Well density rule goes before Oil Conservation Commission Monday

Democratic officials asking for hearing to be delayed

Hannah Grover
Farmington Daily Times
A Hilcorp pump jack is pictured in Animas Park in Farmington.
  • The New Mexico Oil Conservation Commission will be tasked with ruling on the issue during a special hearing at 9 a.m. Monday in Santa Fe.
  • Supporters of the rule change say it could allow existing wells that are not producing much to be put into use again.
  • Opponents argue that the recompleted wells would lead to more venting and flaring, potentially increasing the amount of methane in the environment.

FARMINGTON — Opponents say allowing greater well density in the Blanco-Mesaverde oil and gas pool could have lasting environmental consequences for the climate, as well as for the residents of San Juan and Rio Arriba counties.

But supporters say it could allow existing wells that are not producing much to be put into use again, and would minimize the cost and environmental impacts of drilling new wells.

The New Mexico Oil Conservation Commission will be tasked with ruling on the issue during a special hearing at 9 a.m. Monday in Santa Fe. However, several Democratic elected officials have asked for the hearing to be delayed until newly elected officials take office in January and in light of a recent request from the U.S. Environmental Protection Agency for information about recently recompleted wells.

A previous hearing in September was interrupted by a closed session following intervention from the New Mexico Attorney General’s Office. The attorney general stated there had not been enough public notice about the hearing. The Oil Conservation Commission then tabled the topic and scheduled the special hearing for Monday.

Hilcorp plans on recompleting wells in the San Juan Basin

Currently, oil and gas producers can have four active wells extracting oil or gas from the Blanco-Mesaverde formation on a 320-acre unit in the San Juan Basin. The Hilcorp Energy Company is asking for the number of active wells to be increased to eight wells on a 320-acre unit.

The company wants to take wells that previously drew from the Dakota formation and recomplete them. This would allow Hilcorp to extract from the Blanco-Mesaverde formation, which is located closer to the surface.

Warren Unsicker.

“This actually allows for Hilcorp to recomplete existing wells, thus reducing their impact on the landscape by not having to drill new additional wells,” Farmington economic development director Warren Unsicker said Tuesday during a City Council meeting that can be viewed at fmtn.org. “It likewise reduces the costs of creating those additional wells. That, in turn, gives us the ability to create more economic vibrancy for the community, more tax base for the community, more jobs for the community.”

The city of Farmington and San Juan County have passed resolutions in support of the increased well density.

“We are appreciative of the resolutions passed by San Juan County and the city of Farmington,” said Justin Furnace, a Hilcorp spokesman, in an email to The Daily Times. “We are happy to be partners with them in our shared goal of revitalizing the region.”

While the amended rule would allow for increased well density, regulatory processes would have to be followed.

“This would not instantaneously allow them to drill as many wells as they so desire,” Unsicker said. “This allows them to recomplete existing wells and expand the surface activity in those pools. And so this would benefit the region from an activity perspective but not from a huge amount of surface activity in terms of new wells being built.”

Increasing well density could have economic benefits

Furnace said over the course of the year, Hilcorp has invested $100 million in capital in the region.

“If the pool rule is approved, it will lead to greater investment,” Furnace said “Through taxes, royalties, employment, and secondary economic activity, there will be a substantial economic benefit to the local governments and the state due to increased production.”

An analysis done by New Mexicans for Economic Prosperity — a coalition of groups that includes Four Corners Economic Development and the Farmington Chamber of Commerce — found that amending the rules to allow for more active wells would generate $29 million in new tax revenue and lead to 123 billion cubic feet of new gas production.

“This is a responsible step toward revitalizing the San Juan Basin community,” said Robert McEntyre, spokesman for New Mexico Oil and Gas Association.

Opponents worry about environmental impacts

“Nobody in the hearing on Monday is saying don’t drill,” said activist Don Schreiber, who owns a ranch in Gobernador. “The entire question is a matter of getting all the information to allow drilling to go ahead responsibly.”

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

Schreiber argued that the recompleted wells would lead to more venting and flaring, potentially increasing the amount of methane in the environment. He said that could impact him because there are wells on his property or his grazing leases.

“We have to live and work with it as rural people do all across the western United States,” he said.

In addition, he said methane is a potent greenhouse gas contributing to climate change.

He said decisions regarding increasing well density must include consideration of environmental impacts.

“You can’t create the same conditions for New Mexico that we’ve had for the last 70 years and expect New Mexico to advance.”

Schreiber said extracting from the Blanco-Mesaverde formation could extend the life of a well by 30 years, during which more methane could be vented or flared into the atmosphere.

“The environmental impacts are huge and lasting,” he said.

EPA has asked Hilcorp for information about emissions

Over the course of the year, Hilcorp has applied for and received more than 70 exemptions to the current pool rule, allowing for increased well density.

Earlier this month, the U.S. Environmental Protection agency requested information about the potential air quality impacts from these recompleted wells.

“We take compliance seriously and have been actively engaged with the EPA regarding our response since we received the request last week,” Furnace said. “We plan to fully respond to the EPA within the deadline they provided of January 15. The particular EPA rule referenced and the data requested has nothing to do with the application before the Oil Conservation Commission to evaluate the most efficient way to properly develop the Blanco Mesaverde Pool.”

Elected officials have asked for hearing to be postponed

While Hilcorp says the EPA’s request does not have anything to do with the application the Oil Conservation Commission will hear on Monday, Gov.-elect Michelle Lujan Grisham, a Democrat, cited it in a letter she sent to the Energy, Minerals and Natural Resources Department. The commission is part of that department.

Michelle Lujan Grisham

“The oil and gas industry is the cornerstone of the New Mexican economy,” she wrote in her letter. “But it is imperative we balance this key economic driver with health, safety and environmental considerations.”

McEntyre said the EPA request is unrelated to the application the Oil Conservation Commission is scheduled to hear on Monday. He said asking for the hearing to be postponed based on the request is like asking for the University of New Mexico basketball season to be postponed "until we find out if the Dallas Cowboys fire their coach.”

He said the process began in May, and the Oil Conservation Commission already has heard arguments about the application in the past.

“They should absolutely take action on it right now,” he said.

Land Commissioner-elect Stephanie Garcia Richard, a Democrat, has asked for the hearing to be postponed until she takes office in January.

“This hearing requires an understanding of the technical mineral and reservoir management issues that will clearly impact my office as the largest mineral interest owner in the state,” she states in her letter.

McEntyre said there is already an elected official in place to make decisions for the Land Office, and he should be able to make those decisions through the end of his term, even if those decisions will impact Garcia Richard’s term.

Other Democratic elected officials also have sent letters asking for the hearing to be postponed. The list includes Attorney General Hector Balderas, U.S. senators Tom Udall and Martin Heinrich, U.S. Rep. Ben Ray Luján, U.S. Rep.-elect Deb Haaland and state Rep. Matthew McQueen, who chairs the house Energy and Natural Resources Committee. Navajo Nation Council Delegate-elect Daniel Tso, who will represent chapters in southeast San Juan County, also sent a letter asking for the hearing to be postponed.

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