New Mexico's oil and gas regulators seek more funds from lawmakers to fight pollution

Oil and gas regulators with the State of New Mexico hoped lawmakers would fund additional compliance staff to help regulate the industry and ensure pollution reduction targets are met.

Sarah Cottrell Propst, cabinet secretary at the Energy, Minerals and Natural Resources Department (EMNRD), presented the agency’s requested budget Wednesday before the Senate Finance Committee, seeking a 16.4 percent increase in funds for Fiscal Year 2023.

EMNRD, through its Oil Conservation Division (OCD), is the State’s main regulator and compliance agency for the oil and gas industry, but struggled to enforce state law in recent years, officials said, due to past reductions in funding and high staff vacancies.

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The proposed budget Cottrell Propst advocated for during the meeting was also recommended by Gov. Michelle Lujan Grisham through her annual executive budget.

As proposed, about $3.1 million would be added to EMNRD’s budget to fund eight new compliance officers at the OCD, along with seven administrative employees and 10 staff members to process permits and remediation requests.

Cottrell Propst said the Department needed stronger compliance capabilities as it expects to begin enforcing a recently-imposed rule to require oil and gas operators capture 98 percent of produced natural gas by 2026 and continue to process solar tax credits recently implemented, reporting EMNRD process more than 4,000 such credits so far.

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New OCD staff would also assist with well inspections and plugging, while ensuring compliance with environmental regulations.

The Department also sought $1.3 million for water and wastewater infrastructure upgrades at state parks, $919,000 to fill 11 positions at its Forestry Division and nine firefighters, and funds modernize New Mexico’s electrical grid and create an Office of Regulatory Affairs to engage with future proceedings in regulating electricity.

The Legislative Finance Committee recommended a smaller, 9 percent increase of EMNRD’s budget for FY 2023.

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Cottrell Propst said the increase in funding was needed to allow EMNRD to adequately address climate change and protect New Mexico’s environment.

“New Mexico is already experiencing the impacts of a changing climate, most notably through extended drought which threatens our arid state’s water resources,” she said. “Our agency’s work protects New Mexico’s environment, which is why investing in the agency now is more important than ever.

“The proposed Executive budget will ensure that our programs are strong and sustainable so they can benefit New Mexicans for years to come.”

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During the budget hearing, Sen. William Sharer (R-1) said venting and flaring of natural gas was often a necessary action by operators for “technical reasons” like safely pressurizing a new well, and contended EMRND staff should keep that in mind when enforcing the recent gas capture requirements.

“Certainly, there are leaks, and we all ought to be concerned about that. But the venting and flaring which we talk about a lot in here just ignores the technical of why that happens,” Sharer said. “It doesn’t happen just because people are lazy. There’s real, technical issues with the wells that make that happen.”

He also pointed to a report from EMNRD showing 87 percent of applications to permit drilling (APDs) filed to the agency in 2021 were approve within 10 days, asking why the rest were not.

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Cottrell Propst responded that EMRND was seeing an increase of about 200 percent in recent years in the amount of applications and struggling to keep up with approvals.

“We’re now the No. 2, oil-producing state in the country and the volume of APDs our staff are managing for is huge and that’s why we’re here asking for additional resources so we can hire more staff to get there,” she said.

In a letter to lawmakers from LFC Chair Rep. Patricia Lundstrom (D-9), she touted the committee’s recommendation as maintaining fiscal responsibility despite a budget surplus led by growth in the oil and gas industry.

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Lundstrom cautioned that heavy spending this year could leave the state susceptible to any future declines in the fiscally cyclical industry, and as the COVID-19 health crisis threatened to resurge in late 2021.

When COVID-19 first took hold in New Mexico in March 2020, slumping fuel demand led to a collapse in oil prices and quickly sent the State coffers into a $400 million deficit.  

“New Mexico continues to ride a roller-coaster of finances, reliant on the volatile oil and gas industry for much of its revenue and subject to the pandemic-induced economic storm buffeting the nation,” Lundstrom wrote.

“This year we are on an upward trajectory, with federal funds stimulating the economy, oil production surging ahead of other states, and demand for natural gas growing for the first time in years. But we know from experience, we could easily be on a downward plunge.”

Adrian Hedden can be reached at 575-618-7631, achedden@currentargus.com or @AdrianHedden on Twitter.