Copyright © 2021 Albuquerque Journal
SANTA FE – The oil and gas industry injected nearly $5.3 billion into the budgets of state and local governments in the past fiscal year – a record amount, according to a report released Wednesday by the New Mexico Tax Research Institute and New Mexico Oil and Gas Association.
The association celebrated the report and highlighted the industry’s critical contribution to government revenue.
The 30-page report estimates that oil- and gas-derived income made up 35% of all general-fund revenue for the state budget last year – a share exceeded only once in the most recent eight-year period.
In raw numbers, the industry generated almost $5.3 billion in revenue for state and local governments in the 2021 fiscal year – a 12% increase over 2020 and more than twice as much as in 2016, when revenue took a dive. It was the highest figure listed in the report, going back to fiscal 2014, and the Oil and Gas Association called it a record.
The fluctuations reflect the volatile nature of the oil and gas economy. Diversifying state revenue sources and New Mexico’s broader economy has been a longtime goal of governors and legislators.
In his report, Richard Anklam, president of the nonpartisan New Mexico Tax Research Institute, said the industry made a “remarkable recovery” after starting last year with low prices.
He suggested cautious optimism going forward.
“As drilling returns, production grows and prices stabilize, policymakers and New Mexicans alike have every reason to be cautiously optimistic about the industry’s revenue contributions in future fiscal years,” Anklam said in a written statement released by the Oil and Gas Association.
Leland Gould, president and CEO of the New Mexico Oil and Gas Association, said policymakers should take note of the industry’s vital role in funding government operations.
“Historic revenue equals historic opportunity, and that is great news for teachers and students, critical first responders and health care workers, and each and every New Mexican across this state,” he said in a written statement.
Gov. Michelle Lujan Grisham and state legislators are expecting to have plenty of cash available as they start crafting the next state budget. Surging oil and gas production is contributing to the revenue growth, in addition to increased consumer spending and a flood of federal funds.
Sen. George Muñoz, a Gallup Democrat and chairman of the Senate Finance Committee, said the revenue figures shown in Wednesday’s oil and gas report underscore the importance of building a stronger state economy that is not so reliant on one industry.
“I recognize the importance of oil and gas in New Mexico,” he said in an interview, “but I also recognize, as an appropriator, we can’t ride the roller coaster.”
New Mexico is the nation’s second-largest oil producer.
Even as oil and gas revenue bolsters the state budget, environmental regulators are taking more steps to address air pollution.
New Mexico, for example, banned routine venting and flaring of natural gas earlier this year to become the first oil-producing state to regulate methane at all production sites, pipelines and gathering facilities.
Lujan Grisham, a Democrat, has also promoted renewable energy and ordered the state to join a national coalition seeking to combat climate change.
Republicans, in turn, have blasted Democrats in the state for trying to have it both ways – eager to spend oil and gas revenue, while pursuing excessive regulations.
Gould, president of the Oil and Gas Association, suggested government policies are the only obstacle to future production and revenue.
“Lawmakers in both Washington and Santa Fe should take note of the fact that safe, responsible oil and natural gas production in New Mexico is a win for the environment, a win for local communities and, clearly, a big win for all New Mexicans,” he said.
In an interview, Senate President Pro Tem Mimi Stewart, D-Albuquerque, said lawmakers remain focused on diversifying the economy and broadening revenue sources.
“Although we’re grateful for the oil and gas revenue,” she said of the report, “it’s really not where we want to be long-term.”
Rep. Patricia Lundstrom, a Gallup Democrat and chairwoman of the House Appropriations and Finance Committee, said it’s no surprise how tightly the state budget is tied to the industry.
“Without question,” she said, “they are a major, major source of revenue for us.”