Adrian Hedden
El Rito Media

Another $35 million in federal money was made available to New Mexico to help plug more than a thousand abandoned oil and gas wells throughout the state.

The Department of the Interior announced a total of $775 million offered to 21 states on Aug. 14, part of a $4.7 billion effort to clean up the wells, which often sit abandoned when oil and gas companies deem them nonviable financially.

Not monitored and unplugged, the wells can leak pollution into the air, water and land as they sit idle in New Mexico’s oilfields – both in the Permian Basin to the southeast and San Juan Basin in the northwest.

The money to fix the problem came via the Infrastructure Investment and Jobs Act, which offered $444 million in the first phase of the formula grant process. The money announced this month, including the $35 million in eligibility for New Mexico, was the second phase of the program.

In total, New Mexico was eligible for about $72.3 million via the program for the work.

“President (Joe) Biden’s Investing in America agenda is enabling us to confront long-standing environmental injustices by making a historic investment to plug orphaned wells throughout the country,” said Interior Secretary Deb Haaland. 

“These investments are good for our climate, for the health of our communities, and for American workers. With this third round of additional funding, states will put more people to work to clean up these toxic sites, reduce methane emissions and safeguard our environment.”

Missi Currier, president of the New Mexico Oil and Gas Association said energy companies in New Mexico planned to work with regulators, using the increased funds to aid in remediating abandoned wells.

“Our member companies are committed to the continued remediation of abandoned wells,” Currier said.

Conservation groups urged the federal government to take more action to prevent wells from being abandoned in the first place, rather than paying for their remediation with public dollars.

The Center for Biological Diversity noted 3,300 inactive oil wells in New Mexico the group said operators should be required to clean up rather than seeing the State or federal agencies pick up the tab.

And New Mexico regulators should enforce state law to require companies address their abandoned wells, said the groups led by the Center for Biological Diversity in an Aug. 21 letter to New Mexico’s Oil Conservation Division (OCD) – the state’s lead oilfield compliance arm.

OCD data showed more than 300 companies drilling for oil and gas in New Mexico have wells listed as abandoned or “orphaned” in industry terms, read the letter.

Companies are required to pay into bonding for financial assurance to the state to pay for well clean up, but the groups argued this was inadequate to fund the work.

“It’s high time that oil and gas companies in New Mexico are forced to clean up their toxic mess, rather than leaving the rest of us to deal with it,” said Gail Evans, an attorney with the Center for Biological Diversity, based in Albuquerque. “The state must start prioritizing the health and well-being of New Mexicans and our environment by enforcing its own laws.”

At the state level in New Mexico, this would mean increasing the bonding rates required of companies who extract fossil fuels, the letter read.

In June, former-Acting OCD Director Dylan Fuge estimated the state had $107 million in bonds against up to 35,000 well statewide. That would pay for “less than half” of the cost if 1 percent of those wells should they be abandoned, Fuge said, about $200 million.

He’s now an attorney for nonprofit Earth Justice in Santa Fe and said higher bonding rates would better support state regulators, while protecting the environment.

If 5 percent of the wells in New Mexico were abandoned, Fuge estimated remediation would cost up to $500 million and more than $1 billion if 10 percent of New Mexico’s wells needed clean up.

“Industry is doing plugging continuously, hundreds a year,” Fuge said. “They plug them for a whole host of reasons. It’s not reasonable for us to assume all wells would be abandoned, but there has to be a balance.”

That’s why Fuge supported House Bill 133 during the 2024 Legislative Session, which ended in February, that would have created a “tiered” bonding rate based on the size and production of oil wells drilled in New Mexico. Smaller, low-producing wells would be grandfathered into their current bonding rates, Fuge said, if the bill had passed.

The idea was likely to be brought up again in the 60-day session starting January, he said.

“We know macroeconomic situations can change, increasing state liabilities and we need assurances to cover those liabilities,” Fuge said. “It’s like any insurance, the key is finding a path forward that reflects the right balance in terms of adequately insuring against future risks and not add undue costs.”

Currier, NMOGA president argued oil companies already pay into the state’s Conservation Tax which Currier argued should be used more via legislative action to pay for the well clean up, rather than raising bonding rates.

“Increased bonding requirements will only serve to limit opportunity for small, New Mexico-owned businesses,” Currier said. “An unnecessary increase may actually grow the number of abandoned wells as smaller companies become unable to secure a bond.”

Adrian Hedden can be reached at 734-972-6855, achedden@currentargus.com or @AdrianHedden on the social media platform X.