Santa Fe New Mexican (February 5, 2024) – A bipartisan New Mexico Senate bill intended to unlock more state funding for the clean up of abandoned oil and gas wells was endorsed by industry leaders during the 2024 Legislative Session.

Senate Bill 249, sponsored by Democrat Sens. Joseph Cervantes and George Munoz, along with Republicans Greg Nibert and Steven McCutcheon would require an oil well reclamation fund maintain a balance of $60 million annually, using tax dollars generated through the Oil and Gas Conservation Tax.

These funds would be used to remediate abandoned wells, known as “orphaned,” to prevent environmental impacts and reclaim the land.

Wells are considered orphaned when oil and gas operators leave them unused when the facilities are deemed nonprofitable.

They are unmonitored and believed to spew air and water pollution as they sit abandoned.

The New Mexico Oil Conservation Division estimated there are about 1,700 of such wells in the state and plugs them using a combination of state and federal dollars when private bonding payments are inadequate.

A movement among New Mexico lawmakers and oil and gas regulators sought to increase the bonding payments companies make for well plugging and remediation should they be abandoned. That’s contained in House Bill 133, which passed two committees and next faces a hearing on the House Floor.

But SB 249, which is awaiting its first hearing in the Senate Conservation Committee, would increase public dollars used for the work.

It would first require that federal funds, about $44 million provided by the 2021 Infrastructure Investment and Jobs Act, be used and exhausted before state dollars are provided.

That would happen via a $5 million monthly distribution of revenue, totaling $60 million a year, from Oil and Gas Conservation Tax Act to the Oil and Gas Reclamation Fund, should the bill pass.

All that money would be sent directly to the Oil Conservation Division for plugging and cleaning up the wells.

The bill was supported by the New Mexico Oil and Gas Association (NMOGA), Independent Petroleum Association of New Mexico (IPANM) and Permian Basin Petroleum Association.

The Oil and Gas Conservation Tax was first instituted in the 1950s, with the Reclamation Fund established later to fund such efforts.

But Nibert said SB 249 would ensure the money is used specifically for well cleanup.

As the law stands, two-nineteenths of the receipts from the tax were sent to the Reclamation Fund, and Nibert argued the required dollar amount would increase the funding.

 “The Conservation Tax ensures that oil and gas operators are paying toward the continued reclamation of lands used in oil and gas operations,” he said. “The state must ensure the funds are allocated toward their intended purpose for quickly and sufficiently returning New Mexico’s land to its native state.

NMOGA reported the oil and gas industry plugged 451 wells in New Mexico in 2022, while the State plugged 49 wells using $3.4 million from the Reclamation Fund.

“This bill does not reduce or increase taxes paid by the oil and gas industry for well reclamation,” said NMOGA President Missi Currier. “It ensures the Reclamation Fund is properly funded and used for addressing the clean-up of wells.”

Yet, a growing number of lawmakers argued the industry should pay more to cleanup wells and cut down on pollution.

HB 133 would raise a cap on “blanket bonding” requirements operators pay on all of their wells in the state from $250,000 to $10 million.

An amended version of bill added a tiered structure to this requirement, maintaining the $250,000 rate for operators with less than 50 wells, growing to $350,000 for an operator with more than 50, but less than 100 wells and $500,000 for companies with less than 150 wells but more than 100 wells.

A rate of $750,000 would be imposed on operators with between 150 and 300 wells, and $5 million would be paid for those with between 300 and 500 wells.

The $10 million cap would go into effect only for companies that have more than 500 wells, should the new version of the bill pass.

During Wednesday’s House Judiciary meeting, where HB 133 was passed, Chair Rep. Christine Chandler (D-43) of Los Alamos, who voted in favor, said more of the financial burden to the state for abandoned wells should be shifted to the industry she said was responsible for the pollution.

Concerns were raised by environmentalists, who charged the amended version removed various environmental requirements, opting to focus on financial changes like bonding and fee raises.

Independent oil companies also spoke in opposition, arguing the bill unfairly impacted small producers. NMOGA, which represents larger companies, did not oppose the bill’s latest version, although IPANM did.