New Mexico’s Billion-Dollar Oilfield Orphans

Dave Fosdeck crested a dirt berm on the Hogback, a ridge of hills west of Farmington, New Mexico, when the scent hit him. “Whoa! It stinks!” he yelped. It was June, and he was there with two others to look at the cleanup operations around a battery of massive oil tanks that sat abandoned for years in this rolling, high-desert corner of New Mexico.

The berm surrounds a hole where a semi-buried tank the size of a backyard swimming pool once sat, collecting and leaking waste sludge from surrounding oil wells. Nearby is an even bigger but much newer hole where a cleanup crew had removed contaminated soil. The void wasn’t fully excavated but already was big enough to drop a small house in. The pit’s sides were stained orange and an even stronger petroleum smell rose from it. 

For years, a separator, a semi-trailer-sized machine that split valuable oil from wastewater and other contaminants, sat here. And for years, that separator leaked those toxic compounds onto the ground, where they soaked in, leading to the orange, contaminated soil and foul air. 

The two holes, the stink and a few massive piles of dirt were about all that remained of a facility — known as a tank battery — that treated oil from 30 nearby wells for decades. In addition to the separator and sludge pit, the site was home to seven cylindrical green tanks the size of small grain silos, a decades-old tanker truck with flat tires, several plastic barrels and dozens of ruptured, unlabeled, cube-shaped tanks leaking mystery chemicals. That’s mostly gone now, except for the white and yellow chemical staining on the ground where those cubical tanks leaked. 

“I can’t believe they didn’t dig that all out,” Fosdeck said. 

For a few years, all of this belonged to Chuza Oil, which went bust in 2018, leaving the wells, tank battery and other equipment to bake in the high desert sun. In 2022, Fosdeck, Mike Eisenfeld of the San Juan Citizens Alliance and local rancher Don Schreiber identified the remote site covered in abandoned wells and leaking equipment and began nagging federal and state officials to do something about it.

A view of the Chuza tank battery in 2023. It had been abandoned for years at this point and several unmarked plastic containers were clearly leaking.

This spot in the Hogback exemplifies a worrying, expensive trend in New Mexico’s changing oilfield remediation landscape, where well operators declare bankruptcy and abandon highly contaminated and dilapidated facilities for state and federal agencies to clean up. It’s a national trend that sweeps from the country’s first oilfields in Pennsylvania to the California coast.

Currently, New Mexico pays contractors as much as $165,000 to plug an old oil well, according to the Oil Conservation Division, the state’s primary oil and gas regulator. That’s $65,000 more than the Division reported paying just three years ago. A recent report by the state’s Legislative Finance Committee warns that New Mexico could be on the hook for up to $1.6 billion in cleanup costs in coming years from bankrupt oil and gas companies and rising plugging costs. (The report also gave the Oil Conservation Division a tongue lashing over “inconsistent cost control” in its oilfield remediation contracts.) 

And while the report does talk about cleaning up tank batteries — and describes three very expensive examples — it doesn’t mention how many more may be lurking in the state’s oilfields, or what they could cost the state in the future.

Well plugging involves pulling old equipment out of the ground and scraping and flushing the wellbore before sealing it. So when a contractor arrives on site, often, “Nobody knows what they’re dealing with because it’s subsurface,” said Jason Sandel, the president of Aztec Well Servicing. Pipes rust. Pipes break. Wells might be shallower or deeper than recorded. After the pipe comes out, the contractor injects a series of cement plugs underground to keep oil, gas and other contaminants from migrating to water-bearing formations.

A tank battery has none of that, so at first glance cleaning one up looks like the easier task. But that’s not necessarily the case. The Chuza Oil tank battery site covers only about half an acre, and according to the Oil Conservation Division, the cleanup operation is on track to cost more than $650,000, much of that incurred because it was necessary to dig out and truck away the contaminated soil where the separator leaked at the remote location.

In mid-June, the cleanup clearly wasn’t finished. Orange barrier netting flapped in the wind around the pits, and the orange staining and gassy reek indicated more contaminated soil awaited removal. (Sidney Hill, public information officer for the New Mexico Energy, Minerals and Natural Resources Department, said that work stopped in May due to the end of the state’s 2025 fiscal year and resumed in July with the new fiscal year.)

Fosdeck, Eisenfeld and Schreiber have spent years tracking and highlighting problems in the oilfields around Farmington. Fosdeck, on his own, follows the paper trails of abandoned wells and other fossil fuel ventures. Schreiber and Eisenfeld rattle the cages of state and federal government officials to get oil, gas and coal sites cleaned up. 

“This whole part of the equation — the cleanup part — has been neglected,” Eisenfeld said. That’s one of many reasons why he thinks digging for oil, gas and coal shouldn’t be done in the first place.

Mike Eisenfeld, the energy and climate program manager at the San Juan Citizens Alliance, checks out a piece of abandoned equipment in the remains of the Chuza oilfield in June.

Randy Pacheco retired recently from a company that plugs and cleans up old well sites like Chuza’s, and before that he was dean of the School of Energy at San Juan College in Farmington, the state’s oilfield trade school. He visited the Hogback field with Fosdeck, Eisenfeld and Schreiber before the cleanup began. It wasn’t the worst thing he had ever seen, but, still, it was a mess.

“I think there’s people who have big aspirations to make a lot of money in the oil and gas industry and they end up purchasing these assets and then they don’t know what to do,” he said. 

Even so, the site confounded him. “How would you get yourself in this kind of a mess?” he wondered about the abandoned equipment and dilapidated tank battery he saw. “Who’s selling them those dreams?”

*   *   *

Sometimes the dream sells itself.

Bobby Goldstein is best known for producing Cheaters, a COPS-style reality TV show of hidden cameras, secret lovers, slapped faces and shattered dreams. 

“I’ve got a thousand episodes that run wild all over the world, every day, all day,” Goldstein said. Those episodes made him wealthy. In July, over a long, free-wheeling phone call, Goldstein explained in his smooth Texas patter how he, a Dallas lawyer and TV impresario, followed a dream to become an oil man and how that venture completely collapsed.

“I’ll never forget all this shit,” he said.

In 2010, Goldstein persuaded a couple of acquaintances to go into the oil business with him. They formed Chuza Oil — the name behind the Hogback mess — and, for a little less than $3 million, they bought Parowan Oil, a small company with some old wells and a tank battery near Farmington. 

“[I] grew up around a bunch of rich brats whose families were big oil people,” he said. “They made the earth shake and I always thought, ‘Man, I wish I had some sense to do that.’ That opportunity came about, and I went on it.”

He continued, “I never was an oil man. I was a speculator, and for a minute there I looked real smart. … You see, I bought the land cheap, [and] oil rose and rose and rose.”

Goldstein said Chuza spent about $2 million redeveloping the oilfield infrastructure. “We made a vast improvement to the field so that it would be more efficient and more likely to be operational. So, over time, most all of those wells were working … I even moved to Santa Fe where I could be closer,” he said. “Shit, I bought a jet so I could fly out there direct in an hour and a half and be on that field. I was out there a lot.”

What happened next set the stage for the collapse of Chuza Oil and what became of the Hogback Field.

Goldstein said the company spent millions drilling two fracked wells, which involved ramming huge amounts of water, sand and chemicals into long, horizontal branches of a main wellbore to fracture the surrounding rock and loosen oil and gas trapped within. 

Those wells produced for two months, but the oil was laden with paraffin. The naturally occurring, waxy hydrocarbon can slowly clog wells, in much the same way that cholesterol blocks arteries. In addition, the fracking loosened paraffin in Chuza’s other wells, fouling them as well, Goldstein said.

Then, a financial catastrophe: “The son of a bitch [partner] that was supposed to pay for the wells left us a $3 million unpaid bill with various creditors,” Goldstein said. “So not only did we have a fiscal issue going on, but we also had production issues and the company wound up into a Chapter 11,” he said.

“If everybody had listened to me on that field, we’d probably already sold it for $200 or $300 million. But people that have a little money think they know something, especially when they inherited it and never worked for it,” Goldstein said. “Those are the worst kind of idiots to have to deal with.”

After spending around $15 million to buy and expand the operation, Goldstein said Chuza Oil collapsed into years of bankruptcy litigation, foreclosure, 30 abandoned, paraffin-clogged wells and one messy tank battery.

“It was my Tom Sawyer experience,” Goldstein said. “I did something that I never had any background in, training for, education. And it was just a Wild West venture capital gamble.”

And if he made a show about the experience? “I would call it ‘Pricks and Jackasses Gone Wild,’” he said.

As for his former oilfield in New Mexico, Goldstein said, “I don’t really know what’s going on.” He was unaware that the wells had been plugged and the tank battery removed. In part, that’s because he’s no longer responsible.

One reason to set up a corporation is to protect its principals from fiscal fallout should the company fail. And in that, Chuza Oil succeeded: Bankruptcy protected Goldstein and the other partners from paying for the cleanup.

Chuza’s assets were on Navajo tribal trust land, managed by the U.S. government for the benefit of the tribe. The Bureau of Land Management managed those operations, making it responsible for the overall cleanup that began late last year. 

Fosdeck, left, and Schreiber talk while standing next to an abandoned Chuza oil well west of Farmington, New Mexico, in 2023. The site is on tribal trust land and the warning sign is written in Navajo.

Federal regulations give the Bureau the ability to go after earlier but still extant owners to clean up well sites abandoned by recent owners. In this case, Chuza Oil was the last in a string of owners stretching back to the 1940s for some of the oldest wells. In the end, a Bureau spokesperson said Marathon Petroleum, BP America, Woodside Energy/BHP and Enerdyne plugged 23 Chuza wells they sold years ago. BLM asked the New Mexico Oil Conservation Division to plug five wells and deal with the tank battery — none of which had extant previous owners. The Bureau plugged the remaining two wells. The cost of the cleanup bypassed Goldstein and the bankrupt Chuza Oil entirely. 

Goldstein wasn’t too wistful about his wells getting torn out and smoothed over. “I’m sure the Navajo are glad that all that shit’s gone. I don’t think they ever liked all that going on there and it’s a beautiful piece of land. It was really nice to be out there,” he said.

“Special experience for me,” he concluded.

*   *   *

The cleanup of Chuza Oil’s wells and tanks represents a nominal victory after years of work by Fosdeck, Eisenfeld, Schreiber and others to expunge the legacy of neglect from the northwest corner of the state. But the victory is small. 

According to Oil Conservation Division numbers from the beginning of September, New Mexico has 70,000 oil and gas wells and 6,717 registered tank batteries. About 100 new wells are drilled each month. Eventually, all of those will have to be plugged, and the land returned to something resembling its natural state.

The Legislative Finance Committee report notes that over the past 20 years, operators themselves plugged 95% of nonproducing wells in New Mexico, as the law requires. The remaining 5% were declared orphaned wells and plugged by the Oil Conservation Division. 

The report says there are around 700 orphan wells awaiting state plugging with another 3,400 inactive or low-producing wells that could be added to the list in the near future. Extrapolating forward, the report suggests New Mexico could be on the hook for up to $1.6 billion in cleanup costs over the coming years as more small companies declare bankruptcy before fulfilling their obligations to plug their wells and remove equipment. 

New Mexico’s Oil and Gas Reclamation Fund — filled by a fraction of a tax paid by oil and gas producers — covers the costs of implementing the Oil and Gas Act, which defines how the industry can operate in the state. The fund also pays for plugging and reclamation costs of abandoned wells and facilities. Earlier this year, the fund had $66 million, its highest balance ever. The state has kept that much in the fund by paying for plugging operations with $55.5 million in recent federal grants, as well as forfeited financial assurances that well owners are required to carry but rarely cover the actual costs of cleanup. The Finance Committee report says that the state is eligible for another $111 million from the feds. 

All told, it’s a long way from $1.6 billion.

“That is why the Reclamation Fund is not a substitute for adequate bonding and financial assurance from operators,” state Rep. Matthew McQueen (D – Galisteo) said. He thinks that the report’s $1.6 billion estimate is “scary enough,” but could be low. He said the report seems to expect a stable future for an industry with a notorious boom-and-bust cycle. “In a significant downturn, the State’s liability could skyrocket rapidly” as weak companies fold and abandon wells, he said.

Smaller companies are often the first to feel economic shocks, and the state has a lot of smaller oil and gas producers. In 2024, 326 companies reported producing 740 million barrels of oil to New Mexico’s Oil Conservation Division. Just 25 companies produced 92% of that total. The numbers are similar for natural gas production.

Fosdeck holds a methane detector as it lights up from a leak at an abandoned Chuza oil well in 2023. Schreiber shields the detector from the wind with his hat.

In the last legislative session, McQueen proposed a bill that would have kept well owners on the hook for remediation costs into the future if they sell wells to owners that go bankrupt — similar to what the federal government does. “It would cause the industry to self-police and make sure that any future operators had the wherewithal to properly remediate well sites,” he said. It didn’t pass.

McQueen also proposed legislation to weed out potential buyers without the money or know-how to run an oil production business, as well as so-called bad actors with histories of negligence or bankruptcy. That, too, didn’t pass.

The Finance Committee report recommends several procedural and definition changes, as well as creating a law allowing the Oil Conservation Division to disallow well sales if “the purchaser is unlikely to be able to fulfill its asset retirement obligations” — much like McQueen proposed. It also called for increasing the required financial assurances paid by oilfield operators for cleanup costs on low-producing wells, which are more likely to be orphaned.

However, the Chuza Oil assets wouldn’t have been subject to these proposed laws, because the wells and tank battery were on federal land not subject to state jurisdiction, despite the fact that the state ended up paying for the cleanup.

Ben Shelton, deputy cabinet secretary of the New Mexico Energy, Minerals and Natural Resources Department — the mothership to the Oil Conservation Division — said, “The report got a lot right, including identifying a need for [the Division] to be able to scrutinize transfers more closely in order to reduce the likely incidences of orphaned wells.”

Shelton said that the Division didn’t have an estimate for either the number of orphaned tank batteries or their average cleanup costs, but the oilfield cleanups of a trio of tank batteries were some of the most expensive the state paid for in the last couple of years, at $623,000, $5.1 million and $7.6 million. The estimated $650,000 Chuza Oil tank battery cleanup will eventually join the list.

As of publication, that months-long process wasn’t finished. And in the end, the cleanup around the Chuza Oil tank battery, while expensive and time-consuming, isn’t necessarily uncommon, according to Sandel at Aztec Well Servicing, which is cleaning up the site. 

“There were many more yards of contaminated soil than expected. … But I don’t think that’s abnormal,” Sandel said. “I wouldn’t characterize it as outside the bounds at all.”

Copyright 2025 Capital & Main.

Photos by Jerry Redfern.