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Oil and Gas Education

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Oil and Gas Well Information

New Mexico Oil and Gas Production and Regulation

Water and Oil and Gas Development

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Oil and Gas Well Information

How are wells drilled?

Drilling rigs create a hole called a wellbore that targets a geological formation where oil and/or gas may be present. Vertical wells that are straight up and down were typical in the past, but increasingly the industry is moving toward horizontal or directional wells, where the well curves and exposes the wellbore to more of the target formation. In New Mexico, typical oil and gas wells range from 3,000 to 15,000 feet in depth. The horizontal part of the well can extend for up to two miles.

To protect the wellbore and any drinking water formations, steel pipe called “casing” is placed in the wellbore and cement is pumped through the casing. The cement pushes out the bottom of the casing and flows up the space between the wellbore and casing (or through the “annulus”) back to the surface. When the cement hardens, it forms a bond between the walls of the wellbore and the outside of the casing, thus sealing that space off from the flow of fluids (water, oil, or gases). The casing and cementing is then tested to ensure its integrity. This bond protects groundwater and oil and gas reservoirs from contamination. Typically, there are three separate layers of both casing and cement placed between drinking water aquifers and the actual pipe containing crude oil and/or natural gas. To produce oil and gas, holes are made in the casing in the reservoir interval, allowing hydrocarbons to flow into the well and up to the surface where they are processed and transported to market. Once a well is drilled, cased, and cemented, many also undergo stimulation processes, such as hydraulic fracturing, to boost production and minimize the amount of residual oil remaining in the formation.

What is hydraulic fracturing?

Hydraulic fracturing (also known as “fracking” or “hydro fracking”) has been used in the oil and natural gas industry since the 1940s. Recent advances in fracking coupled with horizontal drilling have opened up vast oil and gas resources in the United States that were previously considered uneconomic to produce.

Fracking is not a drilling process, but occurs after the wellbore has been drilled, cased, and cemented. During fracking, mostly water and sand (~99.5% of the total volume injected) along with small amounts of chemical additives (<0.5% of the total) are pumped at high pressures into a well. The resulting fractures in target rocks allow oil and gas to be produced from formations with low porosity and permeability, such as tight shale. The sand in fracking fluids props the fractures open so the oil and gas can flow freely into the production casing. The chemical additives are used for a variety of purposes, including to keep the sand temporarily suspended in the water, reduce friction losses, eliminate bacteria, and prevent rust. Nationwide, 90% of wells currently are fracked, and in New Mexico hydraulic fracturing takes place in both the San Juan and Permian Basins.

Is hydraulic fracturing safe?

There have been many claims about fracking contaminating groundwater aquifers across the United States. Despite these claims and the wide press they receive, there have been no proven cases of groundwater contamination from hydraulic fracturing anywhere in the United States. In New Mexico, both horizontal and vertical wells are typically drilled and completed in oil and gas zones that are separated by many thousands of feet of impervious rock layers beneath fresh water aquifer zones. In the Western United States, research shows that the tops of fractures are far beneath fresh water aquifer zones. During the fracking process, all fluids are kept isolated from fresh water through the multiple layers of metal casing and cement placed in the well. Fluids that return to the surface are safely disposed of via state regulated processes.

How is hydraulic fracturing regulated?

Oil and gas production is regulated at state and federal levels so that groundwater contamination or other environmental damage does not occur. The New Mexico Oil Conservation Division (OCD) oversees oil and gas production in New Mexico. The OCD gathers oil and gas well production data, permits new wells, enforces New Mexico's oil and gas laws and rules, and ensures the lands of New Mexico are protected and responsibly restored. OCD also protects the fresh waters of New Mexico from harm resulting from oil and gas production, including fracking activities.

OCD has rules in place to ensure proper well construction, fluid storage, fluid handling, and disposal. In addition, in 2012 the OCD created a hydraulic fracturing fluid disclosure rule ( NMAC) that requires oil and gas operators to disclose the contents of their frack fluids to the state.

How much water does hydraulic fracturing use?

Across the U.S., the amount of water needed to frack a well can range from 300,000 to over 8,000,000 gallons. Horizontal wells typically use more water than vertical wells, but also produce more oil and gas and reduce overall surface disturbance.

Each formation and well is unique: a hydraulic fracturing job in a formation in southeast New Mexico uses different volumes and concentrations of additives than a well drilled in northwestern New Mexico. In 2013, the average fracking fluid volume for a well in Eddy County was 1.1 million gallons per well and in San Juan County it was 316,000 gallons per well. In total, hydraulic fracturing fluid volumes in 2013 were 1.7 billion gallons. In New Mexico, the Office of the State Engineer reports that oil and gas production accounts for less than 1% of fresh water use (2010 data).

How are wells plugged and abandoned?

When a well has reached the end of its useful life and has become depleted, or if no oil or gas is found in a well (a “dry hole” is drilled), the well is plugged and abandoned. New Mexico has a rule (19.15.25 NMAC) that guides how to properly plug and abandon a well. Wells can be temporarily or permanently abandoned. Operators must submit, and OCD must pre-approve a Form C-103 before plugging a well, which provides details about proposed procedures for plugging the well. To plug and abandon a well, cement, drilling mud, and plugs are placed in the wellbore to prevent fluid from migrating among the underground rock layers. This is done to permanently confine oil, gas, and water into the strata in which they were originally found. Integrity testing is performed before approval for abandonment is granted.

How do I find information on wells in the area?

The OCD Well Search application allows you to look up a well using a variety of search parameters, including the well’s operator or the location of the well. Once you’ve found the well you’re looking for, you can access information on when it was drilled (“spudded”), its depth, its history of production, and well completion details such as casing and cementing programs, among other information.

New Mexico Oil and Gas Production and Regulation

How much oil and natural gas is produced in New Mexico?

In 2013, New Mexico was the 6th highest oil producer in the United States and 7th highest natural gas producer. Between 2007 and the summer of 2014, oil production doubled in New Mexico, and 2013 was the first year since 1973 where the state produced over 100 million barrels of oil. Between 2007 and 2014, natural gas production declined 14%, largely due to low prices that did not spur development. A full history of production data can be accessed here.

Production data is gathered through C-115 forms, on which operators provide OCD with monthly reports of the amount of oil and natural gas produced, the quantity of water produced from wells, and how much fluid was injected into disposal wells and tertiary oil recovery efforts.

Graph of Oil Production In NM
Graph of Natural Gas Production in NM

Where are oil and gas produced in New Mexico?

There are two major oil and gas producing regions in the state: one in southeast New Mexico (the Permian Basin) and one in northwest New Mexico (the San Juan Basin). Oil and gas are produced on private, state, federal, and tribal lands in New Mexico. The Permian Basin in southeastern New Mexico and West Texas is the major oil producing region in the state. It covers all or parts of Lea, Eddy, Chaves, and Roosevelt Counties. Since 1920, 20 major oil plays have been exploited in the basin, which contains 3 of the largest 100 oil fields in the United States. The continued advancements in horizontal drilling technology and horizontal completion techniques have expanded the development of numerous plays within the New Mexico portion of the Permian Basin. These plays include producing zones within the formations of the Delaware Mountain Group, the Avalon Shale, the Bone Spring Formation, the Wolfcamp (Hueco) Formation and the formations of the Yeso Group. The San Juan Basin is in the Four Corners region and extends from northwestern New Mexico into Colorado. It covers large parts of San Juan, Rio Arriba, Sandoval, and McKinley Counties and a small part of Cibola County. The San Juan Basin houses one of the largest fields of proved natural gas reserves in the United States. Oil and gas companies are also exploring the Mancos shale and Gallup sand in the San Juan Basin for oil development.

How does the state benefit from oil and gas production?

Oil and gas development is a key part of New Mexico’s economy. In fiscal year (FY) 2013, the oil and gas industry provided 31.5% of New Mexico’s General Fund, which in turn funds schools, hospitals, and other government services. This is a conservative estimate, as it doesn’t include induced or secondary revenue generation. Early data suggests oil and gas’s contribution to the General Fund in FY 2014 may be as high as 38%. Oil and gas is directly responsible for 86% of the Severance Tax Permanent Fund and 96.6% of the Land Grant Permanent Fund. In FY 2014 the New Mexico State Land Office reported a record $726 million in revenue from oil and gas royalties alone for the state’s public schools, universities, and hospitals.

In addition, the oil and gas industry is an important employer in New Mexico. It is estimated that in 2012 9% of all employment in New Mexico, or 68,800 jobs, were directly or indirectly related to the oil and gas industry. In oil-producing counties such as Eddy County, the July 2014 unemployment rate was 4.0%, compared to the state average of 6.9%. Lea and Eddy Counties also had the second and third highest wages by county in 2013, with an average annual salary of $50,200, compared to the state average of $40,600.

While oil and gas production revenue is primarily generated in the southeastern and northwestern regions of the state, the revenue from oil and gas production benefits all reaches of New Mexico through General Fund disbursements, capital funding projects, gross receipts taxes, and ad valorem taxes that go to counties.

What does OCD do?

The New Mexico Oil Conservation Division (OCD) is the primary regulator of oil and gas development and production in New Mexico. The OCD gathers oil and gas well production data, permits new wells, enforces New Mexico's oil and gas laws (70-2-1–38; 71-5-1–23; and 74-6-1–16 NMSA 1978) and rules, and ensures oil and gas development is conducted in a way that protects human health and the environment and the lands of New Mexico are protected and responsibly restored. OCD also administers oil and gas–related aspects of the Water Quality Act and regulates development and production of geothermal resources under the Geothermal Resources Conservation Act.

OCD has five bureaus, which include the:

  • Administrative Bureau, which ensures smooth operation of the division, coordinates the hearing and bonding processes, maintains records, and does budgeting and procurement;
  • Engineering and Geological Services Bureau, which processes administrative applications and exceptions to OCD rules and whose staff serve as Hearing Examiners for Division hearings;
  • Environmental Bureau, which develops and enforces environmental rules and regulations that prevent water contamination and govern waste disposal;
  • Legal Bureau, a subset of EMNRD’s General Counsel staff, which provides legal advice and support, works with well operators to develop Agreed Compliance Orders, and participates in the formulation of OCD rules and proposed legislation; and
  • Enforcement and Compliance Bureau, which performs inspections and ensures compliance of all OCD rules and permits.

What is OCD’s process for permitting a well?

A party seeking to drill a natural gas or oil well in New Mexico must submit a Form C-101, Application for Permit to Drill (APD). The APD identifies the well location and provides information on target formations and spacing, along with drilling plans and procedures including the casing, cementing, and blowout prevention plans. The C-101 also includes information on depth to groundwater at the drilling location, distance from the nearest fresh water well, and distance to nearest surface water location. This information is reviewed by OCD personnel and additional conditions are imposed where necessary to protect public health and the environment. After approval is received and a well has been drilled, the operator submits a C-105, Well Completion or Recompletion Report and Log, no later than 20 days after completion. The C-105 includes information of exact well depth and depths and characteristics of casing and cementing.

What are the limits on OCD’s jurisdiction?

The federal government through the Bureau of Land Management (BLM) oversees aspects of drilling on federal public lands. This includes offering leases sales and a separate process for APDs and plugging and abandonment/reclamation. The New Mexico Oil and Gas Act and OCD Rules also apply to federal public lands.

On non-federal lands, there are a few additional areas related to the oil and gas industry over which OCD does not have jurisdiction:

Roads and Traffic: OCD does not have jurisdiction over, and exercises no regulatory authority with respect to, private or public roads or road use. The New Mexico Department of Transportation oversees state highways and trucking, while local governments maintain local highways.

Noise: OCD has no statutory authority over noise or nuisance related issues. Noise and nuisance related issues are governed by local ordinances.

Odors and Air Contaminants: OCD does not have regulatory authority over odors or air contaminants other than the disposal of certain gas by-products. However, for a well within city limits, a city may enact ordinances regarding odors or other nuisances. In addition, the New Mexico Environment Department Air Quality Bureau has jurisdiction over odor and air contaminants through the Air Quality Control Act.

Pipelines: Oil and gas pipelines are under the jurisdiction of the NM Public Regulation Commission and U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration. The OCD does, however, have oversight over spills that may take place from gathering lines or pipelines related to oil and gas production activities.

Water and Oil and Gas Development

How is groundwater protected when a well is being drilled?

To protect the wellbore and drinking water formations, metal pipe called “casing” is placed in the wellbore and cement is pumped down the casing. The cement pushes out the bottom of the casing and flows up the space between the wellbore and casing (or through the “annulus”) back to the surface. When the cement hardens, it forms a bond between the walls of the wellbore and the outside of the casing, thus sealing that space off from the flow of fluids (water, oil, or gases). The casing and cementing is then tested to ensure its integrity. This bond protects groundwater from contamination. Typically, there are three separate layers of both casing and cement placed between drinking water aquifers and the actual pipe containing crude oil and/or natural gas. New Mexico requirements for cementing, casing, and testing their integrity are outlined in 19.15.16 NMAC.

How much water does the oil and gas industry use?

The New Mexico Office of the State Engineer collects and reports fresh water withdrawals (use) every five years. The last report has 2010 data and shows that the amount of water withdrawn for oil and gas operations was reported to be 731 million gallons. This represents well less than 1% of all water used in New Mexico.

Hydraulic fracturing disclosure forms provide additional insight into water use in the oil and gas industry in New Mexico, as hydraulic fracturing is a large source of water consumption in the industry. Hydraulic fracturing fluid disclosure forms from 2013 shows that 1.7 billion gallons of fluid, mostly water, was used for fracturing in New Mexico. Some of this water is reused and most is currently disposed of in injection wells.

Is it possible for oil and gas operators to use recycled water?

Although the total amount of water the oil and gas industry uses represents a small fraction of overall water use in New Mexico, there can be localized impacts to already-stressed water supplies. The oil and gas industry is making moves to reduce its fresh water needs through recycling and reusing flowback fluids (which exit the well after hydraulic fracturing) and produced water (which exits the well during production). In addition, a number of companies are developing technologies that reduce how much water is needed per hydraulic fracture job as well as ways to fracture wells without water.

The OCD encourages the recycling and reuse of water and is working with industry to ensure efficient, effective, and safe water reuse. OCD issued a notice in 2013 to clarify that no permit or authorization is required for produced water reuse as a drilling or completion fluid. In 2014, further modifications to rules have been proposed to encourage reuse and recycling of produced water.

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