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NM impact of federal climate change orders scrutinized

Recent orders by President Joe Biden’s administration have been met by a mixed reaction in New Mexico, which relies heavily on revenue generated by the oil and natural gas industries. A drilling rig south of Carlsbad is shown in this 2019 file photo. (Eddie Moore/Journal)

SANTA FE — Climate change orders issued by President Joe Biden’s administration could have a significant impact on New Mexico revenue levels in coming years but are unlikely to affect the state’s short term cash flow, state officials and economists said Tuesday.

In part, that’s because more than 6,000 oil drilling permits have been acquired by operators — primarily in southeast New Mexico — but not yet utilized.

“We do not believe there will be a major short-term impact,” Adrienne Sandoval, the director of the state Oil Conservation Division, told Senate Finance Committee members during a Tuesday meeting.

But she said an extended “pause” on all new leasing activity on federal lands would eventually lead to a decline in oil production, as about 75% of the oil wells drilled in New Mexico in 2020 were on federal land.

In all, more than 40% of New Mexico’s roughly $7 billion in general fund revenue comes from the oil and natural gas industries, a figure that has increased in recent years despite attempts to diversify the state’s economy.

Given that budgetary reliance, some state lawmakers and oil industry advocates have expressed concern about the recent federal orders.

Just days after taking office last month, Biden issued an executive order to indefinitely pause all new leasing activity on federal lands so the U.S. Department of the Interior can review leasing and permitting processes.

In addition, a separate order issued by acting agency secretary Scott de la Vega — U.S. Rep. Deb Haaland, D-N.M., has been nominated as Biden’s interior secretary but not yet confirmed — limited the authorization of all new drilling permits for 60 days.

Several lawmakers said Tuesday that New Mexico should get federal dollars from the Biden administration to offset the impact of any new restrictions on federal land within the state’s boundaries.

“In exchange for us not developing a natural resource, we should be compensated,” said Sen. Jacob Candelaria, D-Albuquerque, calling federal compensation a “fair proposition.”

Sen. George Muñoz, D-Gallup, the Senate Finance Committee’s chairman, also raised the compensation issue and said lawmakers will have to take a cautious approach to recurring spending levels.

“As a businessman, businesses will seek the path of least resistance,” Muñoz said, referring to the possibility that oil companies could halt New Mexico operations.

Ryan Flynn, the president and CEO of the New Mexico Oil and Gas Association, said a recent survey of group members showed 86% would consider shifting new investments outside of the state if a more lasting leasing ban were to be imposed.

Meanwhile, Dawn Iglesias, the chief economist for the Legislative Finance Committee, said information she has received indicates 90% of the federal acreage available for oil and gas leases are currently leased, after several large lease sales in recent years. Canceling three federal lease sales planned for this year — if that ultimately happens — would cost the state roughly $12 million in direct revenue, she said.

But Iglesias also said oil prices and rig counts are currently above the projections state and legislative economists used to craft December revenue estimates. Revised revenue estimates are expected to be released in the coming weeks.

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