Rule change sought in one of U.S.’ oldest producing gas basins

ALBUQUERQUE, N.M. — A Houston-based oil and gas company wants New Mexico regulators to ease restrictions on well locations in two counties within one of the oldest producing basins in the U.S., saying the change will result in the capture of more natural gas.

The request involving San Juan and Rio Arriba counties comes as an oil and gas boom has helped to refuel state coffers. That includes a recent record-breaking lease sale at the other end of the state near the Texas state line that promises nearly a half-billion dollars more in revenues.

But environmentalists and landowners are concerned about increasing well densities in the northwest as developers look to tap more reserves in the San Juan Basin.

The request by Hilcorp Energy Co. is set to be considered Thursday by the Oil Conservation Commission.

Critics want regulators to put off a decision until a thorough environmental review is done. They’re citing potential cumulative effects of the boom, saying more public scrutiny is needed before rules are changed.

Rancher Don Schreiber said the most pressing environmental questions in New Mexico is how many wells an energy company can drill. He has lived in the region for decades and remembers hunting deer as a boy across San Juan County’s high desert.

“I’ve watched it go in a fairly short lifetime from a place of incredible beauty to a borderline industrial site and certainly doubling the wells would put us over the edge,” he said.

Hilcorp in a statement Monday denied that the application is one that seeks to drill more wells or change the way new wells are permitted.

According to its application, the company currently operates more than 5,300 producing wells in what is known as the Blanco-Mesaverde gas pool in San Juan Basin. It also has thousands of wells that are producing from other formations in the region.

Those additional wells are situated to recover reserves within the Blanco-Mesaverde formation that aren’t being tapped due to current density limits, the company said.

“This allows all operators to reinvest and upgrade existing well sites and production equipment,” the company said, arguing that this will result in extending the life of the San Juan Basin.

The company also argued that changing well density wouldn’t eliminate the need to meet regulatory standards and other environmental, cultural and archaeological requirements for drilling new wells or working on existing wells.

Since the beginning of 2018, the oil commission has granted Hilcorp dozens of exceptions to the density rules. The company contends that updating the rules to allow for eight wells — up from the current four — on 320 acres would prevent waste and boost the capture of natural gas.

Hilcorp’s request follows a previous proposal to seek a change that would have allowed Oil Conservation Division staff to make decisions about well spacing rather than go through a public hearing process. The proposal piqued the interest of the state attorney general’s office and it was ultimately withdrawn.

Environmentalists on Monday asked the attorney general’s office to weigh in this time, citing concerns over public notice as the announcement of the latest proposal and the deadline for intervening spanned only a week over the Labor Day holiday.

They argued that wasn’t enough time, given the importance of the proposed change.

Schreiber said granting the request would amount to a parting gift to industry as leadership at the state Energy, Minerals and Natural Resources Department and the oil commission is expected to change when a new governor takes office in January.

State Energy Secretary Ken McQueen and Oil Conservation Division director Heather Riley both used to work for WPX Energy, which operated in San Juan Basin for years before shifting its focus to places along the Texas-New Mexico border and elsewhere.

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