The oil and natural gas industry continues to power New Mexico’s strong economy, delivering record revenues for fiscal 2023.
The New Mexico Legislative Finance Committee (LFC) recently released its fiscal 2024 budget recommendations, demonstrating the oil and natural gas industry’s tremendous recovery since the pandemic and New Mexico’s long-term confidence in the industry as a contributor to economic success. The report details:
“Supported by high oil and gas related revenues, growing incomes, strong consumer spending and inflation, New Mexico is posting record earnings across all major revenue streams. Revenue for FY22 and early FY23 was higher than expected, raising revenue estimates for subsequent years.” (emphasis added)
According to the numbers, recurring revenue for 2022 was nearly $9.7 billion, a twenty percent increase from fiscal 2021. On Jan. 17, the Legislature began a 60-day session to decide how to spend the state’s record funds, including more than $3.6 billion in excess “new money,” mostly dedicated to the energy industry attributable to New Mexico.
Back to pre-pandemic production levels
In 2021, New Mexico became the country’s second-largest producer of crude oil, and the industry is showing no signs of slowing down. As of September 2022, New Mexico was the only state to exceed pre-pandemic oil production levels. While several energy-producing states were still below their pre-pandemic production peaks despite high energy prices and strong demand, daily oil production in New Mexico rose 49.4 percent (compared to its pre-pandemic peak).
Natural gas production in New Mexico also grew during the pandemic years, with the LFC budget report calculating a 21 percent increase between fiscal 2021 and fiscal 2022.
Revenue from the oil and natural gas industry is vital to New Mexico communities because it helps fund vital programs like education and infrastructure. From the LCF budget proposal:
“The strength of oil and gas revenues is driving severance tax and federal license fee collection well above their five-year averageresulting in large transfers to the Early Childhood Trust Fund and increasing the amount reaching the General Fund throughout the forecast period.”
Joe Vigil, spokesman for the New Mexico Oil and Gas Association, further elaborated on this in a statement to the Karlovy Vary Argus Stream:
“Oil and gas money is necessary for New Mexico to fund public services like education and roads, which account for about a third of the state budget every year since 2014. He said oil and gas generated about $63.3 billion in industrial revenue in New Mexico and contributed about $5.3 billion to state and local governments last year.”
In order for New Mexico to continue reaping the benefits that come from a robust oil and gas industry, New Mexico must continue to invest and expand its production capacity. The federal government must play its part, too—an active state lease program is essential to incentivize sustained energy production in New Mexico. In 2021, about 54 percent of oil production and 60 percent of natural gas production took place on federal land.