By: Al Pickett
July/August 2009

State producer associations often find themselves in “a war” against environmental groups opposed to the oil and gas industry. Perhaps nowhere is that more evident than in New Mexico where Bob Gallagher, president of the New Mexico Oil and Gas Association, claims the state’s industry is under siege.“The progressive Democrats who are anti-oil and gas and the environmental groups have gotten to the regulators in New Mexico,” he states. “We are presently facing an inconsistent, overzealous regulatory environment that has caused operators to pull out of New Mexico or spend their capital dollars in other states.”

To illustrate the negative impact of the “overzealous” state regulators, Gallagher notes that a review of rig counts from April 2006 to April 2008 showed the neighboring states of Oklahoma with a 16.5 percent increase, Texas with a 21.6 percent increase and Colorado with a 31.7 percent increase. During that same two-year period, however, New Mexico had a 28.4 percent decrease in rig counts. “This occurred during the time period when the state of New Mexico was changing significant rules and regulations involving our industry,” he continues. “The new pit rules have resulted in operators spending tens of millions of dollars less in New Mexico and has and continues to cause a loss of revenue to the state as well as over 500 lost jobs.”

The Oil Conservation Commission approved a set of rules in 2007 on the management of surface waste from oil and gas operations that forced companies to haul contaminated soil and water to permanent disposal sites. It also approved stricter penalties to enforce industry compliance with environmental standards.

The most recent rules adopted in May of 2008 by New Mexico’s Oil Conservation Commission call for stricter rules concerning oilfield waste pits, below grade tanks and the use of closed loop systems during oil and gas operations. The new pit rules prohibit the use of unlined pits for oilfield water and increase the requirement for lining oilfield pits from 12 mils to 20 mils to protect against seepage of contaminated materials. Pit proximity to municipal water wells is also prohibited. (See Well Servicing January/February 2009, “Dispute over New Mexico pit rule continues.”)

In his testimony before the Oil Conservation Commission prior to its adoption of the regulations, Gallagher said the changes were unnecessary. “We’ve been producing oil and gas for over 90 years in New Mexico, and there has never been one drop of water delivered to customers that was contaminated by our industry,” he testified. He says the new pit regulations have added $150,000 in operating costs for every new well dug in the state.

“We are also facing over-reaching air quality standards (standards in the Four Corners region in northwestern New Mexico have been even more restrictive than federal Environmental Protection Agency guidelines),” Gallagher adds.
The New Mexico Oil and Gas Association, which has the challenge of fighting these regulations on behalf of the state’s oil and gas industry, was established in 1929 and was located in Roswell until moving to Santa Fe in 1955. Gallagher said the NMOGA has 350 member companies and more than 1,200 individual members.

“The lifeblood of the NMOGA is our standing committees: Public Lands, Regulatory Practices, Environmental Affairs, Legislative Affairs, Tax, and Legal,” he explains.

In order to combat the state’s restrictive regulatory policies, Gallagher says the NMOGA will continue to try and educate the regulatory agencies about the industry’s concerns, approaching the issues with sound science and common sense.

“We will be holding full-day summits this summer and fall on areas of concern, in addition to the pit rules,” he relates. “These areas cover restoration requirements and carbon dioxide (CO2) sequestration. Our member companies have spent in excess of $100,000 on expert witness fees as it concerns the pit rules and the air quality issues.”
Gallagher calls the pit rules and the overall regulatory environment in New Mexico as the biggest obstacles to the continued development of oil and gas resources in the state.

“We must be able to have a consistent, coordinated, constructive and stable regulatory environment for continued development in our state,” he emphasizes.

New Mexico is unique in that oil and gas production exists in just 10 counties in the state. Thus, the New Mexico Oil and Gas Association is waging a campaign to not only educate the regulatory agencies but also the public about the oil and gas industry in the state, according to Gallagher.

“NMOGA is part of a very aggressive campaign that is utilizing radio, television and newsprint to help educate the public as well as elected and appointed officials about our industry, specific to New Mexico,” he says. “The campaign, Energy Advances New Mexico, is very professional and is being guided by pre and post polling results and focus groups. The web site is www.energyadvancesnewmexico.com and has been very effective in our education efforts in New Mexico.”

He says the New Mexico Oil and Gas Association’s goal is to focus awareness and education efforts not only on issues of concern but to also begin to address the industry’s innumerable benefits and the ways it strives to solve potential problems. It provides an open forum for increased communication and cooperation between the industry, New Mexico’s political system and the public in general, according to Gallagher.

He points out that the oil and gas industry produces 1.6 trillion cubic feet of natural gas and 67 million barrels of oil annually. It provided $2.7 billion to the New Mexico economy last year, including more than 99 percent of all school capital investment through the Permanent Fund, and saved New Mexico taxpayers an excess of $800 annually, he states.

The NMOGA’s annual meeting is October 4-6 in Santa Fe. “We understand we are a service organization,” Gallagher emphasizes, “and, as such, if we are not adding value to your company through our services, then we have failed your company and our industry. We are here to help you in New Mexico.”