New Mexico

NM Oil Regulator: Biden Federal Permitting Halt Will Lead To More Flaring In the Permian

State government officials in New Mexico are urgently seeking clarity on the Biden Administration’s executive order on permitting for oil and natural gas development on federal lands, explaining that the uncertainty could undermine economic and environmental progress including the state’s initiatives to reduce flaring.

E&E News reports that the state sent a letter to the federal government seeking guidance as the state stands to lose out on significant production and tax revenue to neighboring Texas:

“New Mexico — the largest federal oil producer in the country — is losing oil rigs to private lands in Texas because of industry confusion over Biden administration oil edicts, a state official said this week in a letter to the Interior Department asking for guidance.”

The letter from Sarah Cottrell Propst, the Cabinet Secretary of the New Mexico Energy, Minerals and Natural Resources Department, underscores how vital responsible energy development is for the state. Notably, Propst highlights how the executive order, sold as attempt to address climate change, is actually having the opposite effect on environmental progress:

“The recent DOI Order achieves important operational goals that we support, but it has resulted in on-the-ground uncertainties that undermine our ability to safeguard New Mexico’s economy and environment.”

The state is especially concerned that this order could undermine efforts the state has taken to reduce routine flaring and improve water management:

“Clarifications on rights of way approvals within the Order are particularly important to New Mexico’s environmental goals. Of particular concern, the Order places a 60-day pause on the administrative authority of BLM field office staff to approve items such as new permits to drill, leases, right of ways, etc. Section 3.g states that “this does not limit existing operations under valid leases” and “does not apply to authorizations necessary to (1) avoid conditions that might pose a threat to human health, welfare, or safety.” However, there is confusion in the field regarding which approvals fall within these categories because additional approvals are often required even when operators have a valid lease and permit to drill. Operators have reported many examples of approvals not moving forward that appear to fall under these exceptions.

“Specifically, right of way approvals are critical to ensure that new wells will have takeaway capacity for their natural gas and not be forced to vent or flare. In addition, right of way approvals are needed for lay-flat pipelines which transport water to and from well sites during completions activity. These lay-flat pipelines facilitate the reuse of produced water in completions operations, which takes pressure off New Mexico’s precious freshwater resources for use in oil and gas operations.” (emphasis added)

The episode is also showing how the executive order isn’t actually reducing the nation’s oil and natural gas output, it’s just reshuffling production to other regions with reserves that sit on private lands, leaving New Mexico facing massive economic and budgetary headwinds for the sole reason that operations there take place primarily on federal lands. Propst said:

“We have seen rigs depart New Mexico for Texas simply because of the uncertainty caused by the Order.”

Propst’s concern about the economic consequences of losing production to Texas is merited. John Waters, the executive director of the Carlsbad Department of Development, recently said that investment is already flowing out of the state:

“As a direct result of the executive order, I was just contacted by a Canadian company to inform me that the plant they were going to construct and operate in south Eddy County will instead go to Reeves County in Texas where their operation will not be surrounded by federal land.”

Oil and natural gas revenue from federal lands made up about 18 percent of the state’s budget last year and provided significant funding for education and other public services. According to an American Petroleum Institute, a ban on production on federal lands would result in the loss of 62,000 direct and indirect jobs supported by the industry – or 5 percent of the workforce by 2022.

Education will especially suffer as the result of a federal lands ban. Jessica Sanders, New Mexico’s 2019 Teacher of the Year and President of the New Mexico Science Teachers Association, said:

“Oil and gas in New Mexico fund $1.37 billion for education.  That money funds teacher jobs, curriculum, and everything related to education in my state. New Mexico’s children are the future, and without vital funding from New Mexico’s oil and gas industry our students will not have access to the tools and resources they need to enter the workforce.”

Additionally, thanks to tax revenue generated from production in the state, many New Mexicans could heading off to college without paying tuition thanks to Gov. Michelle Lujan Grisham’s New Mexico Opportunity Scholarship that’s funded with oil and gas revenue.

These executive orders are having real environmental and economic impacts for the states that rely on this energy development – a fact the leaders of these communities are eager to sit down and talk through with the Biden administration.

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