Last week Commissioner Dunn at the New Mexico State Land Office held a very productive meeting with industry regarding having an open discussion about the economic pressures operators are facing in this low commodity environment.

PLEASE SEND YOUR COMMENTS TO PATRICK PADILLA AT THE STATE LAND OFFICE at PPadilla@slo.state.nm.us Please submit by Friday March 11th at COB.

First, the Commissioner needs to hear from industry whether we would ask for the option to shut in oil wells. The NMSLO is proposing a separate policy from TA well status that would allow operators to leave production equipment in the wellbore and not be subject to MIT tests, but rather perform an annual bradenhead test to demonstrate wellbore integrity. In order to allow industry to have this option, the Commissioner would need to go through a public hearing process to invoke the provisions in statute. This would open the agency up to vigorous debate from those opposed to industry obtaining any relief (the “Leave it in the ground” folks). While the Commissioner has made it clear that he is willing to go the route of allowing for the shut in for oil wells, he needs to hear from industry directly to make sure that this is an effort worth making on their behalf and would be actually used – unlike the current stripper well program.

Second, industry needs to understand that the costs associated with this relief are set by statute and limited only to OIL wells. Because these provisions are in statute, the State Land Office would not be able to amend them (only the Legislature can amend statutes). In simple terms, an oil well would be allowed to be shut in for economic considerations for up to two years with an annual per well payment equal to either $320 or twice the annual rental for the lease on which it is located, with the greater of the two of those amounts being the rate called for by statute. if there is concern with this provision, please let Mr. Padilla know.

Lastly, while OCD is working with industry and the NMSLO on this, at this time, if operators need assistance with the TA policy, they must speak to Daniel Sanchez at the NMOCD at Daniel.sanchez@state.nm.us

Please make sure that someone from your office responds to Mr. Padilla concerning this issue by Friday this week. It is important that the Commissioner know that industry would be interested in obtaining relief as soon as possible. I would also ask that you cc me in any comments you send, so I can continue to keep this issue at the forefront.