Oil revenue hits record high
Reposted with permission from the Hobbs News Sun. 2/13/2019
Revenues $465 million higher than last year – $2.2 billion
SANTA FE — As state lawmakers in Santa Fe consider new taxes and regulations on the state’s oil and natural gas industry — including a possible four-year ban on hydraulic fracturing — state revenues from oil and natural gas have reached record levels, according to a new analysis.
The report from the nonpartisan New Mexico Tax Research Institute shows that the state’s general fund and public schools benefited from $2.2 billion in oil and natural gas taxes and revenues in fiscal year 2018, an all-time high and an increase of $465 million from fiscal year 2017. The state’s fiscal years begin July 1 of each year and end June 30 of the following calendar year.
Much of the record-high O&G revenues can be attributed to oil production in Lea County, which is now the third-highest oil-producing county in the nation. New Mexico also ranks third in the nation in oil production.
“Across New Mexico, communities and public schools are seeing the enormous impact and benefits provided by a thriving oil and natural gas industry in our state,” Ryan Flynn, executive director of the New Mexico Oil and Gas Association, said in a news release Tuesday.
State Sen. Gregg Fulfer, R-Jal, said he hopes state lawmakers will stash away some of the record taxes and revenues from the oil and gas industry.
“I thought the revenue would probably exceed $2 billion, so that is great to hear,” Fulfer told the Hobbs News-Sun Tuesday. “Everybody’s been kind of guessing it might be $1.9 billion. That’s a huge number and that’s going to provide things that we can do in this state to make up for the lost revenue over the bust years and hopefully get education on the right track.”
Flynn said 2018 was a record-breaking year for oil and natural gas production in New Mexico. He said the new revenues give the state unprecedented opportunities to invest in public education, build new roads and invest in other parts of the economy.
“Record-breaking can and should be the new norm for New Mexico, but that also goes hand-in-hand with continuing the policies that have allowed oil and natural gas development to flourish,” Flynn said.
‘That’s a huge number and that’s going to provide things that we can do in this state.’
State Sen. Greg Fulfer
Fulfer said record-high O&G revenues could stave off efforts to tap into the state’s permanent fund to cover state operating expenses.
“I know we’ll be fighting that all we can, to keep from getting into that permanent fund,” Fulfer said. “We know how up and down oil and gas is, and this year’s getting off to a slow start. I know we’ve got good, strong production, but I think this year has kind of got off to a slow start, so we could see a little down dip. If they don’t put a little back for the rainy day fund, that would be devastating in the budget starting out early.”
According to NMOGA, oil and natural gas revenues pumped $1.06 billion into education in fiscal year 2018, supporting nearly $822 million for primary and secondary education, and $241 million for the state’s universities, colleges and other higher education institutions.
That’s an increase of $128 million over 2017 funding levels, or enough to hire more than 2,300 new teachers, NMOGA said.
While most of New Mexico’s oil and natural gas production is concentrated in the southeast and northwest corners of the state, NMOGA said population centers along the Rio Grande corridor like Albuquerque and Las Cruces benefit the most.
Oil and natural gas revenue supplied Albuquerque Public Schools with $205 million, while Las Cruces Public Schools brought in $59 million. The University of New Mexico led higher education institutions with $60 million, followed by New Mexico State University with $50 million.
Oil and natural gas revenues provided $35,937,428 to school districts in Lea County, and $1.96 million to New Mexico Junior College in fiscal year 2018.
The O&G industry provided $27.5 million to Eddy County school districts and charter schools and $1.3 million to higher education.
Oil and natural gas revenue provided $28.8 million for K-12 education in Chaves County, with $4.5 million more for higher education institutions in Chaves County last fiscal year.
Driven by bustling activity in the Permian Basin oilfields, New Mexico surpassed California and Oklahoma last year to become the third-largest oil producer in the United States and has been on a record-breaking streak ever since.
New Mexico is producing oil at record levels, and has seen a record number of drilling rigs operating within the state. Mostly concentrated in the Permian Basin that straddles Texas and New Mexico, NMOGA said drilling rigs are a leading indicator of future production activity and output.
Late last year, the U.S. Geological Survey reported the Permian’s Delaware Basin holds 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids — making it the largest pool of oil and gas reserves ever identified by the USGS.
Meanwhile, the bill that would ban fracking, introduced by Albuquerque Democrat Sen. Antoinette Sedillo Lopez, a retired law professor, awaits action before the Senate Conservation Committee.
Republicans and industry officials say a fracking ban, even if for just four years, would devastate the oil and gas industry in the state and also the state’s economy.
State Rep. Cathrynn Brown, R-Carlsbad, suggested Democrats who support the fracking ban give back to the state the revenues that oil and gas generate for their districts. Sedillo Lopez did not respond to a telephone inquiry Tuesday.
Fulfer said he hopes the proposed fracking ban is killed in the Conservation Committee. He said oil and gas revenues save each state taxpayer more than $800 a year.
“If people vote that through, that doesn’t send a very good message at all for the state,” Fulfer said. “A lot of people have to be sitting back that write checks for investing in New Mexico saying ‘Well, maybe we need to just put this pen up right now and watch what happens.’ We’re liable to lose a lot of money in investment dollars up front.”
Five other Democrats are co-sponsoring the fracking ban, the closest of which to Lea County being Sen. William Soules of Las Cruces.
“The future is very bright for New Mexico, and we can expect these trends to hold for the foreseeable future if New Mexico remains a favorable place for oil and natural gas producers to do business,” Flynn said. “We have the ability to set New Mexico on an upward trajectory that will shape and benefit our state for generations to come. New Mexico has turned the corner. It’s time to keep the momentum going, take advantage of our incredible economic resources, and pave the way to move New Mexico forward.”
NMOGA officials state the oil and natural gas industry is New Mexico’s top economic driver, responsible for more than 100,000 jobs and accounting for $2.2 billion in tax revenue for schools, health care and public safety.
Democratic state lawmakers have introduced several bills this session that would impact the O&G industry, increasing fines, raising royalty rates, requiring environmental assessments and prohibiting all hydraulic fracturing through June 1, 2023.
Jeff Tucker can be reached at email@example.com .
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