By Nicholas Gilmore
The Santa Fe New Mexican
(TNS)
Abandoned oil and gas wells present a potential billion-dollar problem for taxpayers.
A Colorado accountant and a Taos-based data analyst have put forth a lawsuit that shows, they believe, one way to hold even the largest oil and gas companies accountable for the cleanup costs being pushed onto the state.
Greg Rogers and Theron Horton have alleged two companies—including one of the top producers in the state—along with many others are engaged in “massive accounting fraud” that ultimately leaves taxpayers on the hook for millions of dollars in costs for remediation of their wells.
The two have filed what is called a qui tam lawsuit, which allows for plaintiffs to bring claims of violations of the Fraud Against Taxpayers Act on behalf of the government, while giving state officials the opportunity to take on the case.
The attorney general declined Rogers and Horton’s case. But the two have decided to move forward representing themselves in the case against Exxon Mobil Corp. and Empire Petroleum, a situation Rogers referred to as a “David and Goliath” type mismatch.
Neither Exxon Mobil nor Empire Petroleum responded to calls and emails requesting a response to the allegations presented in the lawsuit.
‘It happens everywhere’
The complaint centers around what are called “asset retirement obligations” in the energy industry. The ARO represents the legal and financial obligations to plug and remediate a well, which can involve sealing the well and various levels of costly remediation.
The 74-page lawsuit points to the 2021 sale of 670 “aging” and “low-producing” wells in Lea County from Exxon Mobil’s subsidiary XTO Holdings to Empire’s subsidiary Empire New Mexico. The lawsuit notes the companies’ financial records show a valuation of a little more than $6 million for the AROs of the wells, which are an average age of 63 years old.
Rogers and Horton cite state data, however, in their argument that a “conservative estimate” of the asset retirement obligations for the wells is actually almost $200 million. The discrepancy, they say, points to the companies’ intentions to skirt the ARO liability for the wells altogether.
Rogers called the practice of selling off inactive and so-called stripper wells to smaller companies that eventually go bankrupt “extremely, extremely widespread,” adding, “it happens everywhere.”
His lawsuit alleges that Empire New Mexico was made “ARO insolvent” by the 2021 transaction, arguing that “at a fair valuation,” the sum of its debts was greater than the sum of its assets.
“What’s effectively happening is that the money that’s needed to plug and abandon these wells is instead going to Exxon shareholders,” Rogers said in a recent interview. “One side is benefiting, and the party that’s being injured is, ultimately, the state.”
A report from the Legislative Finance Committee last year warned plugging and remediation of orphaned wells was on track to cost New Mexico taxpayers anywhere from $700 million to $1.6 billion in the years to come, based on the agency’s analysis of current inactive or low-producing wells throughout the state. Officials from the Oil Conservation Division—which takes on the responsibility of remediation for orphaned wells—has raised alarm over the mounting issue.
At the heart of this crisis, the lawsuit argues, is “the systematic, fraudulent scheme employed by major operators like Exxon Mobil, its subsidiaries, and small, undercapitalized companies like Empire Petroleum, to avoid New Mexico’s legal requirements that operators plug oil wells and remediate the surrounding land once the wells become non-productive.”
The subsidiary Empire New Mexico continued to distribute cash flow to its parent company while failing to set aside assets for retirement of the wells “that are anywhere near the amounts it knows will be necessary to fulfill them,” the lawsuit argues.
Public data
Rogers and Horton were able to build the case when the somewhat rare scenario of the sale of the wells from one publicly traded company to another presented the opportunity to closely review the finances behind the transaction, Rogers said.
“It was an unusual situation, because there was a public company selling depleted wells to another public company—or at least to a subsidiary of another public company,” Rogers said. “Normally, these wells move from larger public operators to private companies, and you don’t have any of the accounting because it’s not published in their [U.S. Securities and Exchange Commission] filing, so you just don’t have it. It’s private information.”
The particularly “telling” information, he said, was provided in a federal filing from Empire Petroleum, which estimated an average cost of remediation for the wells at $9,131. State regulators, however, have placed the average cost at about $163,000 in recent years, and the lawsuit cites an estimate of $214,000 per well statewide.
The lawsuit accuses the companies of “knowingly conceding and avoiding obligations to pay money to the state” in violation of the Fraud Against Taxpayers Act.
“Why this case, you would ask, and it’s because you actually have the evidence of the fraud provided to you by the defendant,” Rogers said. “It’s their own information.”
DOJ declined case
The two were hoping for the state to take on the lawsuit, with its “investigatory powers that are far superior to what we’ll have in litigation,” as Rogers put it, but the attorney general declined the case earlier this year.
An assistant attorney general filed a notice of declination for the Department of Justice in February.
The department’s chief of staff Lauren Rodriguez did not give the agency’s reasoning for declining the case against Exxon Mobil and Empire, but she said holding oil and gas operators accountable for proper stewardship of wells is “a priority” for Attorney General Raúl Torrez, noting the department’s Environmental Protection Bureau is currently litigating against an operator in another case for failing to properly cap an orphaned well.
“More broadly, the NMDOJ believes the full range of tools available to the state, including [the Fraud Against Taxpayers Act], the Uniform Voidable Transactions Act and direct enforcement action, should be on the table when operators shift environmental and financial liabilities to taxpayers,” Rodriguez said. “A decision not to intervene in a particular qui tam case reflects a judgment about the posture of where the case stands currently, not about the NMDOJ’s willingness to act.”
The department filed a lawsuit in December alleging several operators have engaged in a scheme to move around inactive, unplugged wells in an effort to avoid retirement costs and regulation. The lawsuit—which alleges claims of violations of the Fraud Against Taxpayers Act as well as the New Mexico Oil and Gas Act—is pending.
State Land Office role?
Since more than half of the 670 wells transferred from Exxon Mobil to Empire are located on state land, the New Mexico State Land Office could take part in Rogers’ and Horton’s qui tam lawsuit itself, officials have acknowledged.
The State Land Office cannot prosecute the case independently, agency spokesperson Joey Keefe said in response to questions recently, but the agency could join as a plaintiff “with [the Department of Justice’s] permission if it decided to take the case.”
Keefe noted Empire Petroleum has had “significant compliance problems” in the past, including dozens of inactive wells on state land, adding “it’s important that this company’s irresponsible behavior is now getting public attention.”
State Land Commissioner Stephanie Garcia Richard has increasingly taken disputes over abandoned wells on state land to court in recent years. Keefe pointed out the agency has filed 40 lawsuits since 2020 and effected the plugging of more than 840 abandoned or inactive oil and gas wells in that time—“at the expense of responsible private parties and at no cost to taxpayers,” he said.
The agency has also proposed a new regulation that would increase the bonding requirement for leases on state land to $150,000 from the current minimum bond of $10,000, which Garcia Richard called “woefully inadequate” to cover retirement costs for wells that reach into the hundreds of thousands of dollars.
Going after oil and gas companies and holding them accountable for their cleanup obligations remains a sticky affair that requires persistence.
One problem, Rogers said, is that if you wait too long, “there’s no money, right?” In the case of Empire New Mexico, he said, “there was no money from the beginning.”
“The state could have gone after Empire the day after the transaction, and there wouldn’t have been enough money there to plug these wells,” Rogers said. “So the key is, how do you get to the seller that actually has money to pay for these liabilities, so that the state doesn’t have to incur that cost on behalf of taxpayers?”
Photo credit: Dantes/Facebook
_______
© 2026 The Santa Fe New Mexican (Santa Fe, N.M.). Visit www.santafenewmexican.com. Distributed by Tribune Content Agency LLC.
Sign in to get access to this free resource, and all of our whitepapers and reports.
Download this content today!
Register Now Already registered? Click here to Log In
