Torres Small Leads Bipartisan Efforts Urging Administration to Follow New Mexico’s Example

Las Cruces, NM–Yesterday, Congresswoman Xochitl Torres Small (NM-02) led a bipartisan letter calling on Secretary of the Interior David Bernhardt to issue a rule that would give oil and gas operators the flexibility to temporarily shut in their wells during the COVID-19 public health emergency. The office of New Mexico’s State Land Commission issued a similar rule to be applied to state land that received support from both environmental groups and the energy industry. 

“Increased supply combined with a dramatic cut in demand due to COVID-19 has caused the price of oil to plummet. The consequences have been devastating for local economies across southeastern New Mexico. Providing oil and gas operators the flexibility to temporarily shut in their wells will help meet needs where current guidance falls short. I’m calling on Secretary Bernhardt to follow New Mexico’s example and take swift action to implement this policy that will benefit oil and gas workers, the environment, and the economy,” said Torres Small.

The letter highlights the unprecedented losses facing oil and gas producers across the country and outlines how New Mexico’s plan could help stabilize the energy industry nationwide while keeping workers safe and helping meet environmental goals.

“An unprecedented confluence of events has severely impacted the oil and gas industry, its workforce, and the small and rural communities that support the industry around the country. In southeastern New Mexico, southern Utah, and similar places all across the country, oil and gas workers and their families are paying the cost for plummeting oil and gas prices they cannot control. In recent weeks, companies have laid off large portions of their workforce and halted new drilling and finishing of wells, severely hurting the support service sector. In New Mexico alone, we’ve seen almost 50% of rigs cease operations since March 16,” wrote the Members.

The Members continued: “While we appreciate the guidance that has been provided to operators on federal lands, we are being told by producers that the guidance doesn’t fully meet their needs to be able to shut-in their wells temporarily. As a result of those conversations, we ask that you consider modeling the guidance after the New Mexico State Land Office emergency rule that allows operators to temporarily shut-in wells due to the severe reduction in the price of oil. ”

In addition to Torres Small, the letter was signed by Chris Stewart (UT-02), J. Luis Correa (CA-46), Kendra Horn (OK-05), Lizzie Fletcher (TX-07), and Vicente Gonzales (TX-15). 

The full text of the letter can be found here and below:

Dear Secretary Bernhardt: 

An unprecedented confluence of events has severely impacted the oil and gas industry, its workforce, and the small and rural communities that support the industry around the country. In southeastern New Mexico, southern Utah, and similar places all across the country, oil and gas workers and their families are paying the cost for plummeting oil and gas prices they cannot control. In recent weeks, companies have laid off large portions of their workforce and halted new drilling and finishing of wells, severely hurting the support service sector. In New Mexico alone, we’ve seen almost 50% of rigs cease operations since March 16. 

As Congress and the administration work to navigate the country through the COVID-19 pandemic, we must be mindful of the impact such actions have had on the oil and gas sector and its workers. As part of our next step in the recovery, we urge the Department of Interior and Bureau of Land Management to give oil and gas operators the flexibility to temporarily shut in their wells for economic reasons until 30 days after the national COVID-19 state of emergency is lifted or December 31, 2020, whichever is later. 

While we appreciate the guidance that has been provided to operators on federal lands, we are being told by producers that the guidance doesn’t fully meet their needs to be able to shut-in their wells temporarily. 

As a result of those conversations, we ask that you consider modeling the guidance after the New Mexico State Land Office emergency rule that allows operators to temporarily shut in wells due to the severe reduction in the price of oil. This rule received support from both environmental groups and industry. The office noted that allowing temporarily shut-in wells (1) reduces production which stabilizes the market; (2) allows producers to wait to sell their oil until the market improves, increasing expected profits; (3) provides increased expected royalty payments, as a percentage of the higher prices; and (4) keeps workers safe by allowing those involved in hydraulic fracturing or well completion to instead follow proper social distancing practices. 

Allowing voluntary shut-ins also benefits the environment. Right now, energy companies and regulatory entities have less manpower and resources, which will inevitably make it more difficult to meet environmental goals and protection standards. Temporarily shutting in wells will encourage production to occur when there are enough resources to ensure all environmental regulations can be followed. 

We urge the Department of Interior and Bureau of Land Management to provide this much-needed flexibility for operators. This action will help reduce pressure on the limited storage capacity, decrease supply, and allow operators to better optimize production of wells on public lands. The American economy, energy sector, workers, and taxpayers all stand to benefit.

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