Thursday, July 1, 2010

The Truth About New Mexico's "Pit Rule"

Over the past two years, a debate has raged in New Mexico between those who work protect our water and land and some irresponsible oil and gas operators who oppose common sense efforts to make oil and gas exploration safer for everyone. The subject of the debate has been New Mexico's new "Pit Rule," which requires that drilling operations follow several new procedure to ensure that groundwater doesn't become contaminated by the drilling operations.

First, the rule requires that the "mud pits" alongside drilling sites be lined for the first time to prevent contaminants from leeching into the ground. Second, the rule requires that a record be kept of where each pit is located. Third, the rule required that the toxic wastes in the lined pits be removed to a disposal facility when drilling finished. Finally, the rule requires that a "closed loop system" be used when groundwater is withing fifty feet of the service to prevent groundwater contamination.

Since the New Mexico Oil and Gas Conservation Division adopted the rule, opponents have many numerous, loud and baseless claims that the rule has cost jobs and revenue to the state. The claims are wrong and are unsupported. There is no evidence to support such claims. In fact, the truth shows that opponents of the pit rule are dead wrong.

Look this statement from Apache Corporation, a New Mexico producer. They're busier now than ever: " We expect to drill in excess of 200 new wells during 2010 and currently have five rigs running in the Permian Basin. Of the 200-plus wells expected to be drilled, 100 new wells will be drilled in New Mexico, which will represent the most wells drilled by Apache in the state in any year. Also, we’ve identified areas that can take advantage of horizontal well technology. The first of those wells is drilled and in the process of being completed." (

Opponents of the pit rule seem not to understand the fundamental truth of the oil and gas business: production follows opportunity, which is made or broken by the price of the commodity. It is the fall in prices since 2008, not the Pit Rule, that has affected production. I have repeatedly raised this issue in committee and on the floor. Each time I have asked for evidence to support the claims made by the rule's opponents, I have heard nothing but silence.

The funny thing is that there is a lot of evidence to contradict the opponents. Take a look at the Baker-Hughes Rig Count data from 02-08. Note that all three states saw rig counts drop in Dec. '08. Colorado saw a HUGE drop, far worse than NM or WY. New Mexico's pit rule, obviously had nothing to do with CO or WY. It was all about commodity prices. Here is the document (pay special attention to the final two pages):

2009 2-19 Baker Huges Rotary Rig Count Weekly Comparison Thru February 13, 2009

For more recent data, as of June 4, there were 67 rigs drilling in New Mexico; that's up from 50 in Feb. 09, and increase of MORE THAN THIRTY PERCENT. Colorado had 52, which is down more than twenty percent from Feb. 09. Wyoming only had 34 drilling, a huge further decrease from Feb. 09. So, since Feb. 09, only one of the three states has seen an increase in drilling: New Mexico!

So, the data show that New Mexico's production is GROWING IN SPITE OF THE PIT RULE.

Opposition to the pit rule is about politics and Republicans' opposition to common sense environmental protections.

No comments: