Bill looks to increase Oil and Gas Act penalties to $10K to discourage bad players

Yahoo

19-02-2025

Feb. 18—SANTA FE — If oil and gas operators are excessively emitting greenhouse gases or contaminating groundwater, state officials want to threaten them back into compliance with an up to $10,000 daily penalty.
That's a 300% increase from the current $2,500 maximum daily penalty, included in House Bill 259, which would also raise fees imposed on operators applying to drill wells. The bill passed its first of three House committees Tuesday on a 7-4 vote along party lines.
The legislation aims to discourage operators from violating the state's Oil and Gas Act, which has public and environmental health and safety regulations in place.
The measure also seeks to increase the cap on aggregate civil penalty assessments from $200,000 to $2.65 million. The ask was initially a $3.65 million cap, but the House Energy, Environment and Natural Resources Committee decreased that number through an amendment.
Since 2019, the Oil Conservation Division has assessed $29 million in penalties, said Ben Shelton, the acting deputy secretary of the state's Energy, Minerals and Natural Resources Department. But of that, he said, the state has only collected $8 million, which went to the general fund.
That's because a goal of the Oil Conservation Division, under the purview of EMNRD, is to bring operators into compliance, Shelton said. The OCD negotiates with operators willing to correct their violations, he said.
"We basically trade dollars for compliance," Shelton said. "It is important to have this cap raised because currently too many violations, too many polluting actions, are seen as a business proposition."
In other words, operators are willing to cough up $200,000 because oil sales will make more than that anyway.
Legislators asked a few times how many operators ignore the penalty assessments and continue operating anyway. Shelton said not many, but when it does happen, it's very costly and harmful to New Mexico. About 5% of operators are repeat offenders, he added.
Lobbyists for operators, including the New Mexico Oil and Gas Association and the Independent Petroleum Association of New Mexico, spoke against the bill.
"$200,000 is already enough to limit or significantly hurt, if not threaten, solvency of many independent operators," said Jim Winchester, executive director of the Independent Petroleum Association of New Mexico. "Let's not continue to send a message to operators that this administration does not want oil and gas here."
Rep. Rod Montoya, R-Farmington, called the numbers arbitrary and said the bill didn't include considerations from the oil and gas industry. He added that while the industry is thriving now, it won't always be flush with cash.
"I'm not saying ... that increasing fees is not necessarily somehow warranted. I just know how we got to where our fees are now, and there was input on the industry," he said.
Under the measure, drilling application fees would increase from $500 to $1,500 — a 200% increase.
Bill sponsor Rep. Matthew McQueen, D-Galisteo, encouraged legislators and advocates not to play "the percentage game" and instead "look at the fee, the penalty, whatever it is, in relation to the economic activity, and is it appropriate in today's market? Not, 'Is it a certain percentage compared to an artificially low amount we had before?'"
Travis Kellerman, senior climate policy adviser for the governor, spoke in support of the bill, saying it's about modernization. It would streamline administrative and regulatory responsibilities at OCD and reduce general fund dependency, he said.
"It makes sense," he said. "This update is overdue."
Rep. Meredith Dixon, D-Albuquerque, said she wants more specifics on this bill, like the exact number of operators who refuse to correct their violations, before it goes to the House Appropriations and Finance Committee, which Dixon is the vice chair of.
"I don't disagree with the premise or what we're trying to do, but I find that it's very challenging to change statute without actual facts and figures," she said.