Oil and gas producers: Bad players don't make us all bad
Megan Gleason, Albuquerque Journal, N.M.
Updated 9 min read
May 27—Part three of a four-part series on abandoned oil and gas wells in New Mexico.
HOBBS — Mark Veteto is following in his father's footsteps.
When he left Hobbs to go to school, he never thought he'd come back. He did.
He ended up working for a small oil company in Hobbs, taking care of field operations and eventually buying Me-Tex Oil and Gas with his father. It was work he knew well from going to rigs with his dad and working laborious oil jobs in the summers as he grew up.
"It's almost in our DNA," Veteto said. "It's family lineage."
The oil and gas industry is a proud one. Veteto compared it to the generations of families who work in the national labs in other parts of New Mexico.
Today, Me-Tex daily production ranges from 500 to 600 barrels of oil and 4 million cubic feet of natural gas — a small company, Veteto said.
He described himself as an environmentalist. He agreed that abandoned wells need to be cleaned up.
"It breaks my heart when I see these things, these wells that are just dirty and nasty, and there's no telling what's downhole," he said. "They need to be cemented. They need to be plugged. I'm for all that."
That doesn't mean the cleanup always happens.
"There's always someone who wants to break the law or the rules, and do it cheaper," Veteto said. "And there are going to be people like that in every industry, in every state, all over the world. Our industry is no different. We have bad players."
Missi Currier is the president and CEO of the New Mexico Oil and Gas Association, a coalition of oil and gas companies, individuals and stakeholders with over 1,000 members. She said deplorable, abandoned oil and gas well sites never should have been left like that.
However, she said abandoned wells aren't representative of the entire industry, and only a small fraction of oil and gas wells are left behind in such conditions.
"Many of our companies work diligently to ensure that they don't leave native New Mexico land in an embarrassing state, for a multitude of reasons," Currier said.
The New Mexico Energy, Minerals and Natural Resources Department didn't agree with the characterization that very few wells are abandoned, spokesperson Sidney Hill told the Journal via email. He said the number of abandoned wells changes over time and wells are abandoned for different reasons, like well conditions, operator health or macroeconomic factors.
It's a fruitful time to be in the oil and gas industry. New Mexico is continuing its upward trajectory in the field production of crude oil, beating record-production levels every year.
There are a handful of factors as to why the industry booms and busts, and one significant catalyst for the current boom was Russia's invasion of Ukraine in 2022.
Currier said it's actually a good thing oil and gas prices are so high; it means companies are less likely to abandon wells.
If prices are low or it's not a high-producing well, it's harder for companies to stay solvent, Currier said.
"Does that mean that that company should walk away from the well? Absolutely not," she said. "Does it sometimes happen that they have to or that they just choose to? Unfortunately, yes."
Overregulation
In the 1970s and '80s, Veteto was concerned the oil and gas industry was damaging the planet. But through protections like cemented casing in the ground to protect the water zone, not excessively venting gas and digging pits to contain oil spills, he said he's convinced the work is safe and environmentally friendly.
"Since 1923, we've been doing this," he said. "People aren't dropping dead."
Veteto said Gov. Lujan Grisham's administration "has done a disservice to our industry" by overreaching in the regulatory environment, like the 2021 ban on routine flaring and venting that he doesn't think harms the atmosphere and the state's pit rule that regulates waste disposal.
"We abide by the rules. I fill out the forms. I get the approval needed," he said. "But it's just so overburdened with regulation."
Currier said the oil and gas industry is held to a very high standard and companies are proud to operate within that standard successfully. But, she said, those regulations could also be driving other businesses away, as the state tries to diversify its income from the oil and gas industry.
"When they see that the state sometimes creates a difficult regulatory environment to operate in, it might hinder that diversification as other companies say, 'Well, if they'll do it to them, would they do it to us?" she said.
A lot of people believe operators are drilling the same way they did a hundred years ago, Currier said, and people who are against the industry don't understand how it has evolved. She said advanced technologies in the industry allow companies to access natural resources "in a more environmentally friendly and regulated way."
"If we were still operating the way we did 100 years ago or even 50 years ago, then those incredibly increasing and overreaching regulations would probably be very fair," she said.
Small, independent oil and gas companies may not be able to afford more advanced technologies.
Veteto said that when horizontal drilling became popular in the early 2000s, his business really changed. As opposed to developing a $10 million well that came with corresponding risk, his company turned more to buying royalties and acreage.
Not having access to that sort of advanced technology as well as staff naturally makes it riskier for independent companies to operate, Veteto said; they're often not guaranteed profit like large companies.
When a major oil company is done with a well, an independent business may say yes to taking over in the hopes there are still enough resources there for profit. As a hypothetical example, Veteto said a smaller company may only need 20 or 30 barrels a day to turn a profit, whereas a large corporation needs 100 barrels.
But if the oil needed isn't there, Veteto said, companies may start cheating on the rules.
"They see a leak and they say 'Hide it, don't fix it because I can't afford it,'" he said. "And the result is you got a well that needs to be plugged, and the state has responsibility."
Currier said the transfer of wells from large companies to smaller companies happens but isn't something she'd label as a trend. It's a free market, she said.
Policy solutions
Currier said oil and gas companies are proud to pay a tax that funds cleanup measures. But she questioned if enough of the taxes are going to the right place.
The oil and gas conservation tax is a monthly state tax companies pay to extract natural resources. The rate is 0.19% of the taxable value, and when the average WTI price of crude oil exceeds $70, it's 0.24%.
A majority of those taxes go straight to the state's general fund. Currier said about 10% — or 19% when crude oil prices are up — goes to New Mexico's reclamation fund, which the Oil Conservation Division of the New Mexico Energy, Minerals and Natural Resources Department oversees and uses for cleanup purposes.
NMOGA wants more of the taxes to go to the reclamation fund.
A bill to change the distribution method failed to pass the 2024 legislative session. It would have changed the percentage allocation to a set dollar amount — $5 million each month. Currier said she's hopeful the bill will run again in the next session, and NMOGA is trying to get conversations started with lawmakers before then.
State Land Office employees said another problem exists — bonding. Bonds are financial guarantees companies pay to get a drilling license or permit and are used to help with cleanup costs, if needed.
The bonds are nowhere near covering the full bill for cleanup. The State Land Office is $8.1 million short of filling the cost gap for well closure and cleanup through its bonds, according to a 2021 analysis from the Center for Applied Research.
Veteto suggested the state make operators with a history of poor ownership put up higher bonds to drill wells.
State Land Office General Counsel Ari Biernoff said bonding should be based on assessments of individual sites, like higher bonds for sites that contain more wells. He said the State Land Office plans to look at and potentially change how bonding works in the future.
Currier said there has to be a balance, with appropriate bonding levels that small businesses can afford.
"That's where it gets into a difficult situation," she said. "You're asking these companies not to walk away from lower-producing wells, but you're also making it impossible for them to do business."
Misunderstood
Veteto said those in the oil and gas industry feel very misunderstood.
"There is no way I can express to somebody in Santa Fe what it feels like to invest a lot of money that I can't afford and do all the research and the geology and put a deal together, and put a hole in the ground and hope and pray that it produces," he said, "and what that feels like when I'm at the end of a flow line, and we just put holes in the pipe to see if that's going to produce and when that oil and gas comes out — that feeling of 'I did it.'"
He expressed pride in the high revenues the oil and gas industry sends to local and state economies.
"God created an oil field in Hobbs, New Mexico, and west Texas because it's terrible," he said, laughing about what he later described as an ugly desert. "Look at the revenue here. We're here because of oil and gas. Every business that's here is here because of oil and gas."
Currier said energy demand is only increasing, and if the U.S. doesn't meet that demand, another country that may not necessarily have the same environmental regulations the U.S. does may step in.
"Because countries like China and Russia and other OPEC-type countries do not have those regulations in place, you will see that their methane release is much higher," she said.
Veteto said the New Mexico government needs to recognize the value of the oil and gas industry. He said if oil companies felt supported instead of put out of business, more operators would feel encouraged to extract resources cleanly and efficiently.
"Is oil and gas that bad? No. Is it bad in areas? Yes," he said. "How do you fix it? Get a good government that is pro-industry."
