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OIL FIELD E&P OPERATIONS

A. OCD Santa Fe Office - The OCD Santa Fe Office has authority for the issuing the following permits and work plan approvals:

1. WQCC discharge plan approvals, modifications, and renewals - reviewed and either
approved or denied by the Director.

2. Groundwater contamination investigations and remediations - requires OCD approval prior to commencement of operations.

3. Hydrostatic test dewatering permits - includes both blanket and individual type permits.

4. Commercial surface disposal facilities - permitted through application under OCD Rule 711.

5. Waste Oil Treating Plants - permitted through application under OCD Rule 312.

6. Salt water disposal (Class II) and non-hazardous industrial disposal (Class I) well permits permitted through application on Form C-108 and either approved or denied by the Director.

7. Below-grade tanks and pit - require OCD's approval prior to installation; design must incorporate secondary containment and leak detection.

8. Surface impoundment closures - requires OCD approval prior to closure.

B. OCD District Offices - The OCD has district offices in Santa Fe, Hobbs, Artesia, and Aztec which have authority for the following activities.

1. Drilling, deepening, workovers, and permanent and temporary abandonment operations must file appropriate forms at the District Office.

2. All normal operations at lease sites that do not require contamination investigations approved by the appropriate District Supervisor.

3. Notification of fire, breaks, leaks, spills and blowouts - requires submittal of spill report as specified under OCD Rule 116.

4. All forms and reports required by OCD Rules or Orders shall be filed with the appropriate District Office of the Division unless specified in a rule or order.

C. New Mexico Environment DepartmentThe New Mexico Environment Department (NMED) regulates several activities associated with the oil and gas industry. Attachment II is the ED-OCD delegation agreement accompanied with diagrams showing the relationship of the various agency responsibilities. The following lists some of the more common oil and gas related activities that NMED regulates:

1. Air emission permits - issued by the NMED Air Quality Bureau. Required for combustion sources, compressors, volatile chemical handling, storage piles, and storage tanks.

2. Underground Storage Tanks (UST) which store gasoline, diesel, and new or waste oils regulated by the NMED UST Bureau. USTs located at OCD regulated facilities which contain waste water or are considered flow-through process tanks are regulated by the OCD.

3. Hazardous wastes generation, transportation and/or storage - regulated by the NMED Hazardous & Radioactive Material Bureau.

4. Normally Occurring Radioactive Material (NORM's) - although currently not regulated in the state of New Mexico, all radioactive material which falls above the WQCC standard of 30.0 pCi/l for Radium-226 and Radium-228 falls under the jurisdiction of the NMED Hazardous & Radioactive Bureau.

5. Sewage discharges - regulated by the NMED. If the sewage is commingled with oil and gas wastes at an OCD regulated facility then the OCD has jurisdiction.

6. Solid waste - regulated by the NMED Solid Waste Bureau. If the solid waste is produced by oil and gas operations and located at an OCD regulated facility then the OCD had
jurisdiction.

7. Surface Waters - NMED Surface Water Bureau enforces water quality standards for surface water.

D. State EngineerThe state engineer has jurisdiction over all water withdrawal wells and all monitor wells which encounter artisan water as detailed below:

1. Pollution recovery well - an application must be filed with the State Engineer prior to drilling new wells or operating existing wells.

2. Water level measuring and water sampling wells - if used exclusively for these operations they are exempt from the requirement for filing an application. However, if artesian water is encountered they must meet the State Engineer's requirements for construction, cementing, casing, testing and plugging the well.

E. Federal AgenciesOil and gas operations that fall under the jurisdiction of the OCD may also be subject to federal regulations. The OCD's policy is to exert jurisdiction over these sites unless the federal regulations and/or requirements are more stringent than the OCD's in which case the federal regulations take precedence. Federal agencies which may also have jurisdiction over oil and gas operations include:

1. Environmental Protection Agencya. National Pollutant Discharge Elimination System (NPDES) permits - required for facilities which discharge to waters of the United States (including a dry arroyo) through a pipe, culvert, ditch or similar point source.

a. NPDES storm water discharge permit may be required if the stormwater (rainwater or snow melt) can be contaminated by contact with gas liquids or other chemical at the facility.

b. RCRA - Attachment IV lists the oil and gas wastes exempted by EPA from consideration as "hazardous wastes."

c. CERCLA/SARA Title III

2. Bureau of Indian Affairs

3. Bureau of Land Management - land use only.

4. U.S. Forest Service - land use only.

5. National Park Service - land use only.

Regulatory Authority - Page 1, Page 2, Page 3

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