American Oil and Gas Reporter - May 2017 - 34

State Legislative Reports

New Mexico Expects Special Session
SANTA FE, N.M.-New Mexico's governor signed a $6.0 billion appropriations
package after using her line-item veto power to cut education funding. According to
her office, Governor Susana Martinez is
expected to call state lawmakers back in
a special session to restore that funding.
The budget package, HB 2, incorporates HB 202, a $350 million tax proposal introduced by Representative Carl Trujillo, D-Santa Fe. HB 202 increases taxes on gasoline, diesel and Internet sales,
motor vehicles and not-for profit hospital
taxes, and raises fees for weight and distance permits, notes Karin Foster, executive director of the Independent Petroleum Association of New Mexico. The
New Mexico Constitution requires a balanced budget be in place by July 1 or the
state government will be shut down.
Despite the oil and natural gas industry's substantial contributions to the state
treasury-accounting for $1.6 billion in general fund revenues in 2016-for the most
part, legislators showed little interest in
working on issues affecting producers,
Foster assesses.
Ryan Flynn, president of the New Mexico Oil & Gas Association, says the state's
fiscal problems underscore the oil and gas
industry's vital role in New Mexico.
"The continuing budget crisis is a direct result of oil and gas prices being where
they are over the past two years," he describes. "That fact looms large at the statehouse. From an industry perspective, operators want prices to rebound as much as
anyone else, but it was somewhat gratifying for people from all sides to recognize
how important the oil and gas industry is
to New Mexico."
State legislators will support the industry more only if it does a better job of emphasizing its impact on New Mexico, he
says. The statehouse always is divided between those who understand and appreciate oil and gas producers and a core
group of people who are strong opponents
of industry activities. But, he assesses, people's memories are fairly short.
Oil And Gas Act Penalties
Although legislation such as SB 307, the
Oil and Gas Act Power and Penalties Act,
filed by Senator Richard Martinez, D-Espanola, failed to advance in the 2017 session, Foster warns many of the bills are likely to resurface, especially when the gubernatorial administration changes in 2019.
Foster says SB 307 seeks to amend the
Oil and Gas Act to give the New Mexico
34 THE AMERICAN OIL & GAS REPORTER

attorney general the power to file lawsuits
against violators of the Oil and Gas Act at
the same time the state Oil Conservation
Division holds hearings on violations. The
bill follows a 2009 New Mexico Supreme
Court decision that OCD is not authorized
to assess administrative civil penalties for
violations of the act and instead must file
a lawsuit in court, the website states.
According to the legislative website, SB
307 also aims to:
* Eliminate requirements that a person
act "knowingly and willfully" in determining violations of the Oil and Gas Act;
* Clarify that each day of a violation
be a separate violation subject to civil
penalty;
* Impose a maximum $10,000 penalty for violations of the act that pollute or
threaten to pollute groundwater; and
* Grant the Oil Conservation Division
or Oil Conservation Commission authority to assess civil penalties, after notice and
public hearing.
Although it failed to make it to the governor's desk, the Senate Conservation
and Judiciary committees approval of an
amended version of SB 307 makes it likely to resurface in 2019, or even possibly
during the 2018 session, Foster predicts.
NMOGA's Flynn says SB 307 was
only one of several bills supported by environmental groups seeking harsher criminal penalties on operators. "Those were potentially the most harmful pieces of legislation this session. There is a false perception about the industry being under-regulated, or unregulated," Flynn says. "What we
saw from opponents is part of a concerted
strategy to continue to hammer that theme."
A proposal to authorize the State Land
Office (SLO) to increase the royalty rate
to 25 percent for wells on New Mexico
land and set the marketable condition point
at the commissioner's discretion failed to
advance out of the Senate Corporations
Commission, Foster says, adding the bill
would have created a negative business environment.
Introduced by Senator Howie Morales,
D-Silver City, SB 375 also would have authorized the commissioner to modify
lease terms to levy royalties on vented or
flared gas, and required him to collect and
publish data on venting, flaring and leaks,
the state legislative website states. The last
provision would have given the state land
commissioner power to modify leases to
require monthly reporting of lost gas.
"The fiscal impacts of the bill were estimated by the SLO to be no more than

$2.4 million a year, if industry still would
be interested in bidding on these higher
royalty leases," Foster points out. "Although the proponents claimed to simply
want industry to pay royalties on all vented and flared gas, this terminology also
would have meant that the commission
could disallow all transportation deductions for gas, with the net effect of a significantly higher royalty rate than currently allowed."
Chaco Canyon And Carlsbad
Several memorials that failed to advance during the 2017 session would
have been problematic for oil and gas interests, Flynn points out. A House joint memorial, HJM 5, asks the Bureau of Land
Management to issue a temporary moratorium on any lease sales involving drilling
and related hydraulic fracturing within the
Greater Chaco Canyon area until it completes a revised resource management
plan, he says. The Chaco-Area Fracking
Lease Moratorium was sponsored by
Representatives Derrick Lente, D-Sandia
Pueblo, and Patricia Roybal Caballero, DAlbuquerque.
"There is no scientific or public health
basis for imposing such a ban," Flynn argues. "The state is struggling with a $350
million budget shortfall and this would add
another $2 billion on top of that."
A potential brine cavern collapse is the
reason Representative Cathrynn Brown, RCarlsbad, introduced HB 30, Flynn says.
The successful legislation appropriates
$500,000 from the state's general fund to
prepare plans to remediate a brine well
near Carlsbad that is threatening to cave
in. Two brine caverns in the state collapsed
in 2008, prompting OCD to study the 32
brine well operations permitted beginning
in 1982 and develop recommendations for
preventing other incidents, he says.
According to the legislative website, the
Carlsbad well of concern is 350 feet
wide, 700 feet long and 150 feet deep. If
it collapsed, engineers predict it would affect an area 1,000 feet by 1,700 feet, potentially damaging a mobile home park,
businesses, highways, railroads, and the
Carlsbad Irrigation District's Southern
Main Canal.
A 2014 study projects a high probability of catastrophic failure within 25 years,
but according to the bill, state agencies cite
more recent information indicating a collapse is likely within five years. OCD has
spent more than $5 million monitoring the
brine well and one possible solution-back-



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