New Mexico’s financial outlook has improved yet again. While revenues are still expected to fall in the fiscal year that begins July 1, the drop won’t be as bad as predicted in December. General fund recurring revenue for the upcoming fiscal year is now estimated to decline by 8.5 percent, an improvement over the 10.9 percent drop forecast just two months ago, according to updated revenue projections presented Wednesday to the Senate Finance Committee. “The [fiscal year 2022] general fund recurring revenue is forecasted to grow by 4.9 percent compared to [fiscal year 2021], so the good news is … that there’s $339 million of new money,” Debbie Romero, acting secretary of the state Department of Finance and Administration, told the committee.
The state of New Mexico is expected to take a major financial hit under executive orders issued by President Joe Biden to fight climate change, including a moratorium on new oil and gas leases on federal lands. But the impact may not be felt right away. After a presentation Tuesday by a chief economist and other state officials, as well as representatives from the oil and gas industry, the new chairman of the Senate Finance Committee said the budget for the upcoming fiscal year will see little, if any, impact. “But in the next years, you will see a great decline,” said Sen. George Muñoz, D-Gallup. “So as [lawmakers file requests for] recurring money or send bills to us, be prepared to look to the future and what that looks like because if we add additional money and recurring money, cutting will not be any fun at all.”
Cora Gonzales was in her room on Jan. 4 when she heard her father yell. In the evenings he watches TV while sitting by the living room window, and that’s where she found him, looking outside and not at the tube. The rest of the family quickly joined them and they stared through the picture window as flames shot into the night sky from a nearby well pad. This particular fire was uncommon.
Later this month, New Mexico lawmakers will have another chance to fix an economic problem that has plagued the state for decades. “For at least 40 years people in the state government and the Legislature have known that they are overly dependent on oil and gas for state revenue,” says Jim Peach, regents professor of economics at New Mexico State University. Right now, more than 40 percent of the state’s income relies on the boom-and-bust fortunes of oil and gas. Now, according to a trio of New Mexico’s leading economists, the time has come to change course. This story was first published at Capital and Main and is republished here with permission.
State Senator Antoinette Sedillo Lopez, D-Albuquerque, plans to introduce a bill during the upcoming legislative session that would enact a four-year pause on fracking permits while studies are conducted to determine the impacts of fracking on agriculture, environment and water resources and public health.
The bill directs state agencies and departments, including the Energy, Minerals and Natural Resources Department, the New Mexico Environment Department, the Department of Health and the Department of Agriculture to study and report annually to the governor and the relevant legislative committees on the impacts of fracking on the respective sectors.
“It’s not a moratorium on fracking or banning fracking altogether. It is simply a pause on issuing new permits for four years,” Sedillo Lopez told NM Political Report.
“The bill requires agencies to study the issue of fracking, and to give recommendations to the legislature for legislation and rules that would be appropriate to deal with the consequences of fracking on our air, our land, our water, and our health,” she said.
The 2021 session will be the third time state legislators will consider the bill, which failed to get on the call during the last 30-day session in January 2020. In even-numbered years, only budget bills and bills on topics chosen by the governor can be discussed by the Legislature. The 2021 version of the bill hasn’t been prefiled.
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In past legislative sessions, the bill has received pushback from Republicans and legislators representing districts in the state’s two energy-producing zones. A fiscal impact report on the bill from 2019 estimated the state would lose $3.5 billion by halting new fracking permits for four years, but an updated analysis is needed to better predict the possible fiscal implications moving forward.
Sedillo Lopez said that the bill has support among many environmental groups and concerned residents, but added that she was surprised at the opposition it has received among other groups.
Trapped underground in the sandstone of northeastern New Mexico sits one of the largest naturally occurring carbon dioxide reservoirs in the nation called the Bravo Dome.
The 1,400 square mile gas field in rural Harding and Union counties is one of a handful of its kind in the United States. They make up a small but critical piece of the nation’s oil drilling operations — one that has bipartisan support and could increase under the Biden administration.
Most of the carbon dioxide extracted from places like the Bravo Dome is piped to oil fields where it’s injected into wells to force out the last dregs of oil in a process called enhanced oil recovery. However, carbon dioxide extraction raises scores of environmental and climate issues — including the potential for massive releases of a greenhouse gas into the atmosphere. And the companies that drill for the gas in New Mexico have questionable records when it comes to dealing with landowners.
Why drill for CO2? Democrats and Republicans alike have supported enhanced oil recovery, or EOR, in which carbon dioxide and water are pumped into wells to help extract remaining oil to the surface.
Between May and September, a single lobbyist for Chevron doled out more than $760,000 in campaign cash to dozens of New Mexico state politicians, both Democrats and Republicans. State Sen. George Muñoz (D-Gallup) calls it a waste of money. “I don’t think they get back anything,” says Muñoz. He and Democratic Speaker of the House Brian Egolf are two of the top three recipients of oil and gas money among state legislators. But, he says, “I don’t think it gets their message heard.”
That’s because he already knows how he and many other legislators will vote.
Just a few weeks after the pandemic hit New Mexico, the price of oil plunged into negative territory for the first time in history. Production screeched to a halt worldwide, workers were laid off, and wells were temporarily plugged while operators hoped to wait out a price war between two of the world’s largest oil suppliers, Russia and Saudi Arabia. More than six months later, the oilfields in New Mexico are starting to show signs of life. Some of the wells that were shut in earlier in the pandemic are now back online, though just 47 well rigs—which drill new wells—are up and running, representing 40 percent of those operating in 2019 before the pandemic hit.
“We’re hearing anecdotally that some producers are choosing to restart some of that production. “We’re still holding fairly steady, with a rig count in the 40s,” Robert McEntyre, director of communications at the New Mexico Oil and Gas Association, said.
A group of local leaders touted New Mexico’s work towards addressing climate change during a recent webinar on public health and climate change. But speakers such as Speaker of the House Brian Egolf, a Santa Fe Democrat, and New Mexico Department of Health (DOH) Sec. Kathyleen Kunkel tip-toed around the state’s recent record oil production and its contribution to climate change. Fossil fuel combustion is the chief driver of carbon dioxide emissions that are causing climate change. While many states have begun transitioning to renewable energy sources to replace coal, oil and natural gas, New Mexico is the only state to adopt a 100 percent clean energy mandate while also producing record levels of oil.
“For the [Gov. Michelle] Lujan Grisham administration, environmental issues are public health priorities,” Kunkel said in her remarks, adding that DOH is part of the governor’s climate change task force.
To Nathalie Eddy’s eye, Loco Hills has become “a graveyard” of oil and gas development.
Eddy is the Colorado and New Mexico field advocate at the environmental group Earthworks. Eddy works frequently in the Permian Basin, using special imaging cameras to capture methane leaks coming from oil and gas wells sites in the area.
Loco Hills, located north of Carlsbad on the Lovington Highway, is a legacy oilfield whose landscape is now dotted with inactive wells, and a few wells still producing, stretching as far as the eye can see. Most of those defunct wells are located on state or federal public lands and they aren’t going away anytime soon. The area “offers a sobering glimpse of drilling’s irreversible damage that scars these public lands and makes the land unavailable for any future use for future generations,” Eddy told NM Political Report.
There is concern that other parts of the Permian Basin may suffer a similar fate. The U.S. Bureau of Land Management’s Carlsbad field office was considered the busiest in the country last year, thanks to record levels of oil and gas production in the Permian Basin.