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July 18, 2012
'Co-development' of NM potash and O&G

A new level of cooperation may be on the horizon for the potash mining industry and oil and gas (O&G) companies that both occupy a 400,000-acre area near Carlsbad in southeastern New Mexico.

That’s the main message behind a draft order from the Secretary of the Interior regarding activities of both sectors in what is called the Secretary’s Potash Area (SPA). The SPA, most of which is managed by the Department of Interior’s Bureau of Land Management (BLM), contains abundant deposits of both O&G and potash-containing minerals (generally called potash), which are used in the production of fertilizer. The SPA is the source of about 75 percent of all potash produced in the United States. The SPA is also the home to about 800 federal O&G leases.

Danger to miners

O&G have been developed in the area since the early 20th century. Conflicts began in the early 1930s when underground mining began for potash deposits, which sit above the O&G reservoirs. O&G wells must extend through the potash formations. If potash mining breaches a well casing, gas could enter the mine workings and endanger miners. In 1973, gas leaking from a well caused a mine shaft explosion that injured 10 workers. Mining companies are forced to enhance ventilation and use equipment that is specialized for gaseous environments. The conflicts have resulted in a long history of litigation initiated by the two industries regarding decisions made by the BLM.

1986 Secretarial Order

The BLM has responded with a variety of actions intended to sort out the differences. In particular, a 1986 Secretarial Order established a variety of provisions to ensure that O&G activity would not interfere with potash mining. The current draft order adheres to much of the 1986 document, including the language and the boundaries of the Designated Potash Area. The draft differs by introducing the concept of co-development, which is based on the two industries working cooperatively instead of trying to stay out of each other’s way and heading to court when that doesn’t happen.

2012 draft

Under the draft, co-development would occur in several ways. Mainly, the BLM would establish development areas in the Designated Potash Area. To limit the impact of O&G activities in each development area, extraction would generally be allowed only from a single drilling island, which could accommodate all vertical, horizontal, and directional wells. While the drilling island concept was introduced in the 1986 order, the current draft would refine the parameters by further reducing the number of drill pads and associated roads, power lines, and other ancillary facilities required to develop the O&G resources. The safety of underground potash miners would also be enhanced by a reduction in the number of O&G drilling locations where wells penetrate the potash formation.

Other new terms in the draft intended to improve interactions between the industries include barren areas and unknown areas. Barren areas are lands within the Designated Potash Area where sufficient data are available to establish that the areas lack mineable potash resources. Unknown areas are areas within the Designated Potash Area where there is an absence of data to classify the potash mineralization of the lands. While barren areas may be the preferred locations for drilling islands, unknown areas may warrant protection from O&G drilling until data are available to properly classify potash mineralization.

Joint committee

Much of the impetus behind the draft has been provided by the Potash/Oil and Gas Joint Industry Technical Committee, which has been working to improve the relationship between the industries and provide direction toward co-development.

The draft Secretarial Order is at http://www.blm.gov/pgdata/etc/medialib/blm/nm/programs/0/solid_minerals/potash.Par.29379.File.dat/Potash_-_SO_-_7-9-12_Draft.pdf.

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