2016 Government Affairs Report

IPANM Annual Meeting

August 1-3, 2016

Santa Fe, New Mexico

Presented by Karin Foster

THANK YOU!

• Thank you for attending our Annual meeting and for

supporting our efforts!

• IPANM is an organization focused on being the ’voice

of the Independent Oil and Gas Operator’ which

means that to represent you, I need your input and

your support.

• Things are NOT slowing down!

THE FOSSIL FUEL INDUSTRY AND THE FIRST AMENDMENT

How the Environmentalists are using every tool in their toolbox

and even more to win the war against Industry

THE FIRST AMENDMENT OF OUR CONSTITUTION

• Amendment I

• Congress shall make no law respecting an

establishment of religion, or prohibiting the free

exercise thereof; or abridging the freedom of

speech, or of the press; or the right of the people

peaceably to assemble, and to petition the

government for a redress of grievances.

THE LATEST ATTACKS ON FOSSIL FUEL

May 2016 NM Attorney General Joins AGs United for

Clean Power Coalition

“We have been impacted by climate change, and

we see its drastic effects in New Mexico—extreme

drought, increased risk of severe forest fires, and

the ruin of our wildlife and natural habitats,”

Balderas said. “Our efforts will ensure that

progress is made on climate change and that the

public is fully aware of the effects on the health

and well-being of New Mexico families.”

EXXON MOBIL AND 40 ADVOCACY GROUPS ARE SUBPOENAED

• “An investigation into what extractive energy companies

knew about the risks of climate change and if they

deliberately misled investors and the public”

• Subpoenas filed by Virgin Islands* AG and

Massachusetts* AG demanding 40 years of

communications regarding Climate change

“you are suspected to have engaged in, or be engaged in, conduct constituting a civil violation

under the Criminally Influence and Corrupt Organizations Act by having engaged in or are or

engaging in conduct misrepresenting Your knowledge of the likelihood that Your products and activities

have contributed and are continuing to contribute to Climate Change in order to defraud the Government

of the United States and consumers in the Virgin Islands, in violation of the laws prohibiting obtaining

money under false pretenses or committing a conspiracy to obtain money by false pretenses”.

HOW IS A CLIMATE CHANGE COMMUNICATION DEFINED?

• ‘Climate change’ as the general subject matter of changes in global or regional climates that persist over time, whether due to natural variability or as a result of human activity. Any documents or communications using any of the terms, ‘climate change,’ ‘climatology’, ‘climate science’, ‘climate model’, ‘climate modeling’, ‘global warming, ‘greenhouse gas’, ‘greenhouse effect’, ‘Co2 greenhouse’, ‘climate skeptics’, ‘global cooing’, ‘solar variation’, ‘carbon tax’, ‘climate legislation’ concern climate change, although documents or communications need not use any of these terms to concern climate change”

• Communication means any conversation, discussion, letter, email, memorandum, meeting, note or other transmittal of information or message, whether transmitted or in writing, orally, electronically or by any other means, and shall include any documents that abstracts, digests, transcribes, records or reflects an issue pertaining to climate change.

AG’S UNITED FOR CLEAN POWER

• Who are they?

• Intervened in case to

defend EPA on Clean

Power Plan

• Pushing for methane rules

to control emissions from

the oil and natural gas

industry.

GROUNDS FOR INVESTIGATING FOSSIL FUEL COMPANIES

• Exxon ‘knew’ as early as 1977 about climate change

• refused to acknowledge ‘settled’ climate science theory

• actively promoted public misinformation ‘campaigns’ including

hiring lobbyists to convince President Clinton not to sign the

Kyoto Protocol

• The ‘evidence’ –

Union of Concerned Scientists

“Climate Deception Dossiers”

THE QUOTE ALLEGEDLY FROM EXXON IN THE “DOSSIERS”

• “Victory will be achieved

when ‘average citizens

‘understand’(recognize)

uncertainties in climate

science”

‘Victory will be achieved when the average person is uncertain about climate science.”

The Actual statement

from an ‘industry

representative at a trade

association meeting’

PRECEDENT FOR THIS TYPE OF INVESTIGATION…

• Nov 2015: Peabody Energy, the worlds largest pubicly-traded coal company agreed to revise SEC disclosures to add statements that “concerns about the environmental impacts of coal combustion … could significantly affect demand for our products”

• Specifially, Peabody’s SEC filings regularly denied the company had the ability to predict the impact of potential regulation of climate change issues on the firm’s operations. But there were internal predictions that those regulations would have a 33% impact on sales.

• And BIG TOBACCO

BIG OIL = BIG TOBACCO

The turning point for tobacco-related public-health policy came when the

industry’s depravity became indisputable. Now, that moment has come for the

climate movement. Bill McKibben co-founder of 350.org

IS THIS ABOUT MONEY?

• “I believe that full and fair disclosures by Peabody and other fossil fuel companies will lead investors to think long and hard about the damage those companies are doing to our plan” NY AG Eric Schneiderman

OR IS THIS SOMETHING ELSE?

Cycle Donations to

Democratic

candidates

2016 3,576,089

2014 5,745,792

2012 6,472,041

2010 6,986,483

2008 8,944,659

2004 5,180,187

2000 7,096,352

1996 6,140,819

1992 7,404,501

1990 4,731,110

Total 83,693,818

OIL AND GAS POLITICAL DONATIONS

Cycle Donations to

Ds

Donations to Rs % to Ds % to Rs

2016 3,576,089 32,332,236 10% 90%

2014 5,745,792 39,290,572 13% 87%

2012 6,472,041 53,196,090 11% 89%

2010 6,986,483 24,651,036 22% 77%

2008 8,944,659 30,879,025 22% 77%

2004 5,180,187 22,223,656 19% 81%

2000 7,096,352 27,437,728 20% 78%

1996 6,140,819 20,592,065 23% 76%

1992 7,404,501 14,316,233 34% 65%

1990 4,731,110 7,612,430 38% 62%

total 83,693,818 340,085,666 20% 80%

Source: OpenSecrets.org/Oil&Gas longtermtrends

PROBABLY….

DEFENDANTS FIGHT BACK

• The allegations leveled against ExxonMobil again today are politically motivated and based on discredited reporting funded by activist organizations. We are actively assessing all legal options.

• Contrary to activists’ claims, our company’s deliberations decades ago yielded no definitive conclusions

• The investigations targeting our company threaten to have a chilling effect on private sector research.

• Exxon Files suit April 16, 2016 – no jurisdiction, violations of 1st, 4th, 5th and 14th Amendments

• June 29, 2016, Exxon and AG Walker come to an agreement to withdraw his subpoena; the case against AG Healy is still pending.

•

ExxonMobil recognizes the risks posed by climate change, and we believe that

everyone should be engaged in meaningful action to reduce greenhouse gas

emissions.

BOTH DIES LINE UP

• Call for investigation of

fossil fuel companies for

full disclosure

• 100% electricity from

renewable sources by

2050

• “[i]t is inappropriate for State

Attorneys General to use the

power of their office to

attempt to silence core

political speech on one of the

major policy debates of our

time.”

“Even law professors and the media agree that criminal

prosecutions are unlikely as Exxon did not appear to have

broken the law”

WHERE IS THE ADMINISTRATION?

• U. S. Department of Justice has asked the FBI to evaluate

whether the company's actions might justify legal action

under RICO, the federal Racketeering Influenced and

Corrupt Organizations law, which is aimed at illegal

conspiracies.

• Sens Ted Cruz (Tx), Mike Lee (Ut), Jeff Sessions (Al),

David Perdue (Ga) and David Vitter (La) sent a letter to

AG Lynch demanding the DOJ end any investigations

“SUE THE BASTARDS” – A SLOGAN FROM THE ENVIRONMENTAL MOVEMENT

• Children’s Trust cases move from State Court to suing the

federal government asking the court to mandate a national plan

to reduce atmospheric concentrations of carbon dioxide to 350

parts per million by 2100

Industry is in court along side the

Administration and lost April 2016

in Federal Court in Oregon but have

won in DC District Court, NM, PA,

OR and in Colorado

STEP ONE IN THE ENVIRO PLAYBOOK – UPDATE LAWS

• Update of Clean Air Act (methane rules), NEPA

(planning 2.0) and ESA (range wide plans- sage grouse)

• Big Splashes in the media (AG’s United for Clean Power

Plan); Children’s trust cases

• Stealth mode – changing Administrative Process

• Quarterly Rotating lease sales; environmental justice;

Royalty overhauls

STEP TWO: IF NOT LEGISLATION OR REGULATION THEN LITIGATION

Big sexy Racketeering, Fraud and deception cases

AND/OR

Administrative process cases

= better fundraising!!

BUT WHO CARES IF THEY WIN IN COURT OR IN CONGRESS THEY ARE SUCCESSFULLY SWAYING THE PUBLIC PERCEPTION OF OUR

INDUSTRY

DEMOCRATIC PLATFORM

ON ENERGY

REPUBLICAN PLATFORM

ON ENERGY

WHICH IS WHY THIS ELECTION IS SO IMPORTANT

POLICY DISCUSSIONS: PARIS AGREEMENT

1. What exactly does the Paris Agreement do?

POLICY DISCUSSIONS: INCREASING FEDERAL ROYALTY RATE

2016 CBO report, “Options for Increasing Federal

Income from Crude Oil and Natural Gas on Federal

Lands” • Increase leasing!!

• Adjust terms of lease – like NMSLO

• Increase minimum bid

• new fee for nonproducing leases

• raising the royalty rate for all leases

• Change the bid process to all sealed (to avoid collusion)

POLICY DISCUSSIONS: CARBON TAX

TAX reforms – lower the corporate income tax rate from 35% to 25%

But this will result in a $1.2Trillion revenue loss over 10 years

Is a Tax on CARBON the answer? - create incentives to limit GHG emissions and stimulate invest in low-

carbon energy - demonstrates ‘fiscal responsibility’ because it will only impact 3000

fossil fuel producers, utilities and business - demonstrates ‘leadership’ to the environmental community and the

global economy - funding could be redistributed to relocate individual impacts of

climate change and promote renewable energy

H.Con Res. 89 – NO Carbon Tax

-

POLICY DISCUSSION: STUDY ON HEALTH EFFECTS

“Fossil Fumes: A public health analysis of toxic air pollution from

the Oil and Gas Industry”

Report: “Living near oil, gas operations increases cancer risk”

“This report presents estimates based on recent analysis carried

out by the EPA, of the cancer risk and respiratory health risk to

residents that can be traced back to air toxics from the oil and gas

industry”

Lea County – 1 in 250,000 chance of having cancer due to living

within a ½ mile of an oil and gas facility

San Juan County – 1 in 1,000,000 chance

According to the report 12 million people are at risk from methane and volatile organic substances

“The two corners of the State of New Mexico are the most at risk populations and those are

‘predominantly low-income people with less access to medical care”

These claims have been made and disputed by State agencies in Texas, Pennsylvania, Colorado and West

Virginia

AND the Science and several peer reviewed studies DO NOT SUPPORT these claims.

NEW MEXICO ISSUES - REGULATORY

1. NEW MEXICO STATE LAND OFFICE

A. WELL-SHUT IN POLICY

B. NEW FEE SCHEDULES

C. REPLACEMENT OF ONGARD

2. New Mexico Oil Conservation Division

A. Roswell Basin Case

B. Spill Rule

NM ISSUES - REGULATORY

• NEW MEXICO DEPARTMENT OF GAME AND FISH

• STATE WILDLIFE ACTION PLAN

• BI-ENNIAL REVIEW

NEW MEXICO :LEGISLATIVE

• 2016 Session

• Voting Records – Why do I do them?

•

• 2017 Session Outlook

FEDERAL ISSUES: WORKING WITH THE BLM

• Venting & Flaring Comments

• Planning and Zoning Comments – does this impact

local/district office involvement and impact planning?

• Onshore Order #3 Comments – how will this impact

New Mexico’s existing Comm Agreements?

• Onshore Order #4,5 Comments – additional measuring

points, how can BLM implement this? How will smaller

operators be impacted?

SHUT IN POLICY

• need to report to the BLM your well is shut-in within 90 days (need to continue to report to ONRR but effective 15 month lag will disappear)

• Need to get authorized officer approval for shutin

• Bradenhead testing will not be acceptable for TA status

• Expected to be about 1000 pages – will this include Planning 2.0 landscape part of regs?

• Working closely with NMOGA – Leslie is the lead

• Will have 90 days to respond – PLEASE ASK for an EXTENSION

CARLSBAD RMP

SHUT IN WELL POLICY AND CARLSBAD RMP

FEDERAL ISSUES: NEW ONRR REGULATION

• You must request a hearing on the record before an ALJ on a Notice by filing a request within 30 days of the date of service of the Notice. The 30 day-period to request a hearing on the record will not be extended for any reason.

• Penalties may be up to $1177 per day within 40 days of receiving a violation

• Penalties may increase up to $11770 per day afterwards for refusal to comply with notice of Noncompliance orders

• the penalty may be as high as $23,548 per day, per violation for each day that the violation continues if you:

• (i) Knowingly or willfully fail to make any royalty payment by the date specified by statute, regulation, order, or a term of the lease

• No vicarious liability provisions and you may work with the Administrative Law Judge to reduce the penalties or seek a stay.

SOME WINS FOR INDUSTRY

• “In recent years, as does the BLM here, federal agencies have increasingly stretched the outer limits of its "delegated" statutory authority by revising and reshaping legislation. Congress has not directed the BLM to enact regulations governing hydraulic fracturing. Indeed, Congress has expressly removed federal agency authority to regulate the activity, making its intent clear. If this Court were to accept BLM argument, there would be no limit to the scope or extent of Congressionally delegated authority BLM has, regardless of topic or subject matter”.

• HF Rule – now on appeal

• Sand Dune Lizard – a March 6th win in DC District Court!

• Lesser Prairie Chicken – A Feb 29th win in W. Dist. of Texas

THANK YOU!