New Mexico has been fortunate in recent years to reap billions of dollars in revenue from oil and natural gas production. These revenues, in turn, have enabled elected officials to expand government and social welfare programs and provide record pay raises for state employees and teachers. The initial funding of these initiatives would not have been possible without the state’s oil and natural gas industry.
Yet, despite the enormous benefits the industry brings to our state, it continues to face relentless attacks from proposed new regulations. The latest example: the Oil Conservation Division (OCD) is proposing new rules requiring producers to provide an additional $150,000 in financial guarantees on certain wells. The stated goal of this new guarantee is to ensure funding is available to clean up abandoned wells – a reasonable concern in principle – but this proposal amounts to nothing more than a hidden tax on energy producers.
Of course, we all want oil and natural gas companies to be responsible stewards of the land. However, what proponents of this new guarantee fail to mention is that New Mexico is already collecting money from the industry for exactly this purpose and has been for decades. Every oil and gas operator in the state pays a "conservation tax," a portion of which is earmarked for the reclamation fund to clean up wells left behind by bankrupt or inactive operators.
Here's the problem: over the years, the Legislature has increased the conservation tax while also quietly diverting an ever-larger share it – nearly 80% - into the state’s general fund to cover the cost of unrelated government spending. In other words, the money intended to be used for regulatory enforcement and abandoned well cleanup is being used to bankroll other priorities.
It’s like a landlord collecting a security deposit from tenants to cover potential damage but spending that money on groceries and vacations. When something inevitably breaks, the landlord then demands even more money from the tenants – even though the tenant already paid upfront for that protection.
Instead of imposing a new financial burden on the very industry that keeps New Mexico afloat, the OCD should scrap this proposal immediately. The Legislature, meanwhile, needs to restore integrity to the system by reversing decades of diversion and ensuring the conservation tax actually supports oil and gas oversight and environmental cleanup – not simply plugging holes in the state’s general fund.
It is also important for every New Mexican to understand why all this is happening. Progressive Democrats failed during the last legislative session to impose a massive new tax on the oil and gas industry, so now they’re using the Governor’s OCD to try again via regulation rather than legislation.
This is no small matter. If state policies make it too costly for oil and natural gas producers to do business here, these producers will simply shift operations to neighboring Texas and New Mexico will lose billions of dollars in needed revenue.
Rather than trying to squeeze more money out of oil and natural gas operators, the solution is for the Legislature and the Governor’s office to keep past promises by using the conservation tax for its intended purpose and not pursue a backdoor tax hike that threatens New Mexico’s economic future.
Gail "Missy" Armstrong is the Minority Floor Leader in the New Mexico House of Representatives. She represents District 49, which includes parts of Catron, Sierra, Socorro & Valencia counties.
