By Jesse Mullins
As we move deeper into the spring of 2023, oil and gas interests in New Mexico have much to be thankful for. Business is good. It can always be better, of course. But activity is strong. The biggest plus that New Mexico oil and gas can look to this spring is the satisfactory conclusion of the 2023 NM Legislature. When the gavel came down, oil and gas survived unscathed. Bills that could have injured the industry were deflected. Maybe that is the best that anyone could have hoped for in this tumultuous 2020s decade.
New Mexico is different from its shared-border neighbor, Texas, and what gets celebrated in New Mexico might not thrill industry supporters if the same results were declared for Texas. But Texas, as a state, is more pro-industry than New Mexico is, so the Land of Enchantment can be happy with small blessings. For them, such blessings are large.
Meanwhile, too, let us keep perspective—among U.S. states, New Mexico is a giant in oil and gas.
PB Oil and Gas Magazine spoke with Mike Miller, who does Governmental Relations for the Permian Basin Petroleum Association (PBPA) in the state of New Mexico, asking Mike for his assessment of conditions in his state’s oil and gas realm and his thoughts on the recently adjourned (March 18) Legislature.
Miller said the industry came out amazingly good considering what the industry anticipated when the Legislature convened.
“We were anticipating that it was going to be very difficult because there’s a faction within the Legislature that’s [opposed to oil and gas],” Miller said. “I mean, we’ve had anti-fracking bills, we’ve had the ‘Green Amendment’ where anybody had the right to bring action because of clean air, clean water, whatever. We’ve had that the last three years. We anticipated this year that it was going to be a difficult struggle. We had a bill to completely modify the Oil and Gas Act, which was not favorable, changing up the composition of a couple of commissions, where instead of having engineers and experts, there would just be citizens [making the decisions].
“We had some water bills that would’ve been detrimental to industry. There was a water leasing bill, and the intent was to come after oil and gas with it; however, the measure had impacts on agriculture. It had impacts on road construction. There’s a lot of times when they bring these forward, that maybe the focus is on one particular industry, but when you drill down just a little bit, it’s a little more widespread than that. This water leasing bill was one of those.”
That particular bill—on water leasing—died on the House floor. It made it through the committees in the House, and arrived at the House floor, where it sat for two weeks or so, and never was called up for a vote.
“They [oil’s opposition] sensed that they didn’t have the votes to pass it. So it was never brought up,” Miller said. “That was a bill that affected agriculture and construction. It affected economic development.”
In the New Mexico Legislature, when a bill is introduced into either legislative body—House or Senate—it normally receives two committee hearings prior to going to a floor vote.
Said Miller: “We were successful most of the time—except in two cases—of not letting any bills out of the first committee. The water leasing bill was one that got by us. It got through two committees into the House floor, and then Senate Bill 418 [the effort to modify the Oil and Gas Act], made it through its first committee, but never got a hearing in the second.
“And then we [faced] another bill called the Clean Futures Act that we had had to deal with in the previous 30-day session. That one came up later, and once again, it was tabled or died in its very first committee. So we had some bills that would’ve been very onerous for industry that we were successful in killing.”
In other words, the industry’s energies in the 2023 session were largely defensive—opposing potentially hostile legislation.
Were there bills advanced by friends of the industry that were pro-oil and gas?
“Well, when your makeup in the Legislature is 25 Republican seats versus 45 Democratic seats [in a 70-seat House], it’s difficult to pass a pro-industry bill. And obviously, what we did accomplish [defensively] we couldn’t have done without the help of some moderate Democrats. But, again, it is much more difficult to pass a pro industry bill. Because industry is not very popular in the Legislature in New Mexico.”
And yet the pro-industry interests did manage to put forth some pro-industry bills.
“We had a couple of bills that would have helped—that would have given some tax credit to small producers to help them retrofit their operations to meet the new ozone precursor rule, the new methane rule,” Miller said. “Those were a few of the pro industry bills, and once again, they died on adjournment.
“But it was the effort [that counted],” he continued. “And the point of those bills in some way was their messaging, because in the analysis of the bills that the legislators received, they saw what the costs are to meet these new regulations. So there was some positives [in raising awareness], even though the bills themselves didn’t pass.”
Miller believes, too, that even though New Mexico legislators are largely not well disposed to oil and gas, they nonetheless recognize the tremendous benefits that oil and gas confers on the state’s coffers. And that realization alone might account for much of the restraint that was shown in the 2023 session—from the Left.
“We had a $3.8 billion budgetary surplus,” Miller said. “I know that, compared to Texas, that doesn’t sound like much. But in New Mexico, that’s a tremendous surplus. And they passed a $9.57 billion budget for a state of just over two million people. There was a whole lot of extra money, close to a billion dollars for legislators to divvy up in their districts for local infrastructure projects, education, and more on a local level. So I think that was always out there [in legislators’ minds].”
That surplus was due in large part to oil and gas taxes paid to the state.
“It was largely [attributable] to ad valorem taxes on oil and gas,” Miller said. “There are some who will say that of that $9.57 billion budget, oil and gas contributed revenues somewhere in the neighborhood between 35 and 45 percent of that. Both directly and indirectly. Now by directly, I mean directly on production taxes and those sorts of things. And then indirectly on the GRT [gross receipts tax] industry pay.”
Miller summed up that PBPA interests had “a very good Legislative session” in 2023.
Moreover, oil and gas had what was probably the best collaborative effort—between the oil-friendly trade associations—than it had ever experienced before.
“I’m talking about between NMOGA [New Mexico Oil and Gas Association] and PBPA and the Independent Petroleum Producers of New Mexico,” he said. “We met on a regular basis to discuss strategies—and that’s always good. It was a very good collaborative effort.”
Miller was asked what he thinks the mood is in New Mexico oil and gas at the present time. The northwest has picked up also.
“The last I looked, we had over a hundred wells [statewide] being drilled,” he said. “I mean, it’s busy. It’s busy. There are a few things picking up.”
And while New Mexico does not have as many players as Texas does, the state does have some heavy-hitting companies in its oil and gas ranks.
“We have Oxy, Chevron, XTO [ExxonMobil], ConocoPhillips, Mack Energy Corp., Yates Petroleum—we have some big companies plus a whole lot of independents,” Miller said, recounting names just off the top of his head.
With such companies having a stake in New Mexico’s future, it bodes well for industry stability. Still, the industry is always on the line in New Mexico, and efforts cannot waver in maintaining honest, equitable policies and fair legislation. For this year, the challenge was met. The challenges will be there to be met next time, and oil and gas—and PBPA—must be ready.