New Mexico oil, gas, 100 years after the big strike

By any standard, in the past decade oil production in New Mexico has attained world-class stature. In 2023, New Mexico produced about 1.8 million barrels per day (657 million barrels that year) of crude oil, 10 times more than 2010, thanks to investments in new fracking technologies. This quantity places New Mexico just about even with the oil-rich countries of Mexico, Kazakhstan and Norway, and slightly above Nigeria and Qatar. If New Mexico were a nation, it would rank 14th in the world in oil production, well above the OPEC countries of Libya, Algeria and Venezuela.

Visionary as they might have been, it seems unlikely Mary and Martin Yates, thrilled by the gushing black liquid at the Illinois #3 well in the spring of 1924, could have imagined exactly one century later their descendants would still be drilling in a New Mexico producing more oil than Qatar.

The New Mexico gross domestic product in 2023 totaled about $130 billion. About one-fifth — $26.1 billion — was generated by oil and gas. According to the New Mexico Tax Research Institute (NMTRI), total state and local government spending in 2023, including federal transfers, added up to $26.2 billion, out of which slightly more than half ($13.9 billion) came from direct and indirect taxes from the oil and gas industry.

Most taxes collected on oil and gas are placed into the General Fund, which also includes revenues from income, corporate and other taxes and fees. The General Fund funds the annual state government budget: schools and colleges, health care, public safety, etc. Other chunks of oil and gas taxes are placed into various funds to pay for roads; for local operating, and state and local capital expenses; to bolster state reserves; and to add to various permanent funds designed to accumulate state monies against the day when extractive industries have been depleted as significant sources for state revenues.

In 2023, the general fund contained $14.98 billion when the legislature convened. Fully half of this amount, $7.5 billion, was collected from oil and gas, according to NMTRI. The other funds received $6.4 billion in oil and gas taxes and fees. Those same taxes paid for nearly 58 percent of 2023 expenses for public and higher education. Twenty-seven percent of all state expenses for health and human services came out of oil and gas, and six percent of public safety expenses. Truly, in recent years, state government spending has dramatically increased its reliance on revenues from oil and gas. By contrast, between 1998 and 2008 energy-related revenues averaged only about 16 percent of the General Fund. From 2011 to 2021 they averaged about 33 percent. In 16 years, the proportion of the state budget reliant on oil and gas has more than tripled.

The oil boom will not last forever. Given that the state is hardly a paragon of excellent government management, there is an urgency to use these generous petrodollars to fix what needs fixing.

Most New Mexicans outside of the Oil Patch — San Juan County is included because of its huge production of natural gas and oil — appear not to have absorbed the full magnitude of the oil and gas bonanza. Most are vaguely aware of oil activity in the east side, but few have any idea of the massive scales or spreading impacts from this surging tide of cash. Consequently, citizens have largely left the management of these riches to the state Legislature and executive branch, with little discussion, much less public pressure about how to spend it. Likewise, the governor’s office and legislative leaders have made few serious remarks about what they might do with the most massive influx of tax dollars in state history. But if they hadn’t thought this through, they have not neglected to spend the money.

If NMTRI is correct, the $13.9 billion collected in taxes last year from oil and gas, if divided equally to every living person in the state, would amount to about $6,575 per person. The share for a family of four would be $26,300. A fair question is, does that family of four get that much value each year from the extra cash state government spends? Experience over the past century shows countries that rely heavily on oil revenues to fund government are highly prone to public corruption: look up corruption scores for Russia, Libya, Nigeria, Mexico, Venezuela, Iraq and Iran. They are also highly prone to neglecting investment in solid infrastructures for economic development when oil revenues have depleted.

The time is ripe for all of us to ask these questions of our governor and our legislators. Mary and Martin Yates, Tom Flynn, and Van S. Welch, if they were here, would surely join the crowd in asking.

Jose Z. Garcia taught politics at NMSU for more than three decades and served as Secretary of the NM Higher Education Department for four years.