New Mexico’s environmental and oil and gas regulators are facing budget cuts for the next fiscal year, as nine months of the COVID-19 pandemic and a significant downturn in the oil market has depleted the state’s budget.
The budget reductions come after years of attrition in regulatory budgets under the Susana Martinez administration. The New Mexico Environment Department’s budget was cut by 32 percent between fiscal years (FY) 2012 and 2019, which was the last fiscal year budget passed by the legislature in 2018 before Martinez left office, according to a report released by the New Mexico Wilderness Alliance. The Energy, Minerals and Natural Resources Department (EMNRD) saw its budget drop roughly 24 percent under the Martinez administration between fiscal years 2012 and 2019.
In Gov. Michelle Lujan Grisham’s first budget proposal for FY2020, NMED’s general fund increased 6 percent compared to FY2019, while EMNRD saw a 9 percent increase in fiscal year 2020 over 2019. The departments saw similar increases in the FY2021 budget. But some of that progress will be reversed as the state grapples with the fiscal ramifications of a nearly year-long public health emergency and an oil boom bust.
NMED to cut back on some services
NMED submitted a $89.2 million budget request for fiscal year 2022.
Some state legislators are concerned about the possible revenue implications of a proposed rule aimed at reducing methane waste in oil and gas operations. The state’s Legislative Finance Committee, a committee made up of members of both the House and Senate that considers priorities for the state budget ahead of the January session, is gearing up for a tough year financially for the state after the COVID-19 pandemic and an unrelated but simultaneous bust in the oil market has ravished state coffers.
“The state is in, in my terms, dire financial straits, because of income,” said Sen. Bill Burt, R-Alamogordo. “We are in a time right now where income to the state is down, oil and gas revenues are down. The timing sometimes is not always the best and so I think hopefully that will come into consideration before we finally apply these rules.”
The state’s Energy, Minerals and Natural Resources Department (EMNRD) proposed methane rule would require all oil and gas operators in the state to reduce their methane waste by a fixed amount every single year, starting in 2022, to reach the 98 percent gas capture rate by the end of 2026.
RELATED: As methane rulemaking progresses, questions about exemptions linger
EMNRD Secretary Sarah Cottrell Propst told lawmakers during a recent Legislative Finance Committee meeting that the department’s proposal “will yield an additional $10 billion a year in revenue to the state for wasted resources” that would otherwise be lost. Cottrell Propst called the $10 billion a “low-end estimate.”
But several lawmakers on the committee worried the new regulations would threaten some of the state’s oil and gas operators during the downturn.
A produced water pipe located across the street from her Carlsbad-area home burst in mid-January, drenching her house and yard with the toxic water for an hour before it was shut off. In the aftermath, Aucoin was forced to euthanize 18 chickens and one dog, and give up her remaining goat. A county official told her she couldn’t eat her chicken eggs, couldn’t eat their meat, and said she probably shouldn’t eat anything grown on her property, either.
The operator responsible for the spill, WPX, attributed the incident to equipment failure. The company removed 25 cubic yards of topsoil from the property, and paid for a third-party contractor to treat the remaining soil.
Aucoin’s life has changed dramatically since the incident. What’s left of her yard is basically useless.
The New Mexico Environment Department and the Energy, Minerals and Natural Resources Department released their respective draft rules targeting methane emissions and ozone precursor pollutants Monday. EMNRD Secretary Sarah Cottrell Propst called the draft rules “pre-proposals” ahead of the official rulemaking process that’s slated to take place in the fall.
“We felt it was very important for the public and the regulated community and anyone to be able to take a look at draft regulatory language side by side from our departments and give us feedback,” Cottrell Propst said during a press conference Tuesday morning.
The draft rules are the culmination of nearly a year of work by the state’s Methane Advisory Panel, which was composed of oil and gas representatives, environmental groups and other stakeholders. Cottrell Propst said the process had been “incredibly collaborative” with stakeholders and said the two departments looked at other states’ methane rules in developing their own.
EMNRD’s 2-phase rule
EMNRD’s proposed draft rule, which Cottrell Propst described as an umbrella regulation, would roll out in two phases. The first phase would involve data collection and “robust” reporting from oil and gas operators in the state’s two oil-producing basins.
“We know that having accurate data is really important for establishing meaningful baselines and enforceable goals to reduce natural gas waste,” Cottrell Propst said. “Historically, the industry has not reported consistent and complete data for venting and flaring to us.
To Nathalie Eddy’s eye, Loco Hills has become “a graveyard” of oil and gas development.
Eddy is the Colorado and New Mexico field advocate at the environmental group Earthworks. Eddy works frequently in the Permian Basin, using special imaging cameras to capture methane leaks coming from oil and gas wells sites in the area.
Loco Hills, located north of Carlsbad on the Lovington Highway, is a legacy oilfield whose landscape is now dotted with inactive wells, and a few wells still producing, stretching as far as the eye can see. Most of those defunct wells are located on state or federal public lands and they aren’t going away anytime soon. The area “offers a sobering glimpse of drilling’s irreversible damage that scars these public lands and makes the land unavailable for any future use for future generations,” Eddy told NM Political Report.
There is concern that other parts of the Permian Basin may suffer a similar fate. The U.S. Bureau of Land Management’s Carlsbad field office was considered the busiest in the country last year, thanks to record levels of oil and gas production in the Permian Basin.
A recent incident involving the alleged dumping of produced water on state lands has highlighted the difficulties state regulators face in holding oil producers accountable to illegal dumping.
“If we don’t have proof of it happening, it’s very hard to move forward with a violation,” Adrienne Sandoval, director of the state Energy, Minerals and Natural Resources Department’s Oil Conservation Division, told NM Political Report.
A rancher alerted the OCD in early March of an incident in which the rancher believed produced water was being dumped on state trust lands and a road in Lea County.
“Luckily it was caught by someone locally,” Sandoval said, adding that the individual “took recordings of it while it was occurring.”
A month later, the OCD issued administrative civil penalties to two companies involved in the incident: the oil producer Advanced Energy Partners Hat Mesa, LLC and a New Mexico-based trucking company named Windmill Trucking. AEP Hat Mesa has a contract with Windmill Trucking for hauling fresh water and produced water to and from oil rigs.
“The trucking company is required to have authorization from us and permits in order to haul this water. It is the operator’s responsibility to ensure the people they are contracting with have the appropriate credentials. That’s why they’re both receiving violations,” Sandoval said.
The OCD fined AEP $7,600 and fined Windmill Trucking $8,700 — the first fines OCD has issued since it regained its ability to collect fines earlier this year.
RELATED: Oil Conservation Division can enforce oil regulations for first time in a decade
“Those are just initial numbers,” Sandoval said. “After we issue the initial notice of violation, they have the option of either having a settlement conference or going to a hearing.
As state legislators convene in Santa Fe for a special session to tackle the budget, environmental groups are asking lawmakers to limit cuts to the state’s environmental regulatory agency budgets to 3 percent.
A group of 28 organizations, ranging from conservation and wildlife advocates to renewable energy proponents, sent a letter to members of the state Senate Finance Committee and the state House Financial Affairs Committee last week.
The New Mexico Environment Department (NMED) and the Energy, Minerals and Natural Resources Department (EMNRD) — the state’s two main environmental regulatory departments — each saw their respective budgets erode during the Susana Martinez administration.
NMED’s general fund was cut by 32 percent between fiscal years (FY) 2012 and 2019, which was the last fiscal year budget passed by the legislature in 2018 before Martinez left office, according to a report released by the New Mexico Wilderness Alliance. EMNRD saw its budget drop roughly 24 percent under the Martinez administration between fiscal years 2012 and 2019.
In Gov. Michelle Lujan Grisham’s first budget proposal for FY2020, NMED’s general fund increased 6 percent compared to FY2019, while EMNRD saw a 9 percent increase in fiscal year 2020 over 2019. The departments saw similar increases in the FY2021 budget, which goes into effect on July 1 and will be amended during the special session due to the COVID-19 caused economic slowdown and dropping oil and gas prices.
“The 2021 budget saw about a 7 percent increase for those agencies from 2020,” said Ben Shelton, policy and political director at Conservation New Mexico, and who coordinated the letter. “What we’re trying to do is hold that reduction in increase as low as possible.”
While the recent budget increases are steps in the right direction, the departments’ budgets are still much lower than they were at the end of Gov. Bill Richardson’s administration in 2011.
“These guys got cuts in the Martinez administration where they got cut below what they needed to do the minimum of their jobs — particularly EMNRD,” Shelton said.
Both departments are suffering from high vacancy rates as a result. NMED has a 19 percent vacancy rate, with only seven inspectors in charge of monitoring 7,700 air emitting sources, two inspectors in charge of monitoring 700 groundwater sources, and seven inspectors for monitoring nearly 3,000 hazardous waste sources.
EMNRD’s Oil Conservation District (OCD), which regulates oil and gas activities in the state, had its budget decline 26 percent under the Martinez administration. The OCD is responsible for oil and gas regulatory activities ranging from permitting new wells, inspecting abandoned wells, ensuring compliance with permits, and enforcing the state’s oil and gas rules.
The EPA’s newly proposed methane regulation revisions drew criticism from oil and gas companies and environmentalists alike and spurred some groups in New Mexico to redouble efforts to pressure state officials adopt more stringent rules for methane emissions in the state. Last week, EPA Administrator Andrew Wheeler proposed updates to federal air quality regulations for the oil and gas industry that would remove limits on methane emissions from production and processing operations and would remove regulations all together for methane emissions coming from transmission and storage sources of oil and gas production. The proposed rule changes will “save the industry millions of dollars in compliance costs each year,” the EPA said, “while maintaining health and environmental regulations on oil and gas sources that the agency considers appropriate.”
“EPA’s proposal delivers on President Trump’s executive order and removes unnecessary and duplicative regulatory burdens from the oil and gas industry,” Wheeler said in a statement. “Since 1990, natural gas production in the United States has almost doubled while methane emissions across the natural gas industry have fallen by nearly 15%. Our regulations should not stifle this innovation and progress.”
U.S. Sen. Tom Udall described the proposed changes as a “backwards move in face of climate crisis,” in a statement released last week.
“EPA’s decision today is an affront to New Mexicans and people across this country who have a right to clean air.
A former secretary for New Mexico’s Energy, Minerals, and Natural Resources Department (EMNRD) will head the EPA’s Region 6. EPA Administrator Andrew Wheeler tapped Ken McQueen to oversee environmental protection for New Mexico, Arkansas, Louisiana, Oklahoma and Texas along with 66 Tribal Nations. McQueen, who is a climate change denier and former oil executive, is the latest Trump administration appointee whose track record appears to be at odds with his new position. “Ken’s experience in public service and familiarity with natural resource issues make him an excellent choice to lead the Region 6 office,” Wheeler said in a statement announcing the selection. McQueen’s industry experience in oil and gas far outweighs his public service.
Outside the town of Hillsboro, N.M., remains of the Copper Flat Mine are visible down a graded gravel road off Highway 152. A white pickup truck moves along in the distance. And there are a couple of buildings and a small electric line. The mine operated for just a few months before closing in July 1982. But a new company hopes to reopen it on 2,190 acres of federal and private land, and put to use water rights it says date back decades.