Thursday, March 26, 2009
Oil Agency Restricted OCD Role Restricted
By Charles D. Brunt
Journal Staff Writer
The state agency that regulates New Mexico's oil and gas industry lacks the authority to directly levy fines against companies that violate state regulations and must go through the Attorney General's Office and the courts to fine violators, the New Mexico Supreme Court has ruled.
State regulators say the ruling will severely limit their ability to enforce oil and gas regulations.
“We're going to have to fall back and regroup,” said Mark Fesmire, director of the Oil Conservation Division of New Mexico Energy, Minerals and Natural Resources Department. “We've been using the penalties to get compliance on some of the lesser issues.”
Fesmire said the division, which regulates oil, gas and geothermal activity in New Mexico, still has the authority “to pull an operator's bond and order any or all of their wells plugged” if they violate state regulations.
“That's kind of a drastic step,” Fesmire said this week. “Instead of proceeding to that step, we thought we had the ability to implement these penalties (fines).”
Raye P. Miller, secretary/treasurer for Artesia-based Marbob Energy Corporation, which filed the suit against the Oil Conservation Commission, said Wednesday that neither his company nor the oil and gas industry are challenging the state agency's right to regulate the industry.
“We believe the OCD needs to have the ability to regulate our industry, and we believe the OCD has the ability to regulate our industry,” Miller said. “Our only issue is the fact that, at times, the OCD appears to be the sheriff, prosecutor, judge, jury and hangman.
“... Their decisions need to have the ability to be reviewed by an impartial body, not by the same person making the accusation,” Miller said.
Marbob filed suit against the Oil Conservation Commission in 2006, which oversees the division, challenging its authority to impose sanctions against companies or individuals it had determined were in violation of state regulations.
In 2007, 1st Judicial District Judge Daniel Sanchez ruled against Marbob. The company appealed, but the state Court of Appeals declined to review Sanchez's ruling. The state Supreme Court took up the case in October 2008.
Before 2005, the Oil and Conservation Commission routinely filed cases involving alleged violations of oil and gas regulations in state District Court. That changed in 2006 after the commission adopted a new regulation giving itself “the authority to assess civil penalties and impose other sanctions against any person who violates the Oil and Gas Act ... or any rule, order, or regulation issued thereunder,” according to the Supreme Court decision written by Chief Justice Edward L. Chavez.
“While not unsympathetic to the (Oil Conservation) Commission's professed need for greater enforcement authority, we defer, as we must, to the Legislature for the grant of that authority ...” Chavez wrote.
Fesmire said the Legislature, as recently as this year, has declined to give the Oil Conservation Division that authority.