Published: 12:01 am, Sun. May. 22nd, 2016Updated: 11:33 pm
New Mexico’s weathering of the Great Recession would have been all the more difficult were it not for elevated oil prices from 2007 to 2014, save for a months-long slide from 2008 to 2009. The proliferation of new oil wells, along with the revitalization of existing wells, brought New Mexico’s oil production to levels not seen since 1970. More importantly, the elevated prices and the record output brought much needed revenue into the state’s general fund.
West Texas Intermediate crude oil was as high as $105 as recently as June 2014, but since then, Saudi Arabia’s focused efforts to protect market share has taken its toll on prices. Thankfully, production has largely held on, which was kept thousands of men and women working and continued to put monies in state coffers, albeit less.
New Mexico’s growth industries, including renewable energy, have come to realize how vital a thriving oilfield is to the state, since many could not economically operate without incentives that are funded in large part from oil and gas revenues.
So with oil revenues down, and with so much depending on continued – though limping – oil production, it seems enormously counterproductive that the federal Bureau of Land Management would propose new regulations that would damage New Mexico’s oil and gas industry. The BLM has proposed new rules that address methane flaring and venting, but the requirements would be disastrously burdensome to producers and would create only marginal benefit.
Natural gas, or methane, is commonly flared, or burned, through vertical stacks as a means to prevent a dangerous buildup of methane at a well site. We believe that advocates for these additional regulations, such as the WildEarth Guardians and the Rio Grande Sierra Club, have overstated the problem and understated the cost to industry. They instead have ignored the local and personal costs, emphasizing so-called benefits to the climate.
But, the facts show that methane emissions from natural gas production dropped significantly between 2009 and 2013 – from about 62 teragrams of CO2 equivalent in 2009, to 47 teragrams of CO2 equivalent in 2013. Additionally, the EPA itself stated in 2013 that methane emissions from crude oil production fell 21 percent since 1990, due mainly to voluntary reductions by industry.
As drafted, this rule will not achieve the BLM’s intended goal to obtain lower methane emissions and cleaner air. In fact, the environmental improvements of this rule are minor while negative economic impacts on the industry are drastic. Methane emissions are decreasing under voluntary industry action and existing regulations that do not put production, reserves, communities and the state at risk. As written, this rule will only hamper New Mexico’s economic growth and put in jeopardy the prosperity of our families and the businesses that employ them.
As the business voice of New Mexico, we have submitted a letter calling on the BLM to more rigorously investigate the statewide direct and indirect economic impacts in comparison with anticipated benefits.
At a minimum, the BLM should consider limiting the application of the proposed regulation to only new wells and grandfather existing facilities to minimize significant unintended consequences. Industry experts foresee that many existing wells will be prematurely shut in because of the uneconomical costs associated with required semiannual inspections of all producing wells.
The oil and gas industry is a significant funding source for the New Mexico general revenue fund, severance tax bonding and permanent funds. In 2014, 35 percent of the state general fund revenues came from activities of the oil and gas industry. Vital services funded by oil and gas revenues include teachers’ salaries, building schools and providing healthcare for our low-income populations.
Adding costly regulations to an already hurting oil and gas industry will not help New Mexico’s jobs outlook or the revenues derived from production. We have too much to lose by gaining more regulations.
(EDITOR’S NOTE: Jason Espinoza is the president of the New Mexico Association of Commerce. Contact him at [email protected])