Introductions of staff Day 1 and Day 2, Session 1, 9:00 a.m. to 12:00 p.m. Short break at about 10:30 a.m.

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2 Introductions of staff Day 1 and Day 2, Session 1, 9:00 a.m. to 12:00 p.m. Short break at about 10:30 a.m. Day 1 and Day 2, Session 2, 1:30 p.m. to 4:00 p.m. Short break at about 2:30 p.m. Daily Discussion Wrap Up 4:00 p.m. to 5:00 p.m. 2

3 Administrative Services Division Amanda Sewell Assistant Director Royalty Compliance Section Billie Hunter Program Manager Billie Hunter has worked for the State of Wyoming since January She has worked for three separate agencies and held positions in financial and auditing for those agencies. Billie has been with the Office of State Lands and Investments since June Billie has been the supervising auditor for the Royalty Compliance Section of the Administrative Services Division since April 2013, In total, Billie has 17 years experience in auditing and nearly nine years of experience in auditing in regard to the oil, gas and hard mineral industries 3

4 MARY ARCHER SENIOR AUDITOR SENIOR STAFF SALLY VIGIL SENIOR AUDITOR Mary Archer has been an auditor with the Office of State Lands and Investments, Royalty Compliance Section for over 17and has been a member of senior staff since Mary is responsible for lease reviews, complex and comprehensive audits. Mary conducts peer reviews and reviews audits performed by co-workers as well as special projects as needed. Mary is the auditor assigned to 57 oil and gas, and hard mineral companies. Mary, as a team leader is responsible for training of new staff members. Sally Vigil has been with Office of State Lands and Investments, Royalty Compliance Section for 17 years and has been a member of senior staff since Sally conducts lease reviews, complex audits and comprehensive audits. She conducts peer reviews for all three audit levels and special projects as they are assigned. Sally is the auditor assigned to 58 reporting companies. As a team leader, Sally is also responsible for the training of new staff. 4

5 ANNA LUCERO AUDITOR II MARDY RAPP AUDITOR II Anna Lucero has been with the Office of State Lands and Investments since She has worked in the finance profession for twenty six years of which the last ten years have been for the Royalty Compliance Section as an auditor. Anna conducts lease reviews and complex audits and she also assists on comprehensive audits as needed. She conducts peer reviews for co-worker lease reviews and complex audits. Anna is the auditor assigned to 58 companies, assisting with reporting issues. Anna aids as backup for the financial tech for the process of all incoming funds. Mardy Rapp has been with the Office of State Lands and Investments for two years as an Auditor II. She has 25 years of experience with finance. Her essential duties include lease reviews, complex audits, special projects as assigned, and total program compliance (determining if companies are compliant or noncompliant with the agency), and is the auditor assigned to 57 companies. 5

6 BRANDI MILLER AUDITOR II LESA TREFREN FINANCIAL TECHNICIAN Brandi Miller has worked at the Office of State Lands and Investments since April 2015 as an Auditor II. She has 9 years of previous experience with claim audits. Her duties include lease reviews, complex audits, and Total Program Compliance. She is the auditor assigned to 57 companies. Brandi also assists with special projects as assigned. Lesa Trefren has worked with the Office of State Lands and Investments as an auditor since 2010 and in September 2014 she took the position of Accounting Technician. Her job duties include posting all income funds, entry of reporting change requests. Additionally, she is responsible for all invoicing, Total Program Compliance, reconciliation, and setting up erma2 accounts. Before coming to the State Lesa was in banking for over 25 years. 6

7 o o o o o o o o o o Vacant Position Auditor Reconcile monthly mineral reporting and remittance advices from assigned payers and operators to ensure timely and accurate receipt of royalties. Monitors timely receipt of all assigned operator and payer royalty electronic and paper reporting documents required by lease terms, rules, procedures, directives and statutes. Counsels mineral lessees, operators and transporters regarding reporting documentation sufficiency, the level of accounting detail, and policy expectations required to meet the mandatory guidelines for reporting and paying. Monitors timely receipt of electronic and paper reporting documents required by lease terms, rules, procedures, directives, and statutes. Counsels and directs responsible parties into correcting reporting deficiencies when incorrectly filed or non-filing of reports occurs. Verifies royalty remittances are accurate. Analyzes calculation of mineral valuation, allowed cost deductibility and applicable royalty rate. Conducts market valuation reviews to confirm reported pricing used in computing royalties due. Traces commodity movements as used, lost, unaccounted for, or sold. Responsible for receipt, examination and validation of royalty, and contract entries into appropriate databases. OSLI hopes to have this position filled by early June

8 Jason Crowder Assistant Director Don Threewitt Wind, Commercial Leasing Julie McCully Land Transactions

9 Jamie Van Hatten Land Management Program Supervisor Brenda Davis Temporary Use Permits, Grazing Renewals Sherri Martinez Assignments, subleases CBM Reservoirs, Surface Impact Payments Tina Vigil Easements Terri Sais Billing, Rentals

10 Tate Smith Mineral Leasing Supervisor Program Management, Extensions, Terminations - tate.smith@wyo.gov Emma Van Vlack Bonding, Unit processing, Auction Administration- emma.vanvlack@wyo.gov Dianna Wolvin Assignments, CA processing, Deposits, APD s Fossils, Late Notices - dianna.wolvin@wyo.gov Lynn Hudson - Archives, Platt book updates, Customer Service, Lease File processing, Lease Terminations - lynn.hudson@wyo.gov Cathy Lujan Hard Rock Leasing and Management, Suspensions cathy.lujan@wyo.gov

11 Ben Bump Assistant Director Robert Moulton - Lander Field Office Appraisal Supervisor Robert.moulton@wyo.gov Ryan Daugherty Appraiser ryan.daugherty@wyo.gov Mike Hastings Appraiser michael.hastings@wyo.gov Chad Mickelson Appraiser chad.mickelson1@wyo.gov Thomas Storey GIS Program Manager Thomas.storey@wyo.gov Shianne Fornstrom GIS Technician shianne.fornstrom@wyo.gov

12 Cole Lambert Field Supervisor William Rose Buffalo Field Office Natural Resources Specialist Eastern Region Kyle Nelson Buffalo Field Office Minerals Specialist Eastern Region Cody Booth Lander Field Office Natural Resources Specialist Western Region Don Gilbreath Minerals Specialist Western Region

13 Title 30, Chapter 5, Article 3 PAYMENT FOR INTERESTS IN PRODUCTION Payment for production; time for payment; payor. (a) The proceeds derived from the sale of production from any well producing oil, gas or related hydrocarbons in the state of Wyoming shall be paid to all persons legally entitled thereto, except as hereinafter provided, commencing not later than six (6) months after the first day of the month following the date of first sale and thereafter not later than sixty (60) days after the end of the calendar month within which subsequent production is sold, with the person or persons entitled to such proceeds. Payment shall be made directly to the person or persons entitled thereto by the lessee or operator or by any party who assumes such payment obligation under any legal arrangement. 13

14 Title 30, Chapter 5, Article 3 PAYMENT FOR INTERESTS IN PRODUCTION Payment for production; time for payment; payor. (b) Notwithstanding subsection (a) of this section: (i) Payments shall be remitted to the person or persons entitled to proceeds from production annually for the aggregate of up to twelve (12) months accumulation of proceeds if the total amount owed is one hundred dollars ($100.00) or less; (ii) Notwithstanding paragraph (i) of this subsection, upon written request of the payee, payments shall be remitted to the payee within sixty (60) days following receipt of the request if the aggregation of the proceeds is twentyfive dollars ($25.00) or greater; (iii) In no case shall payments be made under this section later than twelve (12) months following the date of cessation of production; (iv) Payments shall be remitted to entitled persons within twelve (12) months following the date the payor is no longer responsible for the payments. (c) The lessee or operator is exempt from the provisions of W.S through , and the purchaser shall assume the operator's responsibilities for making such payments if the operator and purchaser have entered into arrangements whereby the proceeds are paid by the purchaser to those legally entitled thereto. 14

15 Title 30, Chapter 5, Article 3, Cont Payment for production; interest on late payments. Any delay in determining any person legally entitled to an interest in the proceeds from production shall not affect payments to all other persons entitled to payment. In instances where payment cannot be made for any reason within the time limits specified in W.S (a), the lessee or operator, purchaser or other party legally responsible for payment shall deposit all proceeds credited to the eventual interest owner to an escrow account in a federally insured bank or savings and loan institution in Wyoming, using a standard escrow document form approved by the attorney general of Wyoming, which deposit shall earn interest at the highest rate being offered by that institution for the amount and term of such deposits. The escrow agent may commingle monies received into escrow from any one lessee or operator, purchaser or other party legally responsible for payment. Payment of principal and accrued interest from such accounts shall be paid by the escrow agent to all persons legally entitled thereto within thirty (30) days from the date of receipt by the escrow agent of final legal determination of entitlement thereto. If the escrow agent is unable to deliver the payment to the legally entitled person within three (3) years from the end of the month in which the escrow agent first received notice of the person legally entitled to the payment, the payment shall be considered unclaimed for purposes of W.S through Applicable escrow fees shall be deducted from the payments. 15

16 Title 30, Chapter 5, Article 3, Cont Payment for production; penalty for violation; jurisdiction; costs and fees. (a) Any lessee or operator, purchaser or other party legally responsible for payment who violates the provisions of this article is liable to the person or persons legally entitled to proceeds from production for the unpaid amount of such proceeds, plus interest at the rate of eighteen percent (18%) per annum on the unpaid principal balance from the due date specified in W.S (a). (b) The district court for the county in which a well producing oil, gas or related hydrocarbons is located has jurisdiction over all proceedings brought pursuant to this article and the prevailing party in any proceedings brought pursuant to this article shall be entitled to recover all court costs and reasonable attorney's fees. (c) Any person who fails to provide royalty information as provided in W.S (b) is liable to the affected royalty, overriding royalty or other nonworking interest owner in the amount of one hundred dollars ($100.00) per month that complete reporting is not provided to the interest owner. 16

17 Title 30, Chapter 5, Article 3, Cont Definitions. (a) As used in this act: (i) "Lessee" means the person entitled under an oil and gas lease to drill and operate wells, paying the lessor a royalty and retaining the remainder, known as the working interest. The lessee pays all costs of production out of his interest, the lessor's interest being free and clear of all those costs; (ii) "Lessor" means the mineral owner who has executed a lease and who is entitled to the payment of a royalty on production, free and clear of the costs of production; (iii) "Operator" means a person engaged in the business of drilling and producing wells for oil and gas; (iv) "Other nonworking interest" means any interest in an oil and gas lease or well which is not a royalty, overriding royalty or working interest; 17

18 Title 30, Chapter 5, Article 3, Cont Definitions. (a) As used in this act: (v) "Overriding royalty" means a share of production, free of the costs of production, carved out of the lessee's interest under an oil and gas lease; (vi) "Costs of production" means all costs incurred for exploration, development, primary or enhanced recovery and abandonment operations including, but not limited to lease acquisition, drilling and completion, pumping or lifting, recycling, gathering, compressing, pressurizing, heater treating, dehydrating, separating, storing or transporting the oil to the storage tanks or the gas into the market pipeline. "Costs of production" does not include the reasonable and actual direct costs associated with transporting the oil from the storage tanks to market or the gas from the point of entry into the market pipeline or the processing of gas in a processing plant; (vii) "Royalty" means the mineral owner's share of production, free of the costs of production; (viii) "Working interest" means the interest granted under an oil and gas lease, giving the lessee the right to work on the leased property to search for, develop and produce oil and gas and the obligation to pay all costs of production; (ix) "This act" means W.S through

19 Title 30, Chapter 5, Article 3, Cont Collection; reporting and remittance of royalties. (a) Unless otherwise expressly provided for by specific language in an executed written agreement, "royalty", "overriding royalty", "other nonworking interests" and "working interests" shall be interpreted as defined in W.S A division order may not alter or amend the terms of an oil or gas lease or other contractual agreement. A division order that alters or amends the terms of an oil and gas lease or other contractual agreement is invalid to the extent of the alteration or amendment and the terms of the oil and gas lease or other contractual agreement shall take precedence. 19

20 Title 30, Chapter 5, Article 3, Cont Collection; reporting and remittance of royalties. (b) Whenever payment is made for oil or gas production to an interest owner, all of the following information shall be included and labeled on the check stub or on an attachment to the form of payment, unless the information is otherwise provided on a regular monthly basis: (i) The lease, property or well name or any lease, property or well identification number used to identify the lease property or well; (ii) The month and year during which sales occurred for which payment is being made; (iii) The total number of barrels of oil or thousands of cubic feet of gas sold; (iv) The price per barrel of oil or the price per thousand cubic feet of gas; (v) The total amount of state severance, ad valorem and other production taxes; (vi) An itemized list of any other deductions or adjustments; (vii) The net value of total sales after deductions; (viii) The owner's interest in sales from the lease, property, or well expressed as a decimal; (ix) The owner's share of the total value of sales prior to any deductions; (x) The owner's share of the sales value less deductions; and (xi) An address where additional information pertaining to the owner's interest in production may be obtained and questions answered. If information is requested by certified mail, an answer must be mailed by certified mail within thirty (30) days of receipt of the request. 20

21 Title 36, Chapter 6, Article 1 Mineral Leases Terms of leases; extensions; rules and regulations; rent and royalties; assignment of leases; grazing and agricultural leases; cooperation with United States or its lessees, in cooperative or unit plans (o). Any mineral lessee or producer shall report all production including total volume, value and disposition of the mineral production under any lease, unit or communitization agreement in a timely manner and in such form as determined by the board. Any person failing to comply with this subsection shall be subject to penalties enacted by the board or the cancellation of the lease or agreement under which they are operating. 21

22 Submission, custody and confidentiality of subsurface log reports Existing oil and gas leases ratified Payment for improvements; "improvements" defined Inspection reports. 22

23 Title 36, Chapter 6, Article 3 Calculation of Royalties on Oil, Natural Gas and Associated Natural Resources Production Definitions "Return on investment" deduction not allowed for calculation of royalty. 23

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25 It is the responsibility of the lessees, reporters and operators to make sure they understand all rules and regulations and same are adhered to. Chapter 7 Disposition of State In-kind Royalty Oil and Gas Chapter 18 Leasing of Oil and Gas effective since March 2007 A. Section 7 Royalties (a) Royalties for oil and gas and other kindred hydrocarbons, natural gasoline, sulfur, and nonhydrocarbon gases and any by-products recovered from such gases shall be based on the terms of the particular lease agreement, subject to all state royalty statutes and rules, and shall be based on the total consideration received for state production. A. Section 15 Royalty Reporting B. Section 16 Field Audits 25

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27 Major Changes to Lease Paying Quantities now defined Paying quantities is defined as production in quantities sufficient to yield a return in excess of operating costs even though drilling and equipment costs may never be repaid. Late Rental Payments If the delay rental is not paid on or before the date it becomes due, notice of default will be sent to LESSEE, and an administrative handling assessment of one dollar ($1.00) per acre for the missing payment will be assessed Transportation Deductions The reasonable, actual, unreimbursed costs of transportation in the market pipeline up to fifty percent (50%) of the value of the residue gas shall be deductible, unless a greater amount is agreed to by LESSOR in writing. 27

28 Market Pipeline now defined Market pipeline is defined as the pipeline segment(s) from which gas can be sold without further treating or compressing. (if the pipeline transports the gas to a gas plant, then further treating is required and is not considered transportation but rather gathering) Some of the market pipelines are: MIGC FUGG WIC CIG Kern River Northwest Pipeline Northern Boarder Pipeline Bison Pipeline 28

29 Major Changes to Lease Operating Purposes on the Lease not to exceed two percent (2%) of wellhead volume unless a greater amount is agreed to by LESSOR in writing. Measurements of Production lists items to be included in support media Penalties Failure to timely submit LESSOR-required reports and reporting documents, including reports reflecting no production, as called for within a practical time period as directed, shall result in a penalty assessment against LESSEE of $100 per lease, per month, or fraction thereof, missing or delinquent. Interest Any royalty not paid when due shall bear interest at a rate of eighteen percent (18%) per annum. 29

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31 Suspensions are now being processed by the Mineral Leasing Division. Please contact Cathy Lujan at or 31

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33 All companies with interest in state mineral leases shall submit 2 official division orders when applicable Items that should be included on the Division Order (DO) State lease number Well API number Well name Operator Name Unit or Communitization Agreement name or number Legal description Effective Date Exhibit showing all NRI totaling 100% Royalty payments are required irrespective of whether or not the DO is executed The DO cannot change the terms of the lease per statute No royalty monies attributable to State leases may be suspended if ownership is in question, the funds can be deposited in an escrow account Information provided on the DO is not confidential information 33

34 One executed DO will be returned to the company only if a postage paid envelope has been included If the DO does not list 100% of the interest owners, the DO will not be executed and returned A copy of a completed W-9 is available on the OSLI website 34

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37 Rental (handled by the Mineral Leasing Section) Prior to discovery Due in advance Late fee of $1.00 per acre if not paid in advance If still not paid, the lease terminates under terms of lease!!! Minimum Annual Royalty(MAR) (handled by the Royalty Compliance Section (RCS)) Once a well has been completed on the lease MAR will be invoiced 60 days after lease anniversary date MAR must be paid within 30 days One late notice will be sent If still not paid, the lease may terminate under terms of lease and the company will be required to plug and abandon all wells!!! 37

38 Examples If lease is 640 acres and prior to discovery and in primary term 640 * $1.00 = $ If lease is 640 acres and after discovery 640 * $2.00 = $1, OSLI receives royalties on lease to cover a portion of the total MAR of $1, Royalties paid of $ MAR due and invoiced will be $1, $ = $

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40 All Flared Volumes Must be Reported to OSLI 15 day testing as allowed by Wyoming Oil and Gas Conservation Commission (WOGCC) Rules All flared volumes must be reported on approved template Below 60 MCFD as allowed by WOGCC Rules All flared volumes must be reported on approved template This includes venting of gas All volumes need to be reported to OSLI as produced volumes that have not been sold Volumes shall be reported monthly and will include the following data Production Period Operator API Well Name Lease Number Total Flared Volume Average Flared Volume per Day 40

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42 Flaring as approved by WOGCC WOGCC staff will determine and authorize venting or flaring of gas WOGCC will possibly send a copy of approval or denial to OSLI Company will need to provide the following to aid in determining if royalty will be due Volume and duration of venting or flaring Reason for venting or flaring Current marketability of gas Efforts to bring gas to market Development of infrastructure Value of associated oil production The SBLC will consider assessing a royalty on vented or flared gas that exceeds the de minimis thresholds All volumes need to be reported to OSLI as produced volumes that have not been sold 42

43 Royalty Free Disposition Application required on all leases Must be presented to the SBLC for approval Items to include in formal request Copy of flaring approval from the WOGCC Initial well production on a per day basis Distance and location of nearest existing potential pipeline including ownership Number of gas wells within a 3 mile radius Provide financial justification for delay in building pipeline connections Provide financial justification for delaying installation of facility to remove liquid stream from flared gas 43

44 Royalty Free Disposition Cont. Requests should be sent to the attention of Billie Hunter via mail to OSLI Request will be reviewed by OSLI staff Board matter will be prepared for the next available SBLC board meeting Company will be notified of the approval or denial of royalty free disposition by SBLC If not approved, royalty will be invoiced at the WASP of like gas produced by the company 44

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46 Leases issued prior to August 4,2011 Lease states Natural gas and oil actually used for operating purposes upon the land and, except as to the ultimate sale thereof, gas or liquid hydrocarbons returned to the sand for stimulating the production of oil or secondary recovery purposes shall be royalty free. Volumes should be reported to OSLI as produced volumes that have not been sold These volumes should be reported using the Natural Gas Flaring template Per statute all volumes must be reported! 46

47 Leases issued after August 4, 2011 Lease states Natural gas and oil actually used for operating purposes on the lease and, except as to the ultimate sale thereof, gas and/or liquid hydrocarbons returned to the sand for stimulating the production of oil or secondary recovery purposes shall be royalty free. Operating purposes on the lease is defined as fuel used for production purposes, including running a pumping unit(s), operate well-head compression, operate initial separation equipment at the well for separation of oil, water and gas, and run tank heaters, not to exceed two percent (2%) of wellhead volume unless a greater amount is agreed to by LESSOR in writing. Operating purposes upon the lease specifically excludes any use beyond separation and storage tank heating and all procedures and processes specifically deemed as the cost of production under the laws of the State of Wyoming. Volumes should be reported to OSLI as produced volumes that have not been sold These volumes should be reported using the Natural Gas Flaring template Per statute all volumes must be reported! 47

48 What is required by OSLI? Wellhead volumes metered upon discharge of the separator for fuel returned to the land Wellhead volumes metered for the separator, glycol pumps, etc. Volumes delivered downstream must be metered Operator shall provide manufacturers test fuel use guidelines for all equipment Number of days the equipment is used monthly Lease schematics showing location of equipment 48

49 What is considered beneficial use? "Beneficial purposes" shall mean that oil or gas which is produced from a lease, which is used on or for the benefit of that same lease, for operating or producing purposes such as (1) fuel in lifting oil or gas, (2) fuel in the heating of oil or gas for the purpose of placing it in a merchantable condition, (3) fuel in compressing gas for the purpose of placing it in a marketable condition, or (4) fuel for firing steam generators for the enhanced recovery of oil. Gas used for beneficial purpose shall also include that which is produced from a lease, which is consumed on or for the benefit of that same lease, (1) as fuel for drilling rig engines, (2) as the source of actuating automatic valves at production facilities, or (3) with the prior approval of the Supervisor, as the circulation medium during drilling operations. Where the produced gas is processed through a gasoline plant and royalty settlement is based on the residue gas and other products at the tailgate of the plant, the gas consumed as fuel in the plant operations will be considered as being utilized for beneficial purposes. In addition, gas which is produced from a lease, which, in accordance with a plan approved by the Supervisor, is re-injected into wells or formations subject to that same lease, for the purpose of increasing ultimate recovery shall be considered as being used for beneficial purposes; provided, however, that royalty will be charged on the gas used for this purpose at the time it is finally produced and sold. 49

50 What is not considered beneficial use? Water treatment facilities Treatment of gas from other state, federal or fee leases On-lease fuel used to power water treatment facilities or other equipment not deemed beneficial will be royalty bearing. 50

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52 MR20, MR50 and MR51 Reports Used for reporting gas products Wellhead Gas (031) Residue Gas (032) CBM Gas (033) Must be submitted by the last day of the second month following the month of production Payment must be received by the last working day of the second month following the month of production Note OSLI does not receive payments on weekends or holidays Postmark date is not used in calculating interest 52

53 MR30 Reports Used for reporting all hard minerals Surface Coal (111) Underground Coal (112) Bentonite (100) Trona (140) Must be submitted by the last day of the month following the month of production Payment must be received by the last working day of the month following the month of production Note OSLI does not receive payments on weekends or holidays Postmark date is not used in calculating interest 53

54 Interest on late royalty payments MR10 30 day MR20 60 day Interest will accrue at 18% per annum on any payment received after the deadline addressed above pursuant to W.S and leases issued after August Interest will be calculated based on the receipt date of the payment (note the OSLI does not receive mail on weekends or holidays). Once the interest assessment has been calculated and the balance has reached a minimum of $100.00, the company will be notified. The company will have thirty (30) days from receipt of the assessment to pay the outstanding interest amount. 54

55 Penalties on late royalty reports MR10 30 day MR20 60 day Penalties will accrue for any report received after the deadline addressed above, any incomplete report, and any missing report as allowed by W.S and leases issued after August A complete reporting includes a separate report for each PSA and Product Code for each lease on which the company is required to report. If a company fails to report on any PSA or Product Code for which they are responsible, a penalty will accrue. Once the penalty assessment has been calculated and the balance has reached a minimum of $100.00, the company will be notified. The company will have thirty (30) days from receipt of the assessment to pay the outstanding penalty amount. Reports are required each month from the time of well completion until the last well has been plugged and abandoned (zero reports) regardless of whether or not there were sales or production. 55

56 Reported Royalty should match the System Calculated Royalty due The system will accept a reported royalty that differs from the calculated royalty due Company will be notified via of the issue and payment will be requested for the unpaid royalties These items will usually be addressed during a lease review Company will have 10 business days to correct the issue 56

57 How are royalties calculated? Gross sales value Processing deduction Transportation deduction = Net sales value Net sale value * State ownership * Royalty rate * Tract allocation = Royalty due erma2 does not take into account the company s royalty burden 57

58 Unit revisions or re-structuring To avoid interest on late payments due to Unit revisions or Communitization Agreements Report at the proposed tract allocation prior to BLM Approval Provide setup documentation to OSLI staff Report monthly until BLM approves tract allocation Report at the approved tract allocation received from the BLM OSLI will give the companies 30 days to report and pay royalties If paid within the 30 days, interest will accrue but will be removed from the account Deposit funds in an escrow account Funds must be deposited in an account that meets Statute requirements Interest earned on the account will be turned over the OSLI in lieu of 18% interest 58

59 erma2 reference number must be noted on the corresponding payment Submissions of prior period amendments must be for dates 6 years or less from the date of production MR10, MR40, and MR41 Reports Used for reporting Oil (010) and Lease Condensate (021) Must be submitted by the last day of the month following the month of production Payment must be received by the last working day of the month following the month of production Note OSLI does not receive payments on weekends or holidays Postmark date is not used in calculating interest 59

60 Prior Period Adjustments (amendments) These must be submitted as net differences Original report Production Sales Vol. Gross Sales Value Deductions Net Sales Value Royalty Due , , , , Actual Production and Sales Production Sales Vol. Gross Sales Value Deductions Net Sales Value Royalty Due , , , , Amendment Production Sales Vol. Gross Sales Value Deductions Net Sales Value Royalty Due , , , ,

61 010 Oil MR Lease Condensate MR Plant Condensate MR Wellhead Gas MR Residue Gas MR CBM Gas MR Natural Gas/Pentane MR Y-Grade Products MR Propane/Butane/Ethane MR Sulfur MR20 61

62 070 Carbon Dioxide MR Nitrogen MR Helium MR Bentonite MR Coal Surface MR Coal Underground MR Leonardite MR Zeolite MR Uranium (In Situ) MR30 62

63 122 Uranium (Solid) MR Limestone MR Sodium/Trona/Soda Ash MR Sand & Gravel (Tons) MR Sand & Gravel (Cu Yds) MR Rip Rap Rock MR Metallic/Non Metallic MR Clay MR Decorative Stone MR30 63

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65 (a) Unless otherwise expressly provided for by specific language in an executed written agreement, "royalty", "overriding royalty", "other nonworking interests" and "working interests" shall be interpreted as defined in W.S A division order may not alter or amend the terms of an oil or gas lease or other contractual agreement. A division order that alters or amends the terms of an oil and gas lease or other contractual agreement is invalid to the extent of the alteration or amendment and the terms of the oil and gas lease or other contractual agreement shall take precedence. (b) Whenever payment is made for oil or gas production to an interest owner, all of the following information shall be included and labeled on the check stub or on an attachment to the form of payment, unless the information is otherwise provided on a regular monthly basis: (i) The lease, property or well name or any lease, property or well identification number used to identify the lease property or well; (ii) The month and year during which sales occurred for which payment is being made; (iii) The total number of barrels of oil or thousands of cubic feet of gas sold; 65

66 (iv) The price per barrel of oil or the price per thousand cubic feet of gas; (v) The total amount of state severance, ad valorem and other production taxes; (vi) An itemized list of any other deductions or adjustments; (vii) The net value of total sales after deductions; (viii) The owner's interest in sales from the lease, property, or well expressed as a decimal; (ix) The owner's share of the total value of sales prior to any deductions; (x) The owner's share of the sales value less deductions; and (xi) An address where additional information pertaining to the owner's interest in production may be obtained and questions answered. If information is requested by certified mail, an answer must be mailed by certified mail within thirty (30) days of receipt of the request. 66

67 (a) All lessees shall submit to the Office a completed monthly royalty reporting statement on a form provided by the Office for each lease (Forms M-1 and/or M-2). The lessee shall submit each lease statement within thirty (30) days of the last day of the month of sales for oil and condensate and sixty (60) days of the last day of the month of sales for gas and gas plant products. The lessee shall attach to the M-1 statement copies of original arms-length sales transaction documents showing the quantity, quality, and value of products sold, including all lease volume sales through affiliate companies. The M-1 and M-2 are now the MR10 and MR20 under the erma reporting platform (b) For participating leases within a unit, a participating area, or a cooperative plan, the unit operator, the participating area operator, or the cooperative plan (communitization) operator shall submit to the Office a completed monthly royalty reporting statement on a form provided by the Office for each unit, unit participating area, and cooperative plan embracing state leases (Form M-4). The respective operator shall attach to the M-4 statement copies of original arms-length sales transaction documents showing the quantity, quality, and value of products sold. The M-4 is now the MR40 and MR50 for SL PSA s and MR41 and MR51 for unit and CA PSA s 67

68 All prior period adjustment support media must be submitted, along with the support media being supplied for the current sales period. Supporting documentation is required for every report submitted from an operator of unitized/communitized lands containing State lease participation, as well as by operators of non-unitized/communitized State leases. Since this documentation will generally be hard-copy, we are allowing a maximum of ten (10) calendar days for receipt in our office, from the due date of the corresponding report to which it is matched, and thirty (30) calendar days for support of amended reporting. Again, like the payment, the support media must describe the particular report it supports. This must be broken out by supported property as a header at each break in multiple lease/unit support documents. This is an allowance of ten (10) calendar days, wherein currently, these items have been required at the time of the report. If the State s lease is not embraced in a unit or CA, then the lease operator/lessee will be required to file the support documentation for the particular lease property. Support media is required to be submitted on a monthly basis any time production or sales have occurred. 68

69 Where there are no first purchaser arms-length non-affiliated purchase statements supporting volumes and values attributable to State s interest production sold at a point where no further consideration exists (i.e., no reciprocity agreements between buyer and seller under buy-sells, volume exchanges affecting value), the office will accept documents that trace the production from State leases to the sales point, be that a plant tailgate, market pipeline interconnect or other arrangement such as production marketing pools. Support media will be used to validate deductions taken against gross sales value. 69

70 An internal document replacing an arms-length first purchase statement is allowed where no other first purchaser documentation exists. The reporter must provide a notarized statement that such a statement is accurate; and, the replacement document must reflect the third party sales location, where sales are out of affiliate and pool sales transactions. The sale to an affiliate should reflect the affiliate s name and the price received in an armslength, non-reciprocal sale to a bonafied third party purchaser. Sold volumes and values should also be shown for all similar sales in the same month to all purchasers of volumes attributable to that affiliate s sales portfolio. This would be the same for pooled sales, to assure that the volume sold and values used for said volumes are reflective of market value and that sales are apportioned such that a weighted average is always the true weighted average for all sales from the affiliate or pool. 70

71 When providing pipeline run statements or gas plant settlement statements, the Lease numbers shall be written on the face of the documents, pursuant to the State Oil and Gas Lease. A cross reference spreadsheet can also be submitted which ties each statement to the specific lease(s) When the supporting documentation provided represents the total well production or volumes sold and the state s volume is only a portion, the operator s report shall reflect the full product volume(s) leaving the lease or unit or pooled area boundary. Where the operator does not have any basis for knowing any other sharing working interests sales prices, unless selling for that working interest, then the operator must provide its pricing/valuation information and information related to any deductions it takes. The royalty reports will then be compared to this information to assure that all volumes and pricing and deductions for the entire package are correct. Support media must include the State s allocation percentage 71

72 Transportation and/or processing deductions can be supported by copies of gas plant or pipeline transportation statements or invoices, showing the volumes of gas processed and sold as products and/or gas moved the deduction amount and the value due the service provider. These documents must reflect the State lease numbers. This information can be as presented by the specific service provider, or noted on the face of the forms sent in support of the gas processing or gas movement. If the facility for which specific deductions are being taken is owned by the producer or a producer affiliate, internal documents reflecting the reasonable actual costs of processing and/or transportation, including tariff verification and any rebates or reimbursements related to the initial charges, must be provided. If pipeline transportation statements or invoices are not included, the deduction will not be allowed and additional royalty will be due 72

73 The remitter may provide backup information to establish the weighted average cost, (i.e., a schedule that can be audited), for the same gas on which a weighted average price is acceptable, reflecting movement of only those volumes in the pool. For example, internally generated documents could reflect the sales point and volume/value for each sale from the pool where State gas can physically be sold, by purchasers with transportation costs related to this pool reflected in the same manner for the same volumes sold. 73

74 If services are being charged reflecting bundled fee services, which may contain elements that are deductible for royalty purposes the reporter must require the service provider to parse out the charges on a unit of charge basis. The reporter can provide this information as a onetime number. The allowed deduction amount will be confirmed with the party requesting the deduction. If bundled fee services are not itemized, the deduction will not be allowed and additional royalty will be due In lieu of the above described third party support media, reporters may submit the required monthly support media using the approved template which can be found on the office website. 74

75 o Support media can be submitted three different ways. o o o 1. Hard copy mailed to office not a preferred method 2. as an attachment 3. CD or thumb drive mailed to office 75

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77 In order to ensure the state trust land beneficiaries are kept whole in the royalty reporting and payments they receive with regard to leases embraced by Unit, Unit Participating Area (PA), Communitization Agreements (CA) and other pooling arrangements, which overlap another Unit, PA or CA, and to aid in audit procedures, OSLI requests that all royalty reporters report in accordance with this policy. When will an aggregated tract allocation be used? CA borders a Federal Unit or CA in which the State has interest CA overlaps a Federal Unit or CA in which the State has interest 77

78 Information Required to Set up the CA CA name, Serial Number, if applicable CA operator CA tract factor(s) Unit name, PA name, Serial number, if applicable Unit operator Unit tract factor(s) Well name(s) API #(s) Well location State lease(s) State ownership factor (where the mineral rights are split between the State and other(s)) Royalty rate(s) CA effective date Unit PA and unit revision effective date(s) Products (WY product codes) 78

79 Implementation Reporting under these guidelines became effective for July 2014 production. 79

80 Sample 80

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82 o o o o o o Support media is due on a monthly basis. Support media due in office within 10 calendar days following erma report (formerly was due at time of report). Amended support media due in office within 30 calendar days following amendment Approved in-house support media template can be used as a form of support media. All production and sales must be labeled by property or support media will not be considered valid. If the State s lease is not embraced in a unit or CA, then the lease operator/lessee will be required to label the support documentation for the particular lease property. Any time production occurs but there are no sales during a reporting period, support media substantiating production must be submitted (in most cases this will pertain only to oil because gas is not usually stored for future sales). This can be satisfied by submitting pumper statements. o Support media is also required for flared gas even if no sales occur. 82

83 All Third Party Media Affecting Accountability for Lease Sale Volumes o Pumper Statements must be signed by pumper o Gauge Reports must be signed by pumper o Gas Plant Statements o Oil Statements o Unprocessed Gas Sales Invoices o Contract copies if used in calculating royalties (once a copy is forwarded, we won t need a copy every month, unless monthly price sheets are used. We will keep the first copy on file for reference. Only updated contract copies will be needed thereafter). o Allowable royalty valuation reducing specific-amount fee invoices, and other third party media you wish OSLI to consider that does not fall within the above list. 83

84 All media aids: o Spreadsheets showing how reported sales volumes in gas plant, oil, and un-processed gas statements and/or invoices, are allocated between all wells, (State, Federal, and Fee), affecting the calculation of State lease royalty. o Spreadsheets must also show how volume/value deductions are allocated to wells/leases affecting calculation of State lease royalties. o Spreadsheets must be reasonably legible. o Explanations (where applicable) regarding sourcing information on spreadsheets. o Conversion worksheets (MMBtu to mcf, and wet gas to dry). o Your Payer/Working Interest in the lease (where multiple payers exists). o Copies of any OSLI communications that would clarify why your reporting may seem outside of traditional requirements. 84

85 o In lieu of the described third party support media, reporters may submit the required monthly support media using the approved template which can be found on the office website. o /media 85

86 o o Processing deductions are not allowed to be taken against residue gas (032) Substantiated processing deductions can be taken up to 2/3 of the value of the liquids (for reporting purposes, all product codes that are reported on the MR20 with the exception of residue gas (032) are considered liquids) o Product code change for ethane ethane was previously reported under product code (040) natural gas / pentanes but is now reported under product code (050) propane / butane. o o This change was due to the price of ethane being closer to products reported under the 050 product code than the 040 product code. When ethane and propane is a negative sales value, royalty may not be reduced by the negative amount. The ethane and propane value will need to be zero. PRODUCT CODES 022 Plant Condensate - gals 031 Wellhead Gas - MCF 032 Residue Gas - MCF 033 CBM Gas - MCF 040 Natural Gas/Pentane - gals 045 Y Grade Products - gals 050 Propane/Butane/Ethane - gals 060 Sulfur - tons 070 Carbon Dioxide - MCF 080 Nitrogen - MCF 090 Helium - MCF 86

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89 TPC is a communication tool used by the Administrative Services Division Royalty Compliance Section, the Field Services Division and the Trust Land Management Division program managers that conduct business with private industry. The goal of this initiative is to provide a simple and effective way for those managers to review company compliance with all agency programs prior to processing an action with the company. TPC is intended to enhance communication between program staff and industry to identify situations that may be rectified through cooperation. In the upcoming year, the Field Services Division will assist in the development of an agency/public collaborative software application with integration of all agency software systems. The Wyoming State Forestry Division will review and assess forestry division systems integration with SLAMS for inclusion in the TPC initiative. 89

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91 OSLI now has the capability to reconcile the operator (MR40, MR41, MR50 and MR51) production and sales volumes with their corresponding royalty report (MR10 and MR20). If the production and sales volume totals do not match, the company(s) will be contacted via erma2 to amend their reporting. 91

92 If amendments are made to the MR10 or MR20, the MR40, MR41, MR50 or MR51 generally needs to be amended. In this instance the original reports are for zero. The amendment was for the sale of wellhead. The MR20 shows sales volumes and the MR50 remained unchanged. This report will not reconcile. Company will be contacted via erma 2 to amend their reporting. 92

93 The sales volumes on this report match between the MR50 and the MR20. The production volumes should also match. 93

94 Operators are required to report 100% of all production on a lease, Unit, PA or CA on the MR40, MR41, MR50 or MR51. Royalty payees are required to report 100% of their take from each lease, unit, PA or CA. 94

95 The sales units reported on the MR50 should total 59,360 to match the total MR20 report. The operator will be contacted via erma 2 to amend their reporting. 95

96 No production on MR50. Gross sales value on the MR20 does not match the MR50. 96

97 The royalty report was amended to zero but the operator report was not. The company will be contacted vie erma 2 to amend reporting. 97

98 Production and sales unit volumes are reported on the MR20 but the operator reported zero volume on the MR51. The operator report should match the volumes for each lease on payer reports. 98

99 The operator and the royalty reporter are the same company. The MR20 and the MR51 should match for the units produced and sold. Gross sales unit volumes do not match. 99

100 The production units on the MR41 do not match the units on the MR10. The gross sales units match between each lease on the MR10 and the MR

101 Royalty reporters may not allocate volumes from a unit, PA or CA between the leases in the unit, PA or CA. The royalty report must show 100% of their takes from each lease. The individual lease tract allocations will calculate the royalty due. 101

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103 OSLI is conducting lease compliance reviews in order to identify any reporting issues early in order to mitigate possible future penalties and interest. The authority to perform these compliance reviews is granted by the Rules and Regulations of the Board of Land Commissioners. Chapter 18 Rules & Regulations Section 16 Field Audits: (a) The Wyoming Department of Audit, the Director or duly authorized representative of either shall have the right at reasonable times and intervals to audit the books and records of any oil and gas lessee or operator on state lands and to inspect the leased premises and conduct field audits for the purpose of determining compliance with this chapter or the terms of the lease. (b) Any and all parties producing and selling state lands royalty interest shall retain their records for six (6) years from the date of sale reporting as due under this chapter for any production from or allocated to state lands for all periods ending after January 1, (c) Absent state lessee or operator production sales reporting as required in this subsection, the state s oil and gas lessee shall only sell or deliver any leased substance to any person who agrees: (1) To file reports with the Office stating the prices, quantity, origin and disposition of all production purchased from a state lease; and (ii) To allow an audit as provided for in this section. 103

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105 Each user must have a unique user name and password Each user must complete 2 agreements with original signatures If your company has contracted with an outside agent to submit reports, a representative of your company will need to sign the erma2 Agreement Security protocols require the documents have original signatures OSLI staff will sign the agreements and one will be returned to the company 105

106 erma2 account will be set up within 5 days of receipt Account setup will generate an to the user with a link to the erma2 system User will need to verify the address and establish a password Users shall not share their account user name or password with any individual If OSLI determines user names or password have been shared, the account will be locked immediately This is for the protection of data submitted by the companies 106

107 Each company is authorized to have a maximum of 3 user accounts for the erma2 system What needs to be done if a user is no longer an employee of the company? An should be sent to OSLI notifying the account should be deactivated can be sent to the follow: Lesa Trefren at lesa.trefren@wyo.gov New erma2 Agreements will need to be completed for new employee 107

108 What happens if a company fails to provide original signatures? User will be notified by phone that the agreement is due within 15 days User will be notified via that agreement is due within 15 days If agreement is still not received Account will be disabled Penalties and interest will accrue due to nonreporting or non-payment 108

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111 1. URLs for erma2 a. a. erma2 Test i. This is for practice and testing ii. Is pink in color iii. b. erma2 Production i. Is blue in color ii. Url=%2ferma2%2fDefault.aspx 111

112 Enter user ID and password, then click on the login button If you have problems logging in, please contact Lesa Trefren at or

113 erma2 Home Page a. Displays Royalties Due, Penalties Due, Interest Due and Minimum Annual Royalty Due. My Account Tab a. Click on the My Account Tab to display Company Information, Lessee of Record, Royalty Obligation, Production Obligation, Penalties Due, Interest Due, and Minimum Annual Royalty. 113

114 erma2 Home Page Tabs at the top of the screen contain dropdown boxes which are links to additional sections of erma2. Home page displays Royalties Due, Penalties Due, Interest Due, and Minimum Annual Royalty Due. Reconciliation Messages This is where messages regarding company reconciliation issues will be found. 114

115 Reconciliation Messages To open the message, check the box on the left side, move your cursor over the line so the color darkens and left click. Line will open. 115

116 Reconciliation Messages Cont. Once issue has been corrected, close the reconciliation message, and left click on the Delete Selected. Line will delete. If you have questions regarding the reconciliation or what is needed to correct the issue, please contact the auditor assigned to your account. 116

117 My Account Tab Click on the My Account Tab to display Company Information, Lessee Leases, Royalty Obligation, Production Obligation, Minimum Annual Royalty, Penalties Due, and Interest Due. The erma2 user can add or edit contacts by left clicking the Edit Contacts button. 117

118 My Account Tab Cont. Highlight the contact needing to be edited and left click on the edit button The following box opens and the erma 2.0 user can make any changes 118

119 erma2 contacts cannot be added, edited or deleted. In order to have an erma2 contact removed please contact Lesa Trefren at or call The company information tab is also where a company password is changed. Left click on Change Password link and enter data into all of the following fields. i. New Password ii. Confirm Password iii. Confirm Click on the Save Changes button. 119

120 New field added to erma2 Lessee of Record. To enter, click on My Account, Lessee of Record. Enter the lease into the box and left click on search. This report may also be exported to excel by clicking on the Green Export to Excel button. 120

121 New field added to erma2 Royalty Obligation To enter, click on My Account, Royalty Obligation. Enter lease number in Search Lease box and click on magnifying glass. This report may also be exported to excel by clicking on the Green Export to Excel button. 121

122 New field added to erma2 Royalty Obligation Cont. Click on lease line and Payer Reporting Information is found. This box shows the lease number, Production Sharing Agreement, PSA Short Name, the acres in lease, Rental per Acre, State Ownership, Tract Allocation and the Effective Date. Also found is the product code and royalty rate for the lease. Lower Bound and Upper Bound are not applicable to oil and gas reporting. 122

123 New field added to erma2 Production Obligation To enter, click on My Account, Production Obligation Enter lease number in Search Lease box and click on magnifying glass. This report may also be exported to excel by clicking on the Green Export to Excel button. 123

124 New field added to erma2 Production Obligation Cont. Click on lease line and Production Reporting Information is found. This box shows the lease numbers, Production Sharing Agreement, PSA Short Name, the acres in unit, Effective Date, and End Date. 124

125 New field added to erma2 Interest Due To enter, click on My Account, Interest Due Enter lease number in Search Lease box and click on magnifying glass. This report may also be exported to excel by clicking on the Green Export to Excel button. 125

126 New field added to erma2 Penalties Due To enter, click on My Account, Penalties Due Enter lease number in Search Lease box and click on magnifying glass. This report may also be exported to excel by clicking on the Green Export to Excel button. 126

127 New field added to erma2 Minimum Annual Royalty Due To enter, click on My Account, Penalties Due Enter lease number in Search Lease box and click on magnifying glass. This report may also be exported to excel by clicking on the Green Export to Excel button. 127

128 Submitting Reports Click on the Reports tab to view Report History, Upload ASCII files, view Un-submitted Reports, view Quarantined Report Lines, or to enter new Reports To enter a royalty report (MR10, MR20, or MR30), click on the Add Royalty Line button 128

129 Select the Form Type MR10 use for Oil (010), or Lease Condensate (021) MR20 use for Plant Condensate (022), Wellhead Gas (031), Residue Gas (032), CBM Gas (033), Natural Gas/Pentanes (040), Y Grade (045), Propane/Butane (050), Sulfur (060), Carbon Dioxide (070), Nitrogen (080), and Helium (090) 129

130 Entering Reports into erma2 Select the correct Sales Period from drop down Select the correct Lease from drop down. 130

131 Entering Reports into erma2 Select the correct Production Sharing Agreement From the dropdown. Select the correct Product Code from drop down 131

132 Entering Reports into erma2 Mark the Amended box if this line is an amendment remember if the company is amending they should enter the Net Difference in the following fields if they are reducing the amount owed, the amounts should be preceded with a negative sign and any values that are not changing should be entered as a zero 132

133 Entering Reports into erma2 Enter the Production Units this is the production volume which should be entered as whole numbers only and should always be entered unless the company reporting is a purchaser only (then should be entered as a zero). Enter the Gross Sales Volume (Sales Unit) this should be entered as a whole number only. Enter the Gross Sales Value this is the dollar value before any deductions. 133

134 Entering Reports into erma2 Enter the Processing Deduction Amount this is the dollar value of the processing charge and usually should only be claimed on gas products. Enter the Transportation Deduction Amount this is the dollar value of the transportation charge and is usually only claimed on gas products Enter the Miscellaneous Deduction Amount this is the dollar value of any miscellaneous deductions and is rarely used and only on hard minerals 134

135 Entering Reports into erma2 Enter the Net Sales Value this the dollar value after all deductions Enter the Royalty Reported this should match closely to the Royalty Expected although the system does allow the company to enter a different amount. Click the Save button 135

136 To edit a royalty report (MR10, or MR20), click on the report line and click the Edit/View button. The user can change any information and Click the Save button 136

137 To submit a royalty report (MR10, or MR20) Click on the report line or click the box next to Reported Royalty and click the Submit Selected button and click the OK button on the Message from webpage box. The lines are then assigned a reference number and are transmitted to the LARCS system 137

138 To enter an operator report (MR40, MR41, MR50, or MR51), click the Add Operator Line button. Select the Form Type MR40 use for Oil (010), or Lease Condensate (021) on Lease Operator reports MR41 use for Oil (010), or Lease Condensate (021) on Unit Operator reports MR50 use for Plant Condensate (022), Wellhead Gas (031), Residue Gas (032), CBM Gas (033), Natural Gas/Pentanes, (040), Y Grade (045), Propane/Butane (050), Sulfur (060), Carbon Dioxide (070), Nitrogen (080), and Helium (090) on Lease Operator reports MR51 use for Plant Condensate (022), Wellhead Gas (031), Residue Gas (032), CBM Gas (033), Natural Gas/Pentanes (040), Y Grade (045), Propane/Butane (050), Sulfur (060), Carbon Dioxide (070), Nitrogen (080), and Helium (090) on Unit Operator reports 138

139 Select the correct Sales Period from drop down. Select the correct Lease from drop down. Select the correct Production Sharing Agreement from drop down. Select the correct Product from drop down. 139

140 Enter the Production Units this should be entered as a whole number and should always be entered Enter the Gross Sales Volume (Sales Unit) this should be entered as a whole number only, if there are multiple payers, the operator should only enter their volume. Enter the Gross Sales Value this is the dollar value before any deductions, if there are multiple payers, the operator should only enter their value. Enter the Processing Deduction Amount this is the dollar value of the processing charge and usually should only be claimed on gas products. Enter the Transportation Deduction Amount this is the dollar value of the transportation charge and is usually only claimed on gas products. Enter the Miscellaneous Deduction Amount this is the dollar value of any miscellaneous deductions and is rarely used and only on hard minerals. Enter the Net Sales Value this the dollar value after all deductions. Click the Save button. 140

141 To edit an operator report (MR40, MR41, MR50 or MR51) Click on the report line and click the Edit/View button. The user can change any information and Click the Save button 141

142 Submitting report To submit an operator report (MR40, MR41, MR50 or MR51), click on the report line or click the box next to Reported Royalty and click the Submit Selected button and click the OK button on the Message from webpage box at which point the lines are assigned a reference number and are transmitted to the LARCS system 142

143 Amendments Mark the Amended box if this line is an amendment remember if the company is amending they should enter the Net Difference in the following fields if they are reducing the amount owed, the amounts should be preceded with a negative sign and any values that are not changing should be entered as a zero 143

144 erma2 Change Form In order to make changes to our system companies will need to submit a completed erma2 Change form with the following supporting documentation. a) Purchase and Sales Agreement, or b) Recorded Assignment with the County, or c) Change of Operator form from the Wyoming Oil & Gas Conservation Commission, or d) Change of Operator form from the BLM, or e) Letters from both companies on their letterhead, from the CEO or president of each company, stating the effective date of the changes. This will insure that our reporting system is correct and to mitigate invalid penalties and interest. 144

145 ASCII File Setup Setup instructions can be found at: To upload a royalty report (MR10, MR20, or MR30), first setup an ASCII file based on system requirements as below. 145

146 ASCII File Setup 146

147 ASCII File Setup 147

148 ASCII File Setup 148

149 ASCII File Setup 149

150 ASCII File Setup 150

151 ASCII File Setup 151

152 ASCII File Setup 152

153 ASCII File Setup You can create your ASCII file by using TextPad. To access this program, click on the windows globe in the lower left corner of your toolbar Go into All Programs and click on TextPad. Following the ASCII format above, enter your data. Using this program eliminates the need for adjusting your column widths and possible hidden formatting issues like what has been found with excel. 153

154 ASCII File Setup The program will count the number of bytes you have in your line if you place your cursor before the number so for example if you want to see if you have reached 152 bytes, enter the data according to the format, place your cursor in front of the last number, and check the lower right hand corner of TextPad. It will show you what line you are on, and how many bytes in the line. 154

155 ASCII File ASCII File Upload Click on ASCII Upload to upload the file, royalty and operator reports can be uploaded in the same file as well as original and amended lines. A Progress box will be displayed A Message from webpage box will be displayed showing the file has been uploaded, click the Ok button 155

156 ASCII File ASCII File Upload With Errors The ASCII File Errors page will be displayed, all red lines need to be corrected or deleted Click the Save All Valid Lines button to save valid lines To correct the issue lines, click on the line to view the error and correct the line 156

157 ASCII File ASCII File Upload With Errors The user should correct data and click the Save Button or click the Delete button These lines will also be displayed in the Quarantined Report Lines section and can be corrected there as well If the user receives an error regarding Sales Period Not Valid, Production Sharing Agreement Not Set, Product Code Not Set, send the issue to Lesa Trefren at for correction via system set up in LARCS, an erma2 Change Form may need to be completed 157

158 ASCII File Submitting Report To submit the report, click on the report line or click the box next to Reported Royalty and click the Submit Selected Button and click the OK button on the Message from webpage box at which point the lines are assigned a reference number and are transmitted to the LARCS system 158

159 ASCII File ASCII File Upload With Errors Click the Search button Report History is displayed and can be printed or exported To print the history click the Print button To export the history click on the Export button 159

160 Viewing Report History Click on Report History link Enter search criteria in all or some of the following fields PSA Sales Period Report Form Leases Ref # Product Submit Date 160

161 Viewing Report History Click the Search button Report History is displayed and can be printed or exported To print the history click the Print button To export the history click on the Export button 161

162 Viewing Report History Click Open or Save button on the File Download box to view the exported history The history is exported as a CSV file which can be saved as an Excel file if needed 162

163 erma Help Tab will be a link to a document explaining how to use erma2. 163

164 Log Out Tab Clicking on Log Out takes you out of erma

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166 Billie Hunter Mary Archer Sally Vigil Anna Lucero Lesa Trefren Mardy Rapp Brandi Miller Vacant Position

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