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Oil and gas: N.M. suspends order allowing more well locations

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By Morgan Lee, The Associated Press

SANTA FE  — New Mexico oilfield regulators suspended an order Tuesday that had relaxed restrictions on natural gas well locations in a major production basin.

The move came over the objections of a Texas-based company as a Democratic administration takes charge of the state’s Oil Conservation Commission.

The commission scheduled a May rehearing on an application by Hilcorp Energy to double well densities in the northwest corner of the state that originally was approved late last year.

Responsibility for oversight of well rules and regulation shifted Jan. 1 to the Democratic administration of Gov. Michelle Lujan Grisham and Land Commissioner Stephanie Garcia Richard.

Newly appointed Oil Conservation Commission Chairman Gabriel Wade said the rehearing is needed to ensure a full review by state government experts at the Oil Conservation Division, where he serves as acting director, and to provide adequate opportunities for public comment.

 Wade noted that the division has an obligation to prevent wasted resources, protect the competing rights of adjacent landholders and safeguard health and the environment.

Commissioner Allison Marks of the State Land Office emphasized the need for consultation with federal government agencies and Native American tribes in the vicinity, including the Jicarilla Apache Nation — a major natural gas developer. A third member of the commission has not yet been designated.

Hilcorp Energy has defended its application as legally and scientifically sound as it seeks to draw more natural gas from a formation known as the Blanco-Mesaverde gas pool through existing and potential new well locations.

An attorney for Hilcorp, Michael Feldewert, on Tuesday alleged political interference with the application and challenged Wade’s qualifications to preside over a commission that makes precedent-setting decisions about rules for oil, gas and geothermal development, arguing he does not have prerequisite engineering education.

“This type of political shenanigans that are going on here is a low point in my opinion for this commission,” Feldewert said.

Hilcorp later issued a statement that the commission’s original decision was based on a careful review of the facts and highlighted the company’s efforts to increase investments in the San Juan Basin and in its communities by improving existing infrastructure and increasing local production.

Hilcorp currently operates 5,329 wells that tap into the Blanco-Mesaverde gas pool across portions of San Juan and Rio Arriba counties. Its application would increase potential well density from four wells to eight per 320-acre tract, or about half a square mile (1.2 square kilometers).

Approval of the well-density application in the final months of the administration of Republican Gov. Susana Martinez was followed by an outcry from conservationists and ranchers, along with a rebuke by departing Land Commissioner Aubrey Dunn.

Garcia Richard, the elected successor to Dunn, attended Tuesday’s meeting and applauded the decision for a rehearing of Hilcorp’s application.

The State Land Office, which formally requested the rehearing, oversees energy leases across some 14,000 square miles (36,000 square kilometers) of state trust land and additional underground resources to help fund schools, universities and hospitals.

“I do acknowledge the importance of the natural gas industry in this region in particular to the financial stability and longevity of the state and the State Land Office,” she said. “I don’t see any reason why we can’t balance increased revenues with responsible development, and that’s what this hearing is really about.”

Advocates for environment conservation with the San Juan Citizens Alliance say they were shut out of last year’s proceedings and hope to present testimony at the May rehearing.

“For too long in New Mexico, over the last eight years, the oil and gas industry has effectively written its own rules,” said Erik Schlenker-Goodrich, an attorney for the alliance.

In an email, New Mexico Oil & Gas Association spokesman Robert McEnytre said the rehearing decision was a blow to responsible oil and gas development in the region.

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