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F I S C A L I M P A C T R E P O R T

SPONSOR Adair

ORIGINAL DATE

LAST UPDATED

1-29-2008

HB

SHORT TITLE Create Oil Conservation Division Committee

SB 394

ANALYST Woods

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates/Conflicts with HB125

SOURCES OF INFORMATION

LFC Files

Responses Received From

Energy, Minerals and Natural Resources Department (EMNRD)

Attorney General (AGO)

SUMMARY

Synopsis of Bill:

Senate Bill 125 seeks to create a ten-member joint interim legislative “Oil Conservation Division

Oversight Committee" (OCD) consisting of five members of the House of Representatives and

five members of the Senate, appointed by the Legislative Council.

The oversight committee will examine the statutes, constitutional provisions and rules governing

the Oil Conservation Division of the Energy, Minerals and Natural Resources Department;

monitor and oversee the Oil Conservation Division as it administers New Mexico’s oil, gas and

geothermal resources; review issues that affect the state’s oil conservation, including emissions,

oil extraction and compliance with federal statutes and policies; make recommendations to the

Legislature relating to the adoption of rules and for suggested legislation, if any are found to be

necessary; and will receive testimony from the Secretaries of Energy, Minerals and Natural

Resources; Economic Development; and Environment.

The oversight committee will function until December 15, 2011. Staff will be provided by the

Legislative Council Service and there is no appropriation attached to the legislation.

Senate Bill 394 – Page

2

SIGNIFICANT ISSUES

AGO notes that the oversight committee would be authorized to “monitor and oversee the Oil

Conservation Division of the Energy, Minerals, and Natural Resources Department as it

administers New Mexico’s oil, gas, and geothermal resources". Depending upon how this

responsibility is interpreted and administered, involvement by the committee in the operations of

that division might implicate Article III, Section 1 of the New Mexico Constitution, commonly

referred to as the “Separation of Powers Clause", since the Division is part of the Executive

Branch of state government.

EMNRD indicates the directive that the committee make recommendations “relating to the

adoption of rules" is unclear. Recommendations relating to changes in rulemaking procedures,

or in the scope of OCD’s rulemaking powers, would be an accepted legislative function. If,

however, the committee is being directed to recommend the adoption (or amendment) of

particular rules, this could infringe upon the constitutional requirement (Article III, Section 1) for

separation of powers between the legislative and executive branches. Delegation of rulemaking

authority to executive agencies enables those agencies to utilize their specialized expertise in

formulating detailed rules. To the extent that the legislature becomes involved in prescribing

details of agency rules, it fails to utilize agency expertise, and bypasses the established

procedures for agency rulemaking.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

EMNRD suggests that this bill is very similar to HB125, which also would create a legislative

committee to oversee OCD. The bills differ in detail, including the number of members on the

committee (10 in HB125, 12 in SB394), party representation (proportional in HB125, equal in

SB394), and selection of the chair (by the Legislative Council in HB125, by the committee in SB

394). SB394 adds the directive, not included in HB125, regarding notification to OCD if the

committee believes its rules conflict with statutes. Both bills direct the committee to receive

testimony from the Secretaries of EMNRD and of the Environment Department. SB394

additionally directs the committee to receive reports from staff members and from

representatives of industry and the

public.

AGO notes that the legislation is largely identical to HB125 except for:

HB 125

HB 394

Committee Life

2011

2012

Membership

10

12

Chair

Council service appoints

Senate Pro Tempore is

temporary chair

Veto Power

Members of both bodies have to

approve all actions

Senate Bill 394 – Page

3

Minimum Membership

Must be at least 1 member from

each party

Division Oversight

Reviews how Division

applies its own rules

Division Oversight II

Will notify Division if

Division rules exceed

statutory authority

Testimony

Certain cabinet secretaries

Certain cabinet secretaries

& Division staff & public

involved in the oil and gas

matters

TECHNICAL ISSUES

EMNRD states that the legislation directs the committee to “review issues that affect the state’s

oil conservation, including emissions, oil extraction . . . ." Since there is no reason to suppose

that the committee would be concerned with conservation and extraction of oil, as distinguished

from natural gas, presumably this sentence should refer to “oil and gas." Further, it is not clear

what is meant by the term, “emissions." That term is most frequently used in regulating air

pollution, not currently regulated by OCD (except for releases of natural gas and hydrogen

sulfide). It is unclear whether this is the intended meaning, or if it applies to waste disposal

generally.

OTHER SUBSTANTIVE ISSUES

EMNRD suggests that time spent by OCD employees in attending meetings of the committee

and responding to its requests would be time diverted from performing the agency’s delegated

duties. Further, that the committee’s operations will doubtless require allocation of some funds,

and, although the legislation specifically provides for the committee to prepare a budget, it does

not include an appropriation

.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

EMNRD states, “OCD would continue to perform its functions, with legislative oversight from

the Legislative Finance Committee and, as appropriate, other existing legislative interim

committees."

BFW/mt