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Lawmakers press agencies on plugging rates, reclamation fund and bond shortfalls
Summary
Legislators pressed the Oil Conservation Division and State Land Office over slowing abandoned‑well plugging, a ~$76 million reclamation fund balance, contractor shortages and whether current bond levels protect taxpayers from cleanup costs. Agencies said federal grants and environmental reviews temporarily reduced plugging but they are rebuilding capacity.
Lawmakers pressed state oil and conservation officials on Wednesday over why New Mexico is not plugging more abandoned wells despite statutory fees collected for that purpose.
Deputy Secretary Ben Shelton told the Water & Natural Resources Committee that production in New Mexico remains steady and that a recent dip in plugging activity resulted from extra environmental reviews tied to spending federal BIL and methane‑reduction funds. "We are getting that back up and spinning," he said, adding the department is updating price agreements to attract more local contractors and is bundling larger tranches of work so bidders can offer full monitoring and post‑plug services.
The crux of the hearing turned to the state reclamation ("rec") fund, which Shelton said holds about $76 million. Legislators — including Sen. Pat Woods and Rep. Rod Montoya — challenged agencies on how much of the conservation tax actually stays in the rec fund and questioned whether current bonding is adequate. "If you took the conservation tax amount on operators and increased it and then gave 100% to the rec fund, it would not be enough," Shelton said, noting environmental remediation costs on some sites can run into the millions.
State Land Office officials described three pathways to get wells plugged: voluntary operator action after notices of violation; compelled plugging through lease enforcement; and, when those fail, construction through the state or the Oil Conservation Division using available funds. The Land Office said it has pulled a limited number of bonds where lessees were noncompliant but that most enforcement emphasizes bringing companies back into compliance.
Small independent producers and representatives of the National Stripper Well Association warned lawmakers that steep increases in bonding or financial‑assurance requirements can push marginal operators out of business and expand the orphan‑well problem. Sam Bradley, a stripper‑well operator, described exiting Colorado after regulatory bonding obligations increased to levels he said exceeded the value of his assets.
Lawmakers asked the agencies for more granular data, including the age profile of wells being plugged, the number of contractors on the current price agreement and detailed projections of remediation liabilities. Several members urged redirecting more fee revenue to the rec fund and better prioritizing bond and enforcement actions before drawing on statewide reclamation balances.
The committee paused further reclamation debate for the next panel on enforcement and reform; staff agreed to follow up with targeted reports on average plugging costs, per‑well liabilities, and the age and location mix of wells scheduled for plugging.
The committee did not take any formal votes on legislation at the hearing; next steps were described as agency follow‑ups and briefings for legislators.
