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It’s the pits

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Sarah Gilman | May 22, 2012 09:34 AM

If you’ve followed any government effort to rein in the impacts of a polluting industry over the last several years, especially in the run-up to this year’s Presidential election, then you’re probably familiar with the beaten-to-death description of all new regulations as “job killers.” (That’s right people! This isn’t about public health or protecting private property rights or the greater good! It’s a nefarious conspiracy cooked up by a handful of rich enviro hippies hell bent on ending honest employment and destroying regular families like yours ONCE AND FOR ALL!)

It has been a favorite mantra of House Republicans bashing the federal Environmental Protection Agency’s efforts to curb power plant air pollution, as well as trade organizations crusading against state and local efforts to mitigate the impacts of the oil and gas industry. (I covered this last in my 2008 High Country News story, “Going to the Gasroots.”)

NM drill pitThe latest episode of this ongoing saga is the oil and gas industry’s intensifying battle against New Mexico’s “pit rule.” Adopted in 2008 after extensive input from industry, ranchers, environmentalists and residents, the measure forbids companies working in the state from dumping drilling waste in unlined pits, strengthens liner requirements for pits used, requires drillers working near water or homes to store fluids and wastes in closed tanks (closed loop systems) and requires all pits to be permitted by the state’s Oil Conservation Division (OCD) and publicly inventoried. The measure has been lauded by groups like Earthworks' Oil and Gas Accountability Project as one of the strictest of its kind in the country. But the state was careful to strike a balance, then-OCD-director Mark Fesmire told me that year. “We have to honor the oil and gas industry and at the same time preserve our resources so we’ll have something left when they’re done.”

Seems reasonable enough, right? But things have changed since Republican Gov. Susana Martinez replaced Democrat Bill Richardson last year. One of her campaign promises was to dismantle the pit rule, and the state Oil Conservation Commission is decidedly more conservative under Martinez appointee Jami Bailey, who serves as chairwoman and the director of the OCD, according to E&E’s EnergyWire (subscription required).

Last week, the commission held a weeklong hearing in Santa Fe to evaluate a request by industry to revamp the rules. According to Bloomberg Businessweek, the proposal includes

…an amendment that calls for reducing the distance between water wells and temporary pits from 500 feet to 100 feet … The industry also wants to be able to bury drilling mud wastes on site as long as the level of salts and other contaminants are low enough and the distance to groundwater is adequate, (as well as to) use one large pit for multiple wells.

Such changes are needed to keep New Mexico competitive, argues the New Mexico Oil and Gas Association, an industry trade group which also asked the state to remove requirements for closed loop systems.

The pit rule “was the stupidest rule that ever was crafted by man," State Rep. James Strickler, R-Farmington, apparently a master of hyperbole, informed the Farmington Daily Times in the leadup to the hearings. "Requirements such as cattle fencing only add costs that small producers cannot afford, (he said). ‘The little guy is getting killed.’ ”

Never mind that poor management of pits (e.g., not bothering to fence them off) can hurt ranchers by poisoning cows (see Hannah Nordhaus’s 2007 HCN cover story touching on the plight of conservative rancher Tweeti Blancett). Yeah, remember them? Aren’t these salt-of-the-earth folks supposed to be a core constituency of conservative politicians as well? Many of them are testifying on behalf of the pit rule.

And never mind that the rules have apparently resulted in vast reductions in the number of incidents of water contamination from stored drilling waste -- a phenomenon which costs industry and the state oodles of cash. By 2005, OCD staff had documented 800 incidents of groundwater contamination from oil and gas operations, 400 of them associated with unlined or poorly lined pits and below grade tanks, according to the Santa Fe New Mexican. But in 2010, “Fesmire claimed in testimony before a legislative subcommittee that after the pit rules were approved, state inspectors had found no new cases of contamination from oil and gas waste pits.”

And most of all, never mind that averaged annual counts of drill rigs operating in New Mexico – a good measure of industry activity – are slightly higher now than they were before the pit rule, according to state data compiled on GO-TECH, a website of the Petroleum Recovery Research Center in Socorro, N.M. In 2009, the rig number did drop to 43 (a little more than half of 2007 and 2008 levels), but given that it more than rebounded to 79 in 2011 and 82 so far in 2012, the decline likely had far more to do with the economic crisis and a resulting sharp decrease in demand for energy than it did with any undue regulatory burden on the industry.

Which brings us to what no industry-bagged politician or industry trade association ever talks about: Cumbersome or costly as they can be, good regulations often force innovations that maintain or improve cash flow while lessening environmental impacts. After all, who’s better at adapting quickly than massive private companies with boatloads of money to dump into figuring out how stay legal while keeping profit margins strong?

Some companies even put this knack for innovation towards getting the jump on government, opting to spend their money not on endlessly challenging regulation, but on finding better ways to do business. During my reporting for that 2008 "gasroots" story I found one particular standout -- Denver-based Cimarex Energy, one of the most active oil and gas companies in the southeastern corner of New Mexico.

Long before the state adopted its pit rule, Cimarex decided to store its drilling fluids in tanks that help prevent contamination of soil and water, allow for the fluids’ reuse, and keep wellpads smaller, among other benefits. The practice earned it an “Environmental Merit” award from the state. “We believe in it,” Doug Park, Cimarex's then-manager of drilling and completions in the Permian Basin area told me that summer. “We felt there was a lot of liability associated with the disposal of pits, so we tried to come up with a process that allowed us to handle all these environmental concerns while preserving a reasonable economic environment.”

When we spoke, he told me that the strategy had worked well for the company so far. “We can get permitting faster, we have more flexibility with location, and of course the government is much happier with the overall system." Though the equipment involved was more expensive, the benefits made it “close enough to a wash that our people are happy.” And when other companies gripe about having to pay fines in the hundreds of thousands of dollars when their open pits lead to contamination, Park said, well, “that’s really just the cost of doing business (that way), isn’t it?”

Unfortunately, those defending the pit rule don’t seem that optimistic that they’ll be able to hold the line against current efforts to weaken it. "We expect (the Oil Conservation Commission) to give industry everything they want," attorney Eric Jantz of the New Mexico Environmental Law Center told the Santa Fe New Mexican. "Bottom line is, if the pit rule is gutted, we're going to have increased incidences of groundwater and surface water contamination."

The next round of hearings will occur June 20, 21 and 22. Comments for and against the proposal to change the pit rule can be made directly to the Governor at 505-426-2200 or sent to Oil Conservation Commissioners Jami Bailey, Greg Bloom and Bob Balch at florene.davidson@state.nm.us (the commission's clerk) and Jami.Bailey@state.nm.us.

Sarah Gilman is associate editor of High Country News.

Photo of a possible drilling fluid waste pit in the Permian Basin, 2003, courtesy of photographer Bruce Gordon with Flickr group SkyTruth.

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