Oil and gas generated over $15 billion in income for New Mexico in the last fiscal year, according to a state economic report presented to lawmakers during a recent meeting in Carlsbad.
Jennifer Faubion, an economist with the Legislative Finance Committee, reported that oil and gas brought in $6.6 billion to the state in taxes and another $8.6 billion from land income in Fiscal Year 2023. She attributed this revenue increase to heightened oil and gas production in the southeast Permian Basin.
Faubion noted that since FY 2018, oil and gas revenues have quadrupled, and the General Fund has more than doubled in the past two years. This growth has benefited several statewide programs and services like education and infrastructure. The General Fund, used to develop New Mexico’s budget, was 35 percent reliant on oil and gas in FY 2023.
“It’s been exceeding our expectations for a number of years,” Faubion said during the June 11 meeting at the Pecos River Village Conference Center. “And it just keeps growing.”
However, she mentioned that this reliance is expected to decrease as the state invests oil money into funds that could appreciate over time. Oil money is also ideal for one-time projects like roads or water systems, addressing local community needs.
The LFC’s forecast showed a near-term increase in the General Fund’s oil and gas reliance from 35 percent in FY 2023 to almost 40 percent in FY 2024 but then gradually declining back to about 35 percent by FY 2028. Faubion attributed this projected decrease to legislative spending and investment of the “windfall” income from ongoing production increases.
“We can start to compare long-term impacts of putting dollars away, especially when our reserve levels are so high and our new money levels are so high,” Faubion said. “You can do a little of both.”
Rep. Gail Armstrong (R-49) asked how proposed statewide oil and gas setbacks would impact revenue from the industry. Faubion said preliminary research indicated about 10 percent of New Mexico’s oil and gas wells would be affected if the setback proposal took effect.
“Oil production will come down naturally over time,” Armstrong said. “If we push it down before we’ve diversified our economy, how are we going to pay for things like schools and roads?”
Carlsbad Mayor Rick Lopez emphasized that oil and gas revenue is necessary for supporting growth locally and statewide. He urged lawmakers to support long-term oil and gas production.
“As everyone knows, the oil and gas processes in the southeast are vital to the state’s finances,” Lopez said. “Our oil and gas partners in the area have been great to work with. I want to highlight the importance of long-term oil and gas production.”
Lopez acknowledged concerns such as higher housing prices and increased traffic due to industry growth but stated that companies were working closely with local leaders to address these issues.
“We understand oil and gas has brought hardships to our communities,” Lopez said. “But rest assured, the oil and gas companies remain transparent and diligent partners in addressing these concerns.”
Chair of Eddy County Board of Commissioners Bo Bowen highlighted contributions by the industry to county infrastructure like roads, noting recent investments made possible by fossil fuel industry growth.
“These are projects we’ve been able to fund ourselves due to conservative fiscal responsibility and oil and gas,” Bowen said. “It’s safe to say industry is here in New Mexico, thriving.”
Despite predictions that demand for fossil fuels could begin declining within a decade, Bowen expressed confidence that the industry would continue its strong support of southeast New Mexico.
“We’re sitting in the Delaware Basin which has one of the largest oil deposits in the world,” he said. “We’re thankful for the booming economy we have, proud to be one of the biggest supporters of the state economy.”