By Megan Gleason, Albuquerque Journal
Upon first glance, it looked almost like a small pool of water. But the liquid puddle in the heart of New Mexico’s most prolific oil basin was indeed fossil fuel that overflowed from a long-since abandoned tankard.
Now, almost exactly four years after the New Mexico State Land Office began a legal battle against the well operator seeking compensation for the contamination, the state has won $7.5 million from the company responsible for the mess.
It’s the largest single judgment the State Land Office has been awarded since its Accountability and Enforcement program, aimed at holding operators responsible for damage left on state land, was launched in 2020.
“Companies are starting to understand that if you do business on state lands in New Mexico, we’re going to make you follow the rules,” Public Lands Commissioner Stephanie Garcia Richard said in a statement.
On Sept. 10, a Santa Fe judge in the 1st Judicial District Court ordered the Texas-based Smith & Marrs, the former operator of multiple wells on state land, to pay $7.49 million in damages to the State Land Office.
The Journal toured one of Smith & Marrs’ abandoned oil well sites in May. Huge oil storage tanks stood unused on the site, and multiple uncovered tanks had oil overlapping onto the ground, causing environmental and groundwater concerns for State Land Office officials.
An environmental engineer estimated cleanup costs, including plugging five abandoned wells and removing leaking oil tanks and abandoned infrastructure, would range from $5.8 million to $9.6 million, so the court set the damages at about the midpoint of the estimate, according to the court’s final order.
The $7.5 million in damages runs at an interest rate of 15% per year, higher than usual because of “tortious conduct,” according to the final order.
Getting to this point
The state discovered in 2016 Smith & Marrs had stopped producing oil and gas on its public land leases, according to the original complaint the State Land Office filed with the 1st Judicial District Court in September 2020.
The company’s leases ultimately expired, and despite the State Land Office reinstating two of them in 2018, Smith & Marrs again stopped producing on the sites and paying the land office its dues.
And, Smith & Marrs didn’t adhere to environmental cleanup rules also required by the State Land Office in its lease and settlement agreements, leaving old infrastructure, oil tanks and oil spills on its former sites.
The State Land Office in 2020 filed a complaint with eight counts against Smith & Marrs: trespass, waste and negligence; common-law trespass and waste; conversion (of minerals on state land); unjust enrichment; accounting; restitution of possession; permanent injunction; and breach of contract.
The agency had multiple requests for relief, including compensatory damages and an injunction prohibiting Smith & Marrs from occupying or using state land, except to reclaim and remediate its abandoned sites.
Ernest Padilla with Padilla Law Firm formerly represented Smith & Marrs, but filed to withdraw from the case in July due to becoming “increasingly frustrated with the clients’ inability to properly defend this action.”
The court in July ordered Smith & Marrs to pay a $150,000 bond, which the company didn’t do. Smith & Marrs also failed to retain an expert for an evidentiary presentation.
The Journal left a message at Padilla’s law office but never heard back. Smith & Marrs has been unrepresented since the judge approved Padilla’s withdrawal in August.
The State Land Office has filed about 30 lawsuits so far aiming for cleanup measures on abandoned sites, with most ending in settlement but four resulting in significant monetary judgments, according to the agency.
“New Mexico’s taxpayers should not be on the hook for contamination caused by oil and gas companies, period,” Garcia Richard said.
This article originally appeared in the Albuquerque Journal.