Bright but challenging future for oil and gas

U.S. oil and gas production remains at historic highs despite price instability, but the industry is facing major regulatory and infrastructure challenges to sustain momentum, local and national leaders told the Albuquerque Economic Forum on Wednesday.

That includes aggressive opposition by environmental organizations, restrictive government regulations and a growing need for new infrastructure, said Robin Rorick of the American Petroleum Institute in Washington, D.C.

“The industry is at a crossroads, a transformative stage,” Rorick said. “The dynamics of the country today are extremely challenging.”

On the positive side, production is at record highs. Nationally, crude output is above 9 million barrels per day, and natural gas 80 billion cubic feet. That’s up from 5 million barrels and 52 billion cubic feet a day in 2005.

New Mexico has particularly benefited, thanks to its stake in the Permian Basin.

In the early 1970s, Permian production peaked at 2.1 million barrels of crude per day. That fell to under 1 million by 2005, but since then, it’s climbed to above 2.2 million barrels per day. Now, industry projects 5 million within 10 years.

“One half of all active drilling rigs in the U.S. are now in the Permian,” Rorick said.

For New Mexico, that’s meant a steady flow of revenue for the state, despite depressed prices, said New Mexico Oil and Gas Association Executive Director Ryan Flynn.

“The industry generated $1.6 billion in revenue directly to the state last year,” Flynn said. “It’s the bedrock of the New Mexico economy.”

But challenges have grown alongside the production boom. For one thing, more infrastructure is needed to transport output from basins to refineries and domestic and foreign markets. In the Permian, for example, a lot more pipeline capacity is needed, Rorick said.

Government regulations are also a challenge, especially red tape in approving drilling and right-of-way permits on federal lands. That’s particularly true in New Mexico, which has the most federally leased land in the U.S. for oil and gas production, Flynn said.

“Conservative estimates say New Mexico loses about $2.3 million in revenue per day because of those delays,” Flynn said.

Nationally, President Trump’s administration has pursued less restrictive policies. But Congress is generally deadlocked, and aggressive opposition from environmental groups often drowns out constructive dialogue, Rorick said.

“There are many individuals with legitimate concerns, but there are also many small but loud organizations with an agenda of ‘keep it in the ground,'” he said. “As a result, we’re not having the discussions and dialogue we need, nor answering the legitimate questions that must be answered. We need to work harder to engage more in dialogue and get past all the rhetoric.”

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