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Oil production has bounced back in a big way in the last year in New Mexico, helping replenish state coffers. In Wyoming, not so much.

Still unanswered in both states is how they will transition their economies from such a high dependency on fossil fuels.

Production has also bounced back in Colorado, if not precisely to the levels of early 2020.

Tis is from Big Pivots 42. New Mexico gets nearly 45% of its total revenue—$4.7 billion in 2020—from taxes and royalties on the oil and natural gas industries, the Santa Fe New Mexican reported.

Wyoming gets 75% of its state revenue from fossil fuels. That includes coal and not just oil and natural gas.

Colorado, unlike its neighbors, depends far less on revenues from the oil and gas sector or from fossil fuels altogether, but an apples to apples comparison is difficult because of different funding mechanisms.

New Mexico

The Albuquerque Journal reports that New Mexico state authorities attribute the resurgence in production in New Mexico to higher prices: $70 per barrel in June, compared to less than $15 in April 2020.

New Mexico is currently the nation’s third-highest oil-producing state, and it is the only top oil-producing state to have recovered to pre-pandemic production. The price decline was caused by a glut produced by a price war between Saudi Arabia and Russia followed by the U.S. economic slowdown.

One measure of drilling activity is the number of rigs operating in any given month. New Mexico had 117 in March 2020, but fell to 40 in November.

Wyoming

Wyoming had a harder tumble, recording a month when, for the first time in a century, no drilling rigs were operating. The monthly rig count has varied widely, the Casper Star-Tribune has noted, with an average 564 in 2015, for example. The average last year was 8; this year it’s 11.

Colorado

Colorado oil production in the early months of 2021 continued to lag below that of 2020. Numbers gleaned by the Colorado Oil and Gas Association’s Scott Prestidge from the Colorado Oil and Gas Conservation Commission website showed January production was 72% of what it was in January 2020, but by April 2021, the latest month for which data are available, production was nearly 81% of the same month in 2020.

Rig counts provide another measuring stick. Development efficiency has dramatically improved during the past decade, causing numbers to slowly trend downward. But rig counts still constitute a good metric of activity, says Prestidge.

In summer 2019 there were 31 rigs. In summer 2020 there were but 4. This summer there are 12 to 13 rigs.

The Colorado Legislative Council, in its June 2021 report, said “regulatory changes for oil and gas drilling are likely to cause a slower bounce back from these low levels.”

Comparing Colorado’s oil and gas sector to those in its neighboring states is difficult.

“A vast majority of the tax revenues go to local taxing districts and not to the state, which is the opposite of what occurs mostly everywhere else,” Prestidge points out. “Tax revenues go to counties, but also school districts, fire districts, water districts, park districts, etc. Simply put, Colorado’s taxing structure for oil and gas does not lend itself to an apples-to-apples comparison with other states.”

Oil and gas in Colorado, if still huge in Weld County and also important in several other counties, is dwarfed by its importance in New Mexico and Wyoming.

Federal lands

Oil and natural gas production in both states adjoining Colorado depend on leases of federal mineral rights. President Joe Biden in January issued a moratorium, but that was lifted. And a federal judge recently ruled that the defensible criteria for the moratorium was absent.

New Mexico was not significantly impacted by that order, partly because operators have 6,000 drilling permits that they have not used. And the moratorium that did occur did not affect existing wells. But in anticipation of a Biden election, operators obtained more permits, 75% from the federal government compared to the usual 50%.

Wyoming’s oil wells tend to be more highly concentrated on federal lands than other states. Too, the wells are located farther from markets, and, says an industry spokesman, the state imposes higher taxes on oil and gas production. All this tends to make it more difficult to make a profit in Wyoming.

In Colorado, 3 drilling rigs are operating on the Western Slope, where they often operate on federal lands, but not exclusively. The majority of activity in Colorado is on private land.

The Associated Press found approvals by the federal government for drilling on public lands were at the highest they had been since George W. Bush was president. The Interior Department has awarded 2,100 drilling approvals since Biden took office in January. New Mexico and Wyoming had the largest number in the Rocky Mountain, but Colorado, Montana, and Utah had hundreds each.

The AP report, however, did not provide precise numbers of drilling permits under the various presidential administrations.

Biden vetoed a permit for the Keystone XL pipeline and drilling in the Arctic National Wildlife Refuge, reversing actions by President Donald Trump. And he has promised to make significant strides in reducing climate changing- carbon dioxide pollution. What to make of all this?

The AP’s Matthew Brown talked with energy industry analyst Parker Fawcett, of S&P Global Platts, the analytics firm, who said the Keystone and wildlife refuge decision came without huge political costs because they were future. Here and now is the price of gasoline, $3 a gallon.

“He is definitely backing off taking drastic action that would rock the market … What you’re going to see is U.S. oil production is going to continue to rebound,” the analyst said.

Anguish in New Mexico about methane from orphaned wells

In the Santa Fe New Mexican come words from the agricultural community about the need to plug wells leaking methane.

From Rio Arriba County, Don Schreiber writes that his family ranch has 122 gas wells, all owned by Hilcorp Energy, which in June was identified as being the biggest methane polluter in the nation and the nation’s second biggest climate polluter overall.

Schreiber credits New Mexico with closing loopholes that allowed Hilcorp to avoid doing a better job of detecting leaks from its wells. “But Hilcorp’s massive methane leaks point to the importance of strengthening New Mexico’s proposed rules even further: Hilcorp and others must stop venting all the methane when they complete a well (Colorado’s rule doesn’t allow it), and we need a time for transitioning to zero-emission pneumatic devices,” he says in a New Mexican op-ed.

Bill Midcap, a native Coloradan now living in Santa Fe, links water quality and the 700 abandoned oil and gas wells scattered throughout the San Juan and Permian basins in New Mexico.

Plugging those wells should not be the responsibility of landowners, he writes. He supports proposed legislation by New Mexico representatives in Congress to deliver federal financing to the effort. This would protect air and water and put unemployed oil and gas workers to work with new jobs.

Midcap, the senior policy director for the Rocky Mountain Farmers Union, says ranchers are on the front line of climate change. “Some might fight that fact, but anyone who spends time working the land knows it in their bones.”

A toxic wasteland?

Santa Fe resident Edward Baca says he drove on Highway 285 from Santa Fe to Pecos, Texas. The first couple hundred miles were uneventful. But then he drove through almost 100 miles of the Permian Basin, which straddles the New Mexico-Texas border.

“When the boom is over, we’ll be left with littered highways, increasing health problems, rusting oil field boneyards, and a vastly depleted water table, i.e. a toxic desert wasteland,” he writes in an op/ed in the Albuquerque Journal. “The alternative is to build a diverse sustainable economy that is not fossil fuel dependent. Do we bite the bullet now or later?”

Allen Best
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