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State sues three companies over county oil and gas lease

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The New Mexico State Land Office has provided this photo of one of the wellheads at a Chaves County oil and gas lease site about 40 miles from Roswell. State officials say the photo shows evidence of chemical staining. (Submitted Photo)

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The New Mexico State Land Office is suing three oil and gas companies over an allegedly damaged Chaves County lease site about 40 miles from Roswell, claiming that the companies have not complied with legal requirements that they plug wells and clean up the property following the expiration of a lease.

In a lawsuit filed Thursday in the New Mexico 1st Judicial District Court in Santa Fe, the State Land Office has complained that Northstar Operating Co. of Texas, Cano Petro of New Mexico Inc. and Cross Border Resources Inc. have committed trespass, waste and negligence.

The agency also contends that Northstar — which the lawsuit indicates was the leaseholder on the site — is in breach of its contract.

The unplugged wells could present a health issue, according to State Land Office Assistant Commissioner of Communications Angie Poss, because they could leak methane or gas.

The State Land Office is asking the court for damages; the possible awarding of fines of $500 a day for each violation; money to pay for cleanup, site remediation or other corrective actions; and injunctive relief that would compel the companies to plug 11 wells, then abandon the plugged wells and site, and comply with other legal agreements.

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Phone messages left for Northstar Operating Co. were not returned by press time.

Cano Petro is listed as the operator of seven of the unplugged wells, while Cross Border Resources is named as operator of four of the wells. Current contact information for those companies could not be obtained by press time.

The legal action is intended to ensure that companies fulfill their legal obligation regarding lease sites, according to Commissioner of Public Lands Stephanie Garcia Richard.

“I take my responsibility to steward the state trust land in my care very seriously, and that is why we are continuing to take companies to court when they shirk their legal responsibility to clean up the land,” she said. “While many companies are working with us, our legal efforts thus far have proven successful, and we will continue pursuing legal action when companies walk away without cleaning up.”

According to the lawsuit, the State Land Lease site is 881 acres in eastern Chaves County. It is part of the Cato Unit, a larger, defunct oil and gas development area consisting of private, state and federal lands.

The lawsuit indicates that Northstar, based in Midland, Texas, was the leaseholder at the time the legal agreement expired on Feb. 23.

But the lease dates back to December 1963 when it belonged to an individual, who transferred it to a company in 2001. That company and Northstar merged in 2003, with Northstar being the surviving corporation, the lawsuit states.

The state agency indicates that the wells stopped producing oil and gas in paying quantities in March 2019, and Poss said that the Land Office oil and gas staff are not sure if the lease site would be used in the future.

“This isn’t considered a prime tract and we’re unsure if a company would nominate it for a lease sale after remediation,” Poss said.

The lawsuit is the 17th that the State Land Office has filed since November 2020, when it created an Accountability and Enforcement Program to ensure that leaseholders abide by contractual obligations. Poss indicated that other Chaves County sites are included in those 17 lawsuits.

Lisa Dunlap can be reached at 575-622-7710, ext. 351, or at reporter02@rdrnews.com.

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Lisa Dunlap is a general assignment reporter for the Roswell Daily Record.