Proposed pit regulations draw oil, gas industry’s anger

| The Associated Press

11/5/2007 -

Mark Fesmire remembers when, as a young engineer readying a new oil well for production in southeastern New Mexico, he was told by his boss to get rid of a pit full of salty waste water by ripping the liner and letting the stuff soak into the ground.

While it broke no rules, "that's haunted me ever since," Fesmire said. "That was wrong."

Two decades later, the state Oil Conservation Division that Fesmire heads is proposing a new, tougher rule for oil and gas pits that has drawn vehement objections from the industry. A hearing that could last into next week resumed Monday before the Oil Conservation Commission, which has the final say.

Environmental groups and some ranchers and city officials contend that contamination from unlined or poorly lined pits threatens water quality and the health of New Mexico's people, livestock and wildlife.

The industry says OCD has been swayed by those advocates into proposing a set of regulations that are not based on science and will punish the industry — and, ultimately, a state economy that depends on it.

"It's overzealous," said Bob Gallagher, president of the New Mexico Oil and Gas Association. "It provides no real additional environmental benefits, and it's arbitrary."

Gallagher estimates the proposed changes could mean an additional cost of $200,000 at each well site, driving operators to neighboring oil- and gas-producing states such as Texas and Colorado.

No one knows exactly how many pits there are in New Mexico, where, according to the OCD, more than 90,000 oil and gas wells have been drilled over the past century or so and about 55,000 are currently producing.

Pits are dug to hold the fluids and solids that are the byproducts of well-drilling, and to dispose of waste from production.

Fesmire says in the past 15 years, OCD has recorded nearly 800 instances of ground water contamination from oil and gas operations, roughly half of those because of pits. The proposed rule aims to drastically curb that.

"We expect that to drop down to nothing," said Fesmire, who chairs the three-member Oil Conservation Commission as well as being director of the Oil Conservation Division.

"There are going to be upsets, spills, accidents," Fesmire acknowledged in an interview. "But what we're going to do is eliminate the procedures that have resulted in contamination in the past."

Republican members of the New Mexico House of Representatives from the state's oil- and gas-rich southeast and northwest corners testified the new rule could hurt the state's finances, which are heavily dependent on the industry.

Oil and gas production pumped about $1 billion directly and another $400 million indirectly into New Mexico's coffers in the budget year that ended June 30, according to recent revenue figures. That means about one of every four dollars in the state's $5.7 billion general fund last year was attributable to oil and gas.

"We don't need to shoot the cash cow," said Rep. Candy Spence Ezzell, R-Roswell, a rancher, farmer and independent oil producer.

The proposed rule requires for the first time that all pits be lined according to certain specifications.

It places extensive restrictions on where pits may be placed. Most importantly, there could be no temporary or permanent pits in places where the ground water is less than 50 feet below the bottom of the pit.

Operators instead would have to use a so-called closed-loop drilling system, a series of storage tanks that separate liquids and solids, with waste trucked offsite for disposal.

And, perhaps the most controversial change, the rules severely curtail the permanent, onsite disposal of pit waste, which has been the industry norm. Instead, waste would have to be hauled to OCD-approved disposal facilities, unless they're more than 100 miles away.

"We just need to put this waste in a centralized landfill, where we have some control over it," Wayne Price, OCD's Environmental Bureau chief, testified Monday.

There are four disposal sites in southeastern New Mexico that would be authorized to take such pit waste. There is none in the northwest — the closest is near Durango, Colo. — but Price said the new rule could encourage the establishment of a commercial landfill for such waste in the northwest.