New Mexico Produced Water Act

The New Mexico Legislature passed by an overwhelming majority, and Governor Lujan Grisham signed, the Produced Water Act, a bipartisan effort to encourage and facilitate the recycling and reuse of produced water by oil and gas producers and the conservation of fresh water for agriculture, municipal, and other uses. See House Bill 546 (HB 546), 2019 New Mexico Laws ch. 197 (sections 1–6, 8, 10, and 11 effective July 1, 2019; sections 7 and 9 effective Jan. 1, 2020). The Act clarifies ownership of produced water and vests authority over produced water in the New Mexico Oil Conservation Division (OCD) with respect to the reuse of produced water for oil and gas uses, id. § 3, and the New Mexico Water Quality Control Commission for any other uses, id. § 11.

Oil and gas producers in the Permian Basin in New Mexico generated approximately 130,000 acre-feet of produced water in 2018. See Brett Walton, “New Mexico Oil Production Is Soaring. Now What to Do with the Wastewater?” Circle of Blue (Mar. 20, 2019). One goal of the Produced Water Act is to encourage producers to use recycled produced water for their operations, allowing New Mexico’s freshwater resources to be saved for other uses. The Act also contemplates the use of recycled produced water for other purposes, such as road building and agriculture, but the regulations that will allow companies to start developing the technology for such uses are not yet drafted. A significant feature of the Act is that it vests ownership of produced water in the entity with possession of the water, and limits liability to that entity, marking a change from hazardous waste laws that arguably applied previously. See HB 546 § 4(A). The Act clarifies that produced water is not under the jurisdiction of the New Mexico Office of the State Engineer, and that recycling and reuse of produced water is not considered an appropriation of water for a beneficial use. Id. § 4(C). It also prohibits private parties from charging for the transport of produced water across state lands or requiring fresh water be purchased and used where recycled produced water is available. Id. § 5.

In addition to the Produced Water Act, HB 546 contains provisions, effective January 1, 2020, that vest the OCD with penalty authority for violations of the Oil and Gas Act, id. § 7, and implement reporting requirements with respect to the number of notices of violations issued and penalties collected, id. § 9. The constitutionality of these portions of HB 546 has been challenged by a pro se litigant in a lawsuit against the New Mexico Oil Conservation Commission, with claims that could result in the invalidation of these provisions and other portions of HB 546 if the relief requested is granted in full. See Marker v. N.M. Oil Conservation Comm’n, No. D-504-CV-2019-00338 (N.M. Fifth Judicial Dist. Ct. filed Apr. 10, 2019).

The Produced Water Act provides clarity with respect to ownership and regulation of produced water. While rules governing produced water have yet to be issued by New Mexico state agencies, companies should now have the legal certainty needed to start developing the infrastructure and technology to recycle produced water for use in the oilfields and beyond.

Editor’s Note: The reporter contributed to the drafting of HB 546 and represents Marathon Oil Company, which has moved to intervene in and dismiss Marker v. N.M. Oil Conservation Commission.

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