Urgent Hearing Begins on New Mexico Oil Industry Bonding Rules

UPDATE: The New Mexico Oil Conservation Commission has just announced a critical rulemaking hearing scheduled for Monday, July 15, 2023, focusing on proposed bonding provisions that could drastically impact the state’s oil and gas industry. Environmental groups advocate for these rules, which industry stakeholders claim are designed to impose prohibitive costs and effectively shut down small, independent producers across New Mexico.

As the hearing approaches, the stakes are alarmingly high. The proposed regulations could increase financial assurance bonding for marginal wells by orders of magnitude, jeopardizing the viability of over 100 independent producers who have already exited New Mexico since 2017. Without the resources to cover these new costs, many operators may be forced to shut down or plug their wells prematurely, leading to a significant reduction in local oil and gas production.

The implications of these rules are dire. If adopted, the regulations would not only raise costs but also grant state regulators the authority to deny the sale of existing marginal wells. This could block operators from buying or selling wells outright, stifling economic activity and potentially leading to a further exodus of businesses from New Mexico.

“The state touts increased production yet continues to kill off smaller independent producers,”

said a representative from the Independent Petroleum Association of New Mexico. This reflects a troubling contradiction as state revenues from oil and gas continue to rise, while the number of local producers diminishes.

Currently, state-based oil and gas companies argue that the new bonding requirements, if implemented, would create an untenable business environment. Many producers fear that the new provisions, which bypass necessary legislative approval, were drafted without input from industry stakeholders. This lack of consideration could lead to a chilling effect on the entire business community in New Mexico.

Environmental advocates, however, have expressed support for the proposed rules, indicating that they align with ongoing efforts to limit fossil fuel production. According to their written testimony, the anticipated shutdowns of marginal wells align perfectly with their environmental objectives.

Industry representatives intend to counter these claims at the upcoming hearing, emphasizing that operators already plug over 95% of their nonproducing wells, which contradicts the state’s inflated projections regarding unfunded liabilities. Additionally, concerns have been raised about the state’s management of the existing reclamation fund, which currently holds over $50 million yet remains unspent.

As the hearing draws near, the Independent Petroleum Association of New Mexico is urging citizens to make their voices heard. They emphasize the importance of independent producers, who play a vital role in local economies. The potential for widespread shutdowns and production cuts poses a significant threat not only to the industry but to the livelihoods of countless New Mexicans who rely on these jobs.

Citizens are encouraged to participate in the public comments during the hearing to defend the industry that contributes significantly to New Mexico’s economy. The urgency of this situation cannot be overstated: the future of local oil and gas production hangs in the balance as the Commission prepares to hear from stakeholders on both sides of this contentious issue.

As this situation develops, it is crucial for all New Mexicans to stay informed and engaged. The outcome of this hearing may shape the future of the oil and gas industry in New Mexico for years to come.