prior to the end of the Easement term a certified letter will be mailed advising the Grantee of the expiration date of the Easement. It is the Grantee s responsibility to keep a current address on file with the SLO. If the letter is not received the Easement nonetheless terminates. Easement Expiration Once the Easement has expired, the Grantee will no longer have a legal right of entry onto the Easement property unless granted in writing by the SLO. Final 12/03/08 - - 9 - - NM State Land Office
Guidelines for Salt Water Disposal Easements Page 10 of 11 SECTION IX. LAND OFFICE CONTACTS The staff at the SLO is glad to answer any questions you may have about Easement application requirements and process. Please don't hesitate to call for information or to schedule an appointment. Our offices are located in the SLO Building, 310 Old Santa Fe Trail, Santa Fe, NM 87501. Our mailing address is: P.O. Box 1148 Santa Fe, NM 87504-1148. Our Website is: http://www.nmstatelands.org Contact Information: General Information Main Office (505) 827-5760 Application Related Information Right of Way/Water Resources (505) 827-5842 Environmental Information Environmental Engineer (505) 827-5723 Cultural and Archeological Archeologist (505) 827-5857 Endangered Species Information Biologist (505) 827-1245 Grazing Issues Grazing Division (505) 827-5731 Spill Reporting, Site Inspections, District Resource Manager (see below) and Local Contact District Resource Manager Contact Information: Lea County: Eddy County: San Juan County: Hobbs District Office Carlsbad District Office Farmington District Office (575) 392-8736 (575) 885-1323 (575) 326-5716 2702-D North Grimes 1004 Paisano 3539 E. 30th Street, Suite 205 Hobbs, NM 88240 Carlsbad, NM 88220 Farmington, NM 87402 Roosevelt County: Chaves County: (575) 763-0796 (575) 623-4979 Clovis District Office Roswell District Office 105E. 6 th St. 1001 S. Atkinson Clovis, NM 88101 Roswell, NM 88210 Other SLO Telephone Numbers: Field Operations (505) 827-5737 Grazing / Rights-of-Way (505) 827-5842 Business Leasing (505) 827-5724 Records Management (505) 827-7984 SECTION X. CONTACT INFO FOR OTHER AGENCIES Other State Agencies can be found on-line at http://www.state.nm.us/ http://www.emnrd.state.nm.us/ocd/ Final 12/03/08 - - 10 - - NM State Land Office
Guidelines for Salt Water Disposal Easements Page 11 of 11 SECTION XI. GLOSSARY OF TERMS Disturbance Any activity requiring the movement of soils and/or removing, or causing a decrease in productivity, diversity or cover, of existing vegetation. Easement Legal description of SLO property granted under the Salt Water Disposal Easement. Grantee Company or individual(s) granted the Salt Water Disposal Easement. Grantor The New Mexico State Land Office. NMOCD New Mexico Oil Conservation Division. Salt Water Produced water as defined by NMAC 19.15.1.7(P)(8). Final 12/03/08 - - 11 - - NM State Land Office