Question
May 26, 2005
VIA MESSENGER
Michael Verne
Premerger Notification Office
Bureau of Competition, Room 303
Federal Trade Commission
600 Pennsylvania Avenue, N. W.
Washington, DC 20580
Re: Hart-Scott Informal Interpretation
Dear Mike:
As you may recall, you and I spoke this morning concerning the scope of the $500million carbon mineral reserves exemption (16 C.F.R. 802.3(a)) and theunproductive real property exemption (16 C.F.R. 802.2(c)) as theypertain to oil and gas reserves. You confirmed that the following generalprinciples apply:
Reserves ofoil and gas that are presently producing count towards the $500 million carbonmineral reserves exemption.
Reserves ofoil and gas that have not yet begun producing are exempt with no dollar limitas unproductive real property. They do not count towards the $500 millioncarbon mineral reserves exemption limit.
Non-producing oil and gas reserves are exempt with no dollar limit asunproductive real property even if they are adjacent to producing reserves thatdo count towards the $500 million limit.
We then discussed a more specific hypothetical:
Under a single piece of ground there is a reservoir of proven oilor gas reserves at 5,000 feet, and another at 9,000 feet. There is equipment onthe surface for production of both reservoirs of reserves. A production companydrills down through the 5,000 foot reserves, down to the 9,000 foot reserves.It begins producing from the 9,000 foot reserves, but not from the 5,000 footreserves. The production company will begin producing from the 5,000 footreserves at a later date (likely after it has exhausted the 9,000 footreserves), using the same production and drilling equipment as was used for the9,000 foot reserves.
Based uponthis hypothetical, you confirmed that the correct analysis would be to look atthe two reservoirs separately, counting the 9,000 foot producing reservestowards the $500 million limit of the carbon-based mineral reserves exemptionand treating the 5,000 foot nonproducing reserves as exempt unproductive realproperty with no dollar limit.
Please letme know if I have misstated our discussion or your conclusions in any way. Asalways, thank you for your time and assistance.