Natural Gas Producer Agrees to Settlement to Reduce Emissions in New Mexico

The Justice Department, Environmental Protection Agency (EPA) and New Mexico Environment Department (NMED) today announced a settlement with Hilcorp Energy Company resolving Clean Air Act and New Mexico state law violations at the company's oil and gas production operations in New Mexico.

Under the settlement, Hilcorp agreed to pay a civil penalty of $9.4 million for violations resulting from Hilcorp's failure to reduce emissions during well completion operations. The civil penalty will be split between the U.S. and the State of New Mexico. In addition, the company must employ an EPA-approved third-party auditor to ensure compliance with all applicable Clean Air Act and New Mexico Air Quality Control Act requirements.

Hilcorp is further directed to account for the excess volatile organic compound (VOC) and methane emissions released through improper well completions by replacing, on a faster timeline than federal regulations require, old process control equipment with equipment that does not emit air pollution. This mitigation project will occur on Tribal lands of the Jicarilla Apache Nation Reservation, in Rio Arriba County, and on Navajo Nation Off-Reservation Trust Land in San Juan and Sandoval counties; all of these areas have potential environmental justice concerns.

The work that Hilcorp will do under this agreement will result in the equivalent of over 113,000 tons of reduced carbon dioxide emissions over the next three years, similar to the number of reductions achieved by taking 24,000 cars off the road for one year. The settlement will also eliminate nearly 583 tons of VOC emissions annually.

The case is the first to address violations of the Clean Air Act New Source Performance Standards covering well completions following hydraulic fracturing, commonly referred to as "fracking."

"Hilcorp is a large, sophisticated natural gas producer and should know better than to violate Clean Air Act requirements to capture and control gas produced as a result of fracking," said Assistant Attorney General Todd Kim of the Justice Department's Environment and Natural Resources Division. "We are committed to upholding the rule of law and holding industry accountable. Today's settlement importantly includes commitments to make infrastructure upgrades that will result in significant reductions of methane and VOC emissions."

"Oil and gas production results in significant air pollution, including emissions of methane that are one of the leading sources of near-term climate change, which makes today's settlement with Hilcorp Energy a huge win for the environment and the planet," said Assistant Administrator David M. Uhlmann of EPA's Office of Enforcement and Compliance Assurance. "EPA is requiring Hilcorp to pay a $9.4 million penalty and make substantial investments in Clean Air Act compliance, which will reduce climate damaging emissions and improve air quality for all New Mexico residents, including communities with environmental justice concerns."

"This settlement holds one of the San Juan Basin's largest polluters accountable for their contribution to climate change and ozone pollution," said Secretary James Kenney of the New Mexico Environment Department. "If we want to make New Mexico's air safe for future generations then Houston-based Hilcorp Energy Corporation executives need to step up their game and comply with federal and state rules."

Federal Clean Air Act and New Mexico state air regulations require oil and gas producers to capture gas that flows back to the surface following fracking using equipment that can accommodate flowback and to implement a reduced emission completion control, commonly referred to as a green completion. Producers have several green completion options to choose from. If none are technically feasible, producers may route the captured gas to a pollution control device like a flare.

Based on EPA's and NMED's investigations, the U.S. and the state allege that Hilcorp conducted at least 192 well completion operations in Rio Arriba and San Juan counties from Aug. 2, 2017, through Aug. 1, 2019.

At 145 of these well completions, Hilcorp captured none of the gas and instead released into the atmosphere all gas that flowed back following fracking. At the remainder of well completions, Hilcorp captured a portion of the gas and directed it to a flare but did not demonstrate that all green completion options were infeasible. Hilcorp's actions resulted in thousands of tons of harmful methane and VOC emissions being released into the environment. Methane is a climate super pollutant and potent greenhouse gas that contributes to climate change, and VOCs adversely affect human health in multiple ways, including being involved in the formation of ground level ozone.

Hilcorp is one of the nation's largest privately-owned oil and gas exploration and production companies, and a top producer of natural gas in New Mexico from 2018-2021. New Mexico is one of the top ten producing states for natural gas in the United States for 2018-2023. In 2022, on-shore oil and gas industry data reported to EPA showed that Hilcorp's San Juan Basin operation emitted the most methane in the U.S. among all oil and gas operations.

The settlement is part of EPA's Mitigating Climate Change National Enforcement and Compliance Initiative, which focuses, in part, on reducing methane emissions from oil and gas and landfill sources. Like all EPA's national enforcement initiatives, the Mitigating Climate Change initiative prioritizes communities already overburdened by pollution and other potential environmental justice concerns.

More information on the settlement agreement is available on EPA's Hilcorp Energy Company webpage.

The consent decree was filed with the U.S. District Court for the District of New Mexico and is subject to a 30-day comment period. Information on providing public comment and the complaint and proposed consent decree are available on the Justice Department's website at www.justice.gov/enrd/consent-decrees.

EPA and NMED investigated the case.

Attorneys of the Environment and Natural Resources Division's Environmental Enforcement Section are handling the case.