Senate bill aims to update 1935 oil and gas law
A bill advocates say would modernize the state’s Oil and Gas Act to consider impacts on the environment and disadvantaged front-line communities will go before the Senate Conservation Committee on Thursday.
Senate Bill 418 contains a beefy list of proposed changes to the 87-year-old law, but the linchpins are more emphasis on combating climate change and pollution that can harm public health, especially in neighborhoods, schools and businesses near fossil fuel operations — which research shows are most often communities of color.
The bill calls for revamping the state’s two main bodies for regulating the industry, eliminating the caps on “blanket bonds” for multiple oil wells, creating safer setbacks of drilling sites from communities and removing limits on fines for ongoing violations.
It also seeks to establish an environmental justice advisory council to identify the inequities and recommend to the Oil Conservation Division and the rule-making commission how to address them.
“The Oil and Gas Act was passed in 1935; we’re pulling this into 2023,” said state Sen. Leo Jaramillo, D-Española, the bill’s sponsor.
The bill is the first major reworking of the law he is aware of, he said, adding any significant revision would’ve happened long ago.
Jaramillo said he’s hopeful the bill will make it through the committee, preferably with its most important provisions intact.
“If not, it at least starts the conversation, and we bring it back again next session,” Jaramillo said.
This is the latest effort to increase oversight on an industry that is extracting fossil fuel at an all-time high, providing about a third of the state’s tax revenue while also emitting a large amount of pollution.
That includes methane, a climate-warming greenhouse gas, as well as nitrogen oxide and volatile organic compounds, which together form toxic ground-level ozone.
The state’s oil production increased to a high of 531.4 million barrels in fiscal year 2022, a 30% jump from 2021.
That has helped drive the state’s projected revenue for fiscal year 2024 to about $12 billion, giving lawmakers considerably more money to work with in the current session than last year’s $8.5 billion.
Industry advocates in emails voiced opposition to the bill, calling it counterproductive.
“SB 418 is a regressive bill that takes regulatory authority out of the hands of subject matter experts and places it into the hands of individuals who have the singular motive of ending the oil and gas industry in New Mexico,” wrote Jim Winchester, executive director of Independent Petroleum Association of New Mexico. “It will not only stifle some of the cleanest oil and gas production in the world, but it will potentially deny New Mexicans of hundreds of millions of dollars that go to critical services like education, public safety, social services, and even environmental stewardship in New Mexico.”
Ben Shepperd, president of the Permian Basin Petroleum Association, expressed concerns about “sweeping changes” the bill would make to the law.
“It will undo all of the efforts that industry and environmental groups have negotiated in good faith over the last five years, including agreements on financial assurance in 2018 … and penalties in 2019,” Shepperd wrote. “Senate Bill 418 is the wrong policy for New Mexico’s future.”
In contrast, a slew of conservation groups back the bill, arguing the law is antiquated and is long overdue for an update.
The current law is geared toward developing fossil fuel and preventing waste and doesn’t address today’s concerns about pollution, public health and climate change, said Tannis Fox, an attorney with the Western Environmental Law Center, which spearheaded the bill.
“You fast-forward to 2023, we know now that oil and gas produce significant greenhouse gas emissions that contribute significantly to climate change — not something we knew in 1935,” Fox said.
When the law was passed, much less was known about health impacts, and no attention was given to the lopsided effects on poorer communities of color, she added.
The bill’s provisions include:
◆ Removing the $250,000 ceiling for bonds that offer blanket coverage for multiple wells. Some operators now drill hundreds of wells on one bond.
◆ Requiring a bond for a higher-risk well rather than allowing them to be bundled under a blanket bond.
◆ Considering impacts on nearby communities when setting bond rates.
◆ Expanding the three-person Oil Conservation Commission to five, with the two additional members focusing on pollution and environmental inequities.
◆ Barring commission members from being employed or under contract with a fossil fuel company and requiring they disclose any income above $10,000 from an oil and gas interest.
◆ No longer requiring the Oil Conservation Division director to have a background in petroleum engineering. Eligibility would be expanded to include someone with regulatory or public health experience.
◆ Eliminating the $200,000 cap on civil penalties for violators. The cap was part of a 2018 deal when the division was given more enforcement authority.
◆ Requiring new wells to be set back a safe distance from communities.
Fox insists the bill is not intended to be anti-fossil fuel.
“Let’s take a balanced approach and take account of all the interests we know are impacted,” she said.