2008-07-16_REVISION - C1980007 (2)

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IBLA 2007-213 company finishes training" and that "no leasehold rights [are] associated with the gathering of this byproduct such as drilling a new well, doing exploration, or assigning the operations to others. If we strip-out all of those things that make an oil and gas lease a lease what would we have?" Aug, 24, 2006, e-mail from Cook to Spisak. Explaining that. "only Oso Energy has proven to the mining company that the gob gas can be safely gathered," Cook noted that sLx panels had already been mined on private lands "with no Pederal minerals and Oso has been gathering the gas from those panels." Cook opposed competitive bidding arrangements because "companies other than Oso might win the bid and not be approved by Andalex." Id. Oso proceeded to identify the agreement as orte for compensatory royalties. E.g., Aug. 8, 2006, e-mail from Mazy Scott, Oso, to BLM, A draft agreement dated August 10, 2006, apparently prepared by Oso, was identified as a Compensatory Royalty Agreement, or "CFA."6 The record indicates that communications with the Department's Office of the Solicitor suggested that "unless there is an O&G lease it is no go." Aug. 24, 2006, e-mail from Spisak to Cook. On September 14, 2006, BLM's Steve Salzman, Deputy Division Chief, Fluid Minerals, Washington Office, e-mailed, inter alia, Cook and Spisak with the news that two attorneys in the Washington, D.C., Office of the Solicitor (WO) had "reviewed your issue paper and ideas for some type of agreement ... - They both agree that the only legal way to collect the gas and pay royalties is to offer an oil and gas lease for competitive bid." Id. "It is their opinion that there is no other legal remedy." Id. Thereafter, all BLM efforts directed at an agreement with Oso derived from the assumption that an MIA oil and gas lease, sold at a competitive lease auction pursuant to MLA section 17, 30 U.S.C. § 226 (2000), was the only possible option. Presumably to facilitate this outcome, in a letter dated September 29, 2006, Oso presented an "expression of interest" for parcels to be included in the next competitive lease sale to be held on February 20, 2007. See 43 C.F.R. § 3120.3-1. b 'A "compensatory royalty" is defined, inter alia, by BLM rule to be owed on a ' determination "that lands owned by the United States are being drained of oil or gas by wells drilled on adjacent lands." 43 C.F.R. § 3100.2-1 (emphasis added). This definition derives from cornnicni law principlesof drainage and is meant to cover t situation where an adjacent oil and gas operator drills for and produces gas from reservoirs that inay extend into the boundaries of the Federal mineral estate. While this definition might arguably be stretchedl.q apply to the coal none operator's drilling of GHVS `on adjacent larids, it is unclear that it would cover all situations involving GHVs sin Federal lands or the Federal m aerai estate, The parties do not suggest that this rule applfe? here, acid we agreetliar it is problematic at best -we take no ftwtl er position on its application. 175 IBLA 14 l Z/( 'd UH 'ON V191 I n;n W,1Q11: 71 1), 07 '07 'einr it