Crashing oil industry hobbles NM

By Denise Fort and Kyle Tisdel 

New Mexicans are getting whiplash watching the ups and downs of the oil industry. Obviously, the industry plays an important role contributing to our state’s budget, but it has also tied our state to a cycle of boom and bust while causing untold harms to people and the environment. The oil industry is in trouble, and the economic future of our state and the livability of our planet depend on our ability to manage that decline.

The industry is volatile, tied to international markets and economics that are entirely out of New Mexico’s hands. For example, the recent oil price collapse was the result of power plays from Russia and Saudi Arabia, with the pandemic exerting downward pressure on all energy consumption. The result in New Mexico was a state budget that suddenly plummeted from lost oil production.

We can no longer afford for oil and gas to dictate the terms of its operations, or allow our fears over lost revenues to prevent accountability and give the industry a pass to pollute. Precisely because the market for oil is international, any breaks we give industry will only exacerbate the harms to our state without making the slightest difference in how many new wells are drilled.

New Mexico has put itself into a box with its heavy reliance on oil and gas revenues — now approximately one-third of the state’s budget, a percentage that increased significantly after tax cuts for the wealthy and corporations were passed in 2003 and 2013. To be clear, the state’s economy is far broader than oil and gas, but we have failed to build a tax structure that is fair and resilient. In order to diversify our economy and build a just and equitable New Mexico we must hold Big Oil accountable. Revenues from oil and gas should be invested and used for limited projects rather than being put in the general fund.

The current volatility has also accelerated the environmental risks to our state. The oil and gas industry does not pay for new wells out of its pockets, but instead does so by borrowing huge sums of money. In the next few years alone, almost $200 billion of this debt will come due — just as the price of oil has collapsed.

At the same time, the oil and gas industry has not been saving for its retirement. Every new well that is drilled adds to a legacy of industrial pollution. In New Mexico alone, there exist almost 100,000 historic oil and gas wells, representing billions if not tens of billions in clean-up costs. As markets go bust and industry bankruptcies rise, those costs will get transferred to the state and its taxpayers … unless we hold industry accountable.

What do we need from state and federal officials?

The state must push forward with methane regulation. The damage that methane emissions do to our future cannot be tolerated—both because it is 87 times more potent than carbon dioxide as a greenhouse gas pollutant, but also because of associated air pollutants and their impacts on our health. Thanks to the governor for standing firm. We expect to see draft rules for the public to comment on later this year. This is especially important since the EPA is on the brink of the final gutting of federal rules.

We must create a mandatory schedule for the plugging and abandonment of wells that are no longer producing — creating jobs and cleaning up a legacy of pollution on our landscapes — and tie any future permit approvals to a company’s compliance with this schedule and its environmental compliance.

We must also update bonding requirements, including full-cost bonding for all new permits and when permits are transferred from one company to another, as well as imposing  liability on all owners to create accountability throughout the chain of well ownership. This will ensure a funding mechanism to clean up industry’s mess in the event of bankruptcies or companies simply walking away.

At the federal level, we need the government to execute a 180 degree turn on oil and gas. In the short term, the prospect of abandoned oil wells has led to a helpful proposal from House Democrats to provide jobs for unemployed workers plugging wells and restoring lands. Another bill would raise federal bonding requirements.

We also need an immediate end to oil and gas leasing on public lands and a managed decline of production. Such bold action is needed to stay within warming thresholds and avoid the worst impacts of the climate crisis.  New Mexico will need to broaden our economy and our tax base as this transition occurs.

The federal government must step forward with regulation and just transition funding, recognizing that some states are far too beholden to the industry to effectively regulate. A protective uniform base of federal regulation can allow some states to be more protective, while ensuring that national interests in climate change and federal lands are protected.

The time will come when the world has transitioned to renewable energy and New Mexicans will once again look out on quiet desert landscapes. We need to act now to ensure that these lands don’t look like something out of Mad Max.

Kyle is an attorney with the Western Environmental Law Center. 
Denise has been a Club member since 1975 and is Professor Emerita of Law at UNM, where she taught environmental law. 

Crashing oil industry hobbles NM