New Oil and Gas Rules Add Major Costs for Producers
The New Mexico Oil Conservation Commission has finalized new rules that dramatically increase financial assurance requirements for certain oil and gas wells. The new rules require $150,000 in financial assurance for wells the state considers high risk, including aging, low-producing, or inactive wells. The previous minimum was $10,000. That is a 1,400% increase. Supporters say the rule is intended to ensure wells are properly plugged and cleaned up. The concern is that this new mandate creates a high fixed cost that will fall hardest on small and independent producers. For smaller companies, a jump from $10,000 to $150,000 per well can tie up capital, limit investment, make transfers more difficult, and force the premature plugging of wells that may still have productive life left.
