Oil Conservation Division could issue fines again under legislation

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San Juan Basin oil and gas facilities / Photo credit - Elizabeth Miller

For the last decade, New Mexico’s Oil Conservation Division has been like a traffic cop that can’t write speeding tickets. That’s the metaphor advocates give for a bill that would reinstate the division’s right to issue fines for bad actors, which, amid booming oil business in the southeastern parts of the state and an increase in spills documented by the department, have hovered near zero. The state’s highest court in 2009 ruled the division couldn’t issue fines because the Oil and Gas Act didn’t grant it that authority.

“If you look at the way the penalties were collected, it basically fell off a cliff, and the last administration didn’t show any interest in actually enforcing our oil and gas regulations, so I think it’s time that we stepped up and got back to doing that,” said Rep. Matthew McQueen, D-Santa Fe.

McQueen and Sen. Richard Martinez, D-Española, are cosponsoring SB 186, legislation that would empower the Oil Conservation Division to once again issue fines.

For those looking to the governor to make good on her climate change agenda, the bill could prove pivotal. If passed, along with spilling liquids, the division could issue fines to operators who excessively vent or flare methane, a potent greenhouse gas, to bring them in line with new methane emission rules promised by this administration.

Part of New Mexico’s Department of Energy, Minerals, and Natural Resources, the Division is tasked with overseeing the oil and gas industry. It issues permits for new wells, tracks production data, and enforces state rules. But the New Mexico Supreme Court ruled in 2009 that existing statute, which dates to 1935, does not allow the division to fine companies for spilling, leaking or otherwise illegally discharging hydrocarbons, fracking fluid, or volatile organic compounds. That case, brought by Marbob Energy Corporation, left the task of pursuing fines to the Attorney General’s Office. Statute also held the maximum penalty at $1,000. Judges noted in the Marbob case ruling that the existing law is outdated and inadequate.

The year before the ruling, the division collected $479,250 in civil penalties. Two years later, that number dropped to zero. At the same time, the number of rule violations reported by the division increased, according to data on quarterly inspection and penalty reports reviewed by Earthworks Oil and Gas Accountability Project. Over the last 10 years, that number climbed from 1,042 to 1,712. The environmental group also found the leading cause of those spills was equipment failure, like split hoses, broken pumps, and frozen valves, that most often released polluted water. The water emerges from a well along with crude oil and gas, and is often salty and laced with oil droplets and toxic compounds. Sometimes, it’s radioactive.

“My sense is if they know there’s no authority, that their practices might start to slide,” McQueen said. “I also think it’s a fairness issue from the perspective of, does an operator who cuts corners get a competitive advantage from one who doesn’t? Part of the role of the Oil Conservation Division is to make sure everyone’s playing by the same rules.”

New Mexico Oil and Gas Association communications director Robert McEntyre wrote in an emailed statement, “We’re committed to doing our part to protect the environment and maintain our lands through responsible production and operating practices. Anyone who violates the law or knowingly jeopardizes the health and safety of New Mexico should be held accountable. The current law does that and ensures due process through a fair and thorough review of the facts while the proposed legislation lacks a basic standard or burden of proof.”

The association has encouraged its members to remind lawmakers that oil and gas produces one-third of the revenue for the state’s general fund and 100,000 jobs, with an average annual salary of $70,000. Legislators have brought up concerns around other bills that ratcheting up regulations could lead companies to abandon wells or move their business across state lines. This legislation may see similar pushback.

“They have to be so careful, because this is way too important,” Sen. Ron Griggs, R-Alamogordo, said. “All these things that we’re seeing which are trying to restrict oil and gas in a variety of ways, it’s the goose that laid the golden egg and while it’s reasonable to do some things, you just have to be careful what you’re doing because way too many things depend on it.”

The proposed legislation, scheduled for its first committee hearing in Senate Conservation tomorrow, would increase fines to up to $15,000 per day of a violation. If a company fails to meet a court order or compliance order, that increases to $25,000 per day. The current law requires proof that the company knew it was breaking the law even to assess civil penalties, and this act removes that standard except for criminal cases. If a person knowingly breaks the Act, its rules, or other orders or permits, including making false statements or omitting or destroying information on forms and records, they could face third-degree felony charges and up to three years of jail time. The committee could see substitute language in the bill as early as tomorrow, meaning some of these details could change.

The revisions bring the Oil and Gas Act in line with similar provisions from the Air Quality Control Act, Water Quality Act and Mining Act. This revision also adjusts Oil and Gas Act text from persistently referencing commissioners by “his” and “him” to non-gender-specific pronouns.

Gov. Michelle Lujan Grisham has signed an executive order committing the state to reducing its climate change-causing greenhouse gas emissions, including regulating methane emissions from oil and gas production.

Fines aren’t the only way to enforce state rules around oil and gas, Tom Singer, senior policy advisor with Western Environmental Law Center, pointed out. Permits can be pulled or denied at reapplication, or production could be limited, he said, though he could not recall a time he’s seen the division exercise that authority. When it comes to methane, just obtaining detailed information on leaks from the state has been a struggle.

“It’s a question, are methane emissions a widespread practice or are they concentrated with bad actors?” Singer said. “In either case, this bill will give teeth to new climate rules and allow the agency to say, ‘Quit it.’”