89th Texas Legislature, Jan. 14-June 2
57th New Mexico Legislature, Jan. 21-March 22
With the endgame of a balanced budget in mind, Texas and New Mexico lawmakers begin each session with a revenue forecast.
Lone Star State
On Jan. 13, Texas Comptroller Glenn Hegar released a Biennial Revenue Estimate of $194.6 billion to spend in the 2026-27 budget cycle, broken down as follows:
- $176.4 billion in total collections of general revenue-related (GR-R) funds; and
- $23.8 billion left over from the 2024-25 biennium.
Of the total, $5.6 billion must be reserved from 2026-27 oil and natural gas tax collections for transfers to the State Highway Fund, Hegar specified.
There will not be any reserves for transfers to the Economic Stabilization Fund (ESF), also known as the Rainy Day Fund, in the 2026-27 biennium since the balance of the fund will be above its allowable cap, Hegar explained. Absent any legislative appropriations, the balance of the ESF is expected to total a record $28.5 billion at the end of the 2026-27 biennium. This amount is constrained by the constitutional mechanisms to limit the ESF balance; otherwise, the balance would be estimated to reach $31.9 billion.
On Jan. 22, both the Texas House and Texas Senate filed their respective budget bills, House Bill 1 and Senate Bill 1. Both versions prioritize property tax cuts, public education, health care, border security, and public safety. Both budgets also set aside about $1 billion for a school voucher program.
Texas Gov. Greg Abbott will deliver his State of the State Address on Feb. 2.
“Texas is the blueprint for America’s future,” said Abbott in a statement previewing his coming speech. “This 89th Legislative Session brings new opportunities for the Texas Legislature and statewide leaders to strengthen our national and global position as the beacon of economic opportunity, prosperity, and individual liberty. From becoming the eighth-largest economy in the world to safeguarding the freedoms that make Texas great, we are working tirelessly to accomplish what seems impossible. Working together, we will continue to build a stronger Texas for generations.”
Oil, Gas, and the State Coffer
Tax revenues account for approximately 88 percent of the estimated $176.4 billion in the GR-R fund, Hegar reported. A listing of other “significant revenue sources” included oil and natural gas production taxes.
According to the latest data from the Texas Oil and Gas Association (TXOGA), released on Jan. 7 in the TXOGA Energy and Economic Impact Report, the Texas oil and natural gas industry paid $27.3 billion in state and local taxes and state royalties in fiscal year 2024, the highest total in Texas history shattering last year’s record by almost a billion dollars, https://bit.ly/tx-oil-gas-taxes.
“Remarkably, 2024 was yet another record-breaking year as the Texas oil and natural gas industry does its part to help reach Gov. Abbott’s goal for our state’s economy to surpass France as the seventh-largest economy in the world,” said TXOGA President Todd Staples. “From tax revenues and production to pipelines, storage, processing, refining, and exports, Texas’ oil and natural gas industry has achieved record-breaking performance across every sector.”
The report also outlines TXOGA’s legislative priorities, including infrastructure, water, and electricity.
Texas lawmakers have until March 14 to file legislation.
The Permian Basin Petroleum Association (PBPA) has been diligently monitoring bills since prefiling began, said Stephen Robertson, PBPA executive vice president. However, the primary focus in January included the election of Dustin Burrows as speaker of the House and the appointment of committee chairs, vice chairs, and committee members. During the next month, PBPA will have a better idea of what industry-related legislation will gain traction.
Land of Enchantment
On Jan. 21, New Mexico Gov. Michelle Lujan Grisham delivered her seventh State of the State address, laying out 2025 legislative priorities, including public safety, affordable housing, child welfare, health care, and economic development. With regard to climate and energy, she included updates to the Oil and Gas Act and assurance of a strategic water supply for clean energy projects, advanced manufacturing, and putting out wildfires.
On Jan., 15, New Mexico’s Legislative Finance Committee recommended $10.8 billion in spending for the 2025-26 fiscal year, closely mirroring Grisham’s December 2024 recommendation. While Texas works on a two-year budget cycle, New Mexico budgets one year at a time in yearly sessions.
Generally speaking, oil and gas direct and indirect revenue make up 25 percent to 30 percent of total general fund revenue, according to the New Mexico Legislative Finance Committee, https://bit.ly/NM-finance.
New Mexico lawmakers have until Feb. 20 to file bills, and the PBPA is tracking dozens of them, with multiple bills already raising red flags.
“This legislative session in New Mexico is critically important,” Robertson underscored. “Once again, the state is benefiting from substantial revenue generated by oil and gas operations. How this revenue is allocated and what policies are enacted that may impact the industry’s growth will be decided in the coming months.”
The following list includes priority bills and the PBPA perspective, as explained by Robertson:
HB 33 would prohibit new oil and gas operations in any county with ozone exceedances. While no county in Southeast New Mexico has been classified as non-attainment for the National Ambient Air Quality Standards by the U.S. Environmental Protection Agency, two monitors near Carlsbad in Eddy County occasionally record exceedances. Under HB 33, these occasional exceedances could effectively halt all new oil and gas operations in the entire county.
“This bill poses a significant threat to New Mexico’s oil and gas industry,” Robertson summarized.
HB 34 proposes adding only a few words to describe the powers of the Oil Conservation Commission and Division, but this simplicity creates vague directives for the Commission and Division leading to potential inefficiencies within both, redundancy with other New Mexico agencies, and significant uncertainty for the oil and gas industry. This uncertainty extends to the state’s economy and the many state-funded programs that depend on oil and gas revenues.
New Mexico already has an Environment Department responsible for regulating environmental activities within the oil and gas sector, as well as a Department of Health whose statutory mission includes ensuring health equity, improving health outcomes, and preventing disease, Robertson explained.
“While the bill’s intent to protect public health and the environment is commendable, its sweeping language and broad mandates pose significant risks and unintended consequences that cannot be ignored,” he continued.
New Mexico already has dedicated agencies tasked with safeguarding public health and the environment.
“Adding vague and overlapping responsibilities to the Oil Conservation Division will only complicate an already complex regulatory framework without providing meaningful benefits,” Robertson stated.
SB 4 is “deeply troubling legislation that threatens not only the oil and gas industry but the entire state economy,” Robertson emphasized.
By mandating carbon net-zero emissions by 2050 without allowing for offsets, the bill effectively demands the cessation of economic growth and modern human activity within the state by mid-century, Robertson continued. Even for those who support transitioning away from oil and gas, achieving economic diversification requires reliable energy and water resources, both of which SB 4 fails to address.
Renewable energy sources cannot fully replace the energy provided by oil and gas development. Moreover, the state’s only emerging water resources – desalination of brackish water and the reuse of treated, produced water from oil and gas operations—are tied directly to this industry. SB 4 would eliminate oil and gas production without providing the infrastructure, power sources, or water resources necessary to sustain the transition to alternative energy, which itself relies on carbon-based inputs.
“This bill is not just a threat to oil and gas; it jeopardizes every industry in New Mexico and endangers the economic stability of the state as a whole,” Robertson declared.
For more information, please go to www.pbpa.info.