Study: New Mexico could lose billions under federal oil and gas leasing ban

Adrian Hedden
Carlsbad Current-Argus

President Joe Biden’s actions to halt new oil and gas leasing on federal land could put more than $1 billion of New Mexico’s revenue at risk, argued the New Mexico Oil and Gas Association (NMOGA) – a trade group representing fossil fuel companies throughout the state.

Last week, Biden signed an executive order to temporarily, but without a specified time frame, block oil companies from acquiring any new leases on federal land.

The initiative was meant to address environmental concerns and mitigate the industry’s impact on pollution and climate change and allow for the federal government to review such impacts and seek stricter regulations.

More:New Mexico Rep. Yvette Herrell joins bill to block future bans on oil and gas leases

But leaders both in New Mexico politics and from the industry quickly condemned the move as potentially devastating the economy of a state that relies heavily on extraction for its bottom line.

An analysis released Tuesday by NMOGA and conducted by the New Mexico Tax Research Institute showed oil and gas production on federal land accounted for $2 billion in state and local revenue and 18 percent of total state spending in Fiscal Year 2020.

Local revenue was bout $163 million and state revenue was $1.8 million, including $1.5 billion to New Mexico’s General Fund.

More:New Mexico industry warns of dire impact as President Biden pauses oil and gas leasing

Operations on federal lands was credited with about 54 percent of the $2.8 billion the industry contributed to state revenue, the report read.

NMOGA President Ryan Flynn said limiting production on federal land would disrupt oil and gas production in New Mexico and could risk its economic benefit to the state.

“Oil and gas development on federal lands is and will be a critical part of New Mexico’s economic and fiscal future,” Flynn said. “Our ability to develop resources on federal lands has a direct impact on the future of our state and the level of investment we’re able to provide in critical areas like education, healthcare, and public safety.”

More:New Mexico Senate bill seeks to transition state away from oil and gas reliance

The ban could create a regulatory environment, Flynn said, that oil companies could view as unfavorable to their business models. That could mean oil and gas producers could move operations into neighboring Texas where most operations occur on private land unimpacted by federal policy.

Less production in New Mexico and domestically could mean more imports of fossil fuels from foreign countries like Saudi Arabia or Russia, Flynn argued, which he said have less-stringent environmental regulations.  

“Policies like a federal leasing ban only threaten to upend our economy, and keeping energy jobs and development here at home, rather than outsourcing them abroad, has an enormous ripple effect on the entire state,” he said.

“New Mexicans want to work, and those who work in this industry want to continue the safe and responsible energy production that our state depends upon.”

More:President Joe Biden halts oil and gas leases, permits on federal land and water

Flynn the industry supported the Biden Administration’s desire to address its carbon footprint and impact on the environment but contended such efforts must be driven by the industry itself instead of blanket regulations from the federal government.

“We share the new administration’s priority to reduce emissions and combat climate change, but we must do so with an inclusive approach that doesn’t put jobs, communities, and states like New Mexico on the chopping block,” Flynn said.

“We are ready to work together to identify solutions and policies that ensure energy jobs stay in New Mexico and essential funding for teachers and first responders is not eliminated.”

More:New Mexico business leaders wary as Biden expected to ban federal oil and gas leasing

But the Department of the Interior, the federal agency Biden’s order called on to impose the halt on leasing, pointed to “millions of acres” stockpiled by the oil and gas industry on federal lands and waters that could sustain operations during the pause, per a release following the announcement of the order.

Onshore, the Department reported more than 26 million acres were under federal lease to the industry and about 53 percent or 13.9 acres were unused and not producing oil or gas.

The industry also held more than 9.3 million unused offshore acres, of 77 percent of its 12 million leased acres.

More:As he's sworn in as President, Joe Biden urged to get tough on oil and gas emissions

About 7,700 approved permits to drill were unused, the DOI reported, both onshore and offshore.

The ban on new leases was part of the Biden’s efforts to reverse former-President Donald Trump’s pro-fossil fuel agenda, the release read, which constituted a “fire sale” of public land to the industry.

“The President’s action will provide a chance to review the federal oil and gas program to ensure that it serves the public interest and to restore balance on America’s public lands and waters to benefit current and future generations,” read DOI statement.

“Irresponsible leasing of public lands and waters impacts communities’ access to clean air, clean water, and outdoor recreation; carves up important wildlife habitat; and threatens cultural and sacred sites.”

More:What now? New Mexico oil and gas looks to future under Biden's halt on land leasing

New Mexico’s Republican Party, a frequent supporter of oil and gas, called on Gov. Michelle Lujan Grisham and the state’s congressional delegation to publicly oppose the executive order and demand the President reverse course.

The party issued a statewide petition on Tuesday and distributed to constituents via email and on social media.

Lujan Grisham indicated following the announcement that her office was reviewing what impact Biden’s order would have on the state. She did not state if she would seek an exemption but vowed to work with the President to develop a “balanced national policy” for energy and action on climate change.

 “The Governor cannot roll over and watch New Mexico suffer even more,” said Nike Kern, executive director of the Republican Party of New Mexico. “RPNM believes it’s imperative the Governor demonstrate her support and commitment to this critical industry by taking suitable action to protect her state and its constituents.”

Adrian Hedden can be reached at 575-628-5516, or @AdrianHedden on Twitter.