By Marita K. Noon
Each day the news is full of stories about some legislation that is being pushed through. In 2008 Congress passed 285 new bills. Some, such as red-light cameras, have obvious impacts on our lives. Others are more obscure. The hidden impacts often come from regulations that seldom make the news — or if they do, the cost to the average person’s life is unclear.
About these regulations, the Competitive Enterprise Institute says, “Precise regulatory costs can never be fully known; unlike taxes, they are unbudgeted and indirect.” In 2008 3,830 final rules were issued — and that is the federal level. Each state adds their own. Because they are “unbudgeted and indirect,” and initiated by non-elected bureaucrats who do not have to worry about reactions from the electorate, they often fly under the radar, unnoticed until the regulations begin to impact regular people.
One example of this is New Mexico’s “pit-rule” — though you can be sure similar scenarios are being played out all over the country.
At first glance the pit rule (Rule 17 of the Oil Conservation District Rulebook) sounds like an OK idea as it was sold as “protecting groundwater.” What the pit rule is supposed to do is regulate liquids and solids used during the drilling process that are typically placed in “pits.”
What it really does is generate extra costs, therefore preventing the drilling of new oil and gas wells, which puts people out of work and hurts the very people the government claims to protect.
How one rule actually impacts people
Here’s how the regulations work in the real world — with increasing impact. This is how one rule can impact the working people, the average citizen.
There are many types of oil and gas wells. But the pit rule is one-size-fits-all. There are no exceptions for locations where the situations the rule was intended to protect against are not present — and despite the fact that oil companies have done it right for 70 years and will continue to do so. However, when regulations are enacted wrongly, they don’t drill.
Yates Petroleum was drilling a well with a cable tool rig. Yet, because of the pit rule, they are required to use a specific system never before required on a cable rig tool. To meet the regulations, Yates was required to rent the more costly system anyway — adding an extra cost of $51,000, or approximately a 25-percent cost increase to drill the well. Realize this is just one regulation and one well. The same scenario is being played out at most every other well — or potential well — in southeastern New Mexico.
On deeper wells, the regulations add $200,000 to $300,000, which makes an economically marginal well too costly to drill and generates fewer taxes.
Therefore, many independent producers (who asked not to be named for fear of recrimination should they ever drill in New Mexico) have opted to sell their interests in New Mexico and drill in more friendly environments. They’d be doing more here, but the restrictions where such that it was not cost effective, which cuts income to the state.
‘We can’t pay the rent’
Next, before the pit rule, United Drilling in Roswell was drilling 100 wells a year. Now they are drilling 10. They have gone from 150 employees to 50. They are looking for jobs out of state and have sent rigs to Texas, Wyoming and Colorado. When payday comes, the New Mexico families supported by drilling activities aren’t getting paychecks. Instead they’re probably at the unemployment office hoping to qualify for benefits when they’d rather be working and paying taxes — but the regulations make the costs too high.
The companies can probably weather this economic storm. But the question is, can the individuals? Angel Salazar, vice president of United Drilling, reported receiving many questions, like this one from Mrs. Moreno, who asked, “What will we do? We can’t pay the rent.”
Proponents of increasing regulations repeatedly say, “They can afford to slow down and do it right.” Try telling that to Mrs. Moreno. Remember she is not the only one impacted.
On a national scale, similar actions are causing businesses to move to more friendly environments, sending jobs overseas and leaving many people, like Mrs. Moreno, wondering how they are going to feed their families. The cap-and-trade legislation just passed by the House is like the pit-rule on a national level.
While you may not be able to talk to Mrs. Moreno, you can talk to your legislators, both state and federal. You can tell them, “Slow down and do it right.” Read the bills and pay attention to the regulations. The obscure has obvious consequences.
Noon is the executive director of CARE (Citizens Alliance for Responsible Energy), an Albuquerque-based nonprofit organization that is advocating for citizen rights to energy freedom. Contact her at marita@responsiblenergy.org.