NM wants company to take responsibility for cavern

AP News
Posted: Nov 23, 2009 10:14 AM

The state of New Mexico has spent more than a half-million dollars investigating and monitoring a giant cavern a few hundred feet beneath the ground in southeastern New Mexico.

Now, it wants the company responsible for the property to pay up.

The state Oil Conservation Division has installed an elaborate monitoring system of tilt meters and pressure sensors at the site in Carlsbad, hoping to detect the earliest signs of a cave-in that could possibly take with it part of a highway, a church, a trailer park, businesses and a major irrigation canal.

The Associated Press obtained a letter that the agency sent to trucking company I&W Inc. on Friday. It demands reimbursement of $563,420, as well as reports that the agency claims the company failed to submit as part of its discharge permit.

The reports would have included information on the size and integrity of the cavern.

The agency also wants I&W to submit a closure plan for its facility above the cavern, where brine well operations were halted last fall after the state became concerned about a potential collapse at the site.

"We think it's time the company do something. This was their business and we don't think that the state should be stuck paying the bill," Oil Conservation Division Director Mark Fesmire said during a recent visit to the site.

I&W did not immediately return calls seeking comment on the state's demands.

Eugene Irby, whose family owns the company, said previously that I&W has always followed the law and performed annual pressure tests on the well as required. He has argued that the state is overreacting because of two brine well collapses north of Carlsbad during a four-month span last year.

Unlike the well in Carlsbad, the others were far from homes and businesses. They left behind sinkholes that spanned hundreds of feet and were at least 100 feet deep.

The Oil Conservation Division said the I&W well shares some characteristics with the collapsed wells.

They were all about the same age, drilled to similar depths and produced between six and eight million barrels of brine from salt layers deep underground. Brine is often used by the oil and natural gas industry.

The city of Carlsbad and the Eddy County Commission declared a state of emergency earlier this month because of the potential danger. They also have established a group of local leaders, scientists and experts to find a way to prevent or at least mitigate a possible collapse.

According to the letter from the Oil Conservation Division, I&W has 60 days to comply with the state's demands for reimbursement and submit a 2008 annual report, a long-term report on subsidence and a health and safety plan.

The letter also orders the company to post $1 million in additional financial assurance that will allow the state to maintain the monitoring system and the early warning system it has installed in the event the company fails to do so.

If I&W misses the deadline or fails to get an extension, the agency can modify the company's permit to include terms that would cover reimbursement and any additional assurances.