New Mexico Taxpayers on theโ Hook for Millions as “Orphaned” Oil Sites Proliferate
Santa Fe, NM – New Mexico isโข facing a growing financial risk โfrom abandoned oil and gas sites, with cleanup costs already reaching into the millionsโค and the potential for a “skyrocketing” state liability during industry downturns, according to a recent Finance committee report and interviews with state officials. The issue, dubbed โthe problem of “oilfield orphans,” highlights โvulnerabilities in โฃthe state’s regulatory framework and the potential for taxpayers to โขbear the burden of environmental remediation when companies fail โto properly close and clean up well sites.
The case of Chuza โคOil, whose abandoned tank battery near Gallup is currently undergoing a $650,000โฃ cleanup funded by the state, exemplifies the problem. Despite theโค site beingโ on federal land – and thus outside of โdirect state jurisdiction – New Mexico ultimately footed โthe bill.
The state’s oil Conservation Division (OCD) recorded 326 companies producing 740โ million barrels โคof oil in 2024, but production is heavily concentrated. โJust 25 companies accounted for 92% of theโ total oil output, aโ similar pattern โexists for โnatural gas. This concentration raises concernsโฃ about โthe financial stability of the numerous smaller producers, who are frequently โคenoughโค the first โคto struggle during economic downturns.
State Representative Matt McQueen (D-Gallisteo) has been advocating for stricter regulations to โprevent future orphaned wells. He proposed legislation in the last session that would have held well โฃowners responsibleโค for remediation costs even after selling wells to companies that later go bankrupt -โ mirroring federal regulations. “It would cause the industryโข to self-police and make sure โthat any future operators had the wherewithal to properly remediate โคwell โขsites,” McQueen stated.โฃ However, the bill did not pass.
Anotherโ proposal by McQueen aimed to screen potential oil and โgas buyers, weeding out those lacking theโข financial resources or โwith a history of negligence or bankruptcy, also failed to gain traction.
Theโฃ Finance Committee report echoes McQueen’s concerns, recommending the OCDโ be granted the authority to disallow well sales if a purchaser is deemed unlikely to meet future cleanup obligations. It also suggests increasing financial assurances required from operators,particularly for low-producingโ wells which are more prone to being โabandoned.
Ben Shelton, deputy cabinetโ secretary of the New Mexico Energy, Minerals and Natural Resources Department, acknowledged the report’s findings. “The report got a lot right, including โฃidentifying a need for [the Division] to be able to scrutinizeโข transfers more closely in order to reduce the likely incidences of orphaned wells.”
While theโ OCD currently lacks specific data on the number of orphanedโข tank batteries orโค their average โcleanup costs, recent cleanups have been ample.Three tank battery cleanups cost the state $623,000, โ$5.1โ million, and $7.6 million respectively. Theโค Chuza Oil site โwillโค add to this growing expense.
According to Sandel at Aztec Well Servicing, the company currently cleaning up the Chuza Oil site, theโ amount of contaminated soil discovered was higher โthan anticipated, โbut “not abnormal” โforโ these types of cleanups.โ The process remains ongoing as of publication.