Incentives Should Align With Compliance

• Author: James C. Kenney
• Position: Secretary. New Mexico Environment Department
• Pages: 29-29

MAY/JUNE 2021 | 29

Reprinted by permission from The Environmental Forum®, May/June 2021.

Copyright © 2021, Environmental Law Institute®, Washington, D.C. www.eli.org.

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SI DE BAR

Incentives Should Align With Compliance

In crafting a regulatory frame-

work to protect public health

and the environment, two equally

important aspects must be con-

sidered. The rules must be clear,

concise, and simple. And the regu-

lator must be able to assure com-

pliance. Environmental agencies

often spend years crafting rules,

constantly balancing the best avail-

able science, feasibility, stakeholder

input, and the cost of compliance.

The notion of assuring compliance

is often an afterthought, and solely

placed on the inspector.

In our state, there are over

60,000 active oil and natural gas

wells. Yet, the New Mexico Envi-

ronment Department has seven air

inspectors — one for every 8,500

wells. There is no way to mean-

ingfully assure compliance with

permits and regulations unless we

rethink how we write such rules.

Meanwhile, our ozone levels are

rising quickly. Ozone often dispro-

portionately impacts environmental

justice communities. Non-attain-

ment with National Ambient Air

Quality Standards could soon be a

reality for our state.

Last July, following over a year of

unprecedented public outreach and

stakeholder collaboration, NMED

released a draft version of the

state’s oil and natural gas rules for

public review and comment. The

draft regulations are focused on

limiting volatile organic compound

and nitrous oxide emissions, the

chemical ingredients of ozone. And

in May, NMED is releasing an up-

dated version and will be petition-

ing its rulemaking board to adopt

the measures.

In rethinking how we regulate

the industry, NMED considered a

number of innovative ideas to solve

our growing ozone problem while

ensuring the department can assure

compliance — and that industry

can achieve it.

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source of emissions from oil and

natural gas operations occurs from

equipment leaks. When it comes

to identifying them, we are em-

bracing technology. Real-time and

remote monitoring should have the

least regulatory burden in environ-

mental rules. Conversely, periodic

monitoring for leaks should have a

greater regulatory burden.

Second, incent game-changing

ideas. Flares are the traditional

means of destroying emissions

from oil and natural gas operations.



be unreliable, resulting in incom-

plete combustion or uncontrolled

emissions when the pilot light or

auto-igniter fails. NMED’s rules

propose the use of fuel cells in lieu



cells chemically convert hydrocar-

bons (i.e., methane and VOCs) to

electricity, which can then be used

to power equipment at the well.

Third, require monitoring. It

would take more than four years



sites per day to visit their share

of 60,000 wells. As proposed, our

rules require an owner or opera-

tor to visit each regulated piece

of equipment on a monthly basis.

Again, real-time and remote moni-

toring can assist industry efforts to

ensure any compliance issue is miti-

gated in less than 30 days.

Fourth, require audits. In the oil

and natural gas industry, history

tells us that mergers and acquisi-

tions are common and likely remain

so in the future. The draft rule

provides that, prior to transferring

the ownership of any equipment,

the current owner-operator must

conduct and document a full com-

pliance evaluation of all equipment

subject to the rule. This ensures

one more safeguard to prevent un-

discovered leaks.

Finally, shift the burden. The

draft regulations state that failing

to comply with any provision of the

rule is a violation for the duration

of the performance period. It is up

to industry to present the regula-

tor with credible evidence to the

contrary, as opposed to requiring

NMED to establish when the viola-

tion started or stopped.

Without considering compliance

assurance, environmental regula-

tions will not achieve the desired

outcome of protecting public health

and the environment. When envi-

ronmental regulations and compli-

ance assurance efforts are devel-

oped in tandem, it can result in a



industry and government.

“When environmental regulations

and compliance assurance eorts

are developed in tandem, it can

result in a more level playing

eld between industry and

government”

James C. Kenney

Secretary

New Mexico Environment

Department