SB0135

SENATE BILL 135

53rd legislature - STATE OF NEW MEXICO - second session, 2018

INTRODUCED BY

Daniel A. Ivey-Soto

AN ACT

RELATING TO ENERGY PRODUCTION; AMENDING THE ADMINISTRATIVE HEARINGS OFFICE ACT TO PROVIDE FOR AN APPEAL OF ADMINISTRATIVELY IMPOSED CIVIL PENALTIES PURSUANT TO THE OIL AND GAS ACT; AMENDING THE OIL AND GAS ACT TO PROVIDE FOR THE ADMINISTRATIVE IMPOSITION OF CIVIL PENALTIES; AMENDING PENALTIES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 7-1B-1 NMSA 1978 (being Laws 2015, Chapter 73, Section 1) is amended to read:

"7-1B-1. SHORT TITLE.--[Sections 1 through 9 of this act] Chapter 7, Article 1B NMSA 1978 may be cited as the "Administrative Hearings Office Act"."

SECTION 2. Section 7-1B-6 NMSA 1978 (being Laws 2015, Chapter 73, Section 6) is amended to read:

"7-1B-6. HEARING OFFICER CODE OF CONDUCT--INDEPENDENCE.--

A. The chief hearing officer shall:

(1) adopt and promulgate a hearing officer code of conduct; and

(2) periodically evaluate each hearing officer's performance for competency, efficiency and professional demeanor in accord with relevant legal standards and the hearing officer code of conduct.

B. The chief hearing officer shall ensure that each hearing officer has decisional independence; however, the chief hearing officer may:

(1) consult with a hearing officer about a genuine question of law; and

(2) review with a hearing officer any issue on appeal addressed by a court of this state.

C. The administrative hearings office shall:

(1) hear all tax protests pursuant to the provisions of the Tax Administration Act;

(2) hear property tax protests pursuant to the provisions of the Property Tax Code;

(3) hear all certificate-denial protests pursuant to the provisions of Section 13-1-22 NMSA 1978;

(4) conduct all adjudicatory hearings pursuant to the Motor Vehicle Code;

(5) conduct all driver's license revocation hearings pursuant to the provisions of the Implied Consent Act; and

(6) hear all protests of civil penalties administratively imposed by the oil conservation commission or the oil conservation division of the energy, minerals and natural resources department pursuant to the Oil and Gas Act.

[(6)] D. The administrative hearings office shall make and preserve a complete record of all proceedings. [and

(7)] E. In a hearing conducted pursuant to the Tax Administration Act, the administrative hearings office shall maintain confidentiality regarding taxpayer information as required by the provisions of Section 7-1-8 NMSA 1978.

[D.] F. In hearings conducted pursuant to the Tax Administration Act, Section 13-1-22 NMSA 1978, the Oil and Gas Act and the Motor Vehicle Code:

(1) the Rules of Evidence do not apply. The hearing officer may require reasonable substantiation of statements or records tendered, the accuracy or truth of which is in reasonable doubt, to rule on the admissibility of evidence. [A taxpayer or the taxation and revenue department] Either party in a dispute subject to a hearing may request a written ruling on a contested question of evidence in a matter in which the [taxpayer] protesting person has filed a written protest and for which that protest is pending. The administrative hearings office shall issue a copy of its written ruling to the [taxation and revenue department] agency whose decision is being protested at the time the ruling is issued to the [taxpayer] protesting person;

(2) the Rules of Civil Procedure for the District Courts do not apply. The hearing officer shall conduct a hearing to allow the ample and fair presentation of complaints and defenses. The hearing officer shall hear arguments, permit discovery, entertain and dispose of motions, require written expositions of the case as the circumstances justify and render a decision in accordance with the law and the evidence presented and admitted. A [taxpayer or the taxation and revenue department] protesting person or the agency may request a written ruling on a contested question of procedure in a matter in which the [taxpayer] protesting person has filed a written protest and for which that protest is pending. The administrative hearings office shall issue a copy of its written ruling to the [taxation and revenue department] agency at the time the ruling is issued to the [taxpayer] protesting person; and

(3) the hearing officer may administer oaths and issue subpoenas for the attendance of witnesses and the production of relevant books and papers, and for hearings conducted for a license suspension pursuant to Section 66-5-30 NMSA 1978, the hearing officer may require a reexamination of the licensee."

SECTION 3. A new section of the Administrative Hearings Office Act is enacted to read:

"[NEW MATERIAL] OIL AND GAS ACT PENALTY PROTESTS--PROCEDURES.--

A. A person may dispute a civil penalty imposed administratively pursuant to the Oil and Gas Act. Upon timely receipt of a protest, the chief hearing officer shall promptly designate a hearing officer to conduct a hearing and shall set a date for the hearing. On that date, the hearing officer shall hear the protest.

B. A person may appear at a hearing set pursuant to the provisions of Subsection A of this section for the person's self or be represented by a bona fide employee or an attorney. If the oil conservation commission or the oil conservation division of the energy, minerals and natural resources department and the protestant agree, a hearing may be conducted via videoconference. A hearing officer may postpone or continue a hearing.

C. At the beginning of the hearing, the hearing officer shall inform the protestant of the protestant's right to representation. Within thirty days after the hearing, the hearing officer shall inform the person in writing of the decision and of the protestant's right to, and the requirements for perfection of, an appeal from the decision to the district court and of the consequences of a failure to appeal. The written decision shall embody an order granting or denying the relief requested or granting such part of the relief requested, as appropriate.

D. If the protestant or the oil conservation division is dissatisfied with the decision and order of the hearing officer, the party may appeal pursuant to the provisions of Section 39-3-1.1 NMSA 1978.

E. No court of this state has jurisdiction to entertain a proceeding by any person in which the person calls into question the administrative imposition of a civil penalty pursuant to the Oil and Gas Act, except as a consequence of the appeal by that person to the district court from the action and order of the hearing officer as provided for in this section.

F. Nothing in this section shall be construed to authorize a criminal proceeding or to authorize an administrative protest of the issuance of a subpoena or summons."

SECTION 4. 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] may:

(1) collect data; [to]

(2) make investigations and inspections; [to]

(3) examine properties, leases, papers, books and records; [to]

(4) examine, check, test and gauge oil and gas wells, tanks, plants, refineries and all means and modes of transportation and equipment; [to]

(5) hold hearings; [to]

(6) provide for the keeping of records and the making of reports and for the checking of the accuracy of the records and reports; [to]

(7) limit and prorate production of crude petroleum oil or natural gas or both as provided in the Oil and Gas Act; [and to]

(8) 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; and

(9) administratively impose civil penalties for a violation of any provision of the Oil and Gas Act or a rule, order or permit issued pursuant to that act.

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, the division [is authorized to] may make rules [regulations] and orders for the purposes and with respect to the subject matter stated in this subsection to:

(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 the 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; and

(23) establish by rule a process for the administrative imposition of a civil penalty for a violation of the Oil and Gas Act or a rule, order or permit issued pursuant to that act."

SECTION 5. Section 70-2-28 NMSA 1978 (being Laws 1935, Chapter 72, Section 19, as amended) is amended to read:

"70-2-28. ACTIONS FOR VIOLATIONS--INJUNCTIVE RELIEF.--Whenever it [shall appear] appears that any person is violating or threatening to violate any statute of this state with respect to the conservation of oil and gas or both or any provision of [this] the Oil and Gas Act or any rule, [regulation or order made thereunder] order or permit issued pursuant to that act, the oil conservation division through the attorney general shall bring suit against [such] that person in the county [of the residence of the defendant or in the county of the residence of any defendant, if there be more than one defendant, or in the county] where the violation is alleged to be threatened or to have occurred [for penalties, if any are applicable, and] to restrain [such] the person from continuing [such] the violation or from carrying out the threat of violation. In [such] the suit, the division may obtain injunctions, prohibitory and mandatory, including temporary restraining orders and temporary injunctions, as the facts may warrant, including, when appropriate, an injunction restraining any person from moving or disposing of illegal oil or illegal oil product or illegal gas or illegal gas product, and any or all such commodities or funds derived from the sale thereof may be ordered to be impounded or placed under the control of an agent appointed by the court if, in the judgment of the court, such action is advisable."

SECTION 6. Section 70-2-31 NMSA 1978 (being Laws 1981, Chapter 362, Section 1) is amended to read:

"70-2-31. VIOLATIONS OF THE OIL AND GAS ACT--STRICT LIABILITY VIOLATION--KNOWING AND WILLING VIOLATION--CIVIL PENALTIES.--

[A. Any person who knowingly and willfully violates any provision of the Oil and Gas Act or any provision of any rule or order issued pursuant to that act shall be subject to a civil penalty of not more than one thousand dollars ($1,000) for each violation. For purposes of this subsection, in the case of a continuing violation, each day of violation shall constitute a separate violation. The penalties provided in this subsection shall be recoverable by a civil suit filed by the attorney general in the name and on behalf of the commission or the division in the district court of the county in which the defendant resides or in which any defendant resides if there be more than one defendant or in the district court of any county in which the violation occurred. The payment of such penalty shall not operate to legalize any illegal oil, illegal gas or illegal product involved in the violation for which the penalty is imposed or relieve a person on whom the penalty is imposed from liability to any other person for damages arising out of such violation.

B. It is unlawful, subject to a criminal penalty of a fine of not more than five thousand dollars ($5,000) or imprisonment for a term not exceeding three years or both such fine and imprisonment, for any person to knowingly and willfully:

(1) violate any provision of the Oil and Gas Act or any rule, regulation or order of the commission or the division issued pursuant to that act; or

(2) do any of the following for the purpose of evading or violating the Oil and Gas Act or any rule, regulation or order of the commission or the division issued pursuant to that act:

(a) make any false entry or statement in a report required by the Oil and Gas Act or by any rule, regulation or order of the commission or division issued pursuant to that act;

(b) make or cause to be made any false entry in any record, account or memorandum required by the Oil and Gas Act or by any rule, regulation or order of the commission or division issued pursuant to that act;

(d) remove from this state or destroy, mutilate, alter or falsify any such record, account or memorandum.

C. For the purposes of Subsection B of this section, each day of violation shall constitute a separate offense.

D. Any person who knowingly and willfully procures, counsels, aides or abets the commission of any act described in Subsection A or B of this section shall be subject to the same penalties as are prescribed therein.]

A. Any person who violates the Oil and Gas Act or any rule, order or permit issued pursuant to that act shall be subject to a civil penalty of not more than one thousand dollars ($1,000) for each violation. For purposes of this subsection, in the case of a continuing violation, each day of violation shall constitute a separate violation.

B. The commission or the oil conservation division of the energy, minerals and natural resources department may administratively impose a civil penalty for a violation not subject to a judicial determination pursuant to Subsection C of this section; provided that:

(1) an administratively imposed penalty shall not exceed a total of twenty-five thousand dollars ($25,000) for one site inspection, operational event or incident;

(2) an administratively imposed civil penalty shall be based on the:

(a) person's history of compliance with or violation of the Oil and Gas Act or any rule, order or permit issued under that act;

(b) seriousness of the violation;

(d) demonstrated good faith by the person in attempting to achieve compliance or remediation;

(3) a person aggrieved by an administratively imposed civil penalty may appeal to the administrative hearings office; provided that, pursuant to rule issued by the commission, prior to appeal the person may choose to request a reconsideration hearing of the penalty by the oil conservation division; and

(4) a decision by the administrative hearings office may only be appealed to the district court of the county in which the violation occurred pursuant to the provisions of Section 39-3-1.1 NMSA 1978.

C. A penalty for a knowing and willful violation of the Oil and Gas Act or any rule, order or permit issued pursuant to that act shall be recoverable by a civil suit filed by the attorney general in the name and on behalf of the commission or the oil conservation division in the district court of the county in which the violation occurred.

D. The payment of a civil penalty shall not operate to legalize any illegal oil, illegal gas or illegal product involved in the violation for which the penalty is imposed or relieve a person on whom the penalty is imposed from liability to any other person for damages arising out of the violation."

SECTION 7. A new section of the Oil and Gas Act, Section 70-2-31.1 NMSA 1978, is enacted to read:

"70-2-31.1. [NEW MATERIAL] VIOLATIONS OF THE OIL AND GAS ACT--CRIMINAL PENALTIES.--

A. It is unlawful for any person to knowingly and willfully:

(1) violate any provision of the Oil and Gas Act or any rule or order of the commission or the division issued pursuant to that act; or

(2) do any of the following for the purpose of evading or violating the Oil and Gas Act or any rule or order of the commission or the oil conservation division of the energy, minerals and natural resources department issued pursuant to that act:

(a) make any false entry or statement in a report required by the Oil and Gas Act or by any rule, order or permit of the commission or oil conservation division issued pursuant to that act;

(b) make or cause to be made any false entry in any record, account or memorandum required by the Oil and Gas Act or by any rule, order or permit of the commission or oil conservation division issued pursuant to that act;

(d) remove from this state or destroy, mutilate, alter or falsify any such record, account or memorandum.

B. A person who commits a violation under Paragraph (2) of Subsection A of this section is guilty of a misdemeanor and shall be sentenced pursuant to Subsection A of Section 31-19-1 NMSA 1978; however, if the violation causes a discharge that is not subject to regulation and penalty under the Water Quality Act and causes water to exceed a contaminant standard adopted pursuant to the Water Quality Act, that person is guilty of a fourth degree felony and shall be sentenced pursuant to Section 31-18-15 NMSA 1978."

SECTION 8. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2018.

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