New Mexico Gov. Michelle Lujan Grisham is expected to sign bipartisan legislation to reform regulations covering produced water from oil and gas operations, including in the booming Permian Basin, after lawmakers in the state House and Senate agreed to several amendments.

House Bill (HB) 546, aka the Fluid Oil & Gas Waste Act, passed the Senate on a 32-6 vote last Wednesday and followed a unanimous House vote from March 8. A conference committee ultimately decided to adopt six amendments by the Senate Judiciary Committee (SJC) and one from the Senate floor, but dropped three SJC proposals.

The bill went to Lujan Grisham's desk after both chambers adopted the conference committee's report last Friday.

HB 546 calls for restoring the state Energy, Minerals and Natural Resources Department's Oil Conservation Division (OCD) as the primary regulatory authority for oil and gas protections and "clarifying and improving" produced water regulations in the state, which have been mostly nonexistent in recent years.

From the oil and gas industry's perspective, produced water is an ever-bigger factor in operations and a consequence of ramped up of Permian Basin production in New Mexico. Over the last decade, gross oil production has increased from 60 million bbl to more than 250 million bbl annually, according to the New Mexico Oil and Gas Association (NMOGA).

NMOGA spokesperson Robert McEntyre told NGI that the bill is really two measures rolled into one. Produced water and the OCD's authority were originally part of an earlier bill that included the ability for the OCD to levy fines. NMOGA did not take a stand on produced water, but it supported language dealing with penalties and fines, McEntyre said.

"We definitely expect the bill to go to the governor for signature, and for her to sign it. There really is not anything dealing with produced water now."

McEntyre noted that the bill originally was viewed as a first step in creating opportunities for the industry to do more with produced water. "We wanted to put some regulatory structure around the issue," he said. "Given the volumes we're seeing in the Permian, it's a pretty significant issue for us."

OCD was reportedly weakened a decade ago in terms of produced water by a state Supreme Court ruling that left the division to rely on the state Attorney General's Office to perform basic enforcement, including assessing fines on oil and gas operators.

Several national environmental groups collaborated on a report released earlier this year, "New Mexico's Moving Ahead: Restoring the OCD's Strength and Authority," recommending some of the provisions that are in HB 546.

The bill was sponsored by House Speaker Brian Egolf (D-Santa Fe), House Minority Whip Rod Montoya (R-San Juan) and Rep. Nathan Small (D-Doña Ana).