American Oil and Gas Reporter - April 2015 - 42

N.M. Pre-Emption Bills Fail To Advance
SANTA FE, N.M.-Overall, the New
Mexico legislative session that ended
March 21 was positive for the oil and
gas industry, assesses Wally Drangmeister,
communications director for the New
Mexico Oil & Gas Association.
"The dynamic of this legislature was
a little different, because for the first
time since 1953 there was a Republicancontrolled House," says Drangmeister.
"Legislators were feeling out how they
would work with each other. There were
some changes as Republicans and Democrats got used to dealing with new
political realities."
Karin Foster, executive director of the
Independent Petroleum Association of
New Mexico, points out there were an
unprecedented number of new legislators
on both sides of the aisle in the House.
Oil and gas groups supported a number
of bills to pre-empt local regulations,
Drangmeister says. In the Senate:
* Senator Bill Sharer, R-Farmington,
introduced SB 184, which sought to prohibit local governments from receiving
state severance tax funds for roads and
infrastructure projects if they passed ordinances increasing costs for producers
by more than 25 percent.
* Senator Ron Griggs, R-Alamogordo,
offered SB 601, which would have required rules issued by the New Mexico
Oil Conservation Commission or Oil
Conservation Division to apply uniformly
to all counties.
* Senator Stuart Ingle, R-Portales,
sponsored SB 421, which would have
prohibited counties from regulating any
matter relating to agricultural, mining or
oil and gas activities, except for setbacks,
asserting that state law should "exclusively
occupy the field." Under the bill, municipalities would be able to continue to
regulate those industries.
None of those measures advanced out
of the Senate Conservation Committee,
Drangmeister reports.
Pre-Emption
In addition to Ingle's SB 421, House
Majority Leader Nate Gentry, R-Albuquerque, worked closely with IPANM to
introduce HB 366, says Foster. Gentry
guided the bill through two House committees and across the House floor, ending
with a 37-28 vote of approval.
"We had several excellent committee
hearings on the issue of pre-emption,"
Foster says. "It was interesting to see
how the issue was so strongly opposed
by the counties, municipalities and envi-

42 THE AMERICAN OIL & GAS REPORTER

ronmental community, who obviously
had not read the legislation. Contrary to
bills seeking to completely limit authority
to things such as noise, dust, air quality,
surface runoff and roads, HB 366 was
carefully crafted to allow for regulation
of things traditionally within local government control."
She adds that legislators understood
that regulating oil and gas siting, drilling,
processing and storage issues are not traditional zoning issues, and that state agencies, including OCC or OCD, are the entities best suited to regulate the oil and
gas industry.
Unfortunately, Foster says, after contentious hearings on SB 421, the chairman
of the Senate Conservation Committee
refused to hold hearings on HB 366 and
it died.
"I still am very pleased with the strong
support for HB 366 in the House and even
in the Senate," Foster says. "Had the bill
made it all the way through, I had received
strong indications from the governor's
office that she would have signed it into
law."
One of the main reasons IPANM
worked on pre-emption this session was
a January ruling by U.S. District Judge
James Browning that found the Mora
County Community Water Rights and
Self Governing Ordinance unconstitutional.
While Judge Browning agreed with
IPANM and SWEPI LP, that a county
doesn't have the authority to completely
limit any oil and gas extraction, Foster
says Browning also seemed to indicate
that the New Mexico Oil & Gas Act provisions don't give the state clear preemptive authority to regulate the industry
exclusively.
"Although several legislators who
voted against the pre-emption bills claim
they were a knee-jerk reaction to the
Mora County ordinance, IPANM's intent
was to simply clarify that state agencies
are best suited to regulate the industry,
instead of poorly funded or staffed counties
or municipalities," Foster says.
Foster says Paula Garcia, chairwoman
of the Mora County Commission and
sole vote against passage of the county
ordinance in 2013, testified against both
SB 421 and HB 366. She also testified
that the county ordinance that completely
banned all oil and gas activities was not
the right way to limit extraction in Mora
County. Foster adds that the Mora County
commissioners voted unanimously in late
March to repeal its ordinance.

Financial Assurances
Two nearly identical bills seeking to
streamline financial assurance for abandoned wells did pass both chambers,
Drangmeister continues.
"An operator has two years to decide
what to do with a well that is not in
service. In the meantime, he needs to
have a bonding contract specific to that
well," he explains. "These pieces of legislation allow for blanket bonding. They
increase efficiency for both regulators
and the industry, while providing financial
assurance."
HB 383, by Representative David Gallegos, R-Eunice, and SB 442, sponsored
by Senator Carroll Leavall, R-Jal, require
operators to provide additional financial
assurance for wells placed on inactive or
temporarily abandoned status either
through a one-well or blanket program,
New Mexico's legislative website says.
Noting that large companies with a
significant number of wells may move a
number of them in and out of production
at times, the website says having the
option of a large blanket bond will provide
them the flexibility to change the status
of wells without having to add or release
individual well bonds. To achieve maximum flexibility, companies may post the
highest amount of blanket bond, which
the website says will increase funds held
by regulators.
Drangmeister says he expects one of
the bills will be signed by the governor.
NMOGA also monitored several bills
that he says were likely to indirectly
affect oil and gas operations. One was
SB 114, which authorizes municipalities
and counties to impose taxes on specialty
fuels, such as biodiesel, of as much as 2
cents a gallon, with the revenues dedicated
to constructing, repairing and maintaining
bridges and roads.
Drangmeister says the Senate also
passed a memorial that requests state
agencies to study how increased flaring
of associated natural gas will affect state
finances and the environment. Senate
Memorial 29 directs the Energy, Minerals
and Natural Resources; New Mexico Environment Department; New Mexico Indian Affairs Department; and Department
of Finance and Administration to work
together on a report to be delivered to an
interim legislative committee, he says.
Crude Exports
Foster says the House passed one very
important memorial in the waning hours
of the session. HM 105, sponsored by

American Oil and Gas Reporter - April 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - April 2015