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Earthworks Oil & Gas Accountability Project, et al, v. New Mexico Conservation Commission, et al, 2016-NMCA-055 (Cert. Den. 4/15/16).

The Appellate Court affirmed the 2013 changes to the “Pit Rule” in concluding that a pending appeal of the 2008 Rule and the 2009 Amendment to the Pit Rule did not remove the New Mexico Oil Conservation Commission’s jurisdiction, the Commission’s decision was not arbitrary or capricious, but was rather based on sufficient evidence and sound reasoning, and sufficient notice was given so as to satisfy statutory requirements.

The Pit Rule

Title 19, Chapter 15, Section 17 of the New Mexico Administrative Code (the “Pit Rule”) covers regulation of pits, closed loop-systems, below-grade tanks and sumps. The purpose of the Pit Rule is to protect public health, freshwater and the environment. The 2013 amendments changed portions of the Pit Rule dealing with siting, permitting requirements, design and construction, and operations and closure. The 2013 amendments also recognized a novel pit, the multi-well fluid management pit. Additionally, the 2013 amendments to the Pit Rule reorganized and clarified the code.

The Commission’s Jurisdiction

 The Court concluded that a pending appeal of the 2008 rule and the 2009 amendments to the Pit Rule did not deprive the New Mexico Oil and Gas Conservation Commission’s (the “Commission”) jurisdiction by drawing a distinction between adjudication and rulemaking, and stating that judicial action may not preempt permissible administrative rulemaking. Petitioners presented no authority to substantiate prevention of rule making during an appeal, and conflated rulemaking with adjudication. The Court found that the Legislature clearly delegated rulemaking authority to the Commission under the Oil and Gas Act and that the Commission’s actions did not resolve a particular dispute involving specific parties and specific problems (adjudication). Relying on the reasoning in New Energy Econ., Inc. v. Shoobridge, 2010-NMSC-049 ( “a court may not intervene in administrative rule-making proceedings before the adoption of a rule or regulation…” and “…the separation of powers doctrine forbids a court from prematurely interfering with the administrative process created by the Legislature”) the Court refused to create a rule allowing an appeal to halt agency rulemaking action.

The Commission’s Decision Was Meritorious

Upon review of the record before the Commission, the Court concluded that the Commission’s adoption of the 2013 Amendments to the Pit Rule was reasonable and not arbitrary or capricious. The Court refused to review the records from the 2008 Rule and the 2009 Amendment, as they were properly limited to review of the record before them (2013 Amendment). The Commission’s enumerated reasoning that the prior rule had “negatively impacted the growth of the oil and gas industry in New Mexico, ha[d] been difficult to understand, [and] ha[d] created unnecessary paperwork…,” etc., was deemed sufficiently reasonable, as was its implementation of a performance-based rule and lowered groundwater contamination standards. Finally, the Commission appropriately included economic considerations in the rule as the language of the Oil and Gas Act allows the Commission to consider economic considerations, so long as they are not the primary purpose behind a rule.

Sufficient Notice

Notice was timely given according to statutory requirements. “The Commission’s notice was issued on behalf of the State of New Mexico, was given under the Commission’s seal, and was signed by the chairman of the Commission” and included the “date, time and place of the hearing, and…gave the date by which written comments were required to be submitted.” Additionally, notice was timely published in the Albuquerque Journal, on the Commission’s docket, in the New Mexico Register, and on the Oil Conservation Division’s website. When combined, all such actions satisfied statutory requirements and regulations.

The full text of the case can be found HERE. 

The full text of the Pit Rule Order can be found HERE.

The full text of the Statute can be found HERE.

An excellent PowerPoint presentation detailing the
2013 Amendments to the Pit Rule can be found HERE.
(ctrl + F to search for “Power Point”)




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