New Mexico Governor Kickstarts Effort to Overhaul Oil and Gas Regulation

After failing in the last legislative session early this year, a major update of New Mexico’s Oil and Gas Act is again in the works, this time with a sharp push from Gov. Michelle Lujan Grisham’s office. The Oil and Gas Act is the bedrock law outlining how production of the two fossil fuels is regulated in the state, and it hasn’t seen a major update in decades. If finalized, the new bill would be introduced in the legislative session that begins in January.

“This effort was spurred by a recognition that the Oil and Gas Act is stale,” said Sidney Hill, public information officer with the New Mexico Energy, Minerals and Natural Resources Department (EMNRD), which is home to the Oil Conservation Division, the state’s main oil and gas enforcement agency. He said the last notable changes to the act happened in the 1980s and ’90s. “The act,” Hill said, “no longer contains all the tools necessary to oversee the current industry and ensure robust environment protection.”

The seven areas of discussion tie up loose ends and loopholes in old laws, lock a recent rule into a new law that can’t be easily knocked down by future administrations and update fines and fees to reflect cost increases and align with those in neighboring states.

Proposals include:

• Phase out freshwater use in oil and gas operations entirely.
• Lock the state’s 98% gas capture target into law.
• Increase new well setbacks from “sensitive locations” like homes, schools and hospitals.
• Increase bonding fees to reduce state liability for orphan wells.
• Increase fees and penalties.
• Direct penalties collected to a well reclamation fund instead of the state’s general fund.
• Tighten transfer rules for old wells that could end up being abandoned by new owners.

Hill said that the initial proposals stemmed from EMNRD’s experiences working under the old act for the last four years (Lujan Grisham took office in 2019). “The proposal,” he said, “represents an area of potential common sense reforms that have some possibility of achieving consensus.”

The process began back in September and has remained fairly hush-hush, despite nearly 50 participants from state government, environmental groups and energy companies and their lobbyists and lawyers. Working documents provided by EMNRD mandate the meetings not be recorded and ask participants not to share invitations to meetings without EMNRD approval, to allow for “frank and constructive” discussions. 

Hill, answering questions sent to both EMNRD and the Governor’s Office, said that Lujan Grisham’s office helped define the areas of discussion and hosted the first meeting in early September. Since then, EMNRD has taken the lead on hosting meetings and shepherding talks. 

Lujan Grisham’s public schedule for the days after the initial meeting shows her seeing representatives from ConocoPhillips, Chevron and Oxy as well as ExxonMobil CEO Darren Woods — all companies at the Oil and Gas Act discussion table. Maddy Hayden, director of communications for the Governor’s Office, said those talks “were wide-ranging and included compliance with New Mexico’s regulations and companies’ efforts to diversify into renewable energy.” 

Tannis Fox, senior attorney with the Western Environmental Law Center, helped create the previous attempt at reform shot down in the last legislative session and is part of this working group as well. “I think that our legislative effort … provided a certain catalyst for this,” she said.

“The forum … has been valuable for all sides of the table,” she said. “It’s been good for everybody to hear everybody.” 

The Lujan Grisham administration has a track record of environmental initiatives in the oil and gas sector. Rules that rein in leaking methane and other pollution from oil and gas operations across the state, implemented in 2021 and 2022, are a basis for the Environmental Protection Agency’s brand-new, nationwide methane reduction rules, announced by the EPA and Lujan Grisham at the United Nations’ COP28 international climate change conference in Dubai over the weekend.

However, back in New Mexico, environmental groups have sharply criticized the Governor’s Office for the dearth of environmental bills passed in the last legislative session. That failure helped spur the Center for Biological Diversity, WildEarth Guardians, YUCCA and others to join together to file a lawsuit against the administration and other branches of state government for not upholding laws to protect the environment, natural resources and citizens’ health from oil and gas production. Those groups would normally be at the table in big environmental discussions like this, but they aren’t this time because they declined to follow “evidentiary protections,” Hill said. 

A representative from ExxonMobil and Missi Currier, president and CEO of the New Mexico Oil and Gas Association — the state’s largest industry group — referred all questions back to EMNRD. Emails sent to other industry groups and oil production companies in the working group went unanswered. 

Fox said the three meetings so far have been “productive and respectful.” Hill said there have been “robust discussions” and “frank exchanges.” Kayley Shoup, director of Carlsbad-based Citizens Caring for the Future, said that despite the differing views, “Definitely no one has gotten up and walked away.” All three said the main goal is to get something in front of the Legislature for the short, one-month session that starts in January — but that’s not a given. 

Shoup lives and works in the middle of the Permian Basin, the most productive oilfield in the country. She has been particularly focused on getting setbacks implemented to keep new wells away from people’s homes. “I find it crazy that setbacks are the most contentious things,” she said. “It’s people’s lives. Its people’s health. I really find it really quite sad that that’s something that is so hard to get over.”

She said that while most discussions have been productive, provisions for setbacks could be on the chopping block.

“It’s been hard to not have too many frontline groups in the room,” Shoup continued. And, “We’re the only one from the Permian [Basin].” An attendee list shows nearly 30% of participants are from environmental groups, three are from EMNRD and the rest — more than half — work in or for the oil and gas industry. “They have a lot of power in the Legislature. That is a reality we have to be cognizant of,” Shoup said.

The reform efforts that died in legislative committees earlier this year were spread across three bills and contained many of the ideas in the current debate. The biggest of the trio was also championed by leaders from the State Land Office and the Indian Affairs Division. That didn’t save it — time ran out on the legislative session before it got a second committee hearing. The other two died in their first hearings, with significant pushback from Democratic legislators. New Mexico has strong Democratic majorities in both houses and a Democratic governor, and while Democrats tend to vote for environmental issues more than their Republican counterparts, oil and gas bills still face a tough slog. Furthermore, fossil fuel companies donate substantially to Democrats.

Those donations are funded by continued, increasing production, particularly in the Permian Basin. Shoup sees the effects of that daily, in both pollution and increased flaring at wells, despite relatively new state rules that ban venting and routine flaring from wells and cap the amount of methane those wells can leak. “I feel that I see more flares than ever before,” she said. That’s due in part to a loophole in the rules that allows flaring during the initial startup of a well. And with all of the new drilling in the basin, she said, “You can only control so much pollution when you have new things going up 24/7.” Plus, she said, “There’s a huge lack of enforcement” due to underfunding of the Oil Conservation Division and the New Mexico Environment Department, the two state agencies that monitor industry.

That’s why she and others are working on the bill proposal. “We’re definitely not saving the world with this,” she said, “but even what’s being done, though, it would be a huge step forward.”

The group’s last scheduled meeting is Dec. 8, with the goal of sending a draft bill to the Legislative Council Service — which drafts bills for the executive branch, among many other tasks — by Dec. 22. 

“I hope the governor agrees [to the bill] and we can get something done,” Shoup said. “It’s about protecting public health more than anything and not about corporate welfare.”

Fox says that her group won’t agree to support anything until they see the final draft that goes to the Legislature, though she is cautiously optimistic. “I really want this process to work,” she said. As for its chances: “I will not prognosticate.”

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