SENATE BILL 493
47th legislature - STATE OF NEW MEXICO - second session, 2006
INTRODUCED BY
Carroll H. Leavell
AN ACT
RELATING TO THE REGULATION OF OIL AND GAS; ENACTING A SECTION OF THE OIL AND GAS ACT TO PRESCRIBE THE PURPOSE OF ALL RULES ADOPTED PURSUANT TO THAT ACT; PROVIDING FOR A REVIEW OF ALL EXISTING RULES ENACTED PURSUANT TO THE OIL AND GAS ACT; MAKING AN APPROPRIATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. Section 9-5A-4 NMSA 1978 (being Laws 1987, Chapter 234, Section 4, as amended) is amended to read:
"9-5A-4. DIVISIONS--DUTIES.--In addition to the duties assigned to each division of the energy, minerals and natural resources department by the secretary of energy, minerals and natural resources:
A. the administrative services division shall provide clerical, recordkeeping and administrative support to the department in the areas of personnel, budget, procurement and contracting;
B. the energy conservation and management division shall plan, administer, review, provide technical assistance, maintain records and monitor state and federal energy conservation and alternative energy technology programs;
C. the forestry division shall enforce and administer [all] laws and regulations relating to forestry on lands within the state;
D. the mining and minerals division shall enforce and administer laws and regulations relating to mine safety, coal surface mine reclamation and abandoned mine lands reclamation;
E. the oil conservation division shall administer [the] laws and regulations relating to oil, gas and geothermal resources [except those laws specifically administered by another authority]; and
F. the state [park and recreation] parks division shall develop, maintain, manage and supervise all state parks and state-owned or state-leased recreation areas."
Section 2. Section 70-2-11 NMSA 1978 (being Laws 1935, Chapter 72, Section 9, as amended) is amended to read:
"70-2-11. POWER OF COMMISSION AND DIVISION TO PREVENT WASTE AND PROTECT CORRELATIVE RIGHTS.--
A. The oil conservation division is [hereby] empowered and it is its duty to prevent waste prohibited by [this] the Oil and Gas Act and to protect correlative rights as [in this act] provided in that act. To that end, pursuant to the requirements of Section 70-2-12.1 NMSA 1978, the division is empowered to make and enforce rules, regulations and orders and to do whatever may be reasonably necessary to carry out the purpose of [this] that act, whether or not indicated or specified in any section [hereof] of that act.
B. The commission shall have concurrent jurisdiction and authority with the oil conservation division to the extent necessary for the commission to perform its duties as required by law."
Section 3. Section 70-2-12 NMSA 1978 (being Laws 1978, Chapter 71, Section 1, as amended) is amended to read:
"70-2-12. ENUMERATION OF POWERS.--
A. Included in the power given to the oil conservation division of the energy, minerals and natural resources department is the authority to collect data; to make investigations and inspections; to examine properties, leases, papers, books and records; to examine, check, test and gauge oil and gas wells, tanks, plants, refineries and all means and modes of transportation and equipment; to hold hearings; to provide for the keeping of records and the making of reports and for the checking of the accuracy of the records and reports; to limit and prorate production of crude petroleum oil or natural gas or both as provided in the Oil and Gas Act; and to require either generally or in particular areas certificates of clearance or tenders in connection with the transportation of crude petroleum oil or natural gas or any products of either or both oil and products or both natural gas and products.
B. Apart from any authority, express or implied, elsewhere given to or existing in the oil conservation division by virtue of the Oil and Gas Act or the statutes of this state, pursuant to the requirements of Section 70-2-12.1 NMSA 1978, the division is authorized to make rules, regulations and orders for the purposes and with respect to the subject matter stated in this subsection:
(1) to require dry or abandoned wells to be plugged in a way to confine the crude petroleum oil, natural gas or water in the strata in which it is found and to prevent it from escaping into other strata; the division shall require a cash or surety bond in a sum not to exceed fifty thousand dollars ($50,000) conditioned for the performance of such regulations;
(2) to prevent crude petroleum oil, natural gas or water from escaping from strata in which it is found into other strata;
(3) to require reports showing locations of all oil or gas wells and for the filing of logs and drilling records or reports;
(4) to prevent the drowning by water of any stratum or part thereof capable of producing oil or gas or both oil and gas in paying quantities and to prevent the premature and irregular encroachment of water or any other kind of water encroachment that reduces or tends to reduce the total ultimate recovery of crude petroleum oil or gas or both oil and gas from any pool;
(5) to prevent fires;
(6) to prevent "blow-ups" and "caving" in the sense that the conditions indicated by such terms are generally understood in the oil and gas business;
(7) to require wells to be drilled, operated and produced in such manner as to prevent injury to neighboring leases or properties;
(8) to identify the ownership of oil or gas producing leases, properties, wells, tanks, refineries, pipelines, plants, structures and all transportation equipment and facilities;
(9) to require the operation of wells with efficient gas-oil ratios and to fix such ratios;
(10) to fix the spacing of wells;
(11) to determine whether a particular well or pool is a gas or oil well or a gas or oil pool, as the case may be, and from time to time to classify and reclassify wells and pools accordingly;
(12) to determine the limits of any pool producing crude petroleum oil or natural gas or both and from time to time redetermine the limits;
(13) to regulate the methods and devices employed for storage in this state of oil or natural gas or any product of either, including subsurface storage;
(14) to permit the injection of natural gas or of any other substance into any pool in this state for the purpose of repressuring, cycling, pressure maintenance, secondary or any other enhanced recovery operations;
(15) to regulate the disposition of water produced or used in connection with the drilling for or producing of oil or gas or both and to direct surface or subsurface disposal of the water, including disposition by use in drilling for or production of oil or gas, in road construction or maintenance or other construction, in the generation of electricity or in other industrial processes, in a manner that will afford reasonable protection against contamination of fresh water supplies designated by the state engineer;
(16) to determine the limits of any area containing commercial potash deposits and from time to time redetermine the limits;
(17) to regulate and, where necessary, prohibit drilling or producing operations for oil or gas within any area containing commercial deposits of potash where the operations would have the effect unduly to reduce the total quantity of the commercial deposits of potash that may reasonably be recovered in commercial quantities or where the operations would interfere unduly with the orderly commercial development of the potash deposits;
(18) to spend the oil and gas reclamation fund and do all acts necessary and proper to plug dry and abandoned oil and gas wells and to restore and remediate abandoned well sites and associated production facilities in accordance with the provisions of the Oil and Gas Act, the rules and regulations adopted under that act and the Procurement Code, including disposing of salvageable equipment and material removed from oil and gas wells being plugged by the state;
(19) to make well price category determinations pursuant to the provisions of the federal Natural Gas Policy Act of 1978 or any successor act and, by regulation, to adopt fees for such determinations, which fees shall not exceed twenty-five dollars ($25.00) per filing. Such fees shall be credited to the account of the oil conservation division by the state treasurer and may be expended as authorized by the legislature;
(20) to regulate the construction and operation of oil treating plants and to require the posting of bonds for the reclamation of treating plant sites after cessation of operations;
(21) to regulate the disposition of nondomestic wastes resulting from the exploration, development, production or storage of crude oil or natural gas to protect public health and the environment; and
(22) to regulate the disposition of nondomestic wastes resulting from the oil field service industry, the transportation of crude oil or natural gas, the treatment of natural gas or the refinement of crude oil to protect public health and the environment, including administering the Water Quality Act as provided in Subsection E of Section 74-6-4 NMSA 1978."
Section 4. Section 70-2-22 NMSA 1978 (being Laws 1935, Chapter 72, Section 14, as amended) is amended to read:
"70-2-22. RULES AND REGULATIONS TO EFFECTUATE PROHIBITIONS AGAINST PURCHASE OR HANDLING OF EXCESS OIL OR NATURAL GAS--PENALTIES.--
A. Pursuant to the requirements of Section 70-2-12.2 NMSA 1978, the oil conservation division is specifically authorized and directed to make such rules, regulations and orders and may provide for such certificates of clearance or tenders as may be necessary to make effective the prohibitions contained in Section [65-3-18 NMSA 1953] 70-2-21 NMSA 1978.
B. Unless and until the oil conservation division provides for certificates of clearance or tenders or some other method so that any person may have an opportunity to determine whether any contemplated transaction of sale or purchase or acquisition or of transportation, refining, processing or handling in any other way involves illegal oil or illegal oil product or illegal gas or illegal gas product, no penalty shall be imposed for the sale or purchase or acquisition or the transportation, refining, processing or handling in any other way of illegal oil or illegal oil product or illegal gas or illegal gas product except under circumstances stated in the [succeeding] provisions of this [paragraph] subsection. Penalties shall be imposed for the commission of each transaction prohibited in Section [65-3-18 NMSA 1953] 70-2-21 NMSA 1978 when the person commiting the [same] transaction knows that illegal oil or illegal oil product or illegal gas or illegal gas product is involved in [such] the transaction or when [such] the person could have known or determined [such] the fact by the exercise of reasonable diligence or from facts within [his] the person's knowledge. However, regardless of lack of actual notice or knowledge, penalties as provided in [this] the Oil and Gas Act shall apply to any sale or purchase or acquisition and to the transportation, refining, processing or handling in any other way of illegal oil or illegal oil product or illegal gas or illegal gas product where administrative provision is made for identifying the character of the commodity as to its legality. It shall likewise be a violation for which penalties shall be imposed for any person to sell or purchase or acquire or to transport, refine, process or handle in any way any crude petroleum oil or natural gas or any product [thereof] of either without complying with the rule, regulation or order of the commission or oil conservation division relating thereto."
Section 5. A new section of the Oil and Gas Act, Section 70-2-12.2 NMSA 1978, is enacted to read:
"70-2-12.2. [NEW MATERIAL] SCOPE OF RULES--RULE REVIEW.--
A. The legislature recognizes the important and vital role that the oil and gas industry provides to the residents of New Mexico. The regulatory burden borne by the oil and gas industry has greatly increased to the point where opportunities to develop oil and gas in this state are not pursued, thereby potentially impacting state revenues. Therefore, the following criteria shall govern all rules adopted by the oil conservation commission or the oil conservation division of the energy, minerals and natural resources department pursuant to the provisions of the Oil and Gas Act:
(1) all rules shall be directly related to the protection of correlative rights, minimizing waste or protecting the environment through the disposition or storage of production resulting from oil field exploration or production; and
(2) prior to the adoption of a rule, the commission or division shall attempt to reduce the regulatory burden imposed in protecting legitimate state interests by:
(a) taking into consideration the economic impact upon mineral owners and oil and gas lessees, the technical feasibility of complying with the rule, the protection of correlative rights, the prevention of waste, the risk to persons and property and the legitimate concerns of the state;
(b) basing all technical rules upon peer-reviewed science; and
(c) analyzing the time and expense that an oil and gas operator or oil and gas owner must expend in complying with the rule.
B. The oil conservation commission and the oil conservation division of the energy, minerals and natural resources department have exclusive jurisdiction to regulate oil and gas exploration, drilling development and production in this state, as well as the disposal of all waste that results from such activities.
C. During fiscal years 2007 and 2008, the energy, minerals and natural resources department, the oil conservation division and the oil conservation commission shall conduct a review of all existing rules enacted by those agencies that affect the oil and gas industry to ensure that they are in compliance with this section. If a rule is determined not to be in compliance with the requirements of this section, the department, division or commission shall propose to revise the rule so that it is in compliance with those requirements."
Section 6. APPROPRIATION.--Two hundred fifty thousand dollars ($250,000) is appropriated from the general fund to the energy, minerals and natural resources department for expenditure in fiscal year 2007 to review and revise existing rules pursuant to Subsection C of Section 70-2-12.2 NMSA 1978. Any unexpended or unencumbered balance remaining at the end of fiscal year 2007 shall revert to the general fund.
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