New hearing on issue scheduled for May 9

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AZTEC — Environmental advocates are heralding a recent decision to rehear a case involving gas well density as a signal that the New Mexico Oil Conservation Commission is changing under new state leadership.

The commission previously granted an application from the Hilcorp Energy Company in November. The application would have doubled the number of wells producing from the gas pool in the Blanco-Mesaverde formation.

But that decision was suspended on Tuesday, and a rehearing on the issue was scheduled for May 9.

"I believe it is entirely due to the new administration," said Don Schreiber, a Gobernador-area ranch owner who has advocated against increasing well density.

Schreiber and other opponents argue that the increased well density will have irreversible environmental and public health consequences.

When Gov. Michelle Lujan Grisham and State Land Commissioner Stephanie Garcia Richard took office earlier this month, it meant a change in some of the members of the Oil Conservation Commission.

In addition, Garcia Richard asked Energy Secretary-designate Sarah Cottrell Propst to request a special meeting to discuss the case. That special meeting led to the rehearing.

"While it is critical to encourage natural gas production, it is imperative that we remember the San Juan Basin has the second-largest natural gas field in the United States, and we need to closely evaluate the impacts of doubling wells in the region," Garcia Richard said in a press release. "These resources are essential to our state's financial viability, and I believe we can ensure long-term sustainability and make more money for New Mexico’s school children while increasing responsible production."

The decision to suspend the previous approval and schedule a rehearing was met with a backlash.

The New Mexico Oil and Gas Association issued a statement saying "extreme activists have derailed a fact- and science-based process into a heavily choreographed political spectacle."

The industry advocacy group said the decision stops a plan that would result in millions of dollars of investment while reducing the need for new wells and decreasing methane emissions.

Hilcorp spearheads effort to increase well density

While increasing well density would apply to all the operators in the basin, the pool rule change was sought by Hilcorp. Hilcorp operates more than 5,000 wells that currently draw from the Blanco-Mesaverde pool. It has thousands of other wells producing from other formations that could draw from the pool if the rule changes.

"We have a huge presence, not only in the basin, but also in Aztec city limits," said Ben Mitchell, a Hilcorp San Juan employee who represented the company at an Aztec City Commission workshop on Tuesday.

Mitchell said Hilcorp has 96 wells operating in the Aztec city limits. The Aztec City Commission asked Hilcorp to present information on its work processes to help inform future commission decisions regarding wells within the city limits.

Application would double the number of wells allowed

The current pool rule allows for four wells to produce from the Blanco-Mesaverde formation for every 320-acre unit. Hilcorp is asking for that number to be increased to eight.

The pool rules are in place so that one operator does not steal gas from another.

"If I drill here, I need to make sure I'm not taking your gas," Mitchell said while explaining the pool rule to the Aztec City Commission.

In 2017, Hilcorp acquired a well located 12 miles east of Blanco from ConocoPhillips when it acquired that company's San Juan Basin assets. That well drew from the Dakota formation. Hilcorp wanted to use the well to draw from the Blanco-Mesaverde formation. But there were already four wells producing from the Blanco-Mesaverde pool in the 320-acre unit.

In January 2018, Hilcorp asked the New Mexico Oil Conservation Division for permission to have a fifth well drawing from the Blanco-Mesaverde pool in that 320-acre unit. The Oil Conservation Division granted the request. That allowed Hilcorp to recomplete the well near Blanco.

Recompleting is the name for the process used when an operator takes a well that draws from one formation and changes it so it can draw from another formation.

Hilcorp has received dozens of exceptions from the Oil Conservation Division that have allowed it to have more than four wells drawing from the Blanco-Mesaverde pool in 320-acre units. That prompted the company to apply to have the pool rule changed.

Hilcorp also seeks change in spacing requirements

In addition to asking for more wells, Hilcorp's application for the pool rule change would allow the wells to be located closer together. Currently, only two wells can draw from the Blanco-Mesaverde formation in each quarter section of the 320-acre unit.

Hilcorp has also received exceptions to that spacing requirement. For example, last year it received permission to have three wells producing form the Blanco-Mesaverde formation in the same quarter section of a 320-acre unit located in the Pump Canyon area east of Aztec. That allowed the company to recomplete a well that was drawing from the Dakota formation.

Without the rule change, Hilcorp will continue to be required to file for an exception each time it wants to drill a fifth well or have more than two wells located in a quarter section.

Recompletion includes flaring of natural gas

After Hilcorp recompletes a well, it vents or flares natural gas, Hilcorp representatives told the Aztec City Commission on Tuesday. That practice has come under criticism recently because the process releases gas into the atmosphere.

"Why is it flared instead of captured?" City Commissioner Rosalyn Fry asked.

Mitchell explained the fracking process used during the recompletion of a well means the natural gas that emerges from a well first is not pure. He said it contains significant amounts of nitrogen, as well as materials or chemicals from the fracking process. That means it cannot be sold or placed in pipelines.

The Aztec City Commission is planning on having another meeting with Hilcorp representatives to learn more about the company's work process.

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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