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SANTA FE, N.M.
New Mexico regulators, who are grappling with how to best regulate the oil and natural gas industry, heard Thursday from energy producers who have seen their costs rise and ranchers who are concerned about contamination.
At issue is a set of regulations that govern how oil and gas producers handle drilling wastes in pits, buried tanks, sumps and closed-loop systems.
The comments came as the state Oil Conservation Commission considers a request by the industry to revamp the so-called pit rule. A weeklong hearing is under way in Santa Fe.
All sides agree on the need to find a way to allow oil and gas development to continue in New Mexico while ensuring the arid state's water sources and soil are not contaminated. The debate is fueled by how to do it.
"I'm not against drilling, don't get me wrong," said Phil Bidegain, an eastern New Mexico rancher who is concerned about an amendment that calls for reducing the distance between water wells and temporary pits from 500 feet to 100 feet.
"Water is a precious commodity, especially in our area," he said. "I just think it would be easier to prevent anything from happening by having a larger distance. One hundred feet is only 33 yards. That's only 33 steps and when you think of it that way, it's pretty close."
Bidegain's family has been ranching near Tucumcari for 102 years, and he has developed a surface user's agreement that lays out rules for any oil and gas companies interested in drilling on his ranch.
The only line of defense for landowners who allow drilling on their property without such an agreement is the pit rule, he said.
The rule was first adopted by the commission in 2008 after dozens of hours of testimony from engineers, economists, environmentalists and ranchers.
Environmentalists and some ranchers argue the rule needs to stay intact to ensure water sources as well as wildlife and livestock are protected. However, the industry contends the regulations need to be amended so producers can remain competitive.
An industry group and environmentalists have filed appeals over the regulations. The cases are stalled in state district court, pending the outcome of the hearing before the commission
Aside from changing the siting requirements for temporary lined pits, the industry wants to be able to bury drilling mud wastes on site as along as the level of salts and other contaminants are low enough and the distance to groundwater is adequate.
The industry also wants use one large pit for multiple wells.
Rep. James Strickler, R-Farmington, testified that oil and gas producers have gone to other states and taken jobs with them because of the rule, costing New Mexico about $1 billion in lost tax revenues.
"That's a tremendous hardship on schools, on our colleges, on highways, on prisons," he said. "We're starting to see a little recovery in the economy, but this pit rule, it's a job-killer."
It could be next month before the commission makes any decisions on the proposed amendments.
Regardless of the outcome, responsible development depends on enforcement, said Gwen Lachelt, director of Earthworks' Oil and Gas Accountability Project.
The watchdog group released a report Thursday showing the number of inspections conducted by the state Oil Conservation Division increased in 2011 but more than half of producing wells still went unchecked.
One of the top energy producing states in the U.S., New Mexico has 12 state inspectors. More than 50,000 producing wells come under their purview.
New Mexico also is limited when it comes to assessing civil penalties against operators that violate the law and reporting and tracking violations, the report states.
Lachelt accused the Oil Conservation Division of failing in its mission.
"With their failure, they guarantee irresponsible oil and gas development and put landowners, their water and the environment at risk," she said.
The agency has acknowledged that it's understaffed, but officials maintain their inspectors are doing a good job.
Follow Susan Montoya Bryan on Twitter: http://www.twitter.com/susanmbryanNM