New Mexico oil oversight agency, with restore authority, plugs orphaned wells, issues fines

Jul. 8—The agency that regulates the state's oil and gas industry is issuing citations and plugging abandoned wells at a faster rate since regaining enforcement power in 2020.

The Oil Conservation Division reported filing 23 complaints against operators — imposing $263,000 in penalties — while plugging 49 orphaned wells, the most in one year since at least 2016. The fines are the first the agency has meted out in more than a decade.

The agency credits the increased oversight with state lawmakers restoring its authority to issue administrative penalties, a power the New Mexico Supreme Court in 2009 ruled the agency did not have under the Oil and Gas Act's previous language.

"In the past two years the OCD has reinforced its commitment to compliance that has only accelerated in the past fiscal year," Adrienne Sandoval, the agency's director, said in a statement. "Our continued work to modernize the division and work efficiently is paying off."

Before, the agency worked with noncompliant operators to get them in line, including through agreed-upon orders that set schedules for reaching compliance, Wendy Mason, the agency's acting spokeswoman, wrote in an email.

If that effort failed, the agency could hold a hearing to seek administrative sanctions, such as requiring a well to be plugged or canceling authorization to transport oil, Mason wrote.

Bringing a case in court required cooperation from the Attorney General's Office and proof that the operator willfully violated the law, she added.

An environmental attorney said the Oil and Gas Act was intended not as a conservation measure but mostly to prevent operators from being so excessively wasteful and inefficient they affected competitors working the same oil field.

The Oil Conservation Division went too far in the high court's view by using it to penalize errant operators, even though the law contained no language to cover such enforcement actions, said Charlie de Saillan, staff attorney for the New Mexico Environmental Law Center.

"It was stretching the law somewhat," de Saillan said.

The agency's restored enforcement power should act as a deterrent, de Saillan said. That's important not only to protect the environment, but to discourage operators from engaging in shoddy practices that undercut competitors, he said.

The $263,000 in penalties collected in the past year suggest the maximum might be too low, de Saillan said. He recalled in the 1990s how one company paid $250,000 for its infractions, and that was well below the maximum.

It's crucial that violators pay enough to hurt their bottom line so they don't simply write it off as the cost of doing business, de Saillan said.

So far, nine of the 23 enforcement actions have been resolved, the agency said in a statement.

The agency also plugged 49 orphaned wells this fiscal year, surpassing the yearly average of 35 going back to 2016.

A well is orphaned when an operator becomes insolvent, leaving the state to plug it and remediate an often contaminated site. These abandoned wells can leak methane and other pollutants into the air and groundwater.

A scrapped well costs about $38,000 to plug, but the defunct drilling site can cost hundreds of thousands of dollars, depending on the contamination.

The agency mainly oversees cleanup of derelict wells on state and private lands but works with the Bureau of Land Management to remove them from federal sites.

Most everyone involved agrees much more funding is required to tackle the full array of orphaned wells. New Mexico has an estimated 700 orphaned wells and thousands of low-producing or idle wells that could be abandoned in the near future, according to an independent study by the Center for Applied Research.

These wells have the potential to increase cleanup costs to an estimated $8.3 billion, the study said.

An environmental advocate said he appreciates the agency's stepped-up effort to hold violators accountable but thinks the wells being plugged barely dent the looming problem.

"The numbers cited in the release are dwarfed by the over 8,000 wells that OCD statistics show are currently inactive," said Tom Singer, senior policy adviser for the Western Environmental Law Center.

Nonproducing wells are at greater risk of pollution and higher cleanup costs — as well as being orphaned, Singer said.

"It seems clear that the agency needs more resources, technology and people to get this work done before it reaches crisis proportions," he added.