EDITORIAL: Environmentalists vs. New Mexico oil, finding middle ground

There’s a battle brewing amid the boom. Environmentalists are increasing the pressure on New Mexico’s oil and gas operations even as the state remains a huge player in one the greatest commodity and economic turnarounds this state and country has ever seen.

America is now exporting the same amount of crude oil, refined products and natural gas liquids as Saudi Arabia or Russia produces, S&P Global Commodity Insights reported.

The boom’s been a boon for the state. But not everyone is happy about it. Oil and gas extraction comes with costs — and controversy.

The Center for Biological Diversity and a coalition of like-minded groups have sued New Mexico, the Legislature, Gov. Michelle Lujan Grisham and state agencies (in May) for what they say are violations of state constitutional duty to control the rapidly growing pollution from the oil and gas industry.

They’re now asking the Legislature to not wait for the outcome of the lawsuit, but to act.

The backdrop: New Mexico, now the nation’s No. 2 oil producer and one of the leading states producing natural gas, sits atop half of the Delaware Basin, the most lucrative portion of the greater Permian Basin in the southeastern part of the state.

New Mexico’s natural gas and oil supports more than 92,000 jobs, provides over $6 billion in wages, and contributes more than $16.6 billion to the state’s economy, according to the American Petroleum Institute. Lawmakers are again working with about $3.5 billion of extra revenues due to the boom, following a “once-in-history” budget surplus of $3.6 billion in the current fiscal year.

Despite the size of the oil reserve and the payouts to the state, market conditions make its future financial yield uncertain. Experts have warned that boom times are certain to be followed by busts in those energy commodity markets, especially in a world as volatile and uncertain as it is now. That also means the demand for oil may continue for years to come.

The politics: Democrats have struggled with messaging on oil drilling. While enjoying the fruits of oil and gas production, they’ve also been promoting a “just transition” away from fossil fuels. That’s another reason experts warn that the oil market is volatile. There’s no telling how the transition to renewable energy (wind, solar) or flare-ups in wars and conflict could affect the price of oil. Oftentimes, no matter who’s the executive in office in Washington or Santa Fe, market forces could force their hand.

“President Biden has been dragged kicking and screaming from his initial keep-it-in-the-ground strategy towards a more pragmatic policy,” Bob McNally, president of Rapidan Energy Group, told CNN in December, noting the administration was “mugged by the reality of high gas prices and Russia’s invasion of Ukraine.”

The bottom line is, how do you sell booming oil drilling, or the need for more domestic drilling (which Biden called for after Russia invaded Ukraine) and please your environmental base?

The complaints: The Center for Biological Diversity cites several studies that assert that living near a well can be related to various health issues, dealing with the lungs and the skin, and most troubling, causing risk during pregnancy. They’re asking lawmakers to implement children’s health buffer zones across the state of at least 1 mile away from drilling operations; they’re asking for mandatory penalties and public notification when operators spill toxic liquid waste; they’re also asking for prohibition of freshwater use for fracking to protect aquifers.

The requests reflect activists’ complaints about the oil industry, who in turn contend, rightly, that plenty of rules and regulations, federal and state, have already been put in place.

Though everyone favors removing bad actors, the cost of compliance, in turns out, is unsurprisingly more burdensome to smaller operators, who simply don’t have the funds to deposit large bonds or cap wells without going bust. One solution is for lawmakers to consider tiered penalties for the various oil/gas well operators.

Oil spills should of course be taken seriously, but the bid for 1-mile setbacks is contentious because setback distances are considered arbitrary. That’s because studies present various distances from wells as contributing to health harm, but there is no consensus on the actual distance.

As for freshwater use, there are state and federal regulations already in place for use of freshwater, near aquifers for example. Larger oil companies have been savvy about climate change, even innovating on their own. Chevron, for example, is said to be making numerous efforts to reduce the methane intensity of its Permian Basin operations — but, again, the situation for smaller producers differs.

The solution: Health concerns for workers and New Mexico’s people alike should be taken seriously. It’s simply not defensible to ignore environmental and health impacts on our youngest or most vulnerable citizens. But that doesn’t mean throwing out the baby with the bathwater.

The state has already made incremental steps to address the issue of pollution, with laws like 2019’s Produced Water Act, which deals with water use in drilling for oil and gas. Overarching it all are federal law and federal rules, such as those establishing charges and fees for methane release from wells.

Although Gov. Lujan Grisham didn’t mention oil and gas revenues in her State of the State speech last week, her administration has shown willingness to dip into the reserve fund to fix some problems, like uncapped wells. But the governor has said it’s up to the Legislature to act on that willingness.

The bottom line is all New Mexicans need to be cognizant of the importance of oil to the state’s economy as well as U.S. national security.

Right now, with Houthi rebels menacing cargo ships in the Middle East, the U.S. would be facing even greater uncertainty about the oil market’s volatility, and people would be already feeling the pinch. It’s because of domestic drilling that this isn’t happening. Any negotiation about our oil and gas industry has to keep that as its central guiding point, even as we work to manage the health risks to our children and families.