New Mexico Sues Texas Oil Execs Over Fraudulent Well Scheme

The lawsuit paints a picture of a calculated operation designed to maximize profits while avoiding environmental responsibilities. The executives allegedly moved wells through multiple shell companies they controlled, creating a complex web of corporate entities that made tracking ownership difficult. On several occasions, the men placed companies into bankruptcy protection, only to transfer their most profitable wells to other companies they owned or managed outside the bankruptcy proceedings.

This strategy allowed them to retain valuable assets while leaving the state with the financial responsibility for plugging and cleaning up the abandoned wells. The complaint alleges this pattern occurred over several years, systematically draining value from the wells while accumulating environmental liabilities that would ultimately fall to New Mexico taxpayers.

Key elements of the alleged scheme included:

• Creating a series of shell corporations and LLCs to hold well assets
• Transferring wells between these entities to obscure ownership
• Placing companies into bankruptcy while moving profitable wells elsewhere
• Collecting revenue from wells while avoiding cleanup costs

Unplugged oil and gas wells pose significant environmental and health risks. These abandoned wells can emit climate-warming methane and carcinogenic gases, creating both climate and public health concerns. Additionally, many leak briny, radioactive wastewater that can contaminate soil and groundwater sources.

Previous investigations into wells belonging to the executives' companies revealed alarming conditions. Some wells leaked such high volumes of methane that the air could potentially explode if ignited. Others emitted hydrogen sulfide at concentrations that could be lethal to humans or wildlife. Several wells were surrounded by visible oil and wastewater spills, indicating serious environmental contamination.

I will not stand by while bad actors take advantage of the system — avoiding responsibility, burdening the state with costly remediation, and recklessly endangering the health of New Mexicans.

The environmental impact extends beyond immediate health risks. Methane is a potent greenhouse gas, with a warming potential many times greater than carbon dioxide over a 20-year period. The cumulative effect of hundreds of leaking wells represents a significant environmental liability for the state.

The financial implications of this case extend far beyond the immediate lawsuit. New Mexico faces millions of dollars in costs to plug and clean up the wells that were shed through the bankruptcies. This represents a growing problem as the state's oil boom ages and wells become less productive.

According to a June 2025 Legislative Finance Committee report, New Mexico faces as much as a $1.6 billion bill to plug orphan wells statewide. The risk is increasing as more wells reach the end of their productive life and become low-producing assets that companies may seek to abandon.

The problem is exacerbated by inadequate bonding requirements. Like all oil-producing states, New Mexico's bonds cover only a fraction of the true cleanup cost. A 2024 analysis found that the 15 states accounting for nearly all U.S. oil and gas production held bonds covering less than 2 percent of the projected $151.3 billion cost to plug wells in those states.

This financial gap means taxpayers ultimately bear the burden when companies walk away from their environmental obligations, creating what environmental advocates describe as a massive financial risk for the public.

The tactics alleged in the New Mexico lawsuit are not unique to this case. Industry observers note that these strategies represent a common playbook used across the oil and gas sector to squeeze maximum profits from aging wells before companies face financial difficulties.

Environmental groups have long warned about this pattern, which involves:

• Identifying low-producing wells as liabilities
• Transferring them to shell companies with minimal assets
• Using bankruptcy to avoid cleanup obligations
• Leaving taxpayers to handle environmental remediation

Oil companies and industry trade groups argue that most orphan wells come from an earlier era of operations, and that modern operators are helping address the problem by paying into various government-managed funds. However, the exact number of orphan wells awaiting cleanup nationwide remains unknown, with estimates ranging into the hundreds of thousands.

The situation has prompted a broader reckoning among New Mexico legislators and regulatory agencies about the inadequacy of current safeguards and the need for more robust protections against companies abandoning their environmental responsibilities.

In response to these challenges, New Mexico has begun a fresh attempt at bonding reform. The state's Oil Conservation Commission started updating bonding rules with hearings in October, backed by a coalition of environmental groups.

The proposed amendments would require companies to put forward a $150,000 bond for each inactive or low-producing well. Research has shown these wells are disproportionately likely to become orphans that the state must eventually plug.

The proposed regulations would specifically target companies with large collections of risky wells. Companies whose portfolios consist of at least 15 percent inactive or low-producing wells would need to buy bonds for each of their wells, not just the problematic ones.

Additional regulatory layers would include:

• Enhanced scrutiny on sales of wells to poorly capitalized companies
• Limits on how long wells can remain idle before requiring plugging
• Stricter requirements for companies with high concentrations of low-producing wells

These reforms aim to close the significant gap between current bonding requirements and actual cleanup costs, reducing the financial risk to taxpayers.

The lawsuit against Everett Willard Gray II, Robert Stitzel, and Marquis Reed Gilmore Jr. represents a significant escalation in New Mexico's efforts to hold oil companies accountable for their environmental responsibilities. The case could set important precedents for how states deal with companies that attempt to use corporate structures and bankruptcy proceedings to avoid cleanup obligations.

Gray has called the lawsuit "meritless" and "baseless," denying any wrongdoing and stating he has always acted ethically. New Era Energy & Digital, one of Gray's companies named in the complaint, said the wells "no longer align with the Company's business model" and that it is instead focused on building an AI data center powered by a yet-to-be-built nuclear power station.

The outcome of this case will likely influence both the implementation of New Mexico's proposed bonding reforms and similar regulatory efforts in other states. As the oil industry ages and more wells reach the end of their productive life, the tension between corporate profits and environmental responsibility will continue to be a critical issue for states across the country.

For now, New Mexico's lawsuit sends a clear message: the state intends to pursue companies that attempt to profit from wells while leaving taxpayers to handle the cleanup costs.