A legislative proposal to reinstate a New Mexico state agency's ability to assess penalties against oil and natural gas operators cleared an initial state Senate committee Thursday, drawing quick opposition from the state's major industry and business organizations.
SB 307, authored by Sen. Richard Martinez, would run counter to a 2009 state Supreme Court ruling that the state Oil Conservation Division (OCD) is not authorized to assess administrative penalties and must pursue them through legal action by the state Attorney General's Office. The New Mexico Oil and Gas Association (NMOGA), Independent Petroleum Association of New Mexico (IPANM) and the Permian Basin Petroleum Association all spoke out against the measure with support from the New Mexico Business Coalition.
"[We] strongly oppose SB 307 as it attempts to overturn a New Mexico Supreme Court decision wherein the court noted that the Attorney General should be the entity to prosecute enforcement actions," said Karin Foster, IPANM executive director.
The Senate Conservation Committee discussed potential legal problems in the bill last week, Foster said, including the due process and intent components. The bill is headed for the Senate Judiciary Committee next, where legal discussions will continue.
The New Mexico Supreme Court, in Marbob Energy Corp. v. OCD said "any enhancements" to the Conservation Commission's powers "must come from the same legislative body that created [it]." It added that the state high court in this instance "must defer to the legislature for the grant of that authority."
"In reality, what the bill does is allow the AG to prosecute and the OCD to impose penalties as well -- for the same violation," Foster told NGI. "Even if there is an appeal to a case prosecuted by the AG, the OCD would be able to move forward on the same violation, which clearly violates due process."
NMOGA's Mike D'Antonio, government affairs director, reportedly told state lawmakers that New Mexico oilfield regulators already have sufficient enforcement powers to restrict well permits and seize security bonds. Local news media reported Carla Sontag, president of the state business coalition, was calling for more encouragement for the energy industry, rather than what she called "efforts to drive companies to other states."
Martinez characterized the proposal as a response to the expectation that the Trump administration will rely on the states, as opposed to federal authorities, to take responsibility for protecting ground water as part of federal deregulation efforts. He told local news media that the bill should bring penalties closer in line with other oil-producing states and rely more on the New Mexico's oil/gas technical experts regarding penalties. There would also be a provision for operators assessed penalties to have a public hearing.
New Mexico's Department of Energy, Minerals and Natural Resources, which oversees the OCD, said some wording in the bill is overly broad and could result in higher penalties on spills, according to an Associated Press report. OCD also said the ability to assess fines would significantly reduce agency enforcement expenses, AP reported.
Nevertheless, Foster said the bill removes any measurement of intent component to the enforcement action by eliminating the "knowing and willful" provisions currently required by law. "As written, either the OCD or the AG could impose criminal penalties of a third degree felony without any proof of willful intent to violate the [state's] Oil and Gas Act," Foster said.