Don't chase oil and gas money away with your environmental regulations.

That's the message lawmakers sent to Energy, Minerals and Natural Resources Secretary Joanna Prukop when she presented her proposed budget to the Legislative Finance Committee on Wednesday.

Although Prukop was there to discuss her $63.3 million budget for fiscal 2009, oil and gas regulation — specifically a ban on open waste pits that the Oil Conservation Commission is considering — was the main focus of the questions directed her way.

State Sen. Joseph J. Carraro, R-Albuquerque, warned Prukop not to "kill the golden goose" by overregulating the industry, which produces funding for about 25 percent of the state's annual budget.

"We need to look at the environment, of course, but let's not push (oil and gas drillers) away," Carraro said. "We want to encourage them to drill here because the cost of oil is up. We need the money."

"What is the impact of the pit rule going to be?" asked state Rep. Donald E. Bratton, R-Hobbs. "If we increase the cost to drill here in comparison to other areas, what will happen to the rig count?"

Prukop assured lawmakers she recognizes the oil and gas industry's importance in funding state government. But she said she is obligated to address increasing concern among some state residents that oil and gas drilling is harming the environment. "We do indeed have contamination of groundwater from oil and gas," Prukop said.

However, Bob Gallagher, president of the New Mexico Oil and Gas Association, said Wednesday — as he has many times — that "in 90 years of drilling, there has never been a drop of water contaminated by oil well ... drilling pits."

Prukop told legislators the pit rule — which would require mining companies to collect and dispose of all waste liquids instead of allowing them to evaporate in open pits — would increase the cost of closing a pit by about $38,000. Gallagher said Wednesday, though, that the cost would be more like $320,000 per pit.

Prukop said many companies are phasing out the practice because they know it's sounder environmentally to do so, another point Gallagher hotly disputed. "She's wrong," he said. "Industry is not spending their time going to a closed loop system. They are spending their time moving their rigs and capital investment dollars out of our state."

Not all the lawmakers were critical of the pit rule.

"I commend you for doing what you are supposed to be doing and protecting the people of New Mexico," said state Sen. Cisco McSorely, D-Albuquerque.

Despite the don't-bite-the-hand-that-feeds-you tenor of the comments, Prukop said she wasn't afraid the pit rule issue would jeopardize her budget's chances of approval. But she said she was concerned Gallagher and others might try to remove the director of the Oil Conservation Department, Mark Fesmire, who proposed the pit rule, from the Oil Conservation Commission, which will decide whether to enact the rule.

Fesmire, an engineer who used to work in the oil and gas industry, has been vocal about the industry's environmental harm, which Gallagher said is inconsistent with his position as head of the Oil Conservation Division.

Gallagher said Fesmire is "openly adversarial to the oil and gas industry," which he considers in conflict with the stated purpose of the division Fesmire heads: protecting, conserving and responsibly developing oil and gas reserves for the benefit of the state.

Prukop estimated after the committee session that New Mexico has enough oil and gas reserves to sustain current production levels for only 50 to 70 years. She said there isn't much incentive for politicians to push for development of alternative energy sources like wind and solar power because those can't be taxed and thus won't bring the state money.

"Legislators have to get re-elected, so they tend to think more short-term," she said.

Contact Phaedra Haywood at 986-3068 or phaywood@sfnewmexican.com.