New Mexico oil bounty comes with costs

In 2017, New Mexico moved into third place in the nation for oil production, pumping some 16 million barrels from the ground in October, behind Texas and North Dakota, and ahead of Alaska, California and Oklahoma. 

For New Mexico budget crunchers, this is welcome news. The higher production numbers, along with higher oil prices, have been a boon to the state’s revenues, which have long been highly dependent on the oil and gas industry. Mineral production taxes are up 17 percent, royalties and rents — most of which come from oil and gas facilities on state land — are up 44 percent. It’s a vastly different picture from just a few years ago, when oil prices plummeted, the drilling rigs were stacked in the yards, and waves of job losses crashed upon the oil and gas patches.

RigCountStates
Heavy drilling in the Permian Basin, along with renewed activity in the Chaco region of the San Juan Basin, has propelled New Mexico ahead of North Dakota in the rig count race.

Bounty, however, comes with a cost of its own, or what my wife, an economics teacher, would call negative externalities. These include an increase in oilfield traffic and resultant truck crashes, as well as impacts to environmental and human health, including oil- and gas-field “incidents” — spills of crude oil, produced water, lube oil and drilling mud, and releases of methane. 

In 2017, more than 1,300 such incidents* were reported to the New Mexico Oil Conservation Division. Some were small enough to be inconsequential, still others were, on their own, quite substantial. We compiled and mapped state data for your perusal. Some highlights:

NMSpills2017Permian
A bulk of the incidents last year occurred in the Permian Basin, in the southeast corner of the state, now one of the hottest oil plays in the nation.

 

  • In 2017, 111,115 Mcf (or 110.9 million cubic feet) of methane was lost in reported incidents in New Mexico. That could heat about 1,800 U.S. homes for a winter, or generate enough electricity to power some 2,700 homes for a year. Methane is a potent greenhouse gas, with 86 times more warming potential than carbon dioxide over the short-term, and at least 30 times more over the long-term. More striking is what spill stats don’t include: Methane lost and emitted during day-to-day oil and gas operations and via venting, flaring, and undetected leaks, which has reached as much as 3 billion cubic feet per month in the past. When a crash in oil prices in late 2014 sent the drill rigs back to storage, venting and flaring volumes dropped considerably. Still, in 2016, they averaged a whopping 531 million cubic feet per month, representing a substantial loss of royalty and tax revenue as well as a serious air pollution and climate altering problem. Volumes started to increase again in 2016, when drilling kicked back up. The Obama administration’s methane waste rule would have helped keep this in check by addressing emissions from flaring, venting and leaks. But Interior Secretary Ryan Zinke put that rule on hold, intending to ultimately kill it. 
VentingFlaringNM
The amount of methane vented and flared follows rig counts, which in turn follow oil prices. When prices crashed in 2015, the rigs went away, and flaring eased off. But in late 2016, as the rigs returned, so did flaring and venting volumes. We won’t know whether they continued to increase until 2017 stats are released later this year. Credit: Energy Information Administration.
  • 12,338 barrels of crude oil were spilled in reported incidents during 2017. The largest spill occurred last January in the Permian Basin, which has become one of the hottest oil plays in the nation, when a valve froze, causing tanks to overflow and slosh 600 barrels (25,200 gallons) onto the ground. Unlike methane, leaked oil can be vacuumed up, and about half of all the oil spilled in New Mexico was recovered last year. 
  • 93,515 barrels (3.9 million gallons) of produced water were released into the environment in New Mexico during 2017. So what’s wrong with a little spilt water? Produced water is the largest waste stream in the oil field. It accompanies oil and gas underground and is typically highly saline and contaminated with naturally occurring heavy metals, hydrocarbons and the cornucopia of chemicals injected into the well as fracking fluid. The salt, alone, can kill grass or crops, and it’s bad news if large quantities get into waterways; in August a Cimarex Energy Co. facility spilled 18,000 barrels of produced water into the Delaware River near the Texas-New Mexico border.
  • Also spilled in 2017 incidents: 473 barrels of liquid natural gas, 233 barrels of lube oil, 406 barrels of drilling mud and 589 barrels of condensate.
  • Most reported incidents were caused by equipment failure, followed by corrosion. Other causes include: human error, lightning, freeze, vandalism, fire, blow out and vehicular accident.
  • Excerpt from one of the more interesting comments on an incident: “While traveling south on Hwy 550, OCD inspector was passed by several Emergency First Responders, OCD stopped and asked if emergency was oil and gas related. Responder indicated that there was a tank fire. … The employee suffered minor burns to his hands and face and was transported to San Juan Regional Hospital via Ambulance. SJCFD extinguished the flames using class B foam.”
  • About 95 percent of these incidents were reported not by regulators or inspectors, but by industry representatives. On the one hand, it shows that industry is abiding by the de facto honor system that results from a low inspector-to-facility ratio. On the other, it makes you wonder just how many incidents aren’t being discovered or reported.
  • Regardless of all the extra cash flowing into New Mexico coffers, funding for the New Mexico Environment Department has not increased accordingly.
  • 2018 has started with a bang. There were an average of five incidents per day during the first two weeks of the year.

See an interactive map showing all of the reported 2017 incidents. Hover over each bubble for details on the specific incident.

*If two different materials are leaked in the same event, we count it as two incidents.

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