A. The oil conservation division of the energy, minerals and natural resources department may:
(1) collect data;
(2) make investigations and inspections;
(3) examine properties, leases, papers, books and records;
(4) examine, check, test and gauge oil and gas wells, tanks, plants, refineries and all means and modes of transportation and equipment;
(5) hold hearings;
(6) provide for the keeping of records and the making of reports and for the checking of the accuracy of the records and reports;
(7) limit and prorate production of crude petroleum oil or natural gas or both as provided in the Oil and Gas Act; and
(8) require either generally or in particular areas certificates of clearance or tenders in connection with the transportation of crude petroleum oil or natural gas or any products of either or both oil and products or both natural gas and products.
B. The oil conservation division may make rules and orders for the purposes and with respect to the subject matter stated in this subsection:
(1) to require dry or abandoned wells to be plugged in a way so as to confine the crude petroleum oil, natural gas or water in the strata in which it is found and to prevent it from escaping into other strata; pursuant to Section 70-2-14 NMSA 1978, the division shall require financial assurance conditioned for the performance of the rules;
(2) to prevent crude petroleum oil, natural gas or water from escaping from strata in which it is found into other strata;
(3) to require reports showing locations of all oil or gas wells and for the filing of logs and drilling records or reports;
(4) to prevent the drowning by water of any stratum or part thereof capable of producing oil or gas or both oil and gas in paying quantities and to prevent the premature and irregular encroachment of water or any other kind of water encroachment that reduces or tends to reduce the total ultimate recovery of crude petroleum oil or gas or both oil and gas from any pool;
(5) to prevent fires;
(6) to prevent "blow-ups" and "caving" in the sense that the conditions indicated by such terms are generally understood in the oil and gas business;
(7) to require wells to be drilled, operated and produced in such manner as to prevent injury to neighboring leases or properties;
(8) to identify the ownership of oil or gas producing leases, properties, wells, tanks, refineries, pipelines, plants, structures and all transportation equipment and facilities;
(9) to require the operation of wells with efficient gas-oil ratios and to fix such ratios;
(10) to fix the spacing of wells;
(11) to determine whether a particular well or pool is a gas or oil well or a gas or oil pool, as the case may be, and from time to time to classify and reclassify wells and pools accordingly;
(12) to determine the limits of any pool producing crude petroleum oil or natural gas or both and from time to time redetermine the limits;
(13) to regulate the methods and devices employed for storage in this state of oil or natural gas or any product of either, including subsurface storage;
(14) to permit the injection of natural gas or of any other substance into any pool in this state for the purpose of repressuring, cycling, pressure maintenance, secondary or any other enhanced recovery operations;
(15) to regulate the disposition, handling, transport, storage, recycling, treatment and disposal of produced water during, or for reuse in, the exploration, drilling, production, treatment or refinement of oil or gas, including disposal by injection pursuant to authority delegated under the federal Safe Drinking Water Act, in a manner that protects public health, the environment and fresh water resources;
(16) to determine the limits of any area containing commercial potash deposits and from time to time redetermine the limits;
(17) to regulate and, where necessary, prohibit drilling or producing operations for oil or gas within any area containing commercial deposits of potash where the operations would have the effect unduly to reduce the total quantity of the commercial deposits of potash that may reasonably be recovered in commercial quantities or where the operations would interfere unduly with the orderly commercial development of the potash deposits;
(18) to spend the oil and gas reclamation fund and do all acts necessary and proper to plug dry and abandoned oil and gas wells and to restore and remediate abandoned well sites and associated production facilities in accordance with the provisions of the Oil and Gas Act, the rules adopted under that act and the Procurement Code [13-1-28 to 13-1-199 NMSA 1978], including disposing of salvageable equipment and material removed from oil and gas wells being plugged by the state;
(19) to make well price category determinations pursuant to the provisions of the federal Natural Gas Policy Act of 1978 or any successor act and, by regulation, to adopt fees for such determinations, which fees shall not exceed twenty-five dollars ($25.00) per filing. Such fees shall be credited to the account of the oil conservation division by the state treasurer and may be expended as authorized by the legislature;
(20) to regulate the construction and operation of oil treating plants and to require the posting of bonds for the reclamation of treating plant sites after cessation of operations;
(21) to regulate the disposition of nondomestic wastes resulting from the exploration, development, production or storage of crude oil or natural gas to protect public health and the environment; and
(22) to regulate the disposition of nondomestic wastes resulting from the oil field service industry, the transportation of crude oil or natural gas, the treatment of natural gas or the refinement of crude oil to protect public health and the environment, including administering the Water Quality Act [Chapter 74, Article 6 NMSA 1978] as provided in Subsection E of Section 74-6-4 NMSA 1978.
History: 1953 Comp., § 65-3-11, enacted by Laws 1978, ch. 71, § 1; 1986, ch. 76, § 1; 1987, ch. 234, § 61; 1989, ch. 289, § 1; 1996, ch. 72, § 2; 2004, ch. 87, § 2; 2018, ch. 16, § 1; 2019, ch. 197, § 6.
ANNOTATIONSRepeals and reenactments. — Laws 1978, ch. 71, § 1, repealed 65-3-11, 1953 Comp. (former 70-2-12 NMSA 1978), relating to enumeration of powers, and enacted a new 70-2-12 NMSA 1978.
Cross references. — For filing rules and regulations, see 14-4-3 NMSA 1978.
For public utilities commission's lack of power to regulate sale price at wellhead, see 62-6-4 NMSA 1978.
For the federal Natural Gas Policy Act of 1978, see 15 U.S.C. § 3301 et seq.
The 2019 amendment, effective July 1, 2019, authorized the oil conservation division of the energy, minerals and natural resources department to make rules and orders to regulate the disposition, handling, transport, storage, recycling, treatment and disposal of produced water; and in Subsection B, Paragraph B(15), after "regulate the disposition", deleted "of water produced or used in connection with the drilling for or producing of oil or gas or both and to direct surface or subsurface disposal of the water, including disposition by use in drilling for or production of oil or gas, in road construction or maintenance or other construction, in the generation of electricity or in other industrial processes, in a manner that will afford reasonable protection against contamination of fresh water supplies designated by the state engineer" and added the remainder of the paragraph.
Applicability. — Laws 2019, ch. 197, § 12 provided that the provisions of Laws 2019, ch. 197 apply to contracts entered into on and after July 1, 2019.
The 2018 amendment, effective May 16, 2018, aligned the financial assurance requirements of this section with Section 70-2-14 NMSA 1978 for the plugging of dry or abandoned wells, and made stylistic changes throughout; in Subsection A, in the introductory clause, deleted "Included in the power given to", and after "natural resources department", deleted "is the authority to" and added "may", and added paragraph designations "(1)" through "(8)"; and in Subsection B, in the introductory clause, deleted "Apart from any authority, express or implied, elsewhere given to or existing in the oil conservation division by virtue of the Oil and Gas Act or the statutes of this state", after "The", added "oil conservation", after "division", deleted "is authorized to" and added "may", and after "rules", deleted "regulations", in Paragraph B(1), after "other strata", added "pursuant to Section 70-2-14 NMSA 1978", after "shall require", deleted "a cash or surety bond in a sum not to exceed fifty thousand dollars ($50,000)" and added "financial assurance", and after "the performance of", deleted "such regulations" and added "the rules", and in Paragraph B(18), after "the rules", deleted "and regulations".
The 2004 amendment, effective May 19, 2004, amended Paragraph (15) of Subsection B to add: "including disposition by use in drilling for or production of oil or gas, in road construction or maintenance or other construction, in the generation of electricity or in other industrial processes".
The 1996 amendment, effective May 15, 1996, inserted "of the energy, minerals and natural resources department" in the first sentence of Subsection A; and in Subsection B, substituted "that reduces" for "which reduces" in Paragraph (4), and inserted "and to restore and remediate abandoned well sites and associated production facilities" and "the rules and regulations adopted under that act" in Paragraph (18).
The 1989 amendment, effective June 16, 1989, added Subsections B(21) and B(22).
The 1987 amendment, effective July 1, 1987, in Subsection B(18), substituted "Procurement Code" for "Public Purchases Act"; added Subsection B(20); and made minor changes in language and punctuation throughout the section.
The 1986 amendment, effective May 21, 1986, substituted "oil conservation division" for "division" in Subsection A and in the introductory paragraph of Subsection B; substituted "provided in the Oil and Gas Act" for "in this act provided" in Subsection A; substituted "the Oil and Gas Act" for "this act" in the introductory paragraph of Subsection B; substituted "cash or surety bond" for "corporate surety bond" in Subsection B(1); added Subsection B(19), and made minor stylistic changes throughout the section.
Burden of production. — An applicant for a permit to drill an oil and gas well in a commercial potash area has the burden of demonstrating that the oil and gas well will not waste commercial potash deposits. Bass Enters. Prod. Co. v. Mosaic Potash Carlsbad Inc., 2010-NMCA-065, 148 N.M. 516, 238 P.3d 885, cert. denied, 2010-NMCERT-006, 148 N.M. 582, 241 P.3d 180.
Correlative rights. — The oil conservation commission is not required to ensure that holders of potash rights and holders of oil and gas rights are entitled to retrieve their equitable share of the resources in a given area, but is required to examine the competing interests for resources and make a determination whether a proposed oil and gas well would unduly impact potash development. Bass Enters. Prod. Co. v. Mosaic Potash Carlsbad Inc., 2010-NMCA-065, 148 N.M. 516, 238 P.3d 885, cert. denied, 2010-NMCERT-006, 148 N.M. 582, 241 P.3d 180.
Substantial evidence supported denial of applications to drill oil and gas wells in potash areas. — Where oil and gas operators applied for permits to drill oil and gas wells on private land that was not included in the potash operator's designated life of mine reserve area, but was located within the buffer zone of the life of mine reserve area; the applications were opposed by the potash operator; and the oil and gas operators did not challenge the potash operator's designation of the life of mine reserve area or the potash operator's evidence that the proposed oil and gas wells would prevent the mining, and therefore cause the waste of, commercial deposits of potash because the wells would block access to potash reserves, and because the potash operator could not, due to the increased risk of methane gas caused by the oil and gas well, mine within one-half mile of an oil and gas well; that the oil and gas operators had alternative means to develop the oil and gas reserves by horizontal or directional drilling; and that the proposed wells were within the buffer zone and were, therefore, prohibited by the oil conservation commission's order which prohibited the drilling of oil and gas wells within the buffer zone unless a clear demonstration was made that commercial potash would not be wasted unduly by the drilling of the wells, the oil conservation commission's orders denying the applications were supported by substantial evidence. Bass Enters. Prod. Co. v. Mosaic Potash Carlsbad Inc., 2010-NMCA-065, 148 N.M. 516, 238 P.3d 885, cert. denied, 2010-NMCERT-006, 148 N.M. 582, 241 P.3d 180.
Denial of applications to drill oil and gas wells in potash areas did not deny applicants due process of law. — Where oil and gas operators applied for permits to drill oil and gas wells on private land that was not included in the potash operator's designated life of mine reserve area, but was located within the buffer zone of the life of mine reserve area; the applications were opposed by the potash operator; the oil conservation commission's order provided that the oil conservation commission should deny any application to drill an oil and gas well in commercial potash areas unless a clear demonstration was made that commercial potash will not be wasted unduly by the drilling of the well; the oil and gas operators were given an opportunity to review the geologic basis for the designation of the potash operator's life of mine reserve area; the oil and gas operators were given the opportunity to either challenge the designation of life of mine reserve area or to demonstrate that the proposed wells would not unduly waste potash; and the oil and gas operators had the opportunity to use the subpoena powers of the oil conservation commission before the hearing, the oil and gas operators were not denied due process of law. Bass Enters. Prod. Co. v. Mosaic Potash Carlsbad Inc., 2010-NMCA-065, 148 N.M. 516, 238 P.3d 885, cert. denied, 2010-NMCERT-006, 148 N.M. 582, 241 P.3d 180.
Award of equitable compensation to landowner. — Where the oil conservation division ordered oil and gas lessee to drill and oversee monitoring wells on the landowners' land, and the oil and gas lease on the land did not include express language that permitted the lessee to drill and oversee monitoring wells on the land, and the implied easements by necessity included in the lease did not create any right that permitted the lessee to drill and oversee the monitoring wells on the land, the district court had authority to order the lessee to pay the landowners an annual access fee to drill and oversee the monitoring of the monitoring wells. Smith & Marrs, Inc., v. Osborn, 2008-NMCA-043, 143 N.M. 684, 180 P.3d 1183.
Powers pertaining to oil well fires. — The lawmakers intended commission not only to seek fire prevention to conserve oil, but also to conserve other property and lives of persons peculiarly subject to hazard of oil well fires. Cont'l Oil Co. v. Brack, 381 F.2d 682 (10th Cir. 1967).
The terms "spacing unit" and "proration unit" are not synonymous and commission has power to fix spacing units without first creating proration units. Rutter & Wilbanks Corp. v. Oil Conservation Comm'n, 1975-NMSC-006, 87 N.M. 286, 532 P.2d 582.
Am. Jur. 2d, A.L.R. and C.J.S. references. — 38 Am. Jur. 2d Gas and Oil §§ 145 to 163.
58 C.J.S. Mines and Minerals §§ 229 to 243.