An effort to modernize state oversight of the oil and gas industry cleared its first hurdle on Thursday.
The billwould rewrite portions of the state’s Oil and Gas Act in order to help regulators keep pace with the industry's growth in recent years, as well as increasingly assertive calls to hold the sector accountable for air pollution, spills and the costly cleanup of equipment and abandoned wells.
The bill was given a Do Pass recommendation on a 6-5 vote in the House Energy, Environment and Natural Resource Committee. It was over the objections of small and moderate sized oil producers but with the endorsement of major industry corporations like Occidental Petroleum and EOG Resources.
The initiative would increase financial assurances for well plugging and cleanups, while ratcheting up administrative fees and penalties for regulatory violations. The bill also would give regulators greater authority over applications to transfer ownership of wells that often change hands when oil and natural gas output declines.
Bill sponsor and committee chair Bill McQueen says the state already has nearly 2,000 orphaned oil wells that cost about $200-thousand each to plug.
He says that places the existing liability at $389 million.
“This is during times of record production. If there’s a downturn that number is going to go up sharply,” he said. “And it’s not going to be one-percent of each operator, it’s going to be whole operators going under. If we can’t put appropriate safeguards in place during record production then we’re never going to have this here. We appreciate the contributions of the oil and gas industry but it doesn’t mean they should have carte blanche to do whatever they want.”
Initial provisions were dropped from the bill that would have established no-drilling buffer zones around schools, residences, surface waters and critical habitats across New Mexico, to the dismay of environmentalists and community advocates who vowed to press legislators to reinstate setback requirements. The State Land Office recently imposed its own buffer around schools.
The state is being sued over alleged failures to meet constitutional provisions for protecting against oil and gas pollution, as residents living near oil wells and environmental groups turn to the judiciary for relief.
The Associated Press contributed to this report.