OIL AND NATURAL GAS PRODUCTION PROPELS “WEALTHY OUTLOOK” FOR NEW MEXICO IN 2024
The oil and gas industry continues to deliver record-breaking revenue for New Mexico and will reach unprecedented levels in Fiscal Year 25.
The Albuquerque Journal details this record revenue:
“Fueled by an incredible oil and gas boom and strong consumer spending, New Mexico’s financial reserves reached about 52 percent of ongoing state spending this summer — a financial cushion of nearly $4.4 billion.
And the geyser is still spewing.”
Over the past financial year, the state has received cash from the industry in the form of severance taxes, federal royalty payments, and other earnings including sales, corporate, and personal income taxes, with oil and gas revenue making up roughly 40 percent of the state general fund.
The forecast from lead economists from four state agencies, including the Legislature’s budget and accountability office and Revenue Department, predicts a surplus of inflows and an unprecedented growth in state revenues from oil and gas. The forecast details:
“’New money,’ or projected recurring revenue for the coming fiscal year [July – June] less current year recurring appropriations, is estimated at $3.482 billion for FY25, or 36.4 percent growth from the FY24 recurring budget.”
This incredible surge is made possible thanks to the state’s strong oil performance. In late 2021 New Mexico eclipsed North Dakota to become the No. 2 oil-producing state in the nation, behind only Texas.
New Mexico oil and gas production has continued to increase at a steady pace.
“The state is estimated to have produced 603.6 million barrels of oil in FY23, a 13 percent increase from total FY22 production. At current levels of daily oil production, the state would produce 670.5 million barrels of oil in FY24. In FY24, the consensus estimate expects oil production will grow 2.9 percent from current levels, resulting in 690 million barrels.”
As the Energy Information Administration recently explained:
“In southeastern New Mexico, horizontal wells in Lea and Eddy counties drove much of the recent growth in Permian Basin crude oil output. Output from horizontal wells in the two counties accounted for 29% of all crude oil production in the Permian Basin in the first quarter of 2023, averaging 1.7 million barrels per day (b/d), according to data from Enverus.”
EIA further detailed how New Mexico’s Lea and Eddy counties accounted for 60 percent of crude oil and 28 percent of natural gas growth in the Permian Basin in the first quarter of 2023.
The record-breaking revenues mark a stark reversal from several years ago when New Mexico State reserves were at the lowest levels since 2000 and state government was forced to drain reserve accounts to fund basic public services and salaries. A report from Pew Research painted a bleak picture of the state’s future:
“In Fiscal Year 2016, the amount of money New Mexico held back and put into savings—to pay for unexpected expenses or shore up the budget when revenues dip—was at its lowest level since 2000.”
However, rising oil production has made it possible for New Mexico to turn around this outlook. The Associated Press reports:
“Surging oil production has allowed New Mexico in recent years to bolster public salaries, expand access to no-pay child care, and offer tuition-free college to its residents — while also setting aside billions of dollars in a variety of “rainy-day” emergency accounts and investment trusts.”
New Mexico lawmakers are optimistic that the inflows from the industry will propel the state forward for the years to come:
“We are living in unprecedented and historical times in the state of New Mexico,” said Wayne Propst, secretary of the state Finance and Administration Department.
“We’re in such a different era. We have the opportunity to exit the roller coaster and get onto a steady climb to a broad prosperity for our state,” said Representative Nathan Small.
“New Mexico has never had this opportunity before,” said Sen. George Muñoz.
New Mexico continues to enjoy the benefits from a robust oil and gas natural industry that is expected to contribute to the lion’s share of state earnings in the years to come. Growth in the sector will increase the level of funding available for critical social services like education and housing while providing high-wage jobs to New Mexicans.