New analysis from the Center for Applied Research has found that oil and gas infrastructure in New Mexico could leave the state with a cleanup bill to the tune of $8.18 billion as a result of insufficient bonding. Bonds are financial assurances held by the state to ensure site cleanup in the case of company bankruptcy.
Market volatility is extremely common in the oil and gas industry, making boom-and-bust the name of the game. As a result, operators may file for bankruptcy in the middle of operations during a downturn, leaving behind minimal bonds and a mess for taxpayers.
The analysis examined the difference between the actual cost of cleaning up oil and gas sites and the bonds held by the state, finding that the financial assurances only amounted to $200 million, or about 2.4% of approximate cleanup costs. The findings highlight the desperate need to reform bonding in Western states and hold oil and gas companies accountable while protecting taxpayer money and local communities.
State Land Commissioner Stephanie Garcia Richard responded to the new report, saying, “That’s $8.1 billion that we don’t have, but will be needed to fill the gaps where existing financial assurances won’t cover the cost... No one can afford these obligations if they have gone bankrupt. That is why we need companies to be adequately bonded on the front end.”
The report also highlighted the fact that nobody has full information regarding all of the pipelines in New Mexico, and as a result the state's liability is likely higher than estimated.
“These findings require our full attention, participation, and action as a state,” Garcia Richard said. “Enormous sums of taxpayer money and money meant for public schools, along with the long-term health of our lands, are on the line. I am committed to ensuring we get to a place where responsible parties are adequately bonded.”
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