All tapped out

Despite New Mexico's status as one of the biggest oil producing states, don't expect any extra oil production anytime soon.

(Photo by Michael P. Whelan/Flickr)

ALBUQUERQUE -- There's been a lot of talk recently about increasing U.S. domestic oil production, and one might think New Mexico — the sixth-highest oil-producing state in the nation — would be a candidate for helping fill the order. But for reasons ranging from a dearth of drill rigs to a lack of promising land, don't expect a flood of black gold out of the Land of Enchantment.

"Even if you had the land, the projects, the rigs and the manpower, I don't see any significant increase in production," said Bob Gallagher, president of the New Mexico Oil and Gas Association.

That's at least in part due to increasing opposition to oil and gas development, and not just by environmental groups. Ranchers, rural residents and now sportsmen are saying they don't accept the idea of energy development at any cost.

President Bush in June called for the country to start producing more oil, saying it was necessary to help bring down the price of crude oil imported from elsewhere in the world. His plan focused on tapping the vast oil shale reserves of the Rocky Mountains, resuming offshore drilling, opening the Arctic National Wildlife Refuge in Alaska and increasing refinery capacity.

Skeptics (environmental groups, energy wonks and The Wall Street Journal) say such measures would do little, if anything, to reduce the worldwide price of oil. And they argue that rather than making more territory available to the oil industry, the nation should require companies to use the millions of acres already under lease.

New Mexico seems like a logical place to look for additional oil. It's been a player in the oil industry since the early 1920s, when the first major wells hit pay dirt in the Four Corners region. Within a decade the state was among the top 10 domestic oil producers, and it still is. It's sixth in oil production, and fourth in the nation in oil reserves. In 2006, according to the state Energy, Minerals and Natural Resources Department, oil wells in southeastern and northwestern New Mexico pumped 60 million barrels.

(To put that in perspective, the United States' total domestic production that year was 1,860 million barrels, including 270 million barrels from Alaska.)

With oil these days topping $125 a barrel the oil industry in New Mexico ought to be scrambling to pump even more, but other factors are conspiring to limit the flow of oil here, said Tony Herrell, the deputy state director for the U.S. Bureau of Land Management in New Mexico.

One major hurdle, he said, is there aren't enough drilling rigs for exploratory and production wells. "Basically every drill rig in the country is drilling now. The manufacturing companies are building new rigs as fast as they can," Herrell said, but it could take years for the supply of rigs to catch up with demand.

Another limitation is the age of New Mexico's oil patch. Most oil in the state is in the Permian Basin in the southeast, Herrell said, and many of the fields have been producing for decades. The low-hanging fruit has been picked, he said, and while companies are using technology to wring the most possible out of older fields, those fields don't produce like they once did.

Land on which to drill is yet another factor holding back New Mexico oil production. The BLM, which manages 13.4 million acres in the state, has sold leases covering 5.4 million acres for oil and gas development, Herrell said. But unlike some areas of the United States, most of the leased land in New Mexico is already being used. Of nearly 9,000 tracts leased in the state, nearly 7,000 have at least one producing oil or gas well, he said.

Of the remaining 2,000 tracts, many have been considered and rejected by the industry, Herrell said. A number of tracts are simply too far from roads, pipelines and other infrastructure, and others were placed off-limits after being leased, through drilling bans, lawsuits and similar other reasons. Gov. Bill Richardson, for example, placed a moratorium on drilling in the Galisteo Basin south of Santa Fe. Rio Arriba County has enacted a similar moratorium. One of the biggest potential sources, Otero Mesa, is off-limits as its water resources are being explored.

The remainder of the BLM's land available for leasing — totaling perhaps 9 million acres — isn't as attractive to the industry because of environmental protections, such as limits on drilling activity during wildlife migration seasons, that are stipulated in the lease agreements.

The restrictions haven't kept the industry away. Every parcel in a BLM lease sale held July 16 was bid on, Herrell said, and the sale drew a record $32.5 million in payments in New Mexico alone.

But even those existing stipulations on federal land throughout the West aren't adequate and need to be stiffened, according to a group called Sportsmen for Responsible Energy Development. Consisting of dozens of nonprofit groups and outdoors-oriented businesses from New Mexico to Montana, the coalition recently cited a litany of concerns and grievances about the effect oil and gas exploration has had on traditional hunting and fishing areas of the West:

Clearly, the system for managing our public lands is broken when the agency entrusted with oversight of fish, wildlife and multiple-use planning [BLM] baldly states, “Wildlife habitat would generally only be protected if a mineral commodity is not present for extraction.”

The group wants better protection of public land, and particularly for the species that are hunted and fished by millions of Americans. In its 10-point Sportsmen's Bill of Rights, it also calls for greater public participation in the decision-making over energy development on public lands, and assurances that the land used for energy development will be restored.

Greg McReynolds, a New Mexico member of the coalition and a spokesman for Trout Unlimited, said the group accepts that energy development will continue to occur throughout the West.

"Our position is that we do it in the most responsible way possible and with the least impact on the landscape," he said. "When the energy has all been extracted, we as sportsmen want there to be something left for the next generation."

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