June 7, 2018

Martinez, state energy secretary face tough questions from congressional committee

On Wednesday, Gov. Susana Martinez and her energy secretary testified in Washington, D.C. that New Mexico is losing revenue from oil and gas drilling due to bureaucratic backlogs. Martinez and Ken McQueen, a former energy executive who now heads the New Mexico Energy, Minerals and Natural Resources Department, testified before a House committee in support of four energy bills, including two proposed by Rep. Steve Pearce, R-NM.

Before running for Congress, Pearce owned and operated an oilfield services company. In November, he will face Democrat Michelle Lujan Grisham in the race for New Mexico governor.

In Martinez’s spoken remarks before the House Resources Committee, she criticized the U.S. Bureau of Land Management for its slow pace in approving drilling applications, blaming those delays on $2 million of lost revenues per day.

New Mexico could use that money, she said, for education, health programs and law enforcement. The BLM’s delays harm the economy, cause the state to lose out on jobs and prevent rural economic growth, she said.

“We need a solution that will streamline layers of bureaucratic requirements and expedite the approval process,” Martinez said, adding that she and five other western governors have proposed changes to the U.S. Department of the Interior that would “ensure the timelier handling of regular, run-of-the-mill applications for drilling permits.”

Because the energy industry is cyclical, booming and busting according to commodity prices, McQueen said, “it is important to provide as many oil permits as possible when oil prices are high like they are today.”

Martinez, McQueen and Pearce each said that in New Mexico, the BLM currently has a backlog of 800 permits to approve.

California Democrat Rep. Al Lowenthal provided additional context for those numbers: Nationwide, about 2,600 applications are currently pending approval, while more than 8,000 permits not being used.

Lowenthal said there is “a common theme” in the four bills and the Donald Trump administration’s take on oil and gas. “Drilling on public lands is robust, and went up 78 percent under the Obama administration,” he said. “But this administration is relentlessly trying to remove anything that might be a burden to the oil and gas industry.”

Speeding up drilling

Each of the four bills focuses on boosting energy development on federal lands in the United States.

One of Pearce’s bills would “clarify” categorical exclusions authorized under the Energy Policy Act of 2005 and “streamline” oil and gas permitting. If it becomes law, it would allow the BLM to approve certain plans without conducting an environmental study or providing for public comment. Categorical exclusions would apply in a number of circumstances, including reinstating a former lease, expanding an existing oil and gas well pad site to include new wells, drilling wells at new well pad sites smaller than 20 acres and building up to two miles of new road or three miles of pipeline.

Under the National Environmental Policy Act, federal agencies must undertake certain levels of environmental analysis depending on the scale of a proposed project. Categorical exclusions are allowed when impacts are expected to be minimal, and their use was expanded by the 2005 Energy Policy Act, spearheaded by then-Vice President Dick Cheney.

The second of Pearce’s bills would remove requirements for drilling permits by the BLM on non-federal lands for subsurface minerals that are less than 50 percent owned by the federal government. Instead, those lands would be subject to state rules.

Another draft bill, which does not list a sponsor, would charge a filing fee to those protesting a lease sale. For protests fewer than 10 pages long, the base filing fee would be $150. For those longer than ten pages, the U.S. Department of the Interior would also charge protestants a $5 per page fee.

Interior’s deputy assistant secretary for land and minerals management, Katharine MacGregor, testified in support of the bills, and noted that a protest fee wouldn’t affect public participation. The protest period is different from the public comment period, she said, and added, “We have FOIA fees and those haven’t prevented anyone from filing FOIAs.”

FOIA, or the Freedom of Information Act, allows fee waivers in certain circumstances.

Criticism, questions

Many members of the House Natural Resources Committee, including the committee’s chair, Arizona Rep. Paul Gosar, Wyoming Rep. Liz Cheney and Pearce, praised the two New Mexico state officials. Others challenged Martinez and McQueen, including Arizona Rep. Raul Grijalva, California Rep. Alan Lowenthal—and New Mexico Rep. Ben Ray Luján.

Though he’s not a member of the committee, Luján requested to join the hearing to question Martinez and McQueen.

Luján challenged McQueen’s assessment of the public comment period for oil and gas operations, saying “My research says there’s basically none,” and reprimanded the secretary for criticizing numbers showing New Mexico loses revenue from methane that is vented, flared or leaked instead of captured and sold, without having solid numbers to back up that challenge.

Luján also asked Martinez to explain state requirements, which she told another committee member “minimize methane waste.”

Her understanding, said Martinez, is that industry is trying to recapture some of the waste.

“Is there a requirement?” Luján pressed.

Martinez answered “no.”

Florida Rep. Darren Soto questioned Martinez about the methane “hotspot” over the Four Corners.

In 2014, satellite images showed that the largest methane anomaly in the country—roughly the size of Delaware—is over northwestern New Mexico. Scientists continued their research and in 2016 released a follow-up study: Most of the methane, which is a greenhouse gas, was related to natural gas wells and coal mining. The study identified 250 emitters of methane and found that 10 percent of those 250 were responsible for about half the methane emissions in the San Juan Basin.

NASA/JPL-Caltech/University of Michigan

The Four Corners area (red) is the major U.S. hot spot for methane emissions in this map showing how much emissions varied from average background concentrations from 2003-2009 (dark colors are lower than average; lighter colors are higher).

Soto also asked: “Does New Mexico have an obligation to states like Florida, who because of climate change, face rising seas? Is there not an obligation for your state to care about my state and others?”

Martinez agreed that “every state certainly should be interested in and care about the environment in their state,” and said New Mexico is “environmentally responsible” and has “taken measures” to address methane.

She continued: “I am very supportive of this industry, not just because of the revenues,” but also because the “fuels” and “great minerals” that New Mexico can use “for national security.”

After the hearing, Luján explained to NM Political Report that he attended in part to “get facts on how much revenue New Mexico is losing by flaring methane, and ask why there is little to no process for public comment and notice.”

Unfortunately, Luján said, Martinez and McQueen left questions unanswered and did not substantiate their claims. “According to estimates, in New Mexico alone, oil and gas companies emit 570,000 tons of methane each year, costing New Mexico $27 million every year in lost revenue,” he said. “This is unacceptable, we know in New Mexico every dollar counts.”

Rushed state efforts

The process for public comment at another state agency may be lacking, as well.

In April, the New Mexico Environment Department (NMED) updated construction permits for oil and gas facilities. NMED Secretary Butch Tongate approved the change after public comment and a hearing—but against the recommendation of the agency’s hearing officer, who said the process wasn’t robust enough.

Erin Anderson, the department’s appointed hearing officer, presided over testimony in Santa Fe in February from NMED and the New Mexico Oil and Gas Association about the proposed rule change. According to Anderson’s report, while the department attempted to include the public in the permitting process, it did not do so extensively or early enough.

She cited an email from the Independent Petroleum Association that said the “short comment period combined with the Christmas & New Year’s Holiday made it impossible to both digest the document and then make technical comments.” If the regulated community, which had been meeting over and discussing the revisions since 2015 had a hard time “digesting the proposed permit due to its complexity,” Anderson wrote, the general public was also affected by the timing of the public notice.

Anderson recommended NMED deny the permit until a new hearing period could be re-opened, with notices in both Spanish and Navajo and including two hearings in northwestern and southeastern New Mexico, where oil and gas drilling occurs.

Otherwise, she wrote, she didn’t believe the state “met its burden of proof or engaged in meaningful consultation with tribes, particularly the Navajo Nation and New Mexicans living in the Checkerboard area.”

Since the existing permit has been in place for 18 years, she wrote, and the new construction permits are granted in perpetuity, a three- to six-month delay would allow the secretary “to make a more informed decision and create a more complete record.”

Jon Goldstein, director of regulatory and legislative affairs with the Environmental Defense Fund, was among those who spoke in opposition to the permit during February’s hearing in Santa Fe.

NMED’s new permit and Wednesday’s hearing in Washington are just two points along a troubling trend to roll back environmental protections, cut public input and fast-track oil and gas permitting before Martinez leaves office at the end of the year, Goldstein said.

Before working for EDF, Goldstein was part of the Gov. Bill Richardson administration for almost eight years, working at different times for the governor’s office and NMED, and also as secretary of the New Mexico Energy, Minerals and Natural Resources Department, the job McQueen holds today.

It’s going to take time for both his former agencies to recover from the Martinez administration, he said. “It has been eight years of serious budget cuts and serious cuts in morale at these agencies,” he said. “There’s been a lot of brain drain and it takes time to get the right people back, to get these agencies heading back in the right direction, protecting New Mexico’s air and water.”

Federal royalties discussed

On the same day Martinez and McQueen testified on Capitol Hill that the state is losing money because of the BLM’s slow approval process, a federal committee met in New Mexico to discuss the royalties energy companies pay for oil, gas and coal extraction on federal lands.

When private companies drill or mine on federal lands, they pay a percentage in royalties. About half the money goes to the federal government and half to the state where the mining or drilling occurred. New Mexico currently receives more royalties from extraction on federal lands than any other state.

Right now, the royalty rate is 12.5 percent for onshore coal, oil and gas. During the Obama administration a new rule would have updated valuation rates to increase royalty collections, but it was repealed by Interior Secretary Ryan Zinke.

On Wednesday, the newly-rechartered Royalty Policy Committee met in Albuquerque. The committee includes federal, state and tribal officials as well as energy companies and will make recommendations to Zinke later this year. But conservation and taxpayer groups say the committee lacks transparency and allows more input from industry than from states, tribes and the public. At the meeting, residents and other activists gave impassioned public comment, asking committee members to ensure companies fairly and fully pay royalties. People also raised issues related to drilling in the state and impacts to communities and the environment.

To read the prepared remarks of Martinez and McQueen, as well as testimony from the other witness before the House Resources Committee, visit here.

Hearing Officer’s Report by New Mexico Political Report on Scribd