A number of proposals aimed at reforming how the oil and gas industry works in New Mexico have stalled out in this year’s legislative session. Meanwhile, others that would see the state bring in even more money from its booming production are still afloat. Reporter for Capital & Main Jerry Redfern has been keeping a close eye on the legislation and spoke with KUNM about why some ideas have gotten more steam than others, and why this is a particularly consequential legislative session for reforming the industry.
JERRY REDFERN: This will be the last big session that Gov. Michelle Lujan Grisham has to get certain legislation passed that would codify various climate change things that she brought up literally the opening days of her administration, back in 2019. Because next year's session will be a quick one-month session dealing primarily with the budget and then, at the end of next year, she's out of office and we'll have a new governor. The other thing is the continuing unfolding chaos that's coming out of Washington D.C. that is clearly going to be affecting the state budget from top to bottom.
KUNM: So, let's get into what we are seeing this session. Often we think of Republicans as the ones who oppose increasing regulations — on any industry, really — but we've actually been seeing some of those efforts from a few New Mexico Democrats this year. What has stalled so far?
REDFERN: I think the biggest and foremost bill that's been affected by this was Senate Bill 4, the Clear Horizons Act. That was going to codify the governor's initial hopes to reduce the state's greenhouse gas emissions to 2005 levels by 2050. And that was tabled last week with votes from Sens. George Muñoz (D-Gallup) and Benny Sendo (D-Jemez Pueblo). There was a plugging reform act that came up, and that was also tabled by Reps. [Nathan] Small (D-Las Cruces) and [Meredith] Dixon (D-Albuquerque), joining together with all the Republicans. There was a proposal to require inspections by the Environment Department on proposed transfers and new licenses, essentially in the oil and gas realm. That was also tabled by all Republicans with votes, including Small and Dixon.
KUNM: Why are Democratic lawmakers defeating new rules and regulations like this?
REDFERN: It's a little bit difficult to parse. I think politicians don't always want to come right out and say things when they're controversial. Sort of reading between the lines a bit, I think that these Democrats are working to maximize oil and gas production, to bring in greater revenues to the state, to be able to do more things.
KUNM: Well, and speaking of greater revenues — while not increasing regulations, some of these same key Democrats have proposed raising fees and taxes on the industry. What proposals have you been watching in that regard?
REDFERN: Two main ones. An oil and gas royalty rate change would raise the royalty rates from 20% to 25% on only new wells in only state lands and in just certain parts of the state, mainly down in the Permian Basin. This particular part of the Permian Basin, that happens to be in New Mexico, is the most productive, most valuable bit of oil and gas drilling on the planet at this point. And the State Land Office is really behind this bill, as well. And they're thinking that we shouldn't —we, as the state — shouldn't be giving away land leases if we could get more for them, I guess is the way to put it. You know, sort of squeeze the maximum dollars out of that. And another one, I'm still trying to figure it out and I'm waiting to hear some comment back, it's by Rep. Small and he's calling it the Oil and Gas Equal Tax Act. And, sort of on the face of it, it doesn't seem like a lot. He's raising the tax on oil from 3.15% to 4%. So, it's like a fraction of a percent that it's going up. And it's called "the equalization act," because back in the 90s, for complicated reasons, the tax on gas went up very slightly. So, that's why they're not the same. In all that, though, that tiny fraction of a percent would actually bring in a whole lot of revenue to the state.
KUNM: So, Democrats are building up this revenue while defeating bills that have the potential to slow production through increased regulation. If it's a full-steam-ahead approach, what about environmental protections?
REDFERN: There is no particular indication that much in the way of environmental reforms that have been talked about would dramatically affect production in New Mexico. That's the big threat that's always brought up, and the compounding threat that it will reduce state revenues. But it should be noted, whenever those arguments come up, that the state has implemented some of the strictest environmental regulations in the nation and it hasn't slowed growth whatsoever. And it's still very profitable. That said, there isn't much actual environmental regulation, I think, still left on the table that has a chance of passing.
