Local oil, gas industry still unsure of drilling rules

Once again, local oil and natural gas producers are left wondering as details of a decision on drilling regulations remain cloudy.

New Mexico’s three-member Oil Conservation Commission discussed the merits of more stringent drilling regulations in Santa Fe from Saturday through Friday. They worked their way through the 17-page rule that applies to the proposal, but adjourned their meeting without publicizing their thoughts on the matter.

“The commission works through it until they finish. Then it goes to the OCC attorney to draft the final order,” wrote Energy Minerals and Natural Resources department spokeswoman Jodi Porter in an e-mail.

The final order will be issued during the commission’s next meeting on April 16, Porter said. Local producers were hoping they would here a decision this month.

The order remains in draft form until Oil Conservation Commissioners sign it and send it to the New Mexico Register for publishing. It takes effect 60 days after publication.

If the time line Porter described is followed, the rules would become effective nearly one year after being proposed. Only then could the state’s producers find firm footing to stand on as they plan their companies’ ongoing drilling strategy.

The state’s producers estimate the proposed regulations, called the pit rules, would add between $150,000 to $200,000 per well to their drilling costs. The rules would change how drilling by-products are disposed of statewide. Producers claim the lined pits used today are adequate and safe, while supporters of the more stringent rules believe they are needed to further protect the environment.

New Mexico oil and gas producers have conducted business as usual as they await the results of the commission’s deliberations, but some have spoken out about their inability to plan further energy exploration.

“The pit rules have created a lot of anxiety for the whole industry,” said John Roe, engineering manager for Dugan Production Corp., San Juan County’s largest independent producer. “One more month doesn’t matter. We’ve tried to do things in anticipation of what might happen.”

Roe, like others in the local energy field, said the rules seemed proposed for no reason apparent to producers.

“They had just been revised,” he said. “I don’t think anyone isn’t willing to drill responsibly, but these rules were based on bad data that didn’t apply to this area.”

When the Oil Conservation Division proposed the more stringent rules last year, Roe had just finished getting Dugan Production into compliance with the state’s last drilling regulation revisions.

“Then out of the clear blue Mark Fesmire said he would change them. Why?” Roe said. “We all spent a lot of time on this, a lot of money and man hours dealing with the changes.”

Speaking for Independent Petroleum Association of New Mexico, local producer John Byrom, the organization’s president, said the delay makes producers tread water longer. Byrom is president and CEO of D.J. Simmons Inc. in Farmington.

John Zent, projects development manager for ConocoPhillips’ San Juan Business Unit, took a more pragmatic view of the latest delay.

“Until they rule we don’t have to operate in the new process, we’re not going to get too excited about it until we know. We will find out in due time,” he said.

Echoing a common criticism voiced by legislators during the recent 30-day Legislature session, Thomas Mullins, principal/engineering manager of Synergy Operating, LLC, expressed disappointment about the latest delay.

“This is not the type of open government we need in New Mexico,” he said.

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