Senate panel OKs oil, gas penalty bill

Legislation would allow Oil Conservation Division to fine violators

A bill to allow the state Oil Conservation Division to directly impose penalties on oil and gas violators passed its first legislative hurdle Thursday morning with a 6-3 “do-pass” vote in the Senate Conservation Committee.

The bill, which moves to the Senate Judiciary Committee, passed on a party-line vote, with three Republicans opposed.

Sen. Richard Martinez, D-Española, sponsored the bill to give the division the authority to directly fine operators that violate state statutes. The state Supreme Court ruled in 2009 that the OCD does not have that statutory authority under the state Oil and Gas Act,

forcing it to file suit against violators through the Attorney General’s Office.

Before that ruling, the division collected, on average, more than $500,000 a year through fines on violators. The amount in 2009 was $727,000. But since then, it has collected a total of $64,500 in fines, with zero penalties imposed in six of the past nine years, including 2018, according to OCD statistics compiled in a new report by Earthworks Oil and Gas Accountability Project.

Violations, meanwhile, have grown significantly during the boom in the Permian Basin in West Texas and southeastern New Mexico. OCD statistics show nearly 1,900 violations in 2017 and more than 1,700 in 2018, up from 856 in 2009.

“We’ve seen a pretty alarming trend in the growing number of violations and zero penalties,” said Earthworks field advocate Nathalie Eddy. “Penalties just fell off the cliff after 2009. It’s a real red flag that the OCD isn’t able to do its job.”

Martinez told committee members the bill would ensure that the state has the tools it needs to protect the environment and public safety. “It gives the OCD authority to penalize bad actors,” he said.

Martinez has worked for four years to get the bill approved by the Legislature, but it never advanced under former Gov. Susana Martinez. Now, the bill is supported by the Energy, Minerals and Natural Resources Department and considered priority legislation by Gov. Michelle Lujan Grisham.

It is also backed by a range of environmental organizations, many of which turned out in support on Thursday.

The oil industry does not oppose the bill outright, but it wants some significant changes. That includes provisions making it a third-degree felony if operators “knowingly” violate the Oil and Gas Act. Criminal pentalties should be left to the courts, said New Mexico Oil and Gas Association Executive Director Ryan Flynn.

“Criminal penalties are a nonstarter,” Flynn told the Journal. “That should be handled by the courts and subject to the criminal system, where you must prove somebody intended to commit a crime with evidentiary standards.”

Many violations cited in OCD statistics are clerical errors that shouldn’t be subject to significant fines and potentially criminal penalties, Flynn said. “The overwhelming majority are paper violations that pose no threat to the environment, such as improper labels on equipment or missing a filing deadline,” he said.

At the hearing, opponents called for clearer language protecting due process for operators, rather than leaving decisions to regulators.

“The OCD would basically be the judge and jury,” said Sen. William Payne, R-Albuquerque, who voted against the bill.

Supporters, however, said it includes administrative appeals and access to the courts.

“Appeals are allowed for any OCD decision, and, in turn, people can appeal to a district court, or to the 1st Judicial District Court in Santa Fe,” said Eric Jantz, staff attorney with the New Mexico Environmental Law Center, who testified at the hearing. “Courts can review capricious decisions. This is standard due process protection in administrative environmental statutes and procedures.”

Opponents also object to the level of fines the OCD could impose. The bill would raise penalties from $1,000 a day per violation now to a maximum of $15,000 a day, and up to $25,000 if a violator fails to comply with an OCD order to fix problems.

“The penalties are very high,” Payne said. “… Small companies don’t have those kind of resources.”

Martinez said fines haven’t been changed since 1935, and the bill allows the OCD to set lower penalties to fit violations.

Jantz said maximum fines would apply only to violations that threaten public health and the environment, and the proposed levels are in line with those of other states. “They’re in line with Colorado and similar to Texas, and they’re lower than Alaska, which has a $100,000 fine for a first offense,” he said.

Some industry concerns could still be worked out as the bill progresses. Talks are underway among industry representatives, state officials and environmentalists, Flynn said.