2008-07-16_REVISION - C1980007 (3)

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IBLA 2007-213 company finishes mining" and that "no leasehold rights [are] associated with the gathering of this byproduct such as dulling 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 eix panels had already been mined on private lands "with no Federal 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 orie for compensatory royalties. E.g., Aug. 8, 2006, e-mail from Mary Scott, OSD, to BLM, A draft agreement dated August 10, 2006, apparently prepared by Oso, was identified as a Compensatory Royalty Agreement, or "CRA."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 CWO) had "reviewed your issue paper and ideas for some type of agreement .. They bath agree that the only legal way to collect the gas and pay royalties is to offer an oil and gas lease for competidve 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 MLA 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. e •A "compensatory royalty" is defined, inter alia, by BLM rule to be owed on a ' detemi1nation "that lands owned by the United States are being drained of oil or gas by welts drilled on adjacent lands." 43 C.F.R. § 3100.2-1 (emphasis added). This e situation where an adjacent oil and gas operator drills for and produces gas from reservoirs that may extend into the boundaries of the Federal mineral estate. While this definition might arguably be stretched. to -apply to the coal r ine operator's drilling -of GHvs bri adjacent lands, it is unclear that it -would cover all situations involving GHVs on Federal lands or the Federal mineral estate. The parties do not suggesttthat this ruie applfe? here, acid we agree`thai ft is problematic at best;we take no further position on its application. 1751BLA 14 lZ/L "I [JCL 'ON viii incn Wa411:71 Omar '07 'MAC,