The U.S. Environmental Protection Agency and U.S. Department of Justice announced a more than $9 million settlement with Hilcorp Energy Co. on Oct. 17 that resolved Clean Air Act and New Mexico Air Quality Control Act violations at the company’s oil and gas production operations in New Mexico.
The case is the first of its kind against an oil and gas producer for violations under the air quality regulations associated with well completion operations, which is the process of bringing oil or natural gas to the surface after drilling has been completed.
The settlement provides that Hilcorp will pay a civil penalty of $9.4 million for the violations. Going forward, the settlement will achieve major reductions by requiring Hilcorp to recover or control emissions from well completions in New Mexico and by requiring the company to use non-emitting process control equipment at facilities on tribal lands in northwestern New Mexico.
The settlement is part of the EPA’s National Enforcement and Compliance Initiative to mitigate climate change and the agency’s larger effort to hold oil and gas companies accountable for widespread violations throughout the country. Like all of the EPA’s national enforcement initiatives, this initiative prioritizes communities already overburdened by pollution and with other potential environmental justice concerns.
Hilcorp Energy is one of the nation’s largest privately-owned oil and gas exploration and production companies and was the top producer of natural gas in New Mexico between 2018-2021.
The majority of Hilcorp’s oil and gas production facilities in New Mexico are in the San Juan basin. The San Juan Basin is a significant source of oil and gas resources located near the common corners of New Mexico, Arizona, Utah, and Colorado. Hilcorp’s San Juan Basin operation is the largest emitter of methane, a climate super pollutant, from the United States onshore oil and gas industry, according to greenhouse gas data reported to EPA for 2022.
Based on the EPA’s investigations, the U.S. alleged that during the period from Aug. 2, 2017, through Aug. 1, 2019, Hilcorp conducted 192 well completion operations in Rio Arriba County and San Juan County, N.M., where the company unlawfully emitted significant quantities of methane and other volatile organic compounds directly to the atmosphere in violation of the requirements.
Hilcorp uses hydraulic fracturing, commonly referred to as fracking, as its method of gas extraction in the San Juan Basin.
When the fracking process is completed, the internal pressure of the rock formation causes fluid known as “flowback” to return to the surface through the wellbore. This fluid contains hydrocarbons, including volatile organic compounds and methane, which without recovery or control are emitted directly into the environment.
Applicable state and federal air emissions standards for well completions require operators to recover or control methane and volatile organic compounds emissions from the flowback.
At 145 of these well completions, Hilcorp captured none of the gas and instead released into the atmosphere all gas that flowed back following fracking. At the remainder of well completions, Hilcorp captured a portion of the gas and directed it to a flare but did not demonstrate that all green completion options were infeasible. At the remaining 47 well completions, Hilcorp failed to justify routing gas to flare by demonstrating the necessary controls were technically infeasible.
Hilcorp also failed to meet reporting requirements related to well completion and flowback operations, in violation of the regulations.
