State of New Mexico can fine oil and gas operators for violating state law

Adrian Hedden
Carlsbad Current-Argus

New Mexico’s oil and gas regulators can now fine operators who do not comply with state law for the first time in 11 years.

A provision in New Mexico House Bill 546, which passed the legislature during the 2019 session went into effect last month allowing the State’s Oil Conservation Division (OCD) – an arm of the Energy, Minerals and Natural Resources Department (EMNRD), charge civil penalties for violations of New Mexico’s Oil and Gas Act.

Violations could range from excessive emissions or unreported spills to administrative issues such as failure to submit the proper reporting on an active oil and gas facility.

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HB 546 directed the OCD to develop a rule making process to assess the civil penalties, and the final order was signed by the Oil Conservation Commission on Jan 16.

The rule went into effect on Tuesday and was published in the federal register.

Penalties were capped at $2,500 per day for each violation, with a higher cap of $10,000 set per day for violations reported to pose a risk to public health or safety or seen as causing “significant environmental harm,” read an EMNRD news release.

Total penalties were capped at $200,000 per violation, with any larger fines required to be issued by a court.

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“The Oil Conservation Division is committed to making sure that the oil and gas industry is acting responsibly and this rule going into effect provides another enforcement tool,” said OCD Director Adrienne Sandoval. “This rule is another example of the great strides EMNRD and the State of New Mexico are making towards a more sustainable future.”

Sandoval said the ability to assess fines would be “another tool” for the Division to enforce compliance with state law, along with shutting in wells and revoking permits.

She said the Division’s ability to charge fines and civil penalties will ensure all operators are working on a “level playing field” and following state law.

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Adrienne Sandoval was hired in April as the director of New Mexico's Oil Conservation Division.

“We have a variety of operators and this will provide a level playing field,” Sandoval said. “For operators who do follow the rules, it’s an unfair advantage for those who don’t.”

When an operator is found out of compliance, the OCD would send a notice of the violation.

The operator can then work to resolve the problem or dispute the OCD’s decision and take it to a hearing with the Oil Conservation Commission, which Sandoval chairs.

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Operators can also make appeal the Commissions’ decision in district court.

The OCD was granted discretion in the law when assessing fines, Sandoval said, to account for a violator’s history of compliance and willingness to work with the State.

“We want to work with operators and ensure people are in compliance,” she said. “This rule doesn’t change that.”

Robert McEntyre, spokesman for the New Mexico Oil and Gas Association – a trade group representing hundreds of oil and gas companies in New Mexico – said the Association worked with the State of New Mexico in developing HB 546.

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He said the industry welcomed stricter penalties for violations of state law but didn’t expect to see many fines issued.

“We certainly expect that all operators adhere to the law,” McEntyre said. “We strive to do that every day, but when circumstances arise, and we see somone not complying with the law, it does impact the whole industry.

“It’s only fair that everyone plays by the same rules.”

While oil and gas continues to grow in New Mexico, McEntyre said the onus would be on operators to follow regulations.

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“In a period of robust growth and economic expansion, there also be the expectation that operators follow the rules,” he said. “We also want to ensure the implementation of the rule is fair and equitable and there is consistency in how it is applied.”

McEntyre said he didn’t expect a lot of fines to be issued, but that the State’s power to do so would act as a deterrent for operators to keep them in compliance.

“The vast majority of operators are in compliance,” he said. “This law would encourage operators to be in compliance. “Our companies have enjoyed a strong working relationship (with the state) to ensure we can produce energy and they can uphold the law.”

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Jon Goldstein, director of regulatory affair for energy at the Environmental Defense Fund said HB 546 was the first major reform for state regulations of oil and gas in more than a decade.

But he criticized the bill for including caps on the penalties.

“We would have preferred this bill followed the examples of the other agencies in New Mexico, as well as in neighboring Texas and Colorado, by not including an administrative cap on penalties,” Goldstein said. “But restoring New Mexico’s ability to protect its health and resources from oil and gas pollution is a critical accomplishment.”

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