Big questions loom as the 2022 primary election nears. Who will Democrats nominate for Attorney General, State Auditor Brian Colón or Bernalillo County District Attorney Raul Torrez? Who among a lengthy list of Republicans will challenge Gov. Michelle Lujan Grisham this fall? Will a concerted effort by conservative forces to unseat a group of progressive Democratic incumbents succeed? I would add, will the oil and gas industry feel like a winner after the election?
Lawmakers will appropriate a record amount of state money in 2022, thanks to unprecedented oil and gas production. Revenue to pay for year-over-year spending, versus one-time costs, in the fiscal year that begins July 1 is projected to go up by 11%, and most of that — 60% — is due to New Mexico’s dominant industry.
We’ve been here before — entering a legislative session flush with cash with projections that an oil and gas boom will last years. But budget leaders at the Legislature know better, precisely because they’ve experienced first-hand the volatile roller coaster of the oil and gas industry’s notorious boom-bust cycles.
A graph put together by the Legislative Finance Committee demonstrates the past turbulence aptly.
Two years ago, in 2020, state lawmakers went on a spending spree due to robust oil and gas production that economists and industry experts predicted would continue for a decade or more, only to return to Santa Fe a few months later to adjust spending after COVID-19 shut down the global economy.
It was an extraordinary moment, one that demonstrated the wisdom of caution when betting on long-term strong oil and gas production.
And, yet, this is where state lawmakers find themselves in January 2022 as oil and gas production has climbed to its pre-COVID peak.
Despite aspirations to wean itself from over-reliance on fossil fuels, New Mexico continues to reap the benefits of oil and gas production, to the tune of $1.6 billion in new money. That’s the amount of dollars coming in for fiscal year 2023 over the expenses of this fiscal year, which ends June 30.
The debate over how cautious to be is playing out in talks about the state’s public education.
As the single-largest item in New Mexico’s state budget, public education commands a central role in every legislative session.
This year is no different, except perhaps in the size of the windfall New Mexico is experiencing and how much cash Gov. Michelle Lujan Grisham and the Legislature want to give public schools and classroom teachers.
The Legislature’s budget arm, the Legislative Finance Committee, proposes spending $421 million more — 12% — over this fiscal year. The governor is in the same vicinity.
Part of the reason for the intense focus is the state’s continuing attempt to right generational education inequities identified in a 2018 landmark court ruling that found New Mexico guilty of violating its responsibility to educate all children equitably.
That generational inequity has contributed to differing education outcomes for groups of students by race or ethnicity, with fewer non-white students graduating than their White peers and performing poorer in reading and math proficiency. A consensus has emerged in recent years among policy makers that more should be spent to address these inequities.
The naked eye can’t tell you much about methane. Sometimes, distortion wavers above an open pipe or tank at an oil and gas well like the haze of heat over a desert highway. When Earthworks’ Sharon Wilson aims her FLIR camera, however, the screen renders the scene in black and white and plumes of black smoke can be seen wafting skyward.
“There are so many pipes and vents and tubes, it’s a lot of opportunity for holes,” said Nathalie Eddy, a field advocate with Earthworks, an environmental organization that monitors and reports methane emissions to regulators. “This industry is built to leak.”
Oil and gas engineers say that’s the system releasing pressure before it compromises equipment, well production, or worker safety. But those pressure valves leak methane.
We pick up where our story left off last year. As in 2019, we find New Mexico’s fortunes glittering in a 21st-century version of a gold rush in the oil-rich southeast as state lawmakers prepare for the 2020 30-day session.
Policy makers will have about $800 million more in revenue than this year’s state budget to work with when crafting the state’s spending plan for the fiscal year that starts July 1. In an election year like 2020, it’s easier to partition a surplus than to cut programs and services, as state leaders discovered a few years ago in 2016 after a freefall in tax revenue forced painful choices. “We’re lucky to have the kind of revenues that are coming into the state,” Gov. Michelle Lujan Grisham told an audience last month at an Albuquerque town hall.
There’s always a “but,” however, and Lujan Grisham didn’t disappoint. After acknowledging New Mexico’s gilded economic forecast, she recited a backlog of needs..“Our roads aren’t safe.
Seated on the floor of First Christian Church on a recent Sunday morning, Pastor Dave Rogers pierces the heart of a debate in Carlsbad as it adapts to a historic oil and natural gas boom. Rogers recounts to three children the parable of the Good Samaritan. A man from a despised group helps a traveler beaten, robbed and left for dead after religious passers-by ignore him.“I wonder what it’s like to be a neighbor to somebody we don’t know and that needs our help,” Rogers asks his young listeners as a dozen or so adults, mostly senior citizens, look on. This story was produced by New Mexico in Depth in collaboration with the Carlsbad Current-Argus, Las Cruces Sun-News and Spotlight on Poverty and Opportunity.
Welcoming strangers and helping neighbors are values many in the small congregation – and broader community – identify with Carlsbad. The hub of Eddy County in southeastern New Mexico, Carlsbad is home to a 21st century version of a gold rush in the Permian Basin that straddles New Mexico and Texas, where hydraulic fracturing is enabling companies to access an ocean of oil reserves.
Storage facilities in the Permian Basin. Photo by Elizabeth Miller. Stepping to the microphone at a press conference wrapping up this year’s legislative session, House Speaker Brian Egolf, D-Santa Fe, hammered the podium to the drum beat for Queen’s “We Will Rock You” before declaring it the “best, most productive” legislative session in state history. He proclaimed major achievements in education funding, criminal justice reform, a path for carbon-free electricity — and a bill that would save 100,000 acre feet of water each year from use in oil fields. “The produced water bill, I think, is going to go down as one of the greatest environmental accomplishments to come out of the state legislature of New Mexico,” Egolf said.
It was a mixed session for people who care about climate change and its effects. The state secured some large-scale wins, but failed to advance measures that would diversify the electrical grid and support individual households in reducing their own carbon footprint. And while measures to hold oil and gas companies accountable for violations of the Oil and Gas Act passed, there was little appetite among lawmakers for drawing more royalty money from an industry responsible for a billion dollar surplus this year. The flagship win for Democrats was the Energy Transition Act, SB 489, which commits the state to 100 percent carbon-free power by 2050. That bill schedules a payment plan for closing the San Juan Generating Station, a coal-fired power plant that supplies Public Service Company of New Mexico (PNM).
The Senate passed a House bill last night on a 32:6 vote dealing with wastewater from oil and gas production, after the Judiciary committee amended it to grant the Oil Conservation Division authority to issue fines and fees. Now, if the House agrees with the amendments and the governor signs it, the OCD will, for the first time since 2009, be able to issue fines for violations of New Mexico’s Oil and Gas Act. The Senate amendments pick up an effort made by sponsors of SB 186, which was sent to Senate Finance and has yet to see a hearing. Initially, HB 546, titled the “Fluid Oil and Gas Waste Act,” sought to address questions around managing the estimated 1 billion barrels of water that emerge with oil through production. Companies had cited concerns over jurisdiction, liability and potential to retain proceeds among the reasons just 8 percent of water that comes out of oil and gas activities was being reused, Jennifer Bradfute, an attorney with Marathon Oil, told House Energy, Environment and Natural Resources committee members when that bill was first heard.
Thermal image of emissions that aren’t visible to the naked eye. Credit: Sharon Wilson, Certified Thermographer, Earthworks Oil and Gas Accountability Project. Reducing methane emissions from the state’s oil and gas industry was among the promises Governor Michelle Lujan Grisham made in her campaign, reiterated in her state-of-the-state speech in January and then acted on in an executive order. The order cites leaked, vented, and flared natural gas, the primary component of methane, as costing the state $244 million a year, and directs state agencies to develop a regulatory framework for those reductions from both new and existing sources. Methane, often released from oil and gas development, ranks among the most potent greenhouse gases, with a short-term warming potential that far exceeds that of carbon dioxide.
A new era is on the horizon for New Mexico. The future for this industry in the state has never been brighter. Of course, this is not only true for New Mexico’s political transition, it’s true for the energy renaissance taking place across America and right here in the Land of Enchantment. Earlier this year, the Energy Information Agency reported that the US became the largest producer of crude oil in the world. This spectacular accomplishment reflects the idea that we should have greater control of our energy future, making our country more secure, and allowing communities and economies to flourish.