This just in from the Capitol: Sen. Rod Adair's proposal to amend the House budget adjustment bill by slashing last year's “pit rules,” which strengthened requirements for waste disposal by oil and gas producers, failed. Adair claims the amendment would've brought an extra $140 million into state coffers. From the press release:
“We are down 14% in natural gas production alone because of these pit rules....It is not the price or the economy. We are driving [oil and gas producers] out of business.”
Adair says he got the numbers from a survey of New Mexico's production from January 2006 through the present. He compared the state to Oklahoma, Wyoming and Texas.
“In any case, even though they're much bigger, [Texas is] up 37 percent in production over that time,” Adair told SFReeper. “Oklahoma's up 14 percent, and Wyoming's up 49 percent. We are down 14 [percent]. The only way to attribute this is the climate provided by NM, where we drive business away because it's so difficult to do business here.” Adair says he got the $140 million price tag by calculating 14 percent of the $1 billion he says New Mexico should have received in oil and gas royalties if production hadn't declined. But Bruce Frederick , a staff attorney at the New Mexico Environmental Law Center, says the pit rules had nothing to do with declining revenues and that Adair's math is fuzzy.
“He's making it up,” Frederick told SFR on Friday. “I'd love to have a real hearing where people present real evidence and there's an opportunity to cross-examine them and submit rebuttal evidence, but we didn't get to do that in the amendment hearing.”
One thing is true: Natural gas and oil production has indeed declined. Despite record profits in 2008, Exxon finally started to feel the recession
this year, and according to industry heavyweight Baker Hughes
, which calculates the number of rigs in production in each state, New Mexico's rig count began to decline in the fall of 2008. The “pit laws” Adair wants rescinded were passed in June 2008.
But pit rules weren't the only thing going on. According to the Energy Information Administration, which releases official energy stats for the US government, gross withdrawals of natural gas also declined sharply
across the nation in fall 2008. New Mexico was actually somewhat insulated from the crash; whereas natural gas withdrawals fell by 4 percent in just one month in Texas, New Mexico's gross withdrawals declined more gradually, dipping in August and November but rising in other months. Data from Baker Hughes' rig counts shows the same trend, both in New Mexico and in the rest of the country, suggesting that whatever has caused declining oil and gas production—and the declining tax revenues in states like New Mexico—might have had a more universal cause.
Remember the summer of 2008, when gas prices were so high that going for a Sunday drive felt like gross overindulgence? Between July and December of last year, prices for New Mexico crude oil bought by the Navajo Refining Company plummeted
from around $130 to around $30. Natural gas prices did the same
, dropping by close to 50 percent in the second half of 2008, and prices on both commodities have remained relatively low since then. Should we be surprised, then, at Thursday's news
that New Mexico's first-quarter earnings from this fiscal year (July through September) were less than half what they were in the summer of 2008?
Adair maintains that gas production is doing just fine in Texas, Wyoming and Oklahoma.
“All those states...are facing the same economic challenges [as New Mexico],” Adair says. “You can control for all the other variables except for the climate.”
“The pit rules are the tip of the iceberg,” Adair continues. “Both the Environment Department and the Department of Energy, Minerals and Natural Resources provide a generally hostile climate in which to do oil and gas business.”
Adair may not be wrong about the fact that pit rules affect oil and gas producers. But neither should we discount the larger trends at work—especially when it comes to budget projections. And anyway, according to Baker Hughes, last week's rig count
showed declines in New Mexico, but also in—you guessed it—Texas, Oklahoma and Wyoming.
Photo courtesy Wikimedia Commons.