The New Mexico Oil and Gas Industry: It’s the Pits!

By DAVID CORREIA

In the spring of 2005 I went with a friend to Eunice, New Mexico in the far southeastern corner of the state. My friend was at the beginning of a research project on the revival of the uranium mining industry in New Mexico and we travelled to Eunice to visit the first privately owned uranium enrichment facility in the U.S. The facility, owned by European conglomerate Urenco, uses centrifuges to separate uranium isotopes to create enriched uranium for nuclear power plants. In June of 2010 the Nuclear Regulatory Commission finally authorized startup of the plant. The arrival of Urenco in New Mexico marked not only the possibility of a revival in uranium mining in the state but also an expansion in New Mexico’s role along the entire nuclear fuel cycle. Today, six years later, while the promises of an expansion of uranium mining have thankfully not come true, New Mexico can stake a claim as a world leader in uranium enrichment and the handling of depleted uranium.

But this is not a story of uranium mining. Our time in Eunice sent us in another direction. During an interview with the director of the Hobbes-area Chamber of Commerce, a major supporter of uranium enrichment in southeastern New Mexico, we were introduced to the particular logic of New Mexico’s oil and gas industry. I asked the director if the manifold risks of the nuclear fuel cycle gave pause to his enthusiastic boosterism for the nascent nuclear industry in Hobbes. “Look around you,” he said. “Those oil derricks you see above ground [they’re everywhere in and around Hobbes, even in the parking lot of the motel we were staying in] are connected by a vast network of underground pipelines and hubs. We live on top of a bomb. What’s a little uranium?”

The oil and gas industry, in other words, was so dangerous to its workers and the people living around it, so threatening to groundwater and wildlife, and so destructive to the local economy, with all its booms and busts, that, well, what could it hurt to add a little more risk?

And that was the argument of the boosters.

The critics were less glib about the human and ecological cost of oil and gas. A local environmental activist (if you’ve been to Eunice you know that the words “local,” “environmental” and “activist” are rarely found together—a testament to the political power of the oil and gas industry in southeastern New Mexico) encouraged us to visit local waste pits where oil and gas operators dump the drilling muds and oil production brines that derricks take up during exploration.

Unlined Oil and Gas Waste Pits. Source: U.S. Fish and Wildlife Service

As one operator later explained to us, when the oil derricks come online, they take up a slurry of mining fluids mixed with a briny solution mingled with oil and gas that firms consider waste (it’s too expensive to extract the oil from the slurry). The standard practice, thus, had been to dump the slurry in massive unlined open pits.

It turns out that two outsiders with cameras and notebooks and driving around in a rental car are unwelcome at the massive waste pits south of Eunice. Twice we were run off by what appeared to be the only employee at the massive waste site operation—a twenty-acre compound hidden from the main road by a long berm hiding half a dozen thick, black, foaming ponds. The ponds were rectangular in shape and at least an acre in size. No telling how deep. We got lucky the second day when we showed up during the lunch hour and found no one on duty.

We pulled in just behind a trucker bringing a load to dump. We watched as he backed his rig up to one of the ponds and dumped an entire truckload of waste. It took nearly thirty minutes to drop this entire load. He stood smoking next to the hose connected to his rig that sprayed the slurry into the pond.

We were astonished at the whole scene. I figured the truck driver was an independent contractor and maybe willing to explain to me what exactly it was that I was seeing.

The ponds were fairly shallow, he explained, and unlined. Something about the soil structure was supposed to make liners unnecessary, but he admitted he was skeptical. He was glad he didn’t live in the area, he told me. He dumped in open pits all over southeastern New Mexico and west Texas and none of them had liners. Texas law allowed operators to dump millions of gallons of toxic waste each year in nothing more than a shallow hole in the ground at distances less than ten feet from drinking water supplies.

We watched as the rig dumped thousands of gallons of waste into what we learned later was only one of more than 80,000 waste pits in New Mexico that extend in an unbroken line from the Permian basin in southeastern New Mexico all the way northwest to the San Juan basin in the Four Corners area.

We weren’t the only ones dazed by the practice of unlined open pits. By 2003 the Environmental Bureau of the Oil Conservation Division (OCD) of the New Mexico Energy, Minerals and Natural Resources Department documented nearly 7,000 cases of unlined, open pits leaching contaminants into the soil and ground water and fouling wildlife habitat.

You can find a partial list of the leaking pits here.

And it wasn’t just leaking pits that concerned regulators. It had become common practice among many operators to dispose of drilling equipment and other wastes, namely the chemicals used in oil exploration, in and alongside the toxic stew of salt-saturated drilling fluids and oil slurry.

Three years after our visit to Eunice, in May of 2008, the Oil Conservation Division published the final version of a new waste pit rule that transformed the way the oil and gas industry operated in New Mexico. The rule made the practices we witnessed in Eunice in 2005 all but impossible. Where oil and gas operators once straight-piped slurry into shallow pits, now they were required to dispose of most wastes at permitted disposal sites. What wastes they could dispose of themselves had to be stored in either closed tanks or pits fitted with liners double the thickness of previous (though unmandated) standards.

Predictably, Senator Pete Domenici condemned the new rules as “double trouble for our country and the people of New Mexico. It could curb domestic production of oil and gas, making us more dependent on foreign oil, and it almost certainly will drive oil and gas business right out of our state which could mean the loss of over a billion dollars a year to our state’s economy.”

Figure 1: State Land Office Bonus Payments for Oil and Gas Leases

Despite Domenici’s fears, bonus payments, the money the State Land Office receives from oil and gas production, jumped dramatically in 2010 and 2011 according to research by the University of New Mexico’s Bureau of Business and Economic Research (figure 1). From $284 per acre in 2010, the figure nearly quadrupled to $908/ acre in 2011.

Figure 2: Oil Production in New Mexico
Figure 3: Gas Production in New Mexico

In addition to increased bonus payments, total oil and gas production increased in the years after the adoption of the new pit rule (figures 2 and 3), while profitability in the oil and gas spiked as prices skyrocketed (figure 4).

If we rely on Domenici’s self-serving logic, a logic that assumes a direct relationship between regulation and oil and gas industry profitability, we could say today that Domenici was right. Given the increase in revenues since the pit rules were enacted, more stringent regulation of the oil and gas industry appears to have increased profitability for those firms New Mexico.

But the industry wouldn’t say that. In fact, despite the spike in revenues, the industry today cries poverty and claims to be overburdened by bureaucratic red tap. The point, it seems, isn’t mere profitability, but the protection at all costs of the super profits to which the oil and gas industry has become accustomed.

Just as large utility companies attacked the Richardson administration’s stringent climate mitigation rules  the second the Martinez administration came into office, so too did the New Mexico Oil and Gas Association (NMOGA), in a coordinated attack, seek to undercut the pit rule.

NMOGA and the Independent Petroleum Association of New Mexico requested that the Oil Conservation Commission consider revisions to the rule. After fits and starts that included legal efforts by environmental organizations to try to block the NMOGA from gutting the rule, initial hearings on proposed changes to the pit rule—changes by industry lobbyists that are all about a return to business as usual—were conducted over five days in May of this year. “Groundwater and surface water is really the issue here,” said New Mexico Environmental Law Center attorney Eric Jantz, “and whether we want to sacrifice that for oil and gas profits.” Those hearings resumed yesterday in Santa Fe and will continue for the rest of the week.

Figure 4: Oil and Gas Prices for New Mexico Oil and Gas Operators

The NMOGA was part of recent efforts that culminated in gutting climate change mitigation rules; now they hope to do the same for the pit rule.

Much is at stake: for the NMOGA, it’s about the return of super profits that they understand are only possible when they’re allowed to engage in polluting practices; for everyone else it’s about clean water and the protection of wildlife habitat.

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