Despite Rules, New Mexico Oil and Gas Producers Keep Polluting

Driving around the Permian Basin in early February, it was impossible to miss. New Mexico has increased its oil production tenfold since 2010 and was the first major oil-producing state to surpass its pre-pandemic output levels — dramatically so. And the evidence is everywhere. At night, strings of drilling rigs light the plains east of Highway 285 between Carlsbad and Loving. In the middle of the day, driving Highway 128 across the rolling, tan, treeless plain between Loving and Jal, the sun glints on drilling rigs every couple of miles. Those rigs continue in all directions down dirt side roads, and orange flares burn off natural gas at new wells and compressor stations.
 

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The industry had a record-crushing year in New Mexico in 2022. COVID-19 triggered a steep production decline in 2020, when oil and gas prices dropped so much that the state encouraged producers to shut in wells, keeping money in the ground. But state oil production at the end of 2022 was 36% higher than its pre-pandemic peak, and natural gas production was 32% higher. That extra production coupled with high oil and gas prices have bumped New Mexico’s state budget to $9.57 billion — another record.

Natural gas is measured in thousands of cubic feet (Mcf), and in 2022 oil and gas producers reported losing 21.6 million Mcf of the stuff. It’s a fraction of the total taken out of the ground, but with an approximate market value of $138 million, it’s not inconsequential. Plus, the state lost around $27 million in tax and royalty revenue while the lost gas contributes to New Mexico’s climate crisis — which the state does pay for. But the true loss is likely steeper than the state’s official numbers reflect.

A Capital & Main review of data from the New Mexico Oil Conservation Division shows dozens of companies venting and flaring natural gas from wells across the state — nearly 39,000 times between February 2022 and February of this year — despite recent rules banning the practice except for emergencies. All of this data is self-reported by the companies as part of the state’s groundbreaking Methane Waste Rule, which has two overarching goals: to end routine venting and flaring of natural gas, and to keep at least 98% of the climate-damaging fuel in pipelines and out of the air.

The sun sets behind a section of “The Trail Ahead…,” a steel sculpture by artist Brian Norwood just north of Jal, New Mexico.

Since the rule went into effect in 2021, the number of reports has dropped among the companies filing, but it appears not all companies are reporting their incidents, and the number of so-called emergencies leaves outside experts skeptical. Only 81 companies reported venting or flaring in 2022, while more than 380 reported production in OCD’s most recent annual report from a year earlier. Recent monitoring by federal agencies shows that the 20% of companies that do file venting and flaring reports aren’t reporting everything they should.

And the state recently dropped a proposal to make oil and gas producers pay for the lost gas. The New Mexico Senate Tax, Business and Transportation Committee passed a version of SB 164 to increase the royalty rates on oil and gas produced on state lands from 20% to 25%. The money would have gone to the state’s Land Grant Permanent Fund, which primarily funds education. However, legislators stripped earlier language requiring operators to pay royalties on gas lost in production. Without that language, there is no consequence for regular venting and flaring, and the losses — both monetary and environmental — are clear. (SB164 has been stalled for days on the Senate floor. The session ends Saturday at noon.)

Meanwhile, even a cursory glance at the list of self-reported incidents shows dozens of individual facilities venting and flaring natural gas almost daily. “That’s a little crazy,” says Jeremy Nichols of WildEarth Guardians. “Are they telling us that every day, every minute is an emergency?”

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Twenty miles east of Loving on Highway 128 you find one of very few non-oil-and-gas signs along the 60 mile route to Jal: An old truck wheel has a rust filing cabinet welded atop it with “BUCK FIDEN” cut in its side. A few miles down the road is another: a historical marker for Project Gnome. In 1961, the Atomic Energy Commission detonated a nuclear bomb 1,200 feet underground to try and gather heat for electric power and create radionuclides for research. The hoped-for results didn’t materialize, but the blast created a radioactive salt cavern and a one-mile-square area where oil and gas drilling is prohibited. Nearby is the Waste Isolation Pilot Plant, where much of the nation’s radioactive waste is buried for eternity. WIPP’s buffer zone is 16 times larger than the Project Gnome site. Radiation danger may be the only proven way to stop oil production in the Permian Basin.

But even there, and everywhere else along the Permian Basin’s highways, the air smells of burning and venting hydrocarbons. As the day winds down in Jal, the sun’s low angle lights up a urine-yellow haze that washes out distant views. On the evening of Feb. 5, Jal was, arguably, the worst smelling town in the state. It stank like Texas, as the prevailing southwest winds blew fumes from even bigger and less-regulated drilling operations across the border. Then the smell mingled with New Mexico’s own hydrocarbon emissions to form a gas-scented plume stretching 40 miles north to Hobbs, the state’s eastern outpost of the Permian Basin.

Nearly half of all the vents and flares reported by operators between February 2022 and February 2023 — more than 17,000 — were attributed to either “Equipment Failure” or “Normal Operations,” neither of which are allowed under OCD’s rule. Again, venting and flaring are only legally permitted in the event of an emergency, which the state defines as “temporary, infrequent and unavoidable,” or a malfunction, which is defined as a “sudden, unavoidable failure or breakdown.” The rule specifically does not include poor maintenance, carelessness or preventable equipment failures — like worn valves or gaskets — as acceptable reasons for venting and flaring.

“Buck Fiden” sign on the highway between Loving and Jal, New Mexico.

A group of state officials, environmentalists and oil and gas industry representatives designed the rule that directs OCD to collect the self-reported information so it can pinpoint and prosecute flagrant violators. But Sidney Hill, public information officer at the division, says, “There are no OCD employees dedicated exclusively to waste rule enforcement.” He says different aspects of permitting and enforcement for New Mexico’s oil and gas industry are spread out across the division. Even though the rule is one of the state’s most important pieces of oil and gas regulation, “The rule itself is not how we are organized,” he says.

Critics say that leads to a lack of oversight, pointing out that enforcement is not simply slow or inefficient but almost nonexistent. “There’s nobody at OCD looking at this data,” says Tom Singer, senior policy adviser with the Western Environmental Law Center. “I don’t believe that there’s anybody using … data sets to identify violators,” he says. Singer worked on the panel that developed the Methane Waste Rule, and he still tracks the reporting closely. He says that staff at the state office tell him, “We don’t have time for that.”

Companies have until 2026 to reach a 98% capture rate for all natural gas they pull from the ground, and a remarkable number of companies claim to have reached that goal already. Some 375 companies filed methane waste reports with OCD in 2021 and 2022 and, of those, 262 reported capture rates of 98% or better. Singer says that when he first saw so many near-perfect numbers he exclaimed, “Whoa, that’s crazy.” He doubts things are going so well.

In its own small way, the Environmental Protection Agency does dedicate staff time to monitoring, and its results indicate that, in the nearly two years since the Methane Waste Rule went into effect, New Mexico’s oil and gas producers aren’t reporting everything that state law requires. The EPA recently released data collected last summer in the Permian Basin during inspection flights with a camera that can spot methane emissions, which are invisible to the naked eye. Those EPA inspections, conducted to enforce the national Clean Air Act, give a glimpse of what OCD may be missing: Fully 85% of leaking tanks or unlit flares that the EPA found did not have reports filed with OCD as required. These emissions could also be violations of the Clean Air Act, and last week the EPA served Marathon Permian with the first Notice of Violation from the flights for a tank that vented gas directly to the atmosphere. In previous years, the agency has shown a weak track record of following up with prosecutions — much less punishments or fines — when it has found similar violations. In fact, the EPA found leaking Marathon facilities during overflight programs in 2019 and 2020 as well, but no fines were levied. Meanwhile, Marathon claimed a 98.5% gas capture rate in 2022.

As the sun sets on Feb. 5, the evening’s yellow light silhouettes “The Trail Ahead…” — a steel statue just north of Jal honoring the area’s 150-year cattle ranching heritage. But these days the region is almost all cattle grates and no cattle. Eight bovines appear in the 20 mile drive north between Jal and Eunice, but there are hundreds of wells, tanks and other equipment — and a 20-foot model B-52 bomber made of scrap metal stuck on a post, entreating people to “CHERISH YOUR FREEDOM.” A full moon rises, and the change in light shows a miles-long string of windmills churning over the border in Texas.

A 20-foot B-52 replica and pumpjack on the drive between Jal and Eunice, New Mexico.

Earlier on that day, the International Space Station whizzed over New Mexico’s portion of the Permian Basin, as an instrument on board collected airborne pollution data. Later, NASA released images of possibly 10 methane plumes around Carlsbad. Only two appeared to be from facilities that had filed required emissions reports with either OCD or the New Mexico Environment Department (NMED), which regulates emissions from large facilities. Another massive vent from a well south of Carlsbad seen by the Space Station last August is still being investigated by OCD. And more such findings are likely on the way as more satellites are launched to find methane emitters around the globe.

Hill at OCD says that the department does not comment on or name subjects of ongoing investigations. But he does say that the department is reviewing the data from NASA and the EPA and comparing it to its own venting and flaring data. “We anticipate these efforts will result in enforcement actions later this year,” he says. The division also hopes for 10 new positions from the record state budget. It currently has 80 full-time positions, several of which are awaiting new hires and about 10% of which are held open to shift the money to other employees, he says. But even if all of the current positions were filled and 10 more added, New Mexico’s numbers would be much lower than those in other oil and gas producing states. “The Colorado Oil and Gas Conservation Commission has 147 full-time employees supporting a fraction of the production,” Hill says. “North Dakota, which has comparable production, has 90-plus … and Oklahoma, which supervises a similar number of wells, has 100-plus.”

“We would love to see NMED [or OCD] do flyovers and to really step up its inspection game,” says Nichols from WildEarth Guardians. But he recognizes that the agencies are underfunded and, at the end of the day, lays the blame with the companies. “It’s their job to comply,” he says. “We don’t blame the police for murders. We don’t blame the police for bank robberies … We blame the criminals, and criminals are the ones responsible here.” It’s a potent metaphor. Gov. Michelle Lujan Grisham found an extra $40 million to hire new cops in the face of increasing crime rates across New Mexico. NMED and OCD have had to fight to meet basic funding levels for oilfield enforcement in this year’s record state budget. After a long slog through the Legislature, the annual funding bill currently sits on Lujan Grisham’s desk, awaiting a signature.

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Of the 39,000 vents and flares reported between February 2022 and February 2023, 15,119 were chalked up to “equipment failure” and 9,034 to “high line pressure.”

High line pressure, caused when a midstream pipeline doesn’t have the capacity to receive more gas, is the first listed “emergency” the Methane Rule doesn’t permit. And it’s not a new issue. The Petroleum Recovery Research Center at New Mexico Tech published a paper 26 years ago that talks of slowing or stopping production when midstream pressure issues arise. Stand-alone wellhead gas capture systems have been available for years.

Failures are a different matter. Last month in Palestine, Ohio, a failed wheel bearing on a train led to 38 cars derailing, 11 of which carried vinyl chloride — an oil-based gas used to make plastic. To keep those 11 cars from exploding, emergency crews evacuated a one-by-two-mile zone, then vented and burned the gas, emitting a massive, toxic, black cloud of soot and chemicals.

Though most might view a failed part on a 30-ton piece of machinery as an unpreventable cost of doing business — or “equipment failure” — Jennifer Homendy, chairwoman of the National Transportation Safety Board, surveyed the catastrophe and said, “I can tell you this much: it was 100% preventable.” The company had instruments to monitor bearing temperatures, but set the limits at a level at which train engineers didn’t know there was a problem until too late. So a wheel bearing overheated and caught fire, derailing the train.

“We call things accidents,” she said. “There are no accidents.” She meant that catastrophes like the one in Ohio are preventable with proper maintenance and attention. Choosing to defer either leads to things like a train derailment.

Nichols of WildEarth Guardians was in the Permian Basin in early February when the International Space Station flew over, both of them looking at oil and gas operations of all sizes. “Every time we looked around, something seemed to be wrong,” he says. “Leaking pipelines, smoking flares, rampant flaring seemingly not for emergency purposes … There’s this general disregard to protecting clean air, protecting the climate, protecting public health in the Permian.” To him, the leaks and flares didn’t look accidental. They were so regular and widespread they looked like normal operating procedures.

That is a category operators can use when filling out their reports for the Methane Waste Rule, though it’s exactly the action the rule was supposed to stop. Last year, 2,119 vents and flares were attributed to “normal operation.”

Even a quick tour of New Mexico’s Permian Basin suggests that perhaps that number was low.

Copyright 2023 Capital & Main.

All photos by Jerry Redfern.