Oil and gas companies face a 1,400 percent increase in the penalty cap for violations of state oil conservation rules if Senate Bill 186 becomes law.
Sponsored by Sen. Richard C. Martinez, D-Espanola, and Rep. Matthew McQueen, D-Santa Fe, the bill calls for increasing a maximum of $1,000 per day to a maximum of $15,000 per day for violation of any rule, order or permit issued under the New Mexico Oil and Gas Act.
The phrase “knowingly and willfully” also is removed from the language of the law if SB 186 passes as written.
“That is egregious to me because you’re imposing punitive fines on an outfit that might, in good faith, have been trying to do the right thing and experienced a mishap,” said Rep. Larry Scott, R-Hobbs, co-owner of Lynx Petrolum in Hobbs. “That is, in my mind, poor legislation.”
In addition, the bill provides for a new penalty of as much as $25,000 per day if the alleged violator fails to comply with an order of a court or the state Oil Conservation Commission.
Scott’s conclusion regarding the increase of penalty cap was, “I think what we’ve found here is a solution in search of a problem.”
Anyone who violates the Oil and Gas Act is guilty of a third-degree felony, according to the bill’s language.
The bill also requires the Oil Conservation Division to report how many violations it investigated the prior year and the total amount of the penalties assessed and collected.
The bill currently resides in the Senate Conservation Committee.
Rep. Phelps Anderson, R-Roswell, acknowledging the bill had not yet made it to the House of Representatives, said, “I am anxious to listen to anybody’s ideas as to the need for such legislation. The hard-working people in the oil patch don’t need that kind of worry.”
Economic Development Corporation of Lea County president and CEO Steve Vierck said he and others representing interests of Lea County would be in Santa Fe late this week meeting with various state agency secretaries to discuss the effects of some legislation currently running through the state Senate and House of Representatives.
Legislators often sponsor bills crafted at the request of state agencies, such as a royalty rate increase for top oil producers proposed by State Land Commissioner Stephanie Garcia Richard and sponsored by Rep. Derrick Lente, D-Sandia Pueblo.
Among scheduled meetings for Vierck’s delegation are those with the secretaries or commissioners of environment, state land, energy, minerals and natural resources and economic development.
“I think there is a lot of new legislation proposed to make it more onerous (to conduct oil and gas business) in terms of regulations,” he said. “We’re going to be discussing with them to understand what is proposed. We’re going to have some people from the oil and gas industry with us to explain some of the downside of that.”
He expressed concern for the effects some pieces of legislation are likely to have on the economy.
“Sometimes things sound really good, but they’re impacting our economic livelihood,” Vierck said. “We have over 10,000 people working in some aspect of oil and gas.
“There’s a lot at stake, a lot of investment, and I think sometimes, much too often, legislation is written by legislators who have no familiarity with oil and gas,” he continued. “That can be of concern because they don’t understand the implications and ramifications for a very important industry, not only to this area, but to the state as a whole.”