Oil and gas’ contribution to New Mexico’s economy could grow by more than $10 billion in the next 30 years, per a recent industry report, as operations grow in the Permian Basin in the state’s southeast corner.
While Eddy and Lea counties, which make up most of New Mexico’s portion of the basin it shares with Texas, comprise about 6.3 percent of the state’s population, they contribute about 21 percent of its private-sector gross domestic production (GDP), per the report issued Aug. 30 by the Permian Strategic Partnership.
The Partnership is made up of oil and gas companies in southeast New Mexico and West Texas, advocating for the industry in the U.S’ most active oilfield.
The U.S. Energy Information Administration estimated in its latest data that the Permian in August produced about 5.3 million barrels of oil per day (bpd) and was expected to climb to 5.4 million bpd next month.
That’s the highest daily production of any of the U.S.’ major shale basins, and about 45 percent of the U.S.’ total oil output per day of about 11.8 million barrels per day, per the EIA.
All that oil production translated to about $17.2 billion in annual GDP to New Mexico attributed to oil and gas production in the Permian, per the Permian Strategic Partnership’s report, and 110,900 jobs.
By 2050, those numbers could rise to $29 billion in New Mexico’s GDP and 169,000 jobs, per the report.
“The Permian Basin creates thousands of jobs every year that support families and local businesses across West Texas and southeast New Mexico, with a long tail of stimulus throughout the entire U.S. economy and across all major industries,” the report read.
“The Permian Basin will continue to be a force in job creations and economic growth for decades to come.”
That also meant billions in tax revenue and royalty payments operators pay to the governments of the states that host oil and gas operations.
Taxes and royalty payments sent to the local and state governments from oil and gas totaled $3.3 billion last year in New Mexico, per the report.
From federal mineral leases, the report showed New Mexico gained about $809 million to its General Fund last year, with funds from fossil fuel production averaging about 30 percent of revenue to that fund primarily used for the state’s budget.
Royalties paid on operations on New Mexico’s State Trust land are earmarked for the Land Grant Permanent Fund, which received about $1.2 billion in industry revenue last year, the report read.
Another $576.6 million in oil and gas revenue from sales tax receipts went to the State, while $518.2 million went to local governments in New Mexico, the report read.
Those funds support public services and education, the report read, and any disruption of such economic activity could mean higher costs for residents of both states that contain the Permian Basin.
“These funds support public schools, state universities, roadways and state services,” read the report. “Without these valuable contributions, the cost of state services and education would increase, placing a major tax burden on Texas and New Mexico residents, and dramatically raising the cost of college tuition.”
Partnership President Don Evans said political leaders should invest more in the region’s fossil fuel sector in the coming years and support an industry he said was crucial to national security and global energy supplies.
“This will enhance the ability for the energy industry to provide the energy resources necessary to keep our nation’s economy strong and country secure,” Evans said. “Over the last century, the Permian Basin has been the lifeblood of our nation – providing vital resources, jobs and economic opportunities.”
But critics of oil and gas warned of the industry’s environmental impact, calling for a transition away from fossil fuels to less carbon-intensive energy sources like oil and gas.
Environmental group Conservation Voters New Mexico argued following the passage of the Inflation Reduction Act, widely regarded as making “historic” federal investments to address pollution and climate change, said more work was needed to gradually curtail New Mexico’s and the world’s use of fossil fuels.
“The impact of the climate crisis has been front and center for New Mexico families for years: drought, wildfire, increasing storm intensity, decreasing crop yields, and the resulting impacts on our economy,” said Executive Director Demis Foster. “We call on the state legislature to take the next step through economy-wide emission reductions and standards as soon as possible.”
A continued reliance on oil and gas could also leave the state vulnerable to dramatic up and downswings as the market shifts, state economists warned.
In its August revenue forecast, the Legislative Finance Committee listed volatility in the oil and gas industry as a key threat to New Mexico’s economic health.
“Inflationary effects and impacts on oil and gas demand may affect state revenue collections.”
To insulate the State from such risk, lawmakers required revenue from oil and gas in excess of the five-year average of federal royalty payments be deposited in a tax stabilization reserve fund, intended to avoid having the state rely on large windfalls of cash when markets are strong and production increases.
“These measures prevent oil and gas revenue surges, which may be unsustainable, from being allocated to recurring budgets,” read the LFC report.
Adrian Hedden can be reached at 575-628-5516, [email protected] or @AdrianHedden on Twitter.