ALBUQUERQUE, N.M. (AP) - New Mexico lawmakers from both sides of the aisle voiced concerns Tuesday about U.S. President Joe Biden’s pause on oil, saying recent actions by the administration will undoubtedly have long-term implications for the state’s financial outlook.
A panel of industry groups and state regulators testified before a key Senate committee about potential production decreases and revenue losses that could stem from a pair of orders issued late last month.
One order places a moratorium on new lease sales on federal land while the administration reviews permitting programs. The other order suspends for 60 days decision-making by local land managers - meaning any permitting, right of way applications and other routine requests have to go through top officials at the U.S. Interior Department.
New Mexico already has seen a decrease in drilling rigs operating in the state and decisions by energy companies to shift multimillion-dollar investments elsewhere. The development of pipelines for gathering natural gas or transporting water needed for drilling activities also are in limbo.
Ryan Flynn, executive director of the New Mexico Oil and Gas Association, told the finance committee that $1.5 billion in state revenue is at risk along with more than $12 billion in capital projects. He noted that more than half of production in the state comes from federal lands.
“If you’re going to decrease revenue for the state, then those losses will have to be made up somewhere, either through budgetary cuts or through tax increases on other sectors or on individuals and those are very difficult decisions for any state policymaker to have to make,” he said.
An analysis by the state Oil Conservation Division indicated that impacts over the short term would be minimal since more than 6,000 applications for drilling permits already have been approved. However, the agency acknowledged that the federal orders create uncertainty for operators that already are dealing with infrastructure challenges and future production would likely drop off as there would be no new wells to replace those that are currently operating.
The agency is recommending the state prepare for a 10% reduction in production.
Legislative analysts reported that the cancellation of this year’s federal lease sales would mean a direct loss of about $12 million for the state but that it’s difficult to predict the total impact given uncertainty within the industry and questions about whether the orders could be extended or amended.
Analysts did note that current prices per barrel and production levels are higher than what was predicted in December’s revenue forecast.
Industry groups that represent producers both in New Mexico and Texas told lawmakers that the Permian Basin remains the epicenter of the shale boom in the U.S. and that New Mexico’s share of the basin is the most productive part. Still, some operators have indicated they would move out of New Mexico due to the amount of federal land and the limits imposed by the new orders.
Sen. Jacob Candelaria, D-Albuquerque, said it’s clear lawmakers will need to be more conservative with spending plans that require recurring funding. He added that the Biden administration needs to consider the effects of an energy transition on oil-producing states like New Mexico and the right of New Mexicans to develop their natural resources as they see fit.
“So in exchange for the people of New Mexico not being able to develop that natural resource, we should be compensated. I think it’s a fair proposition,” he said.
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