On May 14, 2012 the New Mexico Oil Conservation Commission began a public hearing regarding proposed changes to the so-called “pit rule1” as proposed by the New Mexico Oil & Gas Association. There were five days of hearings in May and four additional days of hearings in June. The hearings on the pit rule are scheduled to resume again for up to three additional days on August 28, 2012. The Oil Conservation Commission is then scheduled to deliberate on the pit rule in late September.
The highly technical pit rule provides the basis for regulation of many key processes and facilities in the oil and gas industry including:
• Drilling reserve pits
• Siting criteria
• Construction, operation and closure of production pits and below-grade tanks
What Changes Have Been Proposed
The proposed changes to the rule were developed with input from a wide range of New Mexico oil and gas companies, which operated under three strict criteria in developing the proposal:
1. Changes must be based on sound science.
2. Changes must maintain environmental safeguards.
3. Changes must encourage environmentally responsible energy development.
Having met these criteria, an updated proposal was presented to the New Mexico Oil Conservation Commission on April 16, 2012. The proposed changes keep most aspects of the current pit rule in place, but provide for the use of safe and reasonable alternatives when they make environmental and operational sense.
Specifically, the proposed changes:
• Allow for the use of temporary lined drilling pits and in-place burial of drilling cuttings when these practices are proven to be environmentally safe.
• Provide for changes regarding siting criteria, construction and closure of below-grade tanks and other facilities to improve operational and regulatory efficiency in a manner that is protective of the environment.
• Allow for the use of one pit for the drilling and completion of multiple wells on a single drilling pad. With the increased use of horizontal drilling, this provision will allow larger pits that serve several wells — thereby reducing the number of pits, and the overall footprint previously associated with using individual pits for each well.
Importantly, safeguarding New Mexico’s water and land resources is an industry priority – it’s bad business to do otherwise. New Mexico is our home and we have a stake in ensuring a healthy environment for our families and employees. The people of New Mexico expect us to operate with a focus on protecting the environment. The criteria for the location of drilling pits and required on-site testing will safeguard New Mexico’s water resources.
Why the Pit Rule Should Be Changed
Revising the pit rule will keep jobs and tax revenues from going to other states, like Texas. New Mexico’s current pit rule makes operating here more expensive than surrounding states without providing real environmental benefits. The proposed changes will give oil and gas producers science-based options that protect the environment while leveling the playing field with neighboring states.
Taxes from oil and gas production are currently New Mexico’s fourth largest source of income providing more that one-fifth of the state’s general fund revenues. In 2010 alone, the industry provided $800 million for our public schools, universities, hospitals, schools for the deaf and blind, and road construction and other public works projects. In total the industry provided royalty and tax revenues to state and local governments of over $2.2 billion dollars, that’s over $6 million every day.
For More Information
Official documents related to the hearing on the pit rule can be found at the New Mexico Oil Conservation Division’s website at http://www.emnrd.state.nm.us/ocd/rules.htm
You can also download a copy of the pit rule changes being proposed by the New Mexico Oil & Gas Association at http://www.nmoga.org/proposed-pit-rule-document.
The existing pit rule is available at http://www.nmcpr.state.nm.us/nmac/_title19/T19C015.htm
1Rule 19.15.17 of the New Mexico Administrative Code