Jerry Redfern
Natural gas is burned off at a wellsite near Lovington, NM, as night falls.
This article was produced by Capital & Main. It is co-published here with permission.
In New Mexico, new state rules sparked a dramatic increase in reported incidents of vented and flared natural gas in 2021 — and reveal that the oil and gas industry has been losing vastly more of the climate-change-driving fossil fuel than previously reported.
“The state’s updated reporting requirements were long overdue,” says Jon Goldstein, senior director of regulatory and legislative affairs at the Environmental Defense Fund. The new numbers are in line with previous EDF research showing huge amounts of vented and flared natural gas in recent years.
A review of year-end data from the state’s Oil Conservation Division (OCD) shows that producers vented or flared enough natural gas to power nearly 39,000 homes for a year — roughly the number of households in Las Cruces, the state’s second-largest city.
The actual total for the year is likely much higher as the new reporting only began in May.
Not only that, but the new reporting system also reveals that the state’s largest natural gas producer, Hilcorp Energy of Houston, reported surprisingly low numbers of incidents — about a hundred times lower than either similarly sized competitors or the size of its operations would suggest.
“Unsurprisingly, I’m unsurprised,” says rancher Don Schreiber.Hilcorp has 122 wells scattered across his ranch in the San Juan Basin, and Schreiber keeps a close eye on them.
He says that the small number of official reports from the company reflects “just a failure of the system and a failure of the operator.”
The company also owns the state’s greatest number of wells — over 11,500 — all of them in the San Juan Basin in the northwest corner of New Mexico. Yet, as of Dec. 31, it had reported just 26 incidents total for the whole year, roughly the same as before the new reporting requirements.
The new requirements are part of Gov. Michelle Lujan Grisham’s state-wide push to decrease greenhouse gas emissions across the board.
Previously, operators submitted paper incident report forms to the Oil Conservation Division whenever they spilled oil, vented or flared gas, or spilled produced water or other chemicals on the ground.
The state’s new online filing system and more detailed report forms have bumped up incident submissions from 1,465 in 2019, before industry-wide COVID-19 disruptions, to more than 13,000 since the new rules took effect on May 25 last year.
All told, producers submitted more than 14,000 incident reports for all of 2021, covering more than 15,000 spills. These numbers will increase as late reports continue to be filed.
But operators fill out the reports themselves — and that is checked in the field by just 10 OCD inspectors who are responsible for monitoring more than 52,000 active oil and gas wells across the entire state. The department has requested a 27% bump in its budget for enforcement for 2023, but that ultimately rests with New Mexico legislators in their upcoming session.
Schreiber regularly checks the Hilcorp wells on his property with a heat-imaging camera that can show temperature differences that reveal leaking gasses invisible to the naked eye. “Every chance we get we do that. And we never fail to find leaks and vents,” he says, including in the last seven and a half months since the new reporting rules went into effect.
That imaging was done with Earthworks, which documents leaking wells across the region and reports them to state authorities. Its YouTube channel has more than three dozen videos of gasses leaking from Hilcorp operations in New Mexico.
In a report released earlier this year by Ceres and the Clean Air Task Force, Hilcorp was ranked the most prolific methane emitter of all oil and gas corporations in the country. According to data on Hilcorp’s website, the company has operations across the U.S., but 54% of its activity is in the San Juan Basin, which stretches across New Mexico and a bit into Colorado.
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Further review of the state’s newly collected records tells other critical stories, too.
For one, 90% of all reported incidents involve venting or flaring natural gas.
Statewide in 2021, the industry as a whole reported losing more natural gas to venting and flaring than the 190 smallest producers brought out of the ground in total the year before. And just one well — named Hades and owned by Midland, Texas-based BTA Oil Producers — led the pack, venting and flaring enough to power 1,879 homes.
It’s not that venting and flaring is more common than it used to be. In fact it shouldn’t be, as the new state rule has banned the practice in most instances since May 25.
Jerry Redfern
Instead, OCD’s new reports require much more careful accounting on the part of producers. And the threat of new penalties for not reporting, along with upcoming mandated venting and flaring reductions, likely play a part, too.
However, the records show that the largest single reported cause of all venting and flaring incidents — 23% of all cases — was “high line pressure,” which is not on the list of approved exceptions. Another 15% are noted only as “other.”These reports will help the state monitor and set benchmarks for how much operators can vent and flare in the future. That’s because another section of the new rules annually increases gas capture requirements, culminating in 2026, when venting and flaring can account for no more than 2% of all gas brought out of the ground.
Based on the 2021 reports, Spur Energy Partners of Houston stands out for having the largest number of reports and 30% of all natural gas reported that was vented and flared.
The company has more than 3,000 wells and other facilities and reported 2,503 spills, 1,499 of which were classified as major releases. It also has nine of the 10 leakiest facilities — storage tank farms with more than 1,200 incidents among them. Those numbers are up from 2019, when Spur reported 26 incidents of any kind.
Also from Houston, EOG Resources, which has 3,336 wells and is the second most productive gas developer, reported 1,359 incidents in 2021, up from 33 in 2019. And Devon Energy of Oklahoma City, the third largest gas producer with 2,000 wells, reported 643 incidents, up from 116.
For most major producers in the state, reporting increased in 2021. But not for all. Simcoe LLC of Durango, Colorado, which has about 2,300 wells, went from 12 reported incidents in 2019 to 3 in 2021.
“I do think the large differences in reported incidents among operators is interesting,” says David Lyon, senior scientist with EDF. He speculates that “it is possible that companies like Spur and Hilcorp have a similar frequency of these events, but Spur may have implemented a system that automatically notifies them of issues … while Hilcorp may be unaware of the incidents.”
Hilcorp, Simcoe and Spur did not respond to multiple calls and messages asking for comment for this story.
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Adrienne Sandoval, director of the OCD, says her office is paying close attention to the reports — and she has Hilcorp on her radar.
OCD just settled an enforcement action with Hilcorp for not following remediation plans at a half-dozen spill sites. Hilcorp agreed to pay a civil penalty of $932,500, clean up the sites and prevent similar violations from happening at other locations. The initial violation notice floated a $1.6 million penalty, but that was reduced following settlement talks.
When it comes to monitoring incident reports, she says that at this point “the intent was really to make sure that we had awareness of the operators who were starting off really low.” Sandoval added, “We could give them a little bit more individualized attention as needed.”
These are still early days for the reporting program — just seven and a half months so far — and the data are still a bit messy: For one thing, operators had a grace period of a few months to learn how to navigate the new filing system. Plus, there are not only more reports, but the new, all-online system collects mountains more data than the state’s previous reporting program.
Sandoval has her eye down the road when operators have filled out two quarters’ worth of updated, online production reports that balance how much comes out of their wells with how much ends up in pipelines. This should also indirectly account for all leaks, vents and flares, giving another avenue for vetting the incident reports. By 2026, fully 98% of natural gas that comes out of a well must end up in a production pipeline.
In May 2022, “We’re really going to have a really good picture of where everybody’s at,” she says. “And that’s gonna, I think, help drive some of what we do.”
Meanwhile, a fight is brewing in the state legislature over whether OCD will be able to fulfill its mandate to ride herd on a booming oil and gas industry. The agency — the state’s primary oil and gas regulator — asked for a $3.14 million budget increase to hire new inspectors and other technical staff, and to purchase new oilfield monitoring equipment. All of this is part of Gov. Michelle Lujan Grisham’s plan to reduce carbon emissions across the state by 50% by 2030.
But the state’s Legislative Finance Committee, led by a representative and a senator from the oil and gas-producing San Juan Basin, has countered with a proposed increase of $385,000, about 12% of the request. This is happening following two years of record state income from oil and gas.
At the same time, Lujan Grisham is promoting the San Juan Basin as a potential national hydrogen production hub — which would drive natural gas production even higher. Hydrogen, promoted in many quarters as a miracle, emissions-free green fuel, is usually made by heating and compressing natural gas until the hydrogen cracks off. If the CO2 that also results from the process is somehow sequestered underground, what results is so-called blue hydrogen.
However, every major energy agency around the world says natural gas production — for any reason — needs to shrink, primarily because of leaks in drilling and production. Natural gas is made of up to 90% methane, which is 80 times more potent as a greenhouse gas than CO2. Because of that, the state’s 2% leak limit will still permit emissions that pose a potent climate challenge.
From his vantage point in northwestern New Mexico, Schreiber calls hydrogen a storm cloud on the horizon.
“You can’t cut methane emissions by producing more methane,” even for hydrogen, he says. “As sure as cows eat grass and burp methane, operators that operate methane wells vent methane.
“In defense of cows, no cow ever burped benzene, toluene or xylene, and every single thing about them is biodegradable, in life and in death.”
