September 19, 2022

As EPA fails to fine oil and gas polluters, New Mexico officials demand answers

Jerry Redfern/Capital & Main

For the last few years, this sign has greeted drivers entering the oilfield south of Counselor, New Mexico. The area is dotted with oil and gas wells.

New Mexico officials are asking the federal government to explain why it decided not to impose fines on oil and gas producers it caught violating the Clean Air Act in the state. In May, Capital & Main reported that the Environmental Protection Agency (EPA) found that 24 companies had 111 leaks from wells and other equipment, following an airborne monitoring program over New Mexico’s portion of the Permian Basin in 2019. However, only 11 companies were given violation notices, and only one received a fine for Clean Air Act (CAA) violations. Another company was fined for a permitting violation.

Now, James Kenney, secretary of the New Mexico Environment Department (NMED), and U.S. Senator Martin Heinrich have asked the regional EPA office to explain the paltry number of violation notices and fines. “Within a week [of the Capital & Main story], I was on the phone with EPA leadership, both in Dallas and D.C.,” said Kenney. He was concerned that New Mexico’s ability to enforce its own clean air rules would be “put in jeopardy by EPA’s ‘no penalty’ settlements.” Whitney Potter, deputy chief of staff to Sen. Heinrich, said that he has taken a strong interest in the case as well. “The senator’s office is following this really closely,” Potter said, “at the highest levels.”

This story was written by Capital & Main and is republished with permission.

For the story published in May, an EPA spokesperson explained the lack of fines by saying that “an administrative settlement is based on several factors, including the number and type of violations as well as a facility’s compliance history.” But Kenney shared an email exchange between the senator’s office and the EPA Region 6 office, which covers New Mexico. In it, the senator’s office asked the EPA to “explain why a penalty was not assessed” for most of the violations. The EPA regional office responded, “Our enforcement efforts specific to the 2019 flyovers focused on returning facilities to compliance quickly through the issuance of nonpenalty administrative compliance orders. Such orders are for compliance and only consist of corrective action and do not include penalty authority.”

But Kenney, who worked for years at the EPA before heading NMED, said, “There’s penalty authority that EPA has, in and of itself, on its own — period. EPA can do that.”

Gallo Canyon wells 207 and 208, owned by DJR Energy of Denver, were cited for “multiple pressure relief valve leaks” by the EPA in a Clean Air Act violation notice sent out following a series of monitoring flights conducted in 2020 by the agency.

The senator’s office also asked how the EPA would ensure compliance from these companies in the future. EPA Region 6 responded, “EPA evaluates compliance with the action through deliverables that are provided to EPA by the company. … The settlements require a report be sent to EPA of any updates to procedures and actions or improvements taken to ensure compliance.” In other words, compliance is left up to the companies themselves, and all they have to do to prove compliance is file a report. No follow-up monitoring requirement by the agency is noted.

A state employee who regularly works with the EPA said on background that this nonenforcement was a product of informal, Trump era policies to favor oil and gas operators. “I was told that EPA was instructed in the prior administration to not collect penalties,” the source said.

Andrew R. Wheeler ran the EPA from 2019 to 2021, during the time of the first two overflight programs. A former fossil fuel lobbyist, Wheeler came to office with effusive praise from the American Petroleum Institute, the industry’s leading lobbying and promotional organization. During his tenure, he froze new auto fuel efficiency standards and rolled back rules to dramatically reduce methane released in oil and gas operations, both of which benefitted oil and gas producers at the expense of clean air and the climate. Since leaving the EPA, the noted climate change skeptic was nominated to be Virginia’s secretary of natural and historic resources; he held the office for a little more than a month before state legislators sank his nomination. One lawmaker said he worried that Wheeler would “do exactly what he did at the federal level — systematically deconstruct the regulations which protect our environment.”

EPA Region 6 did not answer questions about whether there were official or unofficial policies discouraging local or national administrators from levying fines against oil and gas companies.

*   *   *

Questions of EPA fines and procedures for Clean Air Act violations in New Mexico are as timely as ever. In August, the EPA conducted a third round of aerial surveys for gas leaks at oil and gas facilities across the Permian Basin of Texas and New Mexico. But it’s unclear what compliance authority the EPA may attempt to assert. Not only did the EPA fine only two companies for violations in New Mexico in 2019 but violation notices from a second round of flights in 2020 were only sent to operators in July and August, just before this year’s flights began.

A Capital & Main investigation of the 2020 New Mexico data identified 28 companies operating those sites — yet only eight received violation notices this summer. (Of 244 leaking facilities recorded in those 2020 flights, only 54 were in the recent violation notices.) And while the 2019 violations produced two minimal fines, no fines were mentioned in the 2020 violation notices for New Mexico.

Across the border in Texas, the EPA is well beyond the violation notice phase. A spokesperson said, “EPA has concluded eight administrative settlements to date for facilities in the Texas Permian Basin, and they can be found on our website. Many of these settlement [sic] included penalties.” The EPA website does show eight companies were cited in the Texas part of the Permian Basin for Clean Air Act violations found during the same 2020 flights that covered New Mexico, and fined four of them a total of $714,630. None of that is in New Mexico.

Of this year’s flights, Kenney said, “I expect that there will be penalties, and administrative and judicial settlements … because what I don’t expect is for them to find full compliance.” But the lack of financial penalties in the 2020 violation notices suggests that EPA’s no-fines policy continues, despite the change in administration, both at the presidential level and locally. In March 2021, President Joe Biden appointed Michael S. Regan to be EPA administrator, and in December, six months before the violation notices were sent, Biden appointed Earthea Nance to run EPA Region 6.

“Year after year, flight after flight, we see significant leak rates,” Kenney said. A new report from GHGSat, a commercial company that monitors greenhouse gas emissions from space, says it found leaking Permian Basin facilities released, on average, 850 kg of methane per hour, or the equivalent of 4.6 cars driven for a year. Methane is 84 times more potent as a climate-warming gas than carbon dioxide over a period of 20 years in the atmosphere.

Airborne chemicals called volatile organic compounds leak from wells along with methane to contribute to ozone pollution around the basin. The EPA’s own documentation says ozone is a respiratory irritant at low levels. At higher levels, it can damage the lungs. Kenney said that air monitoring stations in the Permian Basin show that ozone levels have worsened in recent years — and called that fact a “scientific barometer that something is still not working” at the oversight and enforcement level.

The Lybrook M27-2306 well, owned by DJR Energy of Denver, was cited for “multiple pressure relief valve leaks” by the EPA in a Clean Air Act violation notice sent out following a series of monitoring flights conducted in 2020 by the agency.

It’s an observation shared by Jon Goldstein, senior director of regulatory and legislative affairs at the Environmental Defense Fund. His group has published a series of studies showing widespread leaks of methane and associated ozone-causing gases from oilfield equipment – far greater than amounts estimated by the EPA. Goldstein says that the agency relies on “a 30-year-old set of assumptions that don’t reflect the modern oil and gas industry.”

The pollution has gotten so bad that, in June, the EPA announced it may declare the Permian Basin — across both Texas and New Mexico — an ozone nonattainment area that would require stricter emissions controls and enforcement from the oil and gas industry. “It’s good to see EPA considering that holistic approach of looking at a potential listing that would try and improve the air quality across both sides of that basin,” Goldstein said. The EPA announcement on the nonattainment area should be made this month. Goldstein also emphasized that “enforcement is every bit as important as getting the letter of the rules right.”

*   *   *

The trouble is that it’s difficult to get the government — even at the state level — to enforce environmental rules when it comes to the oil and gas industry. While the EPA appears to slow-roll violation notices and fines, New Mexico agencies simply don’t have the funding or staff to carry out their missions. Those shortages are why Kenney invited the EPA to conduct overflights in the first place. Meanwhile, the state continues to pass new regulations, requiring further oversight and enforcement.

In early August, NMED implemented the state’s own ozone-precursor reduction rules for oilfield equipment in New Mexico but saw a strong backlash from the Independent Producers Association of New Mexico (IPANM). The group, which represents smaller oil and gas producers, filed notice that it plans to sue the state, claiming the rules “were contrived behind closed doors” even though the group attended hearings about the rules and submitted proposed changes that were ultimately not implemented. And at a state legislative committee meeting on August 26, a representative from the New Mexico Oil and Gas Association, the state’s largest industry group, even said that IPANM was part of discussions over the rules.

“Effectively, in my mind, they’re admitting that [companies] are out there not complying,” Kenney says of the IPANM suit. And that will lead to further air pollution and methane leaks. He brushes aside the group’s claims, pointing out that the organization was involved in the rulemaking process and that the cost of fighting its lawsuit will have to be borne by New Mexico taxpayers.

IPANM did not respond to emailed questions about its suit.

Similar legal costs are on Kenney’s mind when he thinks of the EPA’s overflight program finding polluting companies, doling out a few violation letters, but not fining the companies.

He says that the fallout will come at some point in the future when the state takes a company to court for leaking equipment, and the company will say, “EPA didn’t collect a penalty, why are you collecting the penalty?” He calls it a “litigation risk” because, in the future, the state of New Mexico will end up paying for the lack of federal fines with increased legal wrangling, prompting increased legal fees and resulting in more polluted air.

That is what will happen, Kenney said. “Mark my words.”

*   *   *

Kenney remains somewhat hopeful for this year’s EPA flights, pointing to the agency’s latest announcement, which talks of enforcing regulations — and collecting significant penalties.

“We will always invite (EPA) to spend money in our state on compliance assurance,” Kenney said. “It’s money that New Mexico doesn’t have to spend.”

But he reiterated that the EPA should collect penalties as well as require companies to meet Clean Air Act or state permitting requirements.

“Enforcement is not complicated,” he said. “It seems bureaucratically complicated, but there are bureaucrats whose job it is to enforce the Clean Air Act.”

There should be plenty of new opportunities for the bureaucrats. Speaking at the state legislative committee meeting, Kenney said that EPA provided his office with early results from the 2022 overflights in the Permian Basin: approximately 13% of all flares they looked at were either unlit or improperly lit and venting methane, and 18% of tanks had gaseous leaks of some sort.

The Permian Basin isn’t the only oil and gas producing location in New Mexico, and the EPA’s  2020 flight program flew over the smaller San Juan Basin in the Four Corners region in the northwest of the state. The agency found 244 sites with leaking equipment, and it cited 54 of them in its July violation notices. But the region wasn’t included in this year’s flights.

“I would say that’s unacceptable,” Mike Eisenfeld said. He’s the energy and climate program manager at the San Juan Citizens Alliance.

“This history in places like the Four Corners is grim,” he said. For years, environmental groups in the region have demanded more stringent oversight of the area’s energy extraction industries — uranium, coal, oil and gas. Without monitoring and oversight, “How do you hold companies responsible for not polluting?”

The region’s notorious claim to fossil fuel fame is a methane “hot spot” — a massive bloom of the heat-trapping gas that hovers over the San Juan Basin, fed largely by natural gas production in the area. Three different EPA regional offices share parts of the Four Corners, and the institutional churn, coupled with a lack of attention, enrages Eisenfeld, who has worked on environmental issues in the area for years.

“I was on a call a couple of weeks ago where [the EPA] wanted us to explain environmental justice to them. It’s fucking pathetic,” he said. “I’m tired of getting strung along by all these agencies.”

All photos by Jerry Redfern of Capital & Main.