Feds send $45M to New Mexico to fix abandoned oil and gas wells. Industry sues over fees.

Another $25 million in federal funds will be used to clean up abandoned oil and gas wells in New Mexico, the second phase of a series of grant funds offered to states for the work.

Known as “orphaned” wells in oil and gas industry terms, the wells are abandoned by operators when they are found financially unviable. Government agencies like the State of New Mexico’s Energy, Minerals and Natural Resources Department (EMNRD) can pay for the work from bonds funds paid to the state, but often is not enough to cover the job.

Funds from the U.S. Department of Interior via the Infrastructure Investment and Jobs Act were provided to EMNRD’s Oil Conservation Division and would be used to hire contractors to plug the wells and remediate the land to its natural state. The Division estimated there were about 1,700 orphan wells in the state, and its current funding allows the agency to plug about 200 a year.

The State got its first funds via the program in October 2022, and since then the OCD reported plugging 138 wells, curbing 158,000 kilograms of methane emissions, and 4,447 metric tons of carbon dioxide per year.

In its May 16 announcement of the funding, the OCD pointed to a recent project near Carlsbad where the agency remediated an oil and gas site it said was once dubbed a “methane super emitter,” alongside a local RV park.

About 90 percent of initial $25 million was allocated as of May 6, the OCD reported, and the state intended to leverage funding via its Reclamation Fund for the ongoing work. Of those funds $19.4 million was spent on well plugging and methane monitoring, read a news release, while $5.6 million went to eight environmental remediation and surface reclamation projects in the state.

More: APA Corp. plans $700M divestment of Permian Basin, Eagle Ford oil and gas assets

That work led to the removal of 80,000 cubic yards of oil contaminated soil and produced water.

"This funding is making a meaningful difference on the ground by addressing problems left to taxpayers by irresponsible operators," said EMNRD Deputy Secretary Dylan Fuge.

In total, the DOI appropriated $660 million in formula grant funding offered to states, part of President Joe Biden’s “Justice40 Initiative” to provide 40 percent of federal investment benefits to disadvantaged communities and those “overburdened” by pollution, read a DOI announcement.

“These investments are good for our climate, for the health of our communities, and for American workers,” said DOI Acting Deputy Secretary Laura Daniel-Davis. “With this additional funding, New Mexico – and states all across the country – will put more people to work to clean up these toxic sites, reduce methane emissions and safeguard our environment.”

The funding came as another federal agency the Bureau of Land Management, also an arm of the DOI, finalized regulations in April to increase bonding requirements to drill oil and gas wells, intending to increase the industry’s contributions to the work. The regulations drew backlash from industry leaders, including those in New Mexico, which filed a lawsuit against the DOI aiming to reverse the regulations.

The New Mexico Oil and Gas Association (NMOGA) and the Independent Petroleum Association of New Mexico (IPANM) joined the May 15 lawsuit led by the Western Energy Alliance in U.S. District Court for the District of Wyoming.

More: Public lands in Eddy County up for lease to oil and gas by feds in February 2025

The new BLM rule increased the minimum bonding amount to $150,000 per lease, and $500,000 for a company’s leases statewide. Previously, the minimum amount was $10,000. Other fees and royalty rates were increased under the new regulations, along with costs incurred during oil and gas lease auctions and bidding on federal land for oil and gas development.

NMOGA President Missi Currier said the higher federal costs could stymie oil and gas development in New Mexico and across the U.S.

“NMOGA supports the goal of ensuring fair returns for the American public from activities on federal lands, but this approach is an overreach that could impact U.S. energy security, the economy, and the full potential of the lands' multi-use possibilities,” Currier said.

Jim Winchester, IPANM executive director said higher costs will unfairly impact smaller producers represented by the association, and that the lawsuit was its only remaining path to supporting its membership.

“IPANM believes this legal action is necessary to preserve the foundational intent of the BLM to promote fair and equal public land use,” Winchester said. “IPANM is disappointed (Interior) Secretary (Deb) Haaland fails to consider the negative economic ramifications of this overreaching rule to those already in poverty in her home state.”

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on the social media platform X.

This article originally appeared on Carlsbad Current-Argus: Feds send $45M to New Mexico to fix abandoned oil and gas wells