New Mexico adopts rule as oil industry touts fiscal impact
ALBUQUERQUE, N.M. (AP) — New Mexico regulators on Thursday adopted a new rule aimed at oil and natural gas companies as the industry touted the more than $3 billion that was pumped into the state's general fund coffers through taxes and revenues during the last fiscal year.
With the change, the state Oil Conservation Division will be able to assess civil penalties for violating state laws. State officials and environmentalists say that will allow for better regulation of the booming industry.
The division previously had issued only three penalties in the last 11 years because a 2009 court ruling had limited its authority to issue administrative penalties for rule violations. Now, violations could result in daily penalties that range from $2,500 to $10,000. Fines in excess of $200,000 would have to be issued by a court.
Oil Conservation Division Director Adrienne Sandoval said the change gives the agency another tool to ensure the industry operates responsibly. “New Mexico is a great example of how industry can thrive while also being responsible, and this new rule is another step in the right direction to improving regulatory compliance,” she said in a statement.
The New Mexico Oil and Gas Association supported legislation last year that cleared the way for the change, saying oil and gas companies were in favor of tools that regulators could use to ensure a level playing field among operators.
Robert McEntyre, a spokesman for the group, said Thursday the industry already is one of the most highly regulated in the state and that the vast majority of the 60,000 active wells in New Mexico are in compliance.
Environmentalists had complained that without enforcement authority, oil and gas-related spills and violations increased nearly 100% over the last decade as fines assessed by the agency evaporated. They praised the new rule, saying bad actors within the industry can now be held accountable.
New Mexico has grown into one of the nation's leading oil-producing states because of the record-setting development happening across the Permian Basin, which straddles the southeastern corner of the state and parts of West Texas.
The New Mexico Oil and Gas Association on Thursday released a report by the New Mexico Tax Research Institute that showed state coffers and public schools benefited from $3.1 billion in taxes and revenues generated by the industry in fiscal year 2019. That marked an increase of more than $910 million from the previous fiscal year.
“While most New Mexicans may know that oil and natural gas are produced in southeast and northwest New Mexico, the benefits and contributions are felt statewide," said Ryan Flynn, the association's executive director. "From Taos to Anthony, and Gallup to Clovis, the impact of the industry’s success is visible in every community in New Mexico.”
Despite the infusion of record revenues, some state lawmakers are warning Gov. Michelle Lujan Grisham's administration that the windfall might not last forever and to temper recurring spending going forward.
The Legislature will meet beginning next week to hash out the state's spending priorities for the next fiscal year. There are calls to boost spending on public education and fund an initiative for tuition-free college.