New Mexico regulators said Tuesday they plan to reevaluate recently granted approvals that would allow Houston-based Hilcorp Energy Co. to increase San Juan Basin oil and gas development.
The Oil Conservation Commission (OCC) has scheduled a review for early May. The newly reconfigured three-member commission reflects the change in administrations to new Democrat Gov. Michelle Lujan Grisham, who assumed office last week.
The OCC granted a rehearing when GOP Gov. Susana Martinez was still in power. Hilcorp filed a statement at the end of last year, urging the OCC to deny the request for rehearing by the State Land Office, which appoints one of the three commissioners.
New Mexico Oil and Gas Association spokesman Robert McEntyre reiterated that when the OCC last month approved three exceptions to well density rules for Hilcorp in the Blanco-Mesaverde Gas Pool in San Juan County, the producer’s plans were misconstrued by environmentalists and citizen groups who sought a rehearing.
"Hilcorp has an excellent, responsible plan for revitalizing an aging part of the San Juan Basin,” McEntyre said. The plan would give the northwest part of the basin an economic “shot in the arm.” A rehearing would be a "step back in allowing the San Juan to grow."
Hilcorp has more than 5,000 active wells and 54% of its assets centered in the San Juan, where the Blanco-Mesaverde is its primary development. Currently, the pool rule restricts drilling to four wells for every 320 acres.
Critics of the state approvals were banking on the new governor to reverse development, but McEntyre did not agree that Lujan Grisham would halt industry growth, which has helped deliver a surge in revenue from the San Juan and Permian basins. New Mexico began 2018 as the third leading oil producer in the country.
In her inaugural address, Lujan Grisham stressed a desire to diversify the economy from an over-reliance on the oil and gas sector.
However, "Diversification doesn't mean that we have to take a backseat to any industry," McEntyre said. "Most people would agree the state is heavily dependent on oil and natural gas, and it will tend to be that way for the foreseeable future. If it means we will have other complementary industries come up that can help other areas of the state, then that is good."