Forty-three of the extended-term leases (excluding the 7 "Section 6" leases) have been extended for periods of from 7 to 15 years. 17/

Apparently only 6 of the wells that originally qualified the above 96 leases as producible shut-in, are currently in producible condition. Twenty-six are temporarily abandoned with underwater casing stubs extending above the mud line; some possibility exists for re-entry and completion of these wells. Fifty-eight of the wells are plugged and abandoned with all casing shot off at least 15 feet below the mud line; little or no possibility exists for re-entry and completion in these holes. Staff was unable to determine the present condition of the qualifying wells in 6 of the older leases.

As previously stated, a well must be proved capable of producing under OCS Order No. 4 in order to qualify a lease as producible shut-in. Of the 96 extended term leases, 70 had producing or flowing tests, or wire line formation tests to prove the presence of oil or gas, 20 were considered proved by core and log analyses and 6 of the older leases had no reported tests or qualifying core and log analyses.

FPC files indicate that a minimum of 33 of the extendedterm leases are committed or dedicated to interstate pipelines; 13 committed by advance payment agreements only and 20 dedicated by gas purchase contracts. Two of the leases dedicated by purchase contracts are also committed by advance payment agreements.

A number of existing or proposed pipelines are in the areas in which the extended -term leases are located. Twentyeight of the 96 extended-term leases are within one mile of an existing pipeline; 35 are within 1 to 5 miles; 19 are within 5 to 10 miles; 13 are at distances of 10 to 20 miles; and only one lease is more than 20 miles (40) from an existing line. Thus 82, or 85%, of these extended-term leases are within 10 miles of an existing line and 63, or 66%, are within 5 miles of an existing pipeline.

17/

Excluding 8 leases in units that have been extended
7 years or more.

A total of 9 leases are closer to a proposed pipeline than to an existing line.

Leases in Units

The USGS records indicate that 12 leases which are classified as producible shut-in are included in units.

Regulations governing the conduct of mineral operations and development in the Outer Continental Shelf provide for unit agreements. "A unit agreement is defined as an agreement or plan of development and operation for the recovery of oil and gas made thereto as a single consolidated unit without regard to separate ownerships and for the allocation of costs and benefits on a basis as defined in the agreement or plan." 18/ Applicable references are as follows:

As of January 22, 1974, the USGS reported 109 units offshore in the Gulf of Mexico, with 105 being offshore Louisiana and 4 being offshore Texas. Of these units, 70 were classified as "Reservoir Units" in 15 separate fields. The remaining 39 are classified as exploratory or developmental units.

The units vary in size from a few hundred acres (depending on the size of the reservoir) to as large as 74,659 acres (Main Pass Block 112 Unit). These units may contain parts of only one or two leases (reservoir units) or as many as 15 leases for other units. 19/

The 12 producible shut-in leases in units total 59,985 acres and cost $14,905,000 in bonuses to acquire. Lessees vary from 1 to 4 per lease.

Of the 12 producible shut-in leases in units, 9 are classified as gas and 3 as oil. In order to qualify under

18 USGS - Conservation Division, Outer Continental Shelf Statistics; 1953-1972; pg. 26.

19/ USGS Gulf of Mexico Area Engineering Report Calendar Year 1972 (updated) and USGS Oil and Gas Development Map of the Gulf Coast -State of Louisiana Outer Continental Shelf (1-31-7

14

OCS Order No. 4, 9 of the leases had wells which proved the presence of oil or gas by flowing tests or wire line formation tests. One lease qualified under the core and log analyses requirements. No data were available to determine qualifying methods for the remaining 2 leases.

No reasons for extension of leases or suspension of production were noted for any of the producible shut-in leases included in units. These leases would, however, be extended by any action on the unit as a whole.

One of the pr.Jacible shut-in unit leases does not appear to have been drilled. On the eleven other leases, 2 of the qualifying ells are temporarily abandoned and 9 are plugged and abandoned.

One effect of the forming of units with a producible shut-in lease is that a number of other non-producing leases may also be extended beyond the primary term by the extension of producible shut-in leases. The Ship Shoal Block 271 Unit is a good example of this (Table 1); the unit consists of 5 leases totaling 25,000 acres, but only one of the leases has been qualified as producible shut-in.

None of the producible shut-in leases is within 1 mile of an existing pipeline; 6 are within 1 to 5 miles;

3 are within 5 to 10 miles; 1 is within 10 to 15 miles; and
2 are more than 20 miles away with the maximum being 40 miles.
None of the leases are nearer a proposed pipeline than to
an existing pipeline.

FPC records indicate that a minimum of 6 producible shut-in unit leases are dedicated by gas purchase contracts. Three of these leases are also committed by advance payment agreements.

Comparison of Producible Shut-in Leases January 1973-January 1974

A review of Louisiana and Texas OCS producible shut-in leases was made previously by FPC staff based on Bureau of Land Management (BLM) serial register pages obtained in January 1973. 20/ At that time, according to BLM records, there were 185 leases (excluding Section 6 leases) classified producible shut-in (Table 2). These leases, constituting 838,477 acres, were acquired for a total of $971,763,000. In addition to the acreage and bonuses paid, Table 2 shows the date of lease sale, the date each lease was classified producible shut-in by BLM, and the lease owners of record as of January 1973. This information was taken directly from the serial register pages.

207 See testimony of George L. Donkin given October 18, 1973, before the U.S. Senate Subcommittee on Antitrust and Monopoly and the Subcommittee on Administrative Practice and Procedure.

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Serial register pages are maintained by BLM primarily for the purpose of recording the current lease ownership and Before such changes in ownership or assignowner interests. ments of interest are made they must first be approved by BLM. All approved changes are recorded on the serial register pages which are available for public inspection in BLM's OCS Office in New Orleans.

In addition to listing the current owners, the serial register pages also indicate the lease status as reported to BLM by USGS. Leases are classified producing, producible shut-in, off-production, etc., by USGS which subsequently notifies BLM. Usually BLM receives such notification from USGS within a month or two after a change in lease status. Changes in lease status are noted on the serial register pages along with the date the information was received from USGS. The date leases were classified producible shut-in by BLM, as shown in Table 2, is, therefore, the date that BLM received notification from USGS. In Table 1 the lease classification dates are the actual dates USGS classified the leases as producible shut-in.

In this report, Table 2 shows the current status (January 1974) of the 185 producible shut-in leases as of January 1973. Table 3 compares the producible shut-in leases as of January 1973, based on BLM records, with the producible shut-in leases as of January 1974, according to USGS records. Tables 4 and 5 identify the ten companies holding the most producible shut-in acreage as of January 1973 and January 1974, respectively. Bonus, acreage, and lease owner information used in all tables was obtained from BLM.

As part of the recent staff investigation, the current status of the 185 leases that were classified producible shut-in as of January 1973 was determined along with the type of producible hydrocarbon found on each lease (Table 2). summary of the status of these leases as of January 1974 is shown below:

A

21

P = Producing, PSI

=

Producible Shut-in, OP = Off-production, U = Unit Lease--not classified producible shut-in, E = Expire or Terminated, H = Unidentified Hydrocarbon.

The foregoing table shows that 46 (25 percent) of the leases classified producible shut-in as of January 1973 have gone on production while 118 (64 percent) of the leases still retain their producible shut-in classification. Of the remaining 21 leases (11 percent), one has gone off-production, 13 have expired or been terminated and 7 are in units held by producible shut-in leases although none of these 7 leases has been classified producible shut-in.

In addition to the changes in lease status, there were 18 leases with changes in ownership or owner interests from January 1973 to January 1974.

Table 3 shows a comparison of the leases classified producible shut-in by BLM as of January 1973 and the producible shut-in leases listed by USGS as of January 1974. For purposes of this comparison, the leases for both periods have been divided into two categories, those leases still in their primary term and those in extended terms. Additionally, each lease category has been subdivided by the type of producible hydrocarbon found on each lease. In Table 3, Section 6 leases (former state leases) are excluded from the 1973 lease acreage but included in the 1974 acreage. Seven Section 6 gas leases in extended terms containing 31,250 acres are included in the 1974 lease and acreage data as shown in Table 3. However, no related bonus data are available for these leases.

Primary Term Leases

The

There were 68 producible shut-in leases in their primary term in January 1973 and 60 in 1974. Primary-term lease acreage dropped slightly from 308,252 acres to 278,982 during the period while lease bonuses rose from $707,751,000 to $1,081,126,000, representing an increase of 53 percent. average bonus paid per acre jumped from $2,296 to $3,875, an increase of nearly 70 percent. This reflects the addition of more expensive leases which were purchased in more recent Federal offshore lease sales.

Producible shut-in gas leases in their primary term numbered 47 at the beginning of 1973 and 42 in January 1974. Acreage related to these leases was reduced from 212,522 to 192,883. Total bonuses paid for this type of lease rose from $436,985,000 to $700,787,000 in the 12-month period. From 1973 to 1974 the average bonus paid per acre for gas leases increased 77 percent, from $2,056 to $3,633. Gas leases and acreage constitute about 70 percent of the primary-term leases and acreage for both 1973 and 1974. Gas lease bonuses amounted to 62 percent of the primary-term lease bonuses in 1973 and 65 percent in 1974.