New Mexico Land Office approves emergency oil and gas rule | KOB 4
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New Mexico Land Office approves emergency oil and gas rule

New Mexico Land Office approves emergency oil and gas rule Photo: AP Photo/Charlie Riedel, File

The Associated Press
Created: April 23, 2020 09:29 AM

SANTA FE, N.M. (AP) — New Mexico’s top land manager has approved an emergency rule allowing oil and gas companies that lease state trust land to temporarily stop producing without penalty for at least 30 days.

Longer-term relief will be coming through the rule change process already underway, State Land Commissioner Stephanie Garcia Richard said Tuesday.

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The shutting of wells has been deemed necessary by the State Land Office based on plunging oil prices and storage capacity challenges, including the negative value of oil seen in the U.S. earlier this week. Prices first began to drop in February as a result of a price war between Russia and Saudi Arabia. The lack of stability has been exacerbated by the financial effects of the coronavirus outbreak.

Revenue from mineral development on state trust land benefits New Mexico public schools, hospitals and universities.

“It is in the best interest of the vital public institutions we serve that the State Land Office allow the temporary oil well shut-ins to assure we get the best value for the resources that they rely on in order to operate. If oil is sold at $8 a barrel, our public schools don’t get their fair share,” Garcia Richard said.

The Land Office held an online public meeting last week to discuss the shut-in rule. From the feedback given at that meeting, officials have decided to move forward with a rule change that will allow longer-term shut-ins as long as operators are bound to comply with future bonding increases.

The Land Office in February announced it would review the environmental risk posed by oil and gas operations on state trust land. The agency has said the review is expected to inform increases in the amount of bonding companies will be required to have on oil and gas leases held for state trust land operations.

According to the agency, bonds currently top out at $25,000 and can be used by a company to cover hundreds of wells, unlimited miles of pipe and other infrastructure.

Garcia Richard said by including the bonding provision in the next round of shut-in rule changes, she’s aiming to protect New Mexico taxpayers and trust land beneficiaries from having to pay for remediation of sites used by the oil industry.

The New Mexico Oil and Gas Association, which represents hundreds of producers, has supported the change to allow for temporary shut-ins. The industry group has called it a “prudent and necessary step” amid what has been a historic drop in the market.

“It is critical that we continue to work together to fight and end the coronavirus pandemic in order to give our state the best opportunity to bounce back,” Ryan Flynn, the group’s executive director, said in a statement.


(Copyright 2020 by The Associated Press. All Rights Reserved.)

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