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FARMINGTON — The state's Oil Conservation Commission will review its decision to increase the number of producing wells that can draw from the Blanco-Mesaverde formation in the San Juan Basin, according to a press release from the State Land Office.

An agenda for a special meeting scheduled for 9 a.m. Tuesday in Santa Fe calls for reviewing the decision. The case is the sole item on the agenda. The Oil Conservation Commission meets in Porter Hall of the Wendell Chino Building, 1220 S. St. Francis Drive in Santa Fe.

The decision to have a special meeting came after the Oil Conservation Division’s director allegedly violated state statute when she rejected then-State Land Commissioner Aubrey Dunn’s application for a rehearing.

Dunn filed an application on Dec. 24 asking for a rehearing, but then-Oil Conservation Division director Heather Riley denied the request. Dunn received a notice on Dec. 31 that there would not be a rehearing, according to the press release from the state land commissioner’s office.

According to the press release, state statute requires 10 business days to pass before an application for rehearing is denied without formal action by the Oil Conservation Commission.

State Land Commissioner Stephanie Garcia Richard sent a letter to Energy Secretary-designate Sarah Propst Cottrell on Jan. 2 asking for her to convene the Oil Conservation Commission for a meeting to review the decision. The next day, Propst Cottrell released a notice about a special meeting.

“I hope that this bold action by the State Land Office and the new Secretary of Energy Sarah Propst Cottrell begins a new era of transparency and public access to one of the most important state agencies,” said Gobernador resident Don Schreiber, who strongly opposed increasing the well density.

The Hilcorp Energy Co. filed the application for increased well density. It is in the process of recompleting existing wells in the San Juan Basin. That means Hilcorp is taking wells that are extracting from a different formation, such as the Dakota formation, and changing them so they can draw gas from the Blanco-Mesaverde formation. The Blanco-Mesaverde formation is located in San Juan and Rio Arriba counties.

The well-density requirements are outlined in the Blanco-Mesaverde pool rule. The Oil Conservation Commission has the authority to grant exceptions to the pool rule that allows additional wells to produce from the formation.

Prior to the Oil Conservation Commission approving the increased well density, Hilcorp already had received nearly 70 exceptions to the Blanco-Mesaverde pool rule. Hilcorp representatives argued that figure showed the need to update the rule, a process that hadn't been undertaken in 20 years.

“Hilcorp prevailed in this matter by presenting a scientifically sound case in accordance with all laws and regulations over the course of several months," Hilcorp spokesman Justin Furnace stated in an email to The Daily Times.

He said the company is prepared to defend its position and the decision the Oil Conservation Commission made at the upcoming meeting.

"We are excited about the new jobs and millions of dollars of investment in the community the new pool rule will allow,” he said.

The nonpartisan group New Mexicans for Economic Prosperity has estimated that increasing the well density could generate more than $29 million in tax revenue. The additional tax revenue, as well as the potential for new jobs in the natural gas fields, prompted the San Juan County Commission and the Farmington City Council to issue resolutions supporting the increased well density.

In the press release, Garcia Richard said the decision to increase well density sets a dangerous precedent.

"It is imperative that we make a decision in the region that ensures long-term sustainability and production that is fair to every producer in the state," she said.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at hgrover@daily-times.com.

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