Proposed oil regulation would increase transparency on spills, violations

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In mid-February, 300 barrels of crude oil and 1,000 barrels of the salty, chemical-laden water that comes out of the ground along with fossil fuel spilled from a pipeline in northwestern New Mexico and ran for 1.6 miles down a wash. An employee with the company that runs the pipeline called the Oil Conservation Division. The agency’s online incident report describes an effort to stop the spread with earthen dikes and berms. Then, it snowed, covering the trail. The operator used absorbent pads and booms to try to recover some of the oil and liquids, and told the division it has plans to flush the area with fresh water to move the contaminants to a single collection point. Weeks later, the records don’t show whether the cleanup of either the water or oil was successful.

While the details are often available for those who know how to dig long enough through state-run databases, zooming out to see if spills like this one are part of a trend is tough. The way the state currently reports spills and violations makes it difficult to track a spill through enforcement actions, or to see if a particular company is prone to offenses, or if a specific region has been hard hit.

A bill working its way through the legislative process, SB 186, would reinstate the division’s authority to issue fines, which have been rare since 2009 when a court ruling pushed that authority to the state attorney general’s office. Its sponsor, Sen. Richard Martinez, has said those fines are key for enforcing the Oil and Gas Act.

But the bill would also advance transparency around how those rules are implemented. It would require the division to publish an annual report on the number of violations, as well as the total penalties collected and for each violation, the name of the person penalized, the location, the nature of the violation and the penalty calculation. That annual report would also include defendant names, nature of violation and outcome of litigation for lawsuits filed for violating the Oil and Gas Act.

Right now, environmental watchdogs struggle to access that cumulative information.

In 2018, the division noted 1,712 violations, said Nathalie Eddy, with the Earthworks Oil and Gas Accountability Project. She was given that figure by OCD staff over the phone. Quarterly inspection reports haven’t been updated on the agency website since 2017. Currently, she has filed an open records request seeking more detail, and quarterly inspection reports, if they exist.

“We want to know what those look like—we want to know, are those paper violations? Are they spills? Are they emissions? Are they unable to get appropriate permits?” she said. “We don’t have that information. We have no sense of the severity of any particular operator or for any particular area.”

The division reports spills routinely, including the location and cause, but that information is disjointed from violation reports, she pointed out, making it tough to know how much of one number is included in another or discern further meaning.

The difficulty in finding public information about violations makes it tough to identify trends or the “bad actors,” she said, and “leaves the public in the dark regarding how, if at all, those violations were resolved.”

Oil and gas industry advocates have argued that the fines the bill would allow could see them paying thousands for paperwork missteps. Eddy said it’s difficult to vet that statement.

“One point that came up is, if operators are running careful operations, then this bill won’t have an impact on them. There won’t be violations,” Eddy said. “I think it’s hard to say because I’m not sure we have a complete picture of what these violations indicate and how widespread they are. That kind of pattern or trend—I’m not sure we have the data to say what that looks like.”

The New Mexico Oil and Gas Association is not in opposition to the reporting provision, according to spokesperson Robert McEntyre. The association’s executive director, Ryan Flynn, spoke against the bill when it was heard in the Senate Judiciary Committee, saying their opposition “really hinges on the trigger for when an action will go from administrative into courts.”

If a fine reaches $250,000, then it moves from the division to a state district court judge. The Energy, Minerals, and Natural Resources Department had previously agreed to a $500,000 threshold. Those fines would be stacked up at a rate of $2,500 per violation per day. If a fine is considered a threat to public health, safety or the environment, then the fine could go up to $10,000. That’s lower than the $15,000 per day originally in the legislation, but a step up from the $1,000 per day rate set in 1935. But as Sen. Peter Wirth has pointed out, that rate would have reached more than $18,000 had it been adjusted for inflation since then.

But the reporting requirement gives pause to Larry Marker, who operates “stripper wells”—low producing oil wells that might yield a few barrels of oil a day, rather than a few hundred. He’s concerned that existing problems with vandalism and theft could be exacerbated.

“This notification stuff is basically inviting people out to my locations,” he said. “If the state puts together a website that points out all of these issues and gives the location, the name and everything else of the individuals involved, that could create some problems.”

That information is already publicly available, he conceded, but this measure would make it more easily accessible.

And it’s possible it would also actually decrease reporting, he said.

The absence of penalties and a generally cooperative attitude from Oil Conservation Division staff has led to more operators reporting more spills, Marker said. Add the threat of penalties, and that could change. The Oil Conservation Division relies on companies to self-report incidents. Of 1,600 spills in 2018, just 40 were reported by an entity other than an industry representative. Yet another bill, SB 553, has taken a run at fixing a staffing shortage at the Division by implementing application fees to help pay for the costs of overseeing the industry. That fund would support administrative work, and would not put more inspectors in the field.

Marker said the working relationship with those at the Division has led to reporting more of these spills.

“A lot of that has to do with the relationship the OCD has with the industry itself and particularly some smaller guys like me. It’s not really an adversarial position,” he said. “If I pick up a lease and find there was a spill there several years ago, because of how hard those guys [employed at the Oil Conservation Division] have worked, I’m more confident calling those guys and saying, ‘Hey, I found a spill. I’ll get it cleaned up. I just want you guys to know about it.’”

For small producers, like himself and Phelps White, a small operator from Roswell, the fines discussed could be a game-changer.

“A $100,000 fine, especially any of the wells that I have, it would never pay off,” White said. If he, or other small producers, went out of business as a result, he said, that would leave the state paying to plug those wells.

“Even a major company, if they’re looking at $100,000 fine, they would much rather fix the damn problem than pay that $100,000, so it’s got a good bite in it,” he said. But any fine, he said, would do: “I don’t want a fine and I don’t want to screw anything up.”

This story has been updated. Originally, regarding SB 553, we wrote: Whether that would fund more inspectors in the field to spot rule violations is not yet clear. It now reads: That fund would support administrative work, and would not put more inspectors in the field.

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