The oil and gas industry injected a record $ 5.3 billion into state and local governments in New Mexico in fiscal 2021, according to a report the industry has lauded and critics lamented as further proof of the state’s dependence on fossil fuels.
While the governor and some lawmakers have promoted plans to steer the state toward renewables over the next decade to tackle climate change, industry leaders argue that oil and gas will remain a huge source of income for New Mexico for the foreseeable future.
They cited the New Mexico Fiscal Research Institute report as evidence.
“Historic revenues mean historic opportunities, and this is great news for teachers and students, essential first responders and healthcare workers, and for all New Mexicans in this state,” he said. said Leland Gould, CEO of the New Mexico Oil & Gas Association. in a report.
“For years, New Mexico has cemented itself as the center of national oil and gas production, and investments in our state are paying off,” Gould added.
Production was up 37% from FY2020, when the market collapsed with falling oil prices, pumping nearly $ 3 billion into the general state fund this year – an amount representing more than a third of this fund, according to the report.
In total, the industry added $ 1.3 billion to education statewide, accounting for nearly a third of operating budgets, according to the report.
Increased production allowed New Mexico to recently overtake North Dakota and become the second country behind Texas.
An industry group that welcomed the report’s findings also took a defiant tone.
“These results are made possible by the hard-working men and women of New Mexico’s energy industry, and they deserve nothing but our gratitude,” said Larry Behrens, spokesperson for Power for the Future, in a statement. “The fact that record revenues are being generated amid a pandemic and hostile leadership at the state and national levels is a testament to the resilience of New Mexico’s energy workers. “
The report says the industry has generated its highest tax revenue since at least 2014. And that’s more than double the sum of 2016, when the market suffered its deepest recession in the past decade.
Fluctuations over the years show just how volatile the market can be. This has led activists, heads of state and a few economists to call for the creation of more stable sources of income – which includes diversification of the economy – to wean the state from what they say is an addiction. to fossil fuels.
Governor Michelle Lujan Grisham, a Democrat, applauded the industry for the dollars it is investing in the New Mexico economy, but it is also encouraging the diversification of industries in the state and the shift to renewables to reduce greenhouse-effect gas.
“The governor has made the diversification of New Mexico’s economy a priority since his first day in office,” Lujan Grisham spokeswoman Nora Meyers Sackett wrote in an email. “Economic diversification is absolutely essential as New Mexico continues to grow and adapt to a changing climate, upon which the governor has led the charge.”
In a July letter, 16 education, community and conservation groups called on the governor and state lawmakers to establish new sources of revenue for schools so that New Mexico is not too dependent. oil and gas dollars as the industry faces a radical energy transition to tackle climate change. .
This week, 240 educators signed a letter sent to the Oil & Gas Association, asking the group to stop using images of teachers and students in advertisements touting the industry’s benefits to them and how the efforts aimed at reducing production and pollution will harm education.
“They’re trying to make it sound like every educator in New Mexico has a clear support for the industry – that’s just not the case,” said Charles Goodmacher, who helped organize the campaign.
Goodmacher said most of the educators he spoke to clashed over a source of funding that will not be sustainable in the long run, and that comes from an industry “eroding the future of our students.” With pollutants that warm the climate.
An economist said boom and bust cycles in the market make funding unreliable and the state should look to other types of taxes.
“We need to do something to reduce our dependence on state oil and gas revenues,” said Jim Peach, professor emeritus of economics at New Mexico State University. “This [revenue] rebounds everywhere in response to the price of oil.
Creating a value-added tax on goods and services, allowing a sales tax on groceries, and increasing the fuel tax – for the first time since the early 1990s – are some of the ways to at least partially replace fossil fuel revenues, Peach said.
State Representative Patty Lundstrom D-Gallup said this latest report reaffirms that oil and gas revenues are an integral part of the state budget.
“I mean, without a doubt,” Lundstrom said. “We are talking about a good game of diversification, but I see nothing on the immediate horizon that could replace their contribution to our budget process.”
Lundstrom, who heads the House Credit and Finance Committee, acknowledged that the fossil fuel industry is volatile and noted that the state budget was seriously affected when oil prices fell.
Relying too much on one industry is a valid concern, but moving away from it must be done gradually, Lundstrom said.
“I don’t see where you can flip a switch and we’re diverse,” she said. “It’s going to take time, and it will take a lot of good, solid planning – and a lot of business-friendly initiatives. “