New Mexico needs to boost staffing and pay competitive salaries to oil and gas regulators, along with working to improve drilling application approvals, according to a report card by the state’s Legislative Finance Committee (LFC).

In the Performance Report Card for fiscal 1Q2020 issued earlier in December, the LFC identified several areas for improvement within the Energy, Minerals and Natural Resources Department (EMNRD).

The EMNRD, which oversees the Oil Conservation Division (OCD), State Forestry Division, mine reclamation and renewable energy, is pursuing initiatives in fiscal year (FY) 2020 to up its performance in key areas.

Among other things, EMNRD is reorganizing the OCD “to address the agency’s need to pay competitive salaries,” the LFC noted. Gov. Michelle Lujan Grisham in 2019 signed a bill that allows OCD to assess industry fees, as other states are doing, to help cover the cost of its operations.

EMNRD also wants to add performance measures in FY2021 to capture data on waste created by oil and gas activity, as well as reduce the complexity of the drilling permit application process.

The OCD “attributes fewer inspections and a lack of compliance with permits and regulations to compliance officer vacancies; currently half of OCD’s compliance officer positions are vacant,” according to the report. “These positions are located in the department’s various field offices, which increases the difficulty of hiring.”

During FY2019, inspections were conducted at 31,043 oil and gas wells, along with associated facilities, which was a sharp decline from 42,800 in FY2018. OCD’s goal for FY2020 is 42,000 inspections.

OCD has a reorganization effort underway to move most of its compliance officers to Albuquerque from rural areas, “with the goal of increasing the applicant pool. However, the effectiveness of this centralization has yet to be determined.”

The division also continues to process most approved drilling permits within 10 business days, which exceeds its target but still falls short of FY2018 actuals, according to the LFC. Even with “significantly increased oil and gas production activity,” the OCD issued 1,620 violations in FY2019, 78% of the number issued the previous year.

“OCD reports that this reduction is related to the decrease in number of inspections and is also attributable to vacancies in compliance officer and environmental tech positions.”

Meanwhile, the OCD is working with the state’s Environment Department to develop a methane emissions reduction strategy “to prevent the waste of methane and other natural gas in the oil industry,” the report noted.

According to 2018 data provided to EMNRD from oil and gas operators, about 3.5 billion standard cubic feet (Bscf) of natural gas was vented and 32.7 Bscf was flared, compared with a combined total in 2017 of only 17 Bscf.

The gains in flared/vented gas coincide with the huge increase in Permian Basin activity in recent years. Beginning in FY2021, OCD plans to begin reporting on the volume of natural gas vented and flared from New Mexico oil and gas production.

The Environmental Bureau of OCD has the additional responsibility of overseeing the Carlsbad brine well remediation project, which is not captured in the division’s performance measures, the LFC noted.

In early 2018 state lawmakers provided $30 million to fix the abandoned well in Eddy County before a sinkhole could develop near Carlsbad, a major artery for Permian Basin traffic. The Environmental Bureau chief is serving as the project manager, who is working closely with the contractor hired for the project.

Construction was delayed to fix the brine well because of the “difficulty in securing access agreements for the site,” the LFC noted. EMNRD now is projecting an $8.8 million budget shortfall because of costs not anticipated when appropriations for the project, now underway, were made.

In its performance review of the New Mexico Environmental Department (NMED), the LFC said there were 198 outstanding violations that could threaten groundwater at 1,167 regulated underground storage tank facilities within the estimated 3,095 underground storage tank systems in total across the state.

The compliance rate “is above the national average of 70%,” LFC noted.

In addition, there are 2,630 hazardous waste facilities in New Mexico and seven inspector positions, “but NMED reports only three are filled due to budget constraints.”

Air quality permitting grew by 256% between 2008 and 2018, but the Air Quality Bureau did not increase inspection or permitting staff during that time, which led to “difficulties meeting inspection goals,” according to the report card.

“The lack of oversight may contribute to poorer air quality as unpermitted emissions go undiscovered and violations are not addressed by Air Quality Bureau staff. NMED reports that the larger impact on air quality, however, is the increased oil production and related facilities in the state.”