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New Mexico Oil and Gas Regulators Send $40M Message: Noncompliance is Expensive

            New Mexico’s oil and gas regulators levied some of the largest fines in state history on June 29, seeking over $40M from Amerdev, an Austin-based oil and gas company, for alleged violations of the New Mexico Air Quality Control Act (“AQCA”) and other oil and gas regulations.  Section 74-2-12(B) of the AQCA authorizes a civil penalty of up to $15,000 per day per violation and the New Mexico Environmental Department (“NMED”) alleges that Amerdev’s aggregate violations bring Amerdev’s total penalties to $40,336,818. Simultaneously, the Oil Conservation Division (“OCD”) of the Energy, Minerals, and Natural Resources Department (“EMNRD”) issued a notice of violation against Amerdev for failing to submit the OCD’s required forms, issuing a civil penalty of $2.4M, and demand for compliance within five (5) business days.

The AQCA violations were first identified in August 2019, when NMED’s Air Quality Bureau (“AQB”) received a citizen complaint that Amerdev’s oil and gas facilities were flaring excessive amounts of gas in violation of state oil and gas regulations. Following an investigation, the AQB discovered that Amerdev failed to self-disclose the violations for between 100-200 days, operated in violation of its various general construction permits, and was operating unregistered equipment.

Importantly, Amerdev is alleged to have failed to get into compliance for many months once these violations were discovered. However, the majority of the fines levied on Amerdev pertain to excessive emissions from flaring, which were not disclosed in Amerdev’s excessive emissions reports as required by law. Flaring is allowed provided it is documented and approved in accordance with NMED rules. Amerdev is alleged to have emitted from its facilities 7,648,210 total pounds of excess emissions of the regulated air pollutants nitrogen oxides (NOx), carbon monoxide (CO), volatile organic compounds (VOCs), sulfur dioxide (SO2), and hydrogen sulfide (H2S). Amerdev claims that an “emergency condition” was present necessitating the flaring. However, because the alleged emergency conditions lasted in various instances for between 66-6200 hours, the AQB denied acceptance of Amerdev’s emergency condition claims.

The NMED has now ordered Amerdev to cease emitting excess emissions at all of its NM facilities, submit new construction permit applications within 60 days, and hire a third party auditor to audit all of Amerdev’s facilities within 9 months, and submit a list of mitigation projects to NMED within 30 days that “remedy, reduce, or offset past excess emissions resulting from Ameredev’s alleged violations of the Act, Regulations, and/or permits in this matter.” Amerdev now has thirty (30) days to respond to NMED’s allegations. Amerdev now must also secure OCD approval of a third party to audit its operations and submit to OCD a report by August 19, 2023.

New Mexico’s oil and gas regulators are sending a clear message that failure to comply with its regulations will cost far more than complying in the first place. Beatty & Wozniak, PC’s attorneys pride themselves on ensuring the firm’s clients remain in compliance with the complicated regulations that govern New Mexico’s energy industry. The firm will continue to monitor these matters as they proceed. Please contact our team of energy regulatory professionals if you have any questions about how to ensure that your operations are done safely, consistently, and in accordance with applicable laws.