American Oil and Gas Reporter - September 2016 - 93

ConventionSection: New Mexico Oil & Gas Association

Elections Add To Uncertainty
For New Mexico Industry
By Danny Boyd
Special Correspondent
SANTA FE, N.M.-Members of the
New Mexico Oil & Gas Association prepare for their 2016 annual convention
Oct. 2-4 at the Eldorado Hotel in Santa
Fe facing uncertainty over upcoming elections, a growing state budget deficit, and
questions about forthcoming federal rules
that could impede member operators.
While challenges abound, NMOGA
leaders welcomed a key legal victory in
the June 21 decision by U.S. District
Judge Scott W. Skavdahl in Cheyenne,
Wy., to set aside the U.S. Bureau of Land
Management's hydraulic fracturing rule,
says NMOGA Chairman Cliff Brunson.
But additional regulatory proposals
and an election year filled with more
questions than answers continues to keep
the association busy assessing ways to
make an additional impact in Santa Fe
and Washington, adds Brunson, chief executive officer of BBC International, a
Hobbs, N.M.-based environmental consulting company.
NMOGA members continue to ponder
the potential down-ballot impact of the
presidential race pitting Democratic nominee Hillary Clinton and Republican Donald Trump, says Wally Drangmeister,
NMOGA communications director. This
year more than most, the two leading
candidates seem to have plenty of detractors, he reflects.
"When you consider the possible impact of voters opting to support the Green
or Libertarian party candidates instead,
it's hard to tell who will get behind
whom," Drangmeister muses. "So much
is unknown on how that will affect state
races. It's difficult to predict the outcome."
NMOGA invited legislative candidates
for a meet-and-greet at a Board of Directors meeting in mid-August in hopes of
being able to share views on the industry's
contributions to the state and possible
ramifications of unfavorable legislation
and regulation, says association President
Steve Henke. NMOGA has analyzed key
races to help association members learn

how they can impact the outcomes, he
says.
"We are concerned and engaged,"
Henke comments. "There are about 15
state legislative races that could go either
way and will determine majorities in both
the Senate and House. Results could significantly impact the legislature's approach
to oil and gas. It's a tough time for companies, and it's a tough time for the state
of New Mexico, too."
Regulatory Onslaught
The picture is further clouded by the
potential impact of proposed federal regulations on New Mexico production, including the BLM flaring and venting
rule, and Onshore Orders 3, 4, and 5,
Brunson says.
"It's pretty much the typical regulatory
environment for land access issues with
these onshore orders and proposed rules
on methane emissions," he says. "Our
members are trying to operate prudently
and be environmentally conscious, but if
regulations are too onerous, it makes it
that much more difficult in today's price
environment."
NMOGA estimates that 10 percent of
the San Juan Basin's dry gas production
could be abandoned if the BLM's proposed
rule on venting and flaring goes into
effect this fall, Henke says.
Altogether, federal regulations affect
54 percent of oil production and 63
percent of natural gas output in New
Mexico, Henke points out.
"There are a host of regulations coming
out, and because the price of natural gas
is so low, those wells are very sensitive
to being shut in," he says. "Any time you
contemplate a host of potential regulations,
there definitely is the potential for accelerated shut-ins, if all the proposals come
together."
Taken together, the developments exacerbate New Mexico's budget crisis,
Henke says.
"I think we have politicians' attention
on this issue, both at the state and national
levels, and we are hopeful BLM will
make some common-sense adjustments
to proposed rules consistent with the

comments we have submitted, and will
provide some relief from what we see as
pretty dire consequences," he says.
Some local leaders in New Mexico
continue to push for swift adoption of
flaring restrictions, Drangmeister says.
"There is a lot of misinformation on
the benefits those regulations bring," he
says. "That message of benefits has been
broadcast widely. The information is not
completely accurate, but that doesn't
mean it doesn't get play in the media,
which seems at times to have the position
that the oil and gas industry, which sells
natural gas as one of its prime products,
is wasting it frivolously and letting it go
into the atmosphere. That isn't a credible
argument, but it's one the other side has
been making for a number of years."
Venting & Flaring Rule
BLM's venting and flaring rule likely
will become effective by the end of this
year, Henke says. In comments submitted
in April, NMOGA identified specific concerns with the proposed rule and expressed
a desire for the agency to accept the New
Mexico Oil Conservation Division's Gas
Capture Plan as compliance with the proposed rule.
"BLM's regulation, as proposed, is
duplicative of NMOCD's Gas Capture
Plan, unnecessary, and will reduce royalties
returned to (New Mexico) and the federal
government," the association commented.
The BLM can more effectively reduce
flaring and protect royalties by approving
rights-of-way applications in a timely
manner, NMOGA argues. "Completing
(gas) capture infrastructure is critical to
managing stranded gas and new development," the association's comments
state. "The proposed rule . . . fails to acknowledge the significance of federal
right-of-way permitting delays that have
contributed to flaring volumes."
Despite BLM claims that methane
emissions need to be regulated for environmental impact, air quality regulation
is the purview of the Environmental Protection Agency, which is dealing with
emission issues through the Subpart
SEPTEMBER 2016 93

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