American Oil and Gas Reporter - July 2017 - 98

ConventionSection: Independent Petroleum Association of New Mexico
oil and gas industry's downturn. As a
result, Governor Susana Martinez called
a special legislative session to avoid a
constitutionally prohibited budget deficit.
The three-day session concluded shortly
ahead of the Memorial Day holiday when
legislation to reinstate funding for education
and general accounts was approved.
Through the special session, the governor
held steady on a pledge to veto new taxes
on gasoline and online sales while approving
a plan to tap severance tax bonds to fill the
budget gap, media reports add.

Inactive Wells
According to Mullins, many wells
have been shut in during the industry
downturn, notably in the San Juan Basin,
Mullins observes. As a result, BLM informed operators it would tighten rules
for nonproductive wells. In a Sept. 7,
2016 memo that BLM said was intended
to standardize its policy across all New
Mexico and Oklahoma field offices, the
bureau specified that any well to be shut
in or temporarily abandoned would require
approval from the authorizing officer at
the appropriate New Mexico BLM field
office. Wells on federal or Indian leases
could not be temporarily abandoned for
more than 30 days nor shut in for more
than 90 days without BLM approval.
The BLM memo defines a temporarily
abandoned well as "physically or mechanically incapable of producing oil and/or
gas of sufficient value to exceed direct
operating costs (that is, in paying quantities),
but may have value as a recompletion
candidate, or service completion for enhanced recovery or water disposal."
The bureau defines a shut-in well as
one that is likewise inactive and incapable
of producing but which retains all onsite
equipment, including flowlines and storage
facilities. The operator is required, according to the memo, to obtain approval
if the well is to be temporarily abandoned
for longer than 12 months or it is considered permanently abandoned.

County Regulations
Following efforts by other counties
across northern New Mexico to regulate
oil and gas development, Sandoval County,
N.M., in 2016 issued a proposed set of
regulations under its zoning and public
nuisance authority. In March, the county's
planning department presented commissioners with a second draft of oil and gas
regulations covering setbacks, site planning
and stormwater management, among other
98 THE AMERICAN OIL & GAS REPORTER

IPANM Annual Meeting
Albuquerque, N.M.
Thursday, Aug. 3

9:30 a.m. Board of Directors Meeting,
Sandia Resort and Casino
Board Members Only
1 p.m. Golf Tournament, Sandia Resort
Shotgun Start
6:15 p.m. President's Reception, Salon B

Friday, Aug. 4

7 a.m. Buffet Breakfast
8 a.m. General Session
11:30 a.m. Membership Awards Luncheon
Keynote Speaker: Paul Driessen, Committee For a Constructive Tomorrow
and Center For the Defense of Free
Enterprise
1 p.m. General Session

things, Mullins says.
Intended to cover new exploration and
development on fee land, the draft was
to be reviewed in May and discussed at
hearings during the summer. According
to Mullins, it may be approved this fall.
"It is similar to what Rio Arriba
County, N.M., passed in 2009," Mullins
compares. "The second draft is better
and we will continue to work with the
county planning team. Still, we think
county oil and gas ordinances like this
are simply unnecessary."
Second-draft revisions from the original
include dividing the county into two parts
and removing some provisions and setback
distances IPANM considers problematic,
he adds. In what the ordinance refers to
as "sparsely populated" Northwest Sandoval County, the revised draft seeks to
require an operator to secure a temporary
use permit and submit facility, road and
emergency response plans.
Under the draft, permit applications
for the remainder of Sandoval County,
which contains the vast majority of the
county's residents, would be issued as
conditional use permits and additionally,
require plans for waste disposal, stormwater
pollution prevention, terrain management,
a state transportation plan and a state air
quality permit. All proposed oil and gas
wells in the county would be covered by
minimum setback distances of 600 feet
from residences, 750 feet from churches,
schools or single-family water wells or
1,000 feet from multi-family water wells.
The proposal also includes standards
for gas flaring, road construction and im-

provements, road use and traffic standards,
storage tanks, light mitigation, and site
restoration.
According to Mullins, it embodied
the sort of redundant local ordinance-
adding unnecessary cost and time for the
operator-that the industry aimed to avoid
when it supported a pre-emption bill in
the 2015 legislative session. That bill,
HB 366, passed the House on a 37-28
vote but died in the Senate.
"At this time, the makeup of our legislature is not conducive to passing a preemption bill," Mullins assesses. "But we
will have another run at it in a year or two."

Setting The Stage
According to Mullins, while this legislative session featured the quarrels and
wrangling typical of any state government
in which different parties controlled the
legislature and governor's office, the session was mostly uneventful for the industry. And although no legislation that
IPANM considered harmful to the industry
passed, the association followed several
bills with interest, he said.
At the top of the list was a bill that
would increase regulatory penalties significantly and allow the New Mexico Oil
Conservation Division to proceed with
violation hearings at the same time the
attorney general filed suit and the district
attorney pursued criminal penalties for
the same violation.
The bill, SB 307, was sponsored by
Senator Richard Martinez, D-Española,
who claimed it was intended to "ensure
we meet federal government standards
for New Mexico to be in charge of its oil
and gas programs."
The bill moved with Do Pass recommendations from both the Senate Conservation and Judiciary committees, but
died in the Finance Committee. In an
end-of-session brief, IPANM predicts the
bill "will definitely resurface" in the next
year or two "since the administration
would like to regain the ability to assess
higher penalties."
Mullins cites a legal decision from 2009
as the basis for the state's expected press
on administrative penalties. In that case,
producer Marbob Energy sued the state,
arguing that New Mexico lacks the authority
to assess civil penalties and sanctions over
spills, Mullins notes. Later, the state Supreme
Court agreed, saying the legislature must
grant enforcement authority.
Since then, the OCD was directed to
pursue penalties for violations only through

American Oil and Gas Reporter - July 2017

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