New Mexico town, oil companies in fight over water use

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By JENS GOULD The Santa Fe New Mexican
JAL, N.M. (AP) — To get an idea of how important water is out here, you only need glance at the ground.

Alongside the dusty ranch roads carving up the desert plain outside this small town, networks of thick, black pipelines crisscross every which way and extend for miles — seemingly in all directions.

These pipelines haul freshwater pumped from deep underground to nearby oil and gas operations. Soon, they could carry much more, and a battle is heating up to determine whether they will.
“I don’t want to call it a war, but we’re fighting for our lives down here,” Jal Mayor Stephen Aldridge said, standing under the scorching, 100-degree sun on a recent afternoon.
The dispute is over who gets to control water in this parched corner of southeastern New Mexico: Should the oil industry have access to tens of millions of barrels a year for operations like hydraulic fracturing, commonly called fracking, or should the aquifer be conserved for local residents who say their future depends on it?
Two companies — Denver-based Intrepid Potash and NGL Energy Partners of Tulsa — recently paid hefty prices to buy the ranch lands where the wells are located, and they’re now asking permission to greatly increase the amount of water they’re allowed to pump there for commercial use.
In turn, the city of Jal has vigorously protested that bid with the State Engineer’s Office, arguing the companies’ plans could totally deplete its only source of water, harm public welfare and jeopardize the town’s existence. A hearing before the State Engineer’s Office, charged with administering the state’s water resources, is set to begin at the end of this month.
The conflict underscores an undeniable truth. While New Mexico and the entire nation largely have been preoccupied with the coronavirus pandemic and protests, there’s one underlying issue that never goes away in this dry state: water rights.
It also has broader implications that point to the uneasy contradictions inherent in New Mexico’s oil patch, which was booming up until the coronavirus hit. While the huge growth in the oil industry in the southeastern part of the state provides residents with lucrative economic opportunities and also fills the state’s coffers with revenue during boom times, people such as Jal’s own mayor say it also could threaten fundamental aspects of life itself.
The case relates as well to recent efforts by state agencies, legislators and Gov. Michelle Lujan Grisham to encourage the oil and gas industry to lessen its use of freshwater in drilling operations. While laws have been passed and new rules enacted, the Jal case shows energy companies remain intent on securing access to massive amounts of the coveted resource.
The saga began in 2017, when local ranchers Tommy Dinwiddie and Brad Beckham applied to increase the amount of water they could pump to 2,300 acre-feet per year in order to provide “oil and gas water supply” in Lea and Eddy counties. An acre-foot is the volume of water it takes to cover an acre a foot deep — about 326,000 gallons.
Before the matter was decided by the State Engineer’s Office, Dinwiddie sold his 60,000-acre ranch to Intrepid for $53 million, while NGL purchased the 36,000-acre Beckham Ranch along with another nearby property for a total of $93 million.
The two companies continued the push for increased water use and also joined forces, entering into a joint marketing agreement last year to develop and sell the water together.
“We are taking what would otherwise be three separate water systems and plan to combine them into one of the most complete water infrastructure systems in southeast New Mexico,” Intrepid CEO Bob Jornayvaz said last year.
Intrepid said the Dinwiddie ranch gave it 5.8 million barrels per year of permitted water rights and the chance to add 13 million more, while NGL said the two ranches it bought would yield 11.6 million barrels of annual freshwater rights.
That alarmed Jal officials and some of its citizens.
The city already had protested the ranchers’ bid for increased water use in 2018, and it continued to fight it after the companies bought the land.
“This is hardball,” Aldridge said. “It’s a hostile takeover of our water.”
The wells where the companies are proposing to increase pumping are in a groundwater basin known as the Capitan, but they’re also right next to the border of the Jal Basin, which is where the city gets its water.
In its legal challenge, the city of Jal argues the proposed pumping would be contrary to public welfare because the two basins share the same water source and thus would put the city’s water at risk.
It also says the proposal is unlawful because the state closed the Jal Basin to new permits years ago due to declining water supplies, so the companies shouldn’t be allowed to tap waters that are connected to its source.
“Granting this application will be detrimental to the public welfare of the state and contrary to the conservation of water in New Mexico,” the city’s attorneys wrote in a filing earlier this year.
The city further points out the Jal Basin — at only 13.5 square miles — is tiny compared to most others in New Mexico and also is being depleted by wells just across the border in Texas, where water laws are less strict.
On the other side, the companies have argued their proposed pumping plans do not jeopardize the city and are fully permissible because their wells are located in the Capitan Basin, which has not been closed to new permits.
“The pumping schedule proposed by co-applicants and agreed to by the Office of the State Engineer Water Rights Division was designed to avoid impairment of the city’s wells,” attorneys representing NGL and Intrepid wrote in a June filing.
John Romero, director of the Water Rights Division, said the case was complicated and called the city’s argument that increased pumping could deplete its water supply a “gray area that is hard to prove.”
Owen Kellum, an attorney at the State Engineer’s Office who is overseeing the case, said the Water Rights Division has determined it doesn’t agree with the city’s arguments, but State Engineer John D’Antonio will make the ultimate decision.
NGL said it has a policy not to comment on pending litigation and directed a query to its legal filings. Intrepid’s vice president, Matt Preston, and senior vice president for New Mexico, Robert Baldridge, did not respond to requests for comment.
The city of Jal, founded in 1910, was named after the JAL ranch, which used those three letters — the initials of the owner’s father-in-law — to brand its cattle. The community, which is only about eight miles from the Texas border both to the east and to the south, became a boomtown after the discovery of oil in the 1920s.
Approaching Jal by car from Carlsbad leaves no doubt that it’s right in the middle of the oil-rich Permian Basin, which was booming until the novel coronavirus outbreak and an oil price crash began earlier this year.
While there are now fewer active oil rigs than before, there’s still plenty of activity. The highway is awash with industry pickups and “oversize load” semis, while the surrounding landscape is dotted with oil wells, gas flares and signs for “fresh water sales.”
The city has a population around 2,000, although that number can easily double during an oil boom when temporary residents working in fields fill up the man camps and RV parks.
Many of Jal’s permanent residents work in the industry, too. Even the mayor, who is leading the city’s protest of the water applications, has a son who works in the oil fields and a father who worked for El Paso Natural Gas.
“Look, we’re not opposed to fracking,” Aldridge said. “That’s the lifeblood down here.”
Despite the strong ties to oil, some locals are upset about the companies’ plans to pump nearby freshwater supplies.
“It sure seems like they’re an aggressive bunch who feel like their needs outweigh ours,” said Harrell Butler, a retired Jal city and school worker. “It’s a potential danger to our water system out here.”
But Butler acknowledged other local residents don’t feel that way, especially those who work in oil and gas.
“Some people are biased towards the oil field because it pays their way,” he said. “Until the water don’t come out of the tap — what then?”
The wells in question are located just a few miles outside Jal and close to the city’s own water wells.
Both sit near dirt roads with potholes so large only four-wheelers can traverse them, and they are accompanied by the persistent hum of cicadas, endless numbers of mesquite and catclaw bushes, and, of course, the black pipelines.
And then, just several hundred yards away from the city’s water wells stand an oil well and natural gas flare emitting a pungent smell for anyone who gets near. The well, operated by a subsidiary of Fort Worth, Texas-based Lilis Energy, is yet another worry for Jal’s mayor.
Aldridge says he’s concerned nearby tanks holding crude and wastewater could seep into the earth and contaminate the city’s water supply because they’re so close to its wells.
“That’s a fracked well, and this is our water well,” he says, pointing out that both are so close they’re within sight of each other.
The water dispute comes as state officials have been trying to get oil companies to reduce the amount of freshwater they use for drilling.
Last year, Lujan Grisham signed the Produced Water Act, which contains several measures aimed at encouraging more reuse of the oil industry’s “produced water” and less use of freshwater.
But there’s no requirement that companies limit their freshwater use, although the State Engineer’s Office has been looking into changing the way permits are granted in order to conserve more water in the oil-producing region, said Bill Brancard, general counsel at the Energy, Minerals and Natural Resources Department.
“There’s an overall concern about whether the oil boom in the southeast and whether the amount of freshwater that’s being used there is having an impact on the aquifer,” Brancard said.
Land Commissioner Stephanie Garcia Richard also is uneasy about freshwater use for drilling, and her office said it’s been in touch with Jal officials about its dispute with NGL and Intrepid.
“Our largest worry is that these issues are only going to become more common as companies, communities and individuals compete for scarce water resources,” state Land Office spokeswoman Angie Poss said. “We’re following the case, and we’re looking at how the State Land Office can do its part to protect water.”

A spokesman for NGL said its operations “do not consume meaningful quantities of fresh water” and that its main business in New Mexico is “the disposal of produced water.” The company added it is collaborating with and has donated money to an effort announced last year by the state Environment Department and New Mexico State University to study the treatment and reuse of produced water.
As the hearing on the Jal case draws closer, the attorneys representing the town say they’re frustrated with the legal process and believe the State Engineer’s Office has been unduly favoring the companies.

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“They seem to be overly favorable to positions taken by the co-applicants,” said D.L. Sanders, a water lawyer representing Jal who used to be chief counsel for the state engineer. “It seems like no one at the OSE (Office of the State Engineer) seems concerned about the plight of little ol’ Jal.”
He and his partners point out that Bill Duemling, water resources manager with the State Engineer’s Office, in January wrote a report siding with Jal’s position, noting the companies’ application would impair existing water rights and harm public welfare and conservation. Yet in May, Duemling reversed course and said it actually wouldn’t hinder water rights or public welfare, and he recommended partial approval of the companies’ application.
“He flip-flopped,” said Pete Dominici Jr., an environmental attorney representing Jal and son of a former U.S. senator from New Mexico. “Their position has firmed up and become more outspoken against the city of Jal.”

Romero at the State Engineer’s Office said protestants and applicants often complain the agency isn’t being fair and said it’s “never true” that it improperly favors one side over the other.
“We have nothing to gain,” he said. “We’re a regulatory agency. We have the best hydrologists around that have no dog in the fight.”
If the city loses its upcoming case with the state engineer, Aldridge says he’s prepared to appeal. He says the future of his city is on the line.
“Jal was here when I was born,” he said. “I hope it’s still here when I die.”