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New Mexico regulator puts in place rule requiring operators to eliminate gas flaring

Highlights

Operators must capture 98% by April 2022

Permian Delaware operators flared 200 MMcf/d in 2020

New York — New Mexico regulators finalized rules to nearly eliminate routine natural gas flaring, making it the second state in the US to ban the practice, as operators in the Permian Delaware burned off more than 200 MMcf/d of gas in 2020 despite production shut-ins.

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The New Mexico Oil Conservation Commission finalized the rules to eliminate venting and flaring at new and existing wells across the state on March 25. Routine flaring occurs when operators burn off gas produced from oil-directed wells instead of capturing it because of limitations in gathering and processing capacity. New Mexico joins Colorado in becoming the first states in the Lower 48 to end flaring.

"Commencing April 1, 2022, the operator shall reduce the annual volume of vented and flared natural gas in order to capture no less than 98 percent of the natural gas produced from its wells," the rule reads.

Reducing waste

US shale flaring reached a modeled all-time high of around 1.5 Bcf/d on August 19, according to S&P Global Platts Analytics. Post-pandemic, however, producers have done a better job of managing the amount of dry gas and natural gas liquids being wasted, as satellite modeled flare estimates the Delaware, Midland, Bakken and Eagle Ford have flared a combined 800 MMcf/d in this month.

The Permian Delaware, which spans parts of West Texas and New Mexico, flared an average of more than 300 MMcf/d in 2019. Following the oil price crunch and the outbreak of the coronavirus outbreak last year, a wave of production curtailments in the Delaware allowed flaring volumes to fall to about 200 MMcf/d in the basin.

Oil production in the New Mexico portion of the Delaware reached an all-time high of 1.07 million b/d in March 2020 but quickly declined to 871,000 b/d by May, according to Platts Analytics. Associated gas production fell as low as 2.77 Bcf/d in May 2020 after reaching a record high of 3.38 Bcf/d in March.

Despite production rebounding in 2021, averaging 3.34 Bcf/d in March, operators have kept flaring volumes around 200 MMcf/d. Oil has climbed back to 1.01 million b/d. Oil and gas are both forecast to continue climbing in the basin through 2026 under current market conditions.

A study released last year by the state of New Mexico found oil and gas operators released 1.1 million metric tons of methane per year in the state. That study helped guide the NMOCC to pass the new flaring restriction.

Final rule's language

"Venting or flaring of natural gas during drilling, completion or production operations that constitutes waste is prohibited," the final rule reads. "The operator has a general duty to maximize the recovery of natural gas by minimizing the waste of natural gas through venting and flaring.

"During drilling, completion and production operations, the operator may vent or flare natural gas only as authorized. In all circumstances, the operator shall flare rather than vent natural gas except when flaring is technically infeasible or would pose a risk to safe operations or personnel safety, and venting is a safer alternative than flaring."

Environmental groups praised the state regulator's actions.

"Other oil and gas producing states, such Texas, are facing increasing pressure from investors and companies to zero out routine flaring," a statement by the Environmental Defense Fund reads. "And recent surveys have found flaring to be an outsized source of climate-warming methane emissions."