By Adrian Hedden
Carlsbad Current-Argus
A Permian Basin oil and gas operator has been ordered to pay $7.5 million to clean up the company’s abandoned oil wells on state land.
Texas-based Smith and Marrs Inc. was found liable for five abandoned oil wells on leased land the New Mexico State Land Office said the operator was required to clean up. The land office also said the company left behind unused infrastructure that leaked oil and wastewater onto the land surrounding the site.
The land office oversees about 13 million acres of trust land leases for various industries including oil and gas, renewable energy and manufacturing.
Smith and Marrs Inc. owner Ricky Smith declined to comment on the ongoing case. He disputed the cost the State Land Office estimated for the well plugging.
The fine was imposed by New Mexico First Judicial District Judge Kathleen McGarry Ellenwood of Santa Fe on Sept. 10 and announced in a land office news release on Sept. 20.
The judgment resulted from a complaint filed in 2020 by Commissioner of Public Lands Stephanie Garcia Richard, who heads the land office. The complaint was filed after the land office learned that oil production on the land had ceased in 2016.
The violations cited by the land office occurred at the San Mal Queen Unit in Lea County operating about 20 miles outside of Lovington in southeast New Mexico’s Permian Basin. Violations were established by an “expert” assessment, the land office news release said.
Gregory Crabtree, a licensed professional engineer with Young Environmental Services was admitted to the case by the court as the state’s expert witness who conducted the assessment, according to the judge’s ruling. Crabtree’s assessment also determined the cost of remediating the problems found at the site.
The defendants did not provide their own expert witness, the court said, and “made it clear they would not retain an expert witness and would not post the required financial assurance.”
“The Commissioner (Garcia Richard) has established by sufficient evidence her entitlement to an award of damages based on the estimated cost of remediating and reclaiming San Mal Queen Unit,” said the judgment.
Garcia Richard said the violations were assessed under the office’s Accountability and Enforcement Program. The damages against Smith and Marrs were the largest awarded since the program began in 2020, she said.
The land office says the program has saved taxpayers $56 million in clean up costs, plugging 560 abandoned oil and gas wells at the expense of operators.
Garcia Richard said the program has not thwarted continued growth of the oil and gas sector in New Mexico, an industry that produced a record $13.9 million in state revenue in the last fiscal year, according to a report from the New Mexico Oil and Gas Association. Activity in the Permian Basin was expected to produce an average 6.3 million barrels of oil per day in 2024, an 18 percent increase from 2023, according to the Energy Information Administration.
“The State Land Office continues to earn record revenue from oil and gas development while we have implemented this program, proving that appropriate oversight is not a hindrance to making money for New Mexico’s schools, universities and hospitals,” Garcia Richard said.
When an operator on leased State Trust land is found in violation of state requirements, the land office said it first contacts the company, offering the opportunity to plug wells or clean up contamination. Lessees that do not respond face additional enforcement, leading to litigation as occurred with Smith and Marrs.
This article originally appeared in the Carlsbad Current Argus.