New Mexico’s oil wells are pumping at record levels, but more gushing crude means more frequent oil spills and other environmental problems that some state legislators want to plug with stiffer regulation and penalties.
Sen. Richard C. Martínez, D-Española, introduced a bill this session, SB 307, that would make it easier for state regulators to fine oil and gas producers for spills and other violations. The Senate Conservation Committee passed the bill on a party-line 6-3 vote on Feb. 23, sending it on to the Senate Judiciary Committee, where it’s expected to be heard next week.
The bill would authorize the state Oil Conservation Division to directly impose penalties on industry violators through administrative hearings for the first time since 2009. That year, the New Mexico Supreme Court ruled the division lacked such authority under current statutes, forcing it instead to request that violations be prosecuted by the Attorney General’s Office, something that has yet to occur.
“The way things are now is a problem, because everything must be prosecuted by the attorney general, and that hasn’t happened,” Martínez told the Journal . “This would give the OCD the power to enforce the law.”
That’s critical, Martínez said, given the huge drop in fines collected since 2009, plus a sharp increase in frequency and volume of oil and natural gas spills.
Industry representatives disagree with the bill, saying the OCD already has “powerful tools” to regulate the industry without directly imposing fines.
From fiscal years 2005 to 2009, the OCD collected an average of $597,000 annually in fines, according to data from the Legislative Finance Committee. That fell to $14,000 in fiscal 2010, following the Supreme Court ruling.
Oil spills, meanwhile, grew from 200 incidents and 7,000 barrels spilled in fiscal 2011 to 500 spills and 21,000 barrels in fiscal 2015, according to the Finance Committee.
The bill would impose new fines of up to $1,000 per day for each violation, to a maximum of $10,000, and it would eliminate a requirement that fines be contingent on showing operators “knowingly or willfully” committed a violation.
The state Energy, Minerals and Natural Resources Department, which oversees the OCD, has not taken a position on the legislation.
But New Mexico Oil and Gas Association spokesman Wally Drangmeister questioned the need for it, saying the OCD can already require a well to be shut in, stop producers from selling their oil or bar an operator from obtaining new permits to drill. In addition, the bill replaces the standard of “knowingly and willfully” committing a violation with a strict liability standard.
“This means that an operator who suffers a lightning strike that causes a tank failure and resulting spill would be subject to the same penalty as someone who intentionally spills produced water on a lease road,” Drangmeister said.
Industry representatives are concerned about more regulatory costs at a time that producers are struggling due to low oil and gas prices. And they point out that any decrease in production has a direct impact on the state budget because oil and gas provide about one-third of overall revenue.
But environmental groups supporting the bill say it’s “common sense” legislation.
“The OCD is required to enforce compliance with the state’s Oil and Gas Act, and it needs the ability to assess penalties,” said Ben Shelton, a Conservation Voters of New Mexico lobbyist. “Administrative penalties are supposed to be a tool for agencies to make sure lessees or operators are following the rules.”
Meanwhile, Sen. Howie Morales, D-Silver City, has introduced a separate bill, SB 375, that would give the State Land Office authority to raise royalty rates for leases on state lands and collect those fees at the wellhead rather than at point of sale for crude and natural gas.
Assessing royalties at point of extraction would eliminate losses from leaking, venting and flaring of natural gas, which is a point of contention among state and federal lawmakers.
The State Land Office did not respond to calls from the Journal about SB 375, but Shelton said the office has remained neutral on the bill.