HB 286: OIL AND GAS FINANCIAL ASSURANCE

An Act Relating To Oil And Gas; Amending Sections Of The Oil And Gas Act Concerning Financial Assurance, Powers Of The Oil Conservation Commission And The Oil Conservation Division Of The Energy, Minerals And Natural Resources Department, Civil And Criminal Penalties, Permits For The Disposition Of Waste, Appeals And Use Of The Oil And Gas Reclamation Fund.

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MILD HB 286
OIL AND GAS FINANCIAL ASSURANCE

Legislative URL:

HB 286 on nmlegis.gov

Emergency Clause:

No

Germane:

N/A

Location:

- OTHER -

Action:

[9] HENRC/HJC-HENRC [30] DNP-CS/DP-HJC [36] DNP-CS/DP [39] FAILED/H (32-36).

Issue(s):

Energy, Regulation & Enforcement

Related Legislators

Bill Sponsor:

Gail Chasey Michael Sanchez

Related Documents

Downloads:

Introduced
HENRC Committee Report
HENRC Committee Substitute
HJC Committee Report
HJC Committee Substitute
Final House Vote
Fiscal Impact Report

Summary

This piece of legislation amends several sections of the Oil and Gas Act that address financial assurance, powers of the Oil Conservation Commission (OCC) and the Oil Conservation Division (OCD) of the Energy, Minerals and Natural Resources, permits for the disposition of waste and use of the oil and gas reclamation fund.

The bill changes the amount of financial assurance that will be required from operators of oil and gas wells for “blanket plugging financial insurance” for oil and gas wells from an amount not to exceed $50,000 to an amount not be less than $100,000. The actual amount of the blanket plugging financial assurance that will be required of any operator will be determined by multiplying the number of wells operated on January 1 of each year that are not plugged and abandoned or covered by a one-well plugging financial assurance by $5,000, but with a minimum of $100,000.

Under the bill, the section of law allowing the OCD to bring suit against a person who violates the Oil and Gas Act or the rules under the Act is amended to allow OCD to bring suit also for violating permits issued pursuant to the Act.

The bill expands the potential pool of defendants in a suit by the OCD for cases when the financial assurance is insufficient to cover the cost of plugging to include “the most recent owner of the minerals under the tract where the well or wells are located or the most recent lessee of the minerals under the tract.”

The bill amends the penalty provisions of the Act to remove the requirement that the violation be undertaken “knowingly and willfully” and to include violations of permits, not just violations of the Act, rules and orders. It also adds a new provision providing that if a violation is an unauthorized discharge or causes an unauthorized discharge of any contaminant, the civil penalty increases from $1,000 for any violation to not more than $10,000 for each violation or for each day of a continuing violation. The OCC or OCD may assess the penalty after notice and a public hearing. The bill also amends the provisions relating to criminal penalties to increase the maximum fine to $15,000 and to consider violations of permits or orders as violations for purposes of the provision.

The bill updates the terms “oil” and “gas” to “crude petroleum oil” and “natural gas” throughout the sections of law included in the bill. It makes numerous other language changes for purposes of clarity and modernity. It also adds definitions for “inactive well” and “oil and gas operations.” It deletes the definition of “associated production facilities.”

Finally, the bill amends current law to allow the Oil and Gas Reclamation Fund to be used for the replugging of abandoned wells and for the restoration and remediation of wells on federal land. The OCD may file suit to recover the costs expended from the fund for replugging wells (in addition to the current plugging) from the “most recent owner of the minerals under the tract or the most recent lessee of the minerals under the tract,” again in addition to the current law that allows suit against the operator.

The bill might have the positive effect of creating additional accountability on the part of oil and gas well operators, It might also provide additional protections for the State in terms of recouping expenditures made to protect against the discharge of contaminants from abandoned or dry wells.

Updated: HENRC adopted a Committee Substitute for the bill on February 21, 2013, that differs from the original bill as follows:

• The blanket assurance amount ranges from $50,000 – $100,000 rather that being set at a minimum of $100,000.
• The potential pool of defendants in a suit by OCD no longer includes the most recent owner or lessee.
• An illegal discharge must now involve a “water contaminant that that pollutes or threatens to pollute water in excess of any state or federal water quality standard,” rather than a broader array of discharges.
• Finally, the substitute does not include the amendments to the Oil and Gas Reclamation Fund that the original bill did. Thus, its funds will not be available to plug or replug abandoned wells.

A concern with this weakened substitute might be whether it would provide enough protection to ensure the safety of New Mexico’s scant water resources.

The HJC Committee Substitute adopted on March 4, 2013 makes additional changes to the bill. The substitute undoes the changes to the current law’s provision for blanket plugging financial assurance. It does not include the amendments made to the section’s definitions. It maintains that new language that remedies are cumulative. Finally, it also maintains changes to the penalty provisions though with some differences from earlier versions of the bill.

A concern with this substitute might be that by taking out the blanket plugging financial assurance the bill will not provide that protections sought by New Mexicans.

Outcome: HB 286 died on the House floor (32-36).

Date of Summary:  1/31/2013, Updated 2/2/2013 and 3/6/2013