STUDY TRANSFERING OWNERSHIP OF ORPHANED WELLS

HM056

HOUSE MEMORIAL 56

57
th legislature
- STATE OF NEW MEXICO -
second session
, 2026

INTRODUCED BY

Raymundo Lara

A MEMORIAL

REQUESTING THE OIL CONSERVATION DIVISION OF THE ENERGY,
MINERALS AND NATURAL RESOURCES DEPARTMENT TO STUDY POTENTIAL
OPTIONS FOR TRANSFERRING OWNERSHIP OF ORPHANED WELLS TO THIRD
PARTIES INTERESTED IN DEVELOPMENT FOR ENERGY STORAGE AND
HYDROCARBON RECOVERY PROJECTS.

WHEREAS, an orphaned well is an oil or gas well that is no
longer in active production and for which the owner or operator
is unknown, insolvent or otherwise unable to pay for the proper
plugging and abandonment; and

WHEREAS, orphaned wells pose serious environmental and
public health hazards due to leaking methane, toxins, volatile
organic compounds and brine into the surrounding soil, air and
water, which can degrade ecosystems, contribute to increased
risks of cancer and contribute to worsening air quality
conditions; and

WHEREAS, there are estimated to be at least one thousand
seven hundred orphaned wells in the state, with another three
thousand four hundred inactive or very low-producing wells that
could potentially become orphaned; and

WHEREAS, the legislative finance committee has estimated
the state's liability for properly cleaning up and plugging
these wells at anywhere between seven hundred million dollars
($700,000,000) and one billion six hundred million dollars
($1,600,000,000); and

WHEREAS, according to records from the oil conservation
division of the energy, minerals and natural resources
department, while the maximum amount of financial assurance has
been raised in recent years, only one operator in the state
currently has more per well financial assurance than the
current average cost to plug a well, with a median of only
seven thousand dollars ($7,000) per well coverage for an
individual operator; and

WHEREAS, the oil and gas reclamation fund, which receives
a portion of taxes from oil and gas operators, saw its highest
balance ever at the beginning of 2025 at sixty-six million
dollars ($66,000,000) available for plugging activities due to
the state receiving federal grants to conduct plugging
activities, and the state is eligible for another one hundred
eleven million dollars ($111,000,000) in federal grants; and

WHEREAS, even taken all together, with the reclamation
fund, federal grants and financial assurance from operators,
the state remains hundreds of millions of dollars short on
coverage for existing and expected liability resulting from
orphaned wells within the state; and

WHEREAS, in 2025, the legislature passed the Well
Repurposing Act, which permits the energy, minerals and natural
resources department to convert oil and gas wells for
geothermal energy and carbon storage purposes, indicating a
strong legislative interest in finding new and creative
solutions to address the state's orphaned well problem; and

WHEREAS, other states have found creative and lucrative
solutions to help alleviate the financial burden imposed by
orphaned well liability by partnering with third-party
companies to adopt orphaned wells and install filtration
technology and energy recovery units, neutralizing hydrogen
sulfide, recovering valuable hydrocarbons and treating produced
water in the process that can then be reused for other
purposes; and

WHEREAS, a market-friendly, environmentally conscious
approach to solving the problem of orphaned wells within the
state could turn a financial liability into a profitable
venture that creates jobs and generates interest from private
equity investors;

NOW, THEREFORE, BE IT RESOLVED BY THE HOUSE OF
REPRESENTATIVES OF THE STATE OF NEW MEXICO that the oil
conservation division of the energy, minerals and natural
resources department be requested to conduct a study, in
consultation with third-party companies interested in adopting
orphaned wells for energy storage and hydrocarbon recovery
projects, to explore the potential for creative solutions to
alleviate state financial liability resulting from the
thousands of currently identified and potential future orphaned
wells within the state; and

BE IT FURTHER RESOLVED that the oil conservation division
of the energy, minerals and natural resources department be
requested to include in the study an estimate of initial
investments needed to support third-party adoption of orphaned
wells for various purposes and potential future profits from
those ventures, compared to the amount that would be spent by
the state on plugging operations over the next decade or more,
as well as any statutory or regulatory barriers that would need
to be addressed to allow for transfer of ownership of an
orphaned well to a third party, including potential permitting
and financial assurance requirement recommendations; and

BE IT FURTHER RESOLVED that the oil conservation division
of the energy, minerals and natural resources department be
requested to present the findings and recommendations from this
study to the relevant interim legislative committees on or
before November 1, 2026; and

BE IT FURTHER RESOLVED that copies of this memorial be
transmitted to the secretary of energy, minerals and natural
resources and the state petroleum engineer.

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