Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Romero, A.
LAST UPDATED
ORIGINAL DATE 2/17/2025
SHORT TITLE EMNRD Conversion of Certain Wells
BILL
NUMBER House Bill 361
ANALYST Davidson
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
EMNRD
$369.0 to
$615.0
$369.0 to
$615.0
$738.0 to
$1,230.0
Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
Energy, Minerals and Natural Resources Department (EMNRD)
New Mexico Department of Justice (NMDOJ)
New Mexico Institute of Mining and Technology (NMIMT)
Agency Analysis was Solicited but Not Received From
Tax and Revenue Department (TRD)
SUMMARY
Synopsis of House Bill 316
House Bill 361 (HB316) proposes to enable the Energy, Minerals and Natural Resources
Department (EMNRD) to authorize the repurposing of depleted oil and gas wells to be utilized
for energy storage or geothermal energy development. The bill provides for the well to be
plugged if these uses are no longer viable.
The effective date of this bill is July 1st, 2025.
FISCAL IMPLICATIONS
The New Mexico Institute of Mining and Technology (NMIMT) notes, due to ambiguities within
the bill, an accurate fiscal estimate from the university is not possible without clarity regarding
the bill’s language.
House Bill 361 – Page 2
Analysis from EMNRD notes the bill could possibly have positive fiscal impacts on the agency’s
operations, specifically noting the bill seemingly aims to bolster the state’s clean energy
transition and grid modernization efforts. However, due to the technology still emerging, the
agency did not provide an estimate.
If House Bill 316 is implemented, the new energy storage or sources it could create could require
EMNRD to increase its regulatory scope. There are currently around 1,700 orphaned and
abandoned wells in the state, varying in degrees of depth, use, and age. If 10 percent of these
wells were utilized for either energy storage or geothermal energy development, it could require
the Energy Conservation Management Division (ECMD) and the Oil Conservation Division
(OCD) to collaborate on regulation of the new entities or to vest with the regulation of 170 new
energy sources or storage centers. Due to this, the bill likely would require ECMD to need an
additional three to five personnel. The fiscal impact tables uses ECMD’s average personnel cost.
SIGNIFICANT ISSUES
The areas with the most geothermal potential in the state are in the Rio Grande Rift, a rift which
runs from the north to the south through the center of the state and into a portion of the state’s
southwest. NMIMT notes this region of high geothermal potential does not mirror the state’s oil
and gas producing regions. Analysis from NMIMT further notes, due to the low average
temperatures from the oil and gas basins, typically less than 150 F, the bill may not have limited
utility.
NMIMT recommends the most likely path for conversion to a productive geothermal well would
be to deepen the well, which could give cost savings over drilling a new well.
The university notes conversion of oil wells for other purposes is common, with oil wells being
converted to disposal wells, though issues can arise due to mineral holders and mineral leases.
NMIMT notes, once a well is no longer producing, it is abandoned, and HB361 should provide
for the operator of the well to be absolved of future liability, which will be borne by the new
geothermal or energy storage operator.
NMIMT notes the bill does not have specific language regarding the treatment of produced
geothermal water. Produced geothermal water, similar to produced water made from oil
extraction processes, can have varying levels of radioactive chemicals and heavy salts. Due to
the state’s current statutes not having specific language regarding produced geothermal water,
which would be a bioproduct of the bill’s implementation, NMIMT recommends the bill be
amended to address this gap.
NMIMT further notes the bill does not specify the source of water needed to run the energy
storage system the bill points to. The university recommends sections of state statute discussing
impairment of water rights should be included in the bill to accommodate this issue.
EMNRD notes the agency would need to enter rule-making process regarding ECMD and OCD
to ensure its defined how the transition of regulatory authority of oil wells to their new purpose.
EMNRD analysis notes rule making would most likely regard logistical concerns, and it’s likely
both entities would regulate aspects of the updated wells.
House Bill 361 – Page 3
EMNRD analysis notes the bill could possibly address oil and gas industry issues in the Permian
Basin with grid infrastructure:
The oil and gas industry in the Permian presents a potentially enormous consumer of
electricity. Utilizing inactive (or soon to be inactive wells) for energy storage thus solves
two problems at once by presenting a storage solution that is co-located with demand.
The New Mexico Attorney General (NMAG) notes the bill alludes to EMNRD having
jurisdiction over oil and gas wells in the state. NMAG analysis notes OCD and the Oil
Conservation Commission are the two entities who have exclusive jurisdiction, and the bill does
not contemplate the interplay between EMNRD, OCD, and OCC.
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