Capital & Main Reporting Leads to Fines for Oil and Gas Polluters

On Monday, the New Mexico Environment Department announced the second monetary penalty in a week for an oil and gas producer found in violation of state and federal clean air laws. NMED announced a consent decree wherein Matador Resources of Dallas has agreed to pay $1.15 million in fines to the state of New Mexico and the federal government and millions more in wellsite cleanup and upgrades at sites across New Mexico’s portion of the Permian Basin, after a 2019 overflight program conducted by the EPA found dozens of Clean Air Act (CAA) and permitting violations by the company. Last week the EPA announced a settlement under which Chisholm Energy of Fort Worth will pay a $440,000 penalty and spend millions on upgrades after that company also was found to be in violation of the CAA following overflights in 2020.

NMED Secretary James Kenney says the fines are a result of two earlier stories reported by Capital & Main showing that the EPA was closing out CAA cases without fines for air pollution violations found in New Mexico during annual flyovers looking for methane leaks at oil and gas facilities in the Permian Basin. Capital & Main “pointed out to me EPA was settling these cases without a penalty for a while until we said, ‘That’s unacceptable,’” Kenney says.

While both cases happened in New Mexico and were the result of illegal emissions found during oilfield overflights looking for methane leaks in 2019 and 2020, they differ in how they were enforced and by whom. Chisholm Energy was handled entirely by the EPA, while NMED and EPA teamed up on the Matador case.

“I’m appreciative EPA is coming in to do the enforcement: We need it — we need that help,” Kenney says. However, “It bothers me that the penalties that the feds will collect will go to the U.S. Treasury and will not benefit New Mexico.” All of the money from the Chisholm case will go to the federal government, while the Matador case penalty will be split roughly 60/40 between the federal government and the state of New Mexico. If NMED was better funded, Kenney says the agency would conduct enforcement actions on its own, and any penalties would end up in New Mexico’s accounts instead.

These two cases and four more are part of a batch found through the EPA overflights that Kenney had hoped to wrap up last summer. He is not sure when the remaining four will be settled, or when his office will be ready to take up further cases. “A lot of our enforcement resources have been tied up in the judicial cases that I thought we would have been announcing last summer,” he says. He had hoped that the companies would enter consent decrees under which they would agree to clean up problem facilities, change future practices and pay a reduced fine for cooperating with the state. But, he says, “They’re not rolling over and settling.” That means NMED has to take the companies to court, making the cases much more costly and time consuming, he says.

Matador, the ninth-largest producer in the state, earned $2.1 billion before taxes in 2022, double its earnings the previous year. Chisholm Energy is a privately held company that lists two main investors: Warburg Pincus, a private equity firm that claims more than $85 billion in assets, and the Ontario Teachers’ Pension Plan, with more than $247 billion in assets.

Kenney says NMED devoted two staffers and its attorney and general counsel to the Matador case while also trying to enforce air rules for cement plants, power plants, asphalt plants and other industries. “It’s not oil and gas all the time,” Kenney says. “It could be with the amount of violations we do observe.”

He had hoped to hire up to 19 new staffers this year to work in the Air Quality Bureau with a hoped-for funding bump from the state Legislature, but the bump didn’t work out as planned. Despite receiving a 14% budget increase from the Legislature, mandated across the board pay raises left the department with a $1 million shortfall. Kenney says, “All the general fund money that we’re getting for increasing staff … we have to sweep all that money and put it toward the raises.” That whittled a multi-million dollar departmental increase down to $175,000, he says. 

That’s because 82% of NMED employees are funded through federal grants and other inflexible funds, so when the Legislature mandates a 6% pay raise, he has to scavenge the money from other operating expenses in the division to make the payment. And Kenney says that for NMED employees, “Your paycheck is larger, but your workload has increased exponentially.”

That’s why he’s planning two changes to how NMED operates. One is to dramatically increase air permit fees to cover the costs of hiring new enforcement officers. The other is to make all of the state’s information on air violators quickly and publicly available so outside groups can take on air enforcement cases themselves, much as WildEarth Guardians did last year.

“There’s ample opportunities to hold polluters accountable,” Kenney says. “All you need to do is look at the flyover data.”

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