Dylan Fuge, who currently serves as general counsel for the state’s Energy, Minerals and Natural Resources Department will be stepping into the director role for the Oil Conservation Division starting Saturday. He has been serving as acting OCD director since January while also serving as general counsel.
As general counsel, he has advised the department’s secretary and divisions in matters related to natural resources and regulatory issues.
He will continue to serve as general counsel until that position is filled. Fuge previously worked at T-Mobile in permitting efforts and advocacy support for cell site development efforts. Prior to that, he worked as counselor to the Director of the Bureau of Land Management and as Attorney Advisor in the U.S. Department of the Interior’s Office of the Solicitor. His time in the DOI provided him with experience working with oil and gas development and oversight as well as renewable energy project development, land use planning and management of public land.
A bill attempting to reform New Mexico’s Oil and Gas Act passed its first committee, the Senate Conservation Committee, on a 6-3 vote on Tuesday. The Oil and Gas Act became law in 1935 and many of those original provisions remain in place. SB 418 reconstitutes the Oil Conservation Commission and requires that the Oil Conservation Division protects the public health and environment and promotes the public interest, health, safety and general welfare. It also requires “fair treatment and meaningful involvement of the public, including environmental justice communities,” according to the fiscal impact report.
SB 418 also includes an environmental justice advisory council as well as single-well bonds for inactive or low-producing wells. These bonds would provide financial assurance that the wells will be remediated and bring those financial assurances more in line with actual costs.
As the Energy, Minerals and Natural Resources Department’s Oil Conservation Division reviewed gas capture data submitted by operators, the regulators noticed several companies reporting more than 100 percent gas capture, which OCD Director Adrienne Sandoval said is impossible. Phase one of the natural gas waste rule, which required data collection to gauge how much gas the operators are currently capturing, has now wrapped up and the second phase is beginning. In phase two, operators will be required to attain increasing rates of gas capture on an annual basis.
Sandoval said the OCD sent letters to 10 companies requiring them to undergo a third-party audit and warned 74 companies to check their data after reporting more than 100 percent gas capture on either their first or second quarterly report. “That gas capture percentage is important because that is the starting point for operators as they move forward and try to meet the compliance requirements of this rule,” she said. All operators must achieve 98 percent gas capture by 2026, but some operators have farther to go to reach that target.
Soon the state’s Oil Conservation Division will have the ability to issue civil fines when oil and natural gas industry spills occur. The Oil Conservation Commission approved a final order to amend the state’s release rule during a meeting on Thursday. This unanimous vote came approximately one month after it was discussed and approved during a two-day hearing. The rule change will be printed in the New Mexico Register in August prior to taking effect. The change comes as a result of a petition filed in March by WildEarth Guardians and the New Mexico Energy, Minerals and Natural Resources Division, which oversees the OCD, seeking amendments to the release rule.
Following concerns from members of the environmental community, the New Mexico Environment Department removed the exemptions from the oil and gas sector ozone precursor rule for stripper and marginal wells. The department released the ozone precursor rule Thursday and filed a petition with the Environmental Improvement Board to review it. A public hearing is anticipated this fall. If approved by the seven-member board, the rules would likely go into effect in early 2022. It is intended to work in conjunction with a methane waste rule that the Energy, Minerals and Natural Resources Department already finalized.
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.
Conservation and environmental groups are unhappy with the state’s first step towards regulating the use of treated produced water, a toxic waste byproduct of oil and gas activity, outside the oilfield.
The state Oil Conservation Division (OCD), which sits within the state Energy, Minerals and Natural Resources Department (EMNRD), released a proposed rule amendment in late June to align its produced water regulations with new mandates established in the state Produced Water Act, which was signed into law in 2019. The law established jurisdictional and legal clarity over produced water use in New Mexico and aimed to encourage oil and gas producers to reuse produced water when possible rather than rely on fresh water sources for oil and gas extraction.
As unconventional drilling exploded over the past few years in New Mexico, so has the amount of wastewater being produced. Every barrel of oil generates four to seven barrels of wastewater, of which oil and gas operators must pay to dispose. In 2018 alone, over a billion barrels of wastewater was produced in New Mexico.
Oil and gas operators are having a hard time disposing of that waste, and are increasingly looking for uses for the water outside the oil field. That’s led to a push among some oil-producing states to begin formulating new rules that would allow for produced water to be treated and put to use in other sectors, such as road construction and management, and even irrigation.
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.
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“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.
At its meeting on Thursday, September 13, the New Mexico Oil Conservation Committee will hear from an energy company that wants to double the density of gas wells in northwestern New Mexico. Hilcorp Energy Company is asking the state to amend well density requirements in what’s called the Blanco-Mesaverde Gas Pool in San Juan and Rio Arriba counties. Under the current rules, companies can drill four wells within the designated 320-acre spacing units, and only two can be drilled within each 160-acre section. Companies can also ask the state to increase the density of wells on a case-by-case basis, something Hilcorp notes in its application New Mexico has allowed it to do in 62 instances this year. Rather than continuing to file individual applications, each with its own public notice and hearing, the company is now asking New Mexico to change the spacing rules for the entire Blanco-Mesaverde pool.