The path to $43M: Can Brine Well Authority secure state funding?

Adrian Hedden
Carlsbad Current-Argus
Carlsbad Brine Well Authority designee John Heaton addresses the Radioactive and Hazardous Waste Legislative Committee Friday in Carlsbad. Heaton assured the committee that an emergency management plan was in place to respond to a collapse of the brine well.

A path to the $43 million local leaders believe they need to prevent the Carlsbad brine well from collapsing could take several turns through federal, state and local governments.

The State of New Mexico already earmarked $250,000 from its general fund, coupled with $125,000 from both the City of Carlsbad and Eddy County to establish the $500,000 Brine Well Remediation Fund.

During the Carlsbad Brine Well Remediation Advisory Authority’s January meeting, members unveiled a nine-step funding proposal aimed at generating the money using state, local and federal dollars to bolster the fund.

MORE:Local, state leaders defend Carlsbad brine well bills against State Land Office

The proposal asked both Carlsbad and Eddy County to contribute another $500,000 each, annually for the next four years.

The Authority also hoped to receive $4 million from the Federal Emergency Management Agency (FEMA), a one-time contribution.

Some argued FEMA funds could only be made available after the collapse of the brine well. The proposal argued FEMA could contribute via its Pre-Disaster Mitigation Fund.

But such an appropriation would require an engineering study, as well as an entity taking ownership of the well.

Members of the Carlsbad Brine Well Remediation Advisory Authority discuss funding for the project during a meeting, Jan. 10 at the Municipal Annex Building.

The rest of the project's funds would also need to be identified before the federal dollars could be provided, meaning FEMA would be the last source of funding secured. 

Previously owned by I&W, the well was decommissioned in 2008 when the ground was deemed unstable.

City, state and county officials have tangled for years on whether I&W, now bankrupt and defunct, should be held responsible or if a government agency should take ownership.

Local officials contend the well was permitted, monitored and profited from by the state, which should should be liable for remediation.

At the state level, lawmakers argued the well was built and operated in the city, under its supervision.

Either way, any allocation from FEMA is capped at $4 million, and is competitive, meaning entities other than the Authority could win the funding.

“Dependence on this completely without a back-up for the $4 million is risky,” read the proposal.

The proposal also contained a request for $2 million in fiscal year 2018, and $1 million in fiscal year 2019 from local severance tax bonds collected by the state from oil and gas producers.

MORE:State Land Commissioner challenges brine well bills

This money could be appropriated by legislators committing $200,000 each to the project, read the proposal.

The Authority hopes lawmakers will see the perceived impact a collapse could have on the oil and gas industry.

“This will mean this project is Carlsbad’s top priority, and most likely everything else will have to be put on hold,” read the proposal. “It is believed that there is enough concern by other legislators around the state because of the impact on revenues to the State from oil and gas production by the brine well.”

The brine well’s collapse is expected to create a massive sinkhole, deeper than the New Mexico Capitol building is tall.

It is located beneath the South Y interchange of U.S. Highway 285 and U.S. Highway 62/180, constantly used by the extraction industry to transport materials across the city, from the oilfields south of Carlsbad, to the refinery in Artesia and throughout the Permian Basin.

There is also an irrigation canal operated by the Carlsbad Irrigation District (CID), pumping water to almost 800 users, mostly farmers in southern Eddy County.

Director of the CID Dale Ballard said the collapse could interrupt service to 80 percent of his customers for up to three years.

MORE:Cost of fixing Carlsbad Brine Well could be almost double past projections

In total, experts predicted the collapse could cause up to $1 billion in damaged infrastructure, lost tourism, litigation and loss of life.

The potential catastrophe, the Authority hopes, could sway lawmakers to also unlock a general fund special appropriation for a $2 million contribution in both fiscal year 2018 and 2019.  

Contained in the state’s Appropriations Bill, the general fund special allows for appropriations to miscellaneous items, usually one-time expenditures.

Through lobbying state leaders, the Authority hopes to secure the funding for both years.

“This will take significant effort from our legislative delegation, and support for the Appropriations Bill,” read the proposal.

State Senator Carroll Leavell (Jal-41) smiles before the opening ceremonies of the 2018 Legislative Session which convened on January 16, 2018 at noon.

The bills

Of the $43 million the Authority said is needed to remediate the well, 65 percent or $28 million was contained in five senate bills introduced by State Sen. Carroll Leavell (R-41), at the start of the current 30-day legislative session.

The bills were cosponsored by Sen. Gay Kernan (R-42) and Rep. David Gallegos (R-61).

State Rep. Cathrynn Brown (R-55) introduced identical bills in the House of Representatives, to expedite the approval process between the two legislative chambers.

More:Companies submit proposals for brine well backfill project

Senate Bill 64, which was intended to create a one-time $1 million appropriation drawn from the State Road Fund was dropped as the New Mexico Department of Transportation and the Authority work to design a bypass route to take traffic from the South Y around the cavity.

The other four senate bills were scheduled for hearings Thursday in the Senate Conservation Committee.

The house bills are scheduled to be heard on Jan. 30 before the House Energy, Environment and Natural Resources Committee.

SB 62

Senate Bill 62, if approved, would take $3 million annually for fiscal years 2019 to 2021 from the State’s Corrective Action Fund.

The bill amends the Corrective Action Fund Act, established to “provide for financial assurance coverage” to support clean-up efforts related to the extraction industry.

“The priorities for corrective action shall be based on public health, safety and welfare and environmental concerns,” read the bill.

SB 63

Senate Bill 63 seeks $1.5 million from the State’s Water Project Fund, annually from fiscal year 2019 to fiscal year 2021.

The Water Project Fund is intended to pay for water-related projects throughout the state.

Records show the monies from the fund can provide grants or loans to “qualified entities” for any projects approved by the Legislature.  

In the bill Leavell argues remediating the brine well would prevent brine water from contaminating nearby fresh water aquifers.

State Rep. Cathrynn Brown speaks to participants of the Eddy County DWI Drug Court Friday at Carlsbad Magistrate Court.

The southern tip of one of the nation’s largest underground freshwater aquifers, the Ogallala — or High Plains Aquifer — extends into southeast New Mexico and has for decades provided fresh water to local farmers and extraction operations.

The appropriation to the brine well project is proposed to be made after 10 percent of all water project funds are used by the state engineer to evaluate water rights disputes across the state.

The money for the brine well would also be paid, if SB 63 is passed, before the issuance of any of water project funds for loans or grants.  

If the balance in the Water Project Fund drops below $1.5 million, after dedicating funds to the state engineer, Leavell proposed the entire remainder of the fund be allocated to the brine well. 

SB 65

From fiscal year 2019 to 2021, Senate Bill 65 seeks $2.5 million annually from the state’s Oil and Gas Conservation Tax.

The tax was initially intended to generate revenue from extraction operations for the Oil and Gas Reclamation Fund, but SB 65 adds the Carlsbad Brine Well Remediation Fund as a recipient.

The bill requests 2/19 of the tax’s net receipts go to the brine well, the same amount earmarked in the original act for the reclamation fund.

SB 66

Leavell’s and Brown’s proposals to bring a total of $6 million during the next three fiscal years, at $2 million per year, from the Oil and Gas Reclamation Fund recently came under fire by State Land Commissioner Aubrey Dunn.

Dunn challenged the bill’s attempt to divert money from the fund first established to pay for plugging abandoned oil wells.

CARLSBAD BRINE WELL AUTHORITY:Reclamation funds are meant to aid brine well remediation

He said using reclamation dollars to fix the brine well was a “misappropriation.”  

“The Oil and Gas Reclamation Fund is meant for oil and gas operations that go awry, not cleaning up salt mines,” Dunn said.

A map of the South Y highway junction where a brine well could collapse creating a massive sinkhole.

Ken McQueen, cabinet secretary of the Energy, Minerals and Natural Resources Department, which oversees the Authority, argued the act that established the reclamation fund was amended in 2010 to include remediating facilities used for brine production in its list of acceptable uses.

“The Commissioner fails to realize that in 2010 the Legislature specifically included brine production within the definition of production facilities,” McQueen said.

McQueen also has Authority, according to SB 66’s proposal, to continue pulling $2 million annually from the fund until remediation is complete.

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.