Bill aims to strike down pit rules

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By Susan M. Bryan

ALBUQUERQUE, N.M. (AP) — A lawmaker from northwest New Mexico, home to one of the nation's largest natural gas basins, is taking aim at state regulations for oil and natural gas producers.

Rep. Tom Taylor, R-Farmington, has drafted legislation seeking to rescind the so-called pit rule, which restricts the use of pits for onsite waste disposal at drilling sites. The rule also regulates below-grade tanks and the use of closed loop systems during oil and gas operations.

"The pit rule had one goal and that was just to raise the cost of fossil fuels. The problem is they are so much cheaper than some of the alternative energies out there," Taylor said. "I think it's a political thing that deals with money, it doesn't deal with the environment."

The industry blames the pit rule in part for a slowdown in drilling activity in New Mexico and the loss of hundreds of millions of dollars in state revenues.

Taylor's legislation says the rule has cost the state about $140 million in tax revenue since being enacted in 2008 and that rescinding the rule would help recharge the state's coffers. Legislators are in the last stretch of a 30-day session that has focused on finding more revenue and raising taxes to plug a budget shortfall.

The legislation also says the pit rules have "no scientific basis, provide no environmental benefit and were adopted without legislative approval."

Oil Conservation Division director Mark Fesmire disputes those claims. He and environmentalists who supported the tougher regulations say they were needed to help the industry manage its drilling waste and to protect the environment.

Fesmire said Monday if the pit rule was rescinded, it would leave the state without any regulations for dealing with drilling waste.

"It's blatantly unconstitutional," he said of the legislation.

He added that the pit rule was created after industry experts, environmentalists and others gave hundreds of hours of testimony and state regulators reviewed thousands of pages of filings from all of the parties. Gov. Bill Richardson also relaxed some provisions in the rule last year after hearing from the industry.

Gwen Lachelt, director of Earthworks Oil and Gas Accountability Project, said that without the legislation, water quality, soil and public health are at risk.

Fesmire agreed, saying the rule's "common sense requirements are based on the fact that it is always less expensive to prevent pollution than to clean it up after the fact. This piece of legislation would repeal sensible requirements and leave our groundwater completely unprotected."

The state points to national rig count reports to show that the economic downturn and a drop in price have had more of an impact on activity than the pit rule. The state had 55 rigs exploring in New Mexico as of Friday, up from a low of 30 in April 2009.

But those in the industry say they know of producers who have left for Texas, Arkansas and Pennsylvania because of New Mexico's regulatory environment.

John Maxey, president of Roswell-based Read & Stevens Inc., said his company has transferred some of its capital investment budget to Texas. Operating under the pit rule, he said it cost his company an additional $200,000 to drill a 11,200-foot well.

Taylor said he is doubtful his bill will get far with just over a week remaining in the session, but he hopes it gets people talking about the pit rule and the importance of the oil and gas industry.

"We have the state question, 'Red or green (chile)?' If you apply it to this, in an attempt to go green, we've turned our budget red," Taylor said.