New Mexico regulators fine oil producer USD 40 million for burning off vast amounts of natural gas

New Mexico oilfield and air quality regulators on Thursday announced unprecedented state fines against a Texas-based oil and natural gas producer on accusations that the company flouted local pollution reporting and control requirements by burning off vast amounts of natural gas in a prolific energy-production zone in the southeast of the state.

The New Mexico Environment Department announced a USD 40.3 million penalty against Austin, Texas-based Ameredev, alleging the burning caused excessive emissions in 2019 and 2020 at five facilities in New Mexico's Lea County near the town of Jal. Regulators raised concerns about the excess release of several pollutants linked to climate warming or known to cause serious health issues, including sulfur dioxide.

The agency alleged that Ameredev mined oil and natural gas without any means of transporting the gas away via pipeline, as required by state law. The company instead is accused of burning off the natural gas in excess of limits or without authorization in 2019 and 2020 with excess emissions equivalent to pollution that would come from heating 16,640 homes for a year, the agency said in a statement.

The open-air burning, or flaring, of natural gas is often used as a control measure to avoid direct emissions into the atmosphere, with permit requirements to estimate burning.

"They simply were not following what they had represented in their permits. ... They represented that they would capture 100 per cent of their gas, send it to the sales pipeline," said Cindy Hollenberg, compliance and enforcement section chief at the air quality bureau of the New Mexico Environment Department. Representatives for Ameredev and a parent company could not immediately be reached for comment Thursday by phone or email.

Separately, state oilfield regulators issued a violation notice and proposed a USD 2.4 million penalty against Ameredev for a series of regulatory infractions at one of the company's wells. It accused Ameredev of failing to file required production and natural gas waste reports.

"Such reports are critical for operators to demonstrate compliance with (New Mexico) waste rules, which themselves are a key component of New Mexico's climate change policy," the Energy, Minerals and Natural Resources Department said in a statement. "Other required reports were submitted but were unacceptably late."

Energy, Minerals and Natural Resources Department Secretary Sarah Cottrell Propst said her agency was pursuing the maximum penalty available. The sanctions can be disputed administratively, and eventually appealed in court.

The Environment Department has ordered the company to cease all excess emissions and seek permits that accurately reflect its operations, with verification from an independent auditor.

Hollenberg said that the sanctions stem from anonymous calls from concerned citizens about open-air flares from the burning of natural gas. She said that led to on-site inspections in late December 2019 at installations of tanks that receive crude oil from the wells.

"None of the facilities had permitted a flare and yet every facility was flaring," Hollenberg said in an interview. "Every site was different than what they had represented."

Advanced oil-drilling techniques have unlocked massive amounts of natural gas from New Mexico's portion of the Permian Basin, which extends into Texas. But existing pipelines don't always have enough capacity to gather and transport the gas.

State oil and gas regulators recently updated regulations to limit venting and flaring at petroleum production sites to reduce methane pollution, with some allowances for emergencies and mandatory reporting.

Recent changes by the state Environment Department focus on oilfield equipment that emits smog-causing pollution, specifically volatile organic compounds and nitrogen oxides.