NM tumbles in oil and gas survey
New Mexico may be home to a substantial amount of crude oil reserves, but a new survey of the international petroleum industry suggests the state is becoming less attractive to companies that might be interested in drilling here.
The state ranks 33rd out of 81 jurisdictions in the Global Petroleum Survey published Thursday by the Fraser Institute, a conservative think tank based in Canada. That's on par with Utah, Bangladesh and Alberta, Canada. It's also down from 24th the year before, though the 2007 ranking compared only 54 locations. The rankings were based on 16 factors that affect the companies' investment decisions, from political and regulatory stability to tax burden and availability of local labor.
The report doesn't spell out why New Mexico is seen as less inviting to Big Oil now than in 2007. But in most cases, the report says,
"jurisdictions that have imposed heavier tax and regulatory burdens during the past year received more negative scores than they did in 2007. ... Policy makers would do well to recognize these consequences and weigh the costs of big government in terms of foregone investment, lost jobs, and corporate flight. More prudent policies will be rewarded with the economic growth that accompanies investments in petroleum exploration and development."
Some of New Mexico's slippage may be due to some regulatory changes approved in the last year by the state Oil Conservation Commission, such as tighter restrictions on disposal pits at drill sites. But it may also reflect a change in the demographics of the West, said Eric Jantz, a staff attorney at the New Mexico Environmental Law Center in Santa Fe.
"The social landscape of the West is changing. It's moving from a resource-extraction-at-any-cost mentality to a more measured and balanced approach," Jantz said. Communities throughout the West know that a boom-and-bust extractive industry doesn't contribute to their long-term economic health and stability, he said. "People in the industry don't like the way things are changing, and I think that's what this (survey result) is about."
Examples of New Mexico community push-back include a moratorium on gas drilling by Rio Arriba County, widespread concern over the potential for drilling in Mora County and the state-imposed moratorium on drilling in the Galisteo Basin, Jantz said. "I think local communities are beginning to feel more empowered to be the authors of their own destiny or fate, to stand up and say this is the kind of community we want."
Members of the petroleum industry in New Mexico have also noted the change in local attitudes, which may help explain the Fraser survey numbers, said Stephanie Reid, director of government and regulatory affairs for the New Mexico Oil and Gas Association. In the last year, she said, between drilling moratoria and regulatory changes, "We've just been hammered."
Many counties, including some of the top recipients of oil and gas revenue, "are coming up with their own way to regulate the industry," she said. "But it's just an additional layer of regulation" beyond the state and the federal Bureau of Land Management, both of which have professional staffs for those issues. "Now it's almost like a trend for counties to be taking on this role."
It's driving operators out of state, Reid said, which ultimately affects all New Mexicans. Oil and gas revenues, through the state's permanent fund, make up 90 percent of school capital projects in the state, the association says.
While New Mexico slipped a few notches, Colorado took a mighty tumble in the rankings. The state was No. 1 last year, but fell to 26th in 2008 — on par with Pakistan, Ukraine and Indonesia. In an interview with the Rocky Mountain News, the report's authors attributed the free-fall to Gov. Bill Ritter's proposed overhaul of oil and gas regulations.
Bolivia was rated No. 1, with Ecuador and Venezuela close behind. Thailand was last among the ranked jurisdictions.
The survey comes out at a time of record high oil prices and renewed interest in increasing domestic oil production, including a call from President Bush last week for Congress to remove barriers to production. While Bush focused on offshore drilling, oil shale and opening the Arctic National Wildlife Reserve, New Mexico has plenty more to offer. According to federal statistics posted by the New Mexico Oil and Gas Association, the state ranks fourth nationwide in crude oil reserves.
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