Urgent Hearing Begins Monday: New Mexico Oil Industry Faces Major Rule Changes

UPDATE: Starting Monday, October 30, 2023, the New Mexico Oil Conservation Commission will hold a crucial rulemaking hearing that could impose severe new costs on the oil and gas industry. Radical proposals from environmental groups threaten to devastate local independent producers by escalating bonding requirements to unprecedented levels.

These new bonding provisions aim to increase financial assurance for later-life, marginal wells, potentially forcing many producers to cease operations. With this immediate bond increase, many independent operators may find it financially unfeasible to continue extracting oil and gas, leading to widespread shutdowns across New Mexico.

The implications are staggering: small, multigenerational producers could be forced to plug wells prematurely, cutting off production before resources are fully depleted. This not only jeopardizes industry jobs but also threatens significant state revenue streams reliant on oil and gas production.

“The state touts increased production but simultaneously kills off smaller independent producers,”

said a spokesperson for the Independent Petroleum Association of New Mexico. “Since 2017, we’ve seen a 20% decline in state oil and gas reporting entities, equating to over 100 independent producers who have exited the industry.”

If adopted, these rules would also grant state regulators unprecedented authority to block the sale of existing marginal wells, hindering transactions based solely on financial assessments. This alarming shift raises concerns about regulatory overreach and the potential collapse of a critical industry segment.

The upcoming hearing has already sparked panic among businesses in New Mexico, emphasizing the urgency for industry voices to be heard. Many independent producers report that the new regulations were drafted without their input, leading to fears of shutdowns and loss of livelihood.

Environmentalists have openly celebrated the anticipated closures that these new rules may cause, exposing their intentions to eliminate smaller operators. In contrast, industry representatives are poised to present compelling evidence at the hearing, demonstrating that independent producers already bear the responsibility of plugging over 95% of their nonproducing wells.

Moreover, industry leaders will reveal that the state’s current financial assurance bond funds, totaling over $50 million, are not being utilized effectively. Instead, the state selects specific companies for well-plugging contracts, ignoring more efficient alternatives available in the market.

The Independent Petroleum Association of New Mexico is urging the three-member Oil Conservation Commission to consider the serious ramifications of these proposed changes. They emphasize the importance of listening to independent producers whose operations significantly contribute to the local economy and community.

As the hearing approaches, the call to action is clear: everyday citizens who benefit from the oil and gas industry are encouraged to participate in public comments and advocate for the industry that supports all New Mexicans.

In a climate of uncertainty and potential upheaval, the outcome of this rulemaking hearing could redefine the landscape of New Mexico’s oil and gas industry. Stakeholders are watching closely as the Commission prepares to make a decision that could have lasting effects on jobs, local economies, and energy production in the state.

Stay tuned for updates on this developing situation, as the implications of these new rules could reshape the future of oil and gas in New Mexico.