Report warns of volatility as Republicans credit oil and gas for income
Republican lawmakers have given the oil and gas industry credit for a predicted increase in income in New Mexico and called on lawmakers to support the growth of fossil fuel development in the next legislative session in 2020 which begins in January.
The Legislative Finance Committee (LFC) announced revised state revenue projections last week, which showed about $ 8.8 billion forecast for fiscal 2023, an increase of about $ 1 billion per year. compared to previous budget figures.
The August report showed that projected revenues had increased over the past three fiscal years, to about $ 8.05 billion in fiscal 2021 from the February forecast of about $ 7.2 billion and up. ‘to $ 8.1 billion for fiscal 2022, compared to about $ 7.5 billion previously forecast.
Supporters of the oil and gas industry in the New Mexico Senate have argued that the increased funding of federal relief dollars amid the COVID-19 pandemic was a temporary boon, while support for the mining could mean a continued boon to the state’s bottom line.
While mining saw one of the largest declines in gross revenue tax returns (mgrt) between fiscal years 2020 and 2021, at around 32%, the LFC report showed that the mining industry ‘mining still grossed around $ 4.5 billion in mgrt.
The matched gross revenue tax shows the amount of taxes and economic activity resulting from the industry.
The report claimed that rising oil and gas revenues could mean a boost to utilities like child care.
“The strong recovery in the oil and gas markets pushes severance packages and federal royalties well above their five-year averages, leading to large transfers to the new early childhood trust fund,” the report says. .
New Mexico Senator Pat Woods (R-7) who represents Curry, Quay and Union counties in eastern New Mexico, an area known for energy development, praised the industry’s contributions in the face of reductions caused by the pandemic.
Amid the pandemic and the downturn in oil and gas markets, when the price of a barrel of oil fell below $ 0 a barrel for the first time in history, a budget surplus of $ 2 billion that many credited the industry with having generated a deficit of $ 400 million in the state budget.
Lawmakers then called a special session to rebalance the budget, and the market has recovered to around $ 60 in recent months, meaning state revenues have been clawed back.
Woods feared the Democrats were looking to overspend the income.
“What we see here is our state battling adversity despite roadblocks last year,” Woods said. “While I am encouraged by these new projections, I am concerned about how this excess income will be spent.
“While oil and gas will continue to fuel New Mexico’s economy, the federal government’s injection of money is only temporary. It is up to us, as stewards of the people’s money, to invest in the infrastructure that will put our state on the path to recovery and long-term success.
Senator Crystal Diamond (R-35), who represents Dona Ana, Hidalgo, Luna and Sierra counties in southwest New Mexico, said she was concerned Democrats in Santa Fe would continue to support the initiatives aimed at keeping the state away from heavy oil and gas production. .
She highlighted the support of her colleagues opposite for a temporary hiatus on federal oil and gas leasing that President Joe Biden decreed when he took office in January as particularly disturbing.
Biden’s ruling on new federal leases was recently blocked by a federal judge in Louisiana, and the Federal Department of the Interior this week announced plans to resume the land tenancy.
About half of New Mexico’s oil and gas production occurs on federal land, and Diamond said a reduction in that activity could devastate the state’s economy.
“It was disheartening to see Democratic lawmakers push for the demise of our energy industry when they backed the president’s ban on oil and gas leases earlier this year,” Diamond said. “This massive influx of revenue is proof that the Republican pullback has been effective, and I hope it serves as a reminder to my fellow lawmakers how important this industry is to our state.
“Until we take seriously job growth, diversifying our economy and supporting small businesses, the success of our state will continue to depend heavily on our hard-working friends in the land of oil and some gas.”
But the LFC report warned that New Mexico’s continued dependence on oil and gas revenues could subject the state to drastic ups and downs in the commodities industry and shifting. towards stricter regulations imposed on the industry.
“New Mexico’s dependence on the energy sector makes oil market volatility one of the biggest and most significant risks to the forecast – up and down.” indicates the report.
“Any changes to the regulatory environment for oil and gas production will affect New Mexico, as more than half of the state’s oil and gas production occurs on federal land and most of the remaining half occurs on state land. “
Adrian Hedden can be reached at 575-618-7631, [email protected] or @AdrianHedden on Twitter.