OCC decision in Hilcorp case signals change for activists, industry

Hannah Grover
Farmington Daily Times
A slide displayed on a projector during an Aztec City Commission work session, Tuesday, Jan. 8, 2019, details the three phases of recompleting wells.

FARMINGTON — Regardless of their positions on the issue, various organizations agreed that change is in the air after an early-January decision by the New Mexico Oil Conservation Commission to rehear Hilcorp Energy Company’s application to increase well density in the San Juan Basin.

For some, it means increased transparency and public input. For others, it signals the growing influence of environmental advocacy and politics in decisions regarding the oil and gas industry.

The stakes are high on all sides.

While the Permian Basin in southeast New Mexico has seen a boom in oil development, the San Juan Basin continues to struggle despite sitting on the second largest natural gas pool in the United States.

New Mexicans for Economic Prosperity projected increasing well density in the San Juan Basin would bring in more than $29 million in new tax revenue over five years.

"The decision to hold yet another hearing on the already approved rule update jeopardizes its positive economic impacts that would be felt in San Juan County, Rio Arriba County, and around the state,” said Kyler Nerison, the executive director of New Mexicans for Economic Prosperity, in a statement released after the decision. “Without the update, New Mexico will forego new high-paying jobs, tens of millions of dollars in annual investment, and more than $29 million in state tax revenue it could have created." 

Activists say the days of the oil and gas industry running the show and making the rules in New Mexico are over.

A well owned by Hilcorp Energy Co. is pictured in Berg Park in Farmington.

Activists praise increased opportunity for public comment

After the special meeting this month, Don Schreiber, an activist rancher from Gobernador, praised the decision as a sign that after eight years of being closed out, ignored and left out of the process, advocates and members of the public will finally be able to participate in critical decisions.

Prior to the meeting, Navajo Nation Council Delegate Daniel Tso criticized the Oil Conservation Commission through a letter. Tso letter stated the Oil Conservation Commission only listened to the oil and gas industry.

The commission made it clear during the meeting that it wanted input from impacted communities. Commissioner Allison Marks specifically highlighted the Jicarilla Apache tribe as well as the Bureau of Indian Affairs.

“I believe there are about 1.3 million acres affected by this application and 70-or-so-thousand acres of State Trust Land,” Marks said, according to a transcript of the hearing. “I think it’s imperative that the (Bureau of Land Management), all government land agencies are noticed, that we get as much public input as possible and that we encourage public participation in this application.”

NM oil and gas industry on edge

Erik Schlenker-Goodrich, executive director of Western Environmental Law Center, asked for impacted Navajo Nation chapters to also receive notices. The Oil Conservation Commission agreed.

Rancher Don Schreiber talks about the oil and gas operations on his ranch in Gobernador on May 17.

Environmental advocacy group San Juan Citizens Alliance had been denied the opportunity to have their arguments considered as evidence in the November hearing. The group, which is represented by Western Environmental Law Center, claimed the increased well density could have last environmental and health consequences and argued that the tribal chapters were not adequately informed of the plans. It praised the decision to rehear the case.

“Hilcorp shot itself in the foot by aggressively trying to silence the voice of public interest watchdog groups who work with impacted communities,” said Schlenker-Goodrich in a statement issued after the meeting. “But it’s a new day in New Mexico, and the oil and gas industry will no longer be able to write its own rules and subordinate the public interest to benefit corporate fossil fuel profits.”

Hilcorp seeks to increase wells that can draw from the Blanco-Mesaverde formation

Hilcorp began pursuing increased well density in the Blanco-Mesaverde formation of the San Juan Basin in May. It withdrew its initial application due to concerns with public notice. Months later, the company re-filed the application and it was granted in November.

The application sought to increase the number of active wells producing from the Blanco-Mesaverde oil and gas pool. Currently four wells can draw from a 320-acre unit. The application asked to double that. That would not have bypassed the permitting process for new wells, but it would make it easier for operators to recomplete wells so they draw from a different reservoir.

FMN Mesaverde completions vs. time

While the application was initially granted in November, it was suspended on Jan. 8 after a special meeting.

After the meeting, Hilcorp issued a statement that it was disappointed but will defend its position in May.

NMOGA spokesman calls decision a discouraging sign

For others, the decision is another sign of environmental and political pressures impacting the oil and gas industry.

“Overall, it’s a very discouraging sign,” said New Mexico Oil and Gas Association Spokesman Robert McEntyre.

Proponents of the increased well density have argued that Hilcorp presented scientific evidence while arguing for the increased well density.

McEntyre said the political process could take precedence over scientific, evidence-based proceedings in the future as well.

“I think it’s concerning the way that all of this has gone on,” McEntyre said.

A workover rig sits in the rig yard of Aztec Drilling on Thursday July 21, 2016, in Aztec.

Decision could have economic impacts

McEntyre said suspending the previous approval of the pool rule means foregone economic value in the San Juan Basin.

He said Hilcorp had presented a sound, environmentally-safe plan to invest millions into the basin. The plan focused on recompleting existing wells rather than drilling new wells. Recompleting existing wells means Hilcorp would take a well that drills into one formation and modify it to produce from another.

“We really have to look at this decision in terms of the human consequences,” McEntyre said.

In this file photo, a hiring sign for Halliburton is pictured on Tuesday, Oct. 17, 2017 on East Main Street in Farmington.

McEntyre said Farmington is craving new job opportunities.

Both San Juan County and the city of Farmington had passed resolutions in support of the increased well density, citing economic impacts.

Opinion: State budget depends on oil, gas cash

“This just continues to prolong the economic drought,” McEntyre said.

McEntyre said the debate is not about the merits of the case. He argued that it is about stopping oil and gas development.

He said it is based on a political agenda and there can only be two possible outcomes: win or lose.

Ultimately, both sides are hoping the May 9 rehearing backs their position.

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