New Mexico
Oil and gas fighting back as feds, New Mexico increase industry pollution oversight
Oil and gas companies struggled to adhere to New Mexico’s and the federal government’s recent restrictions on methane emissions, said industry supporters concerned the new rules could stymie energy production and the economic benefit it brings to the state.
An about $3.5 billion infusion of “new money” was recently reported by the state’s Legislative Finance Committee, largely credited to growing oil and gas production in the Permian Basin of southeast New Mexico.
Grant Swartzwelder with OTA Environmental Solutions said during a meeting with oil companies and the Independent Petroleum Association of New Mexico (IPANM) that recent regulations could be difficult for operators to navigate as they produce oil and gas but also remain compliant with state and federal laws.
More: Top oil and gas bills to watch during New Mexico’s 2024 Legislative Session
New Mexico in 2021 and 2022 passed new regulations via the Oil Conservation Division (OCD) and New Mex Environment Department (NMED) aimed at limiting air pollution from the fossil fuel industry.
The OCD rules outlawed routine flaring, the burning of excess natural gas, while calling on all operators in the state to capture 98 percent of produced gas by 2026.
Meanwhile, NMED added stricter requirements for leak detection, repair and reporting of emissions of volatile organic compounds (VOCs) and other chemicals believed to form ground-level ozone, or smog.
More: $4.5 billion sale of Callon Petroleum to APA announced as oil surges in Permian Basin
At the same time the Environmental Protection Agency last year enacted rules to increase requirements for the use of low-emission technology at oil and gas facilities around the U.S. and require states to develop air pollution reduction plans for not only newly installed but also existing extraction operations.
And New Mexico Democrat lawmakers proposed multiple bills to increase regulations on the industry, a week ahead of the 2024 Legislative Session. Those proposals sought to increase royalty payments, restrict the use of freshwater in drilling and block oil and gas facilities from areas within a mile of schools.
Swartzwelder said increased state and federal rules were making it a challenge to continue producing fossil fuels in the Permian Basin, arguing the industry was already taking successful actions to address its environmental impacts.
More: Here’s the latest oil and gas drilling rig count in Permian Basin, New Mexico and Texas
“As you know, New Mexico is trying to be a leader in regulatory actions. It really creates a lot of challenges for operators,” Swarzwelder said. “What’s frustrating about all the regulatory changes, is its really in light of some positive things in the industry. The industry up to this point has done a very good job of limiting its emissions.”
He said a recently enacted “methane tax,” a policy by the EPA to charge operators for methane emissions would affect 65 percent of operators in U.S., mostly small operators, threatening their financial viability.
The EPA announced in last year it will charge $900 per metric ton for methane waste emissions in 2024, rising to $1,200 in 2025 and $1,500 per metric ton in 2026 and after for operators reporting more than 25,000 metric tons of emissions per year.
More: Oil and gas exempt from drilling rules in endangered bird habitat. Is species threatened?
“It really affects the smaller producers,” Swarzwelder said. “There’s a lot of small producers out there. It really puts you in a sensitive situation.”
President of American Petroleum Institute Mike Sommers said lawmakers should pursue policies that encourage, not restrict, oil and gas producers in the U.S.
He said recent requirements could curb American energy production without providing adequate environmental benefit.
More: Civitas Resources’ $2 billion sale closes, Permian Basin merger wave continues in 2024
Sommers’ comments came during the Institute’s annual “State of the Energy” conference that sees oil companies, political leaders and others convene to discuss global energy market and policy trends.
He called on government leaders to lease more public land to the industry, speed up permit approvals and walk back policies that tightened environmental requirements.
“We produce more energy than any country in the world,” Sommers said. “This benefits our economy, our national security and is our insurance in a volatile time. This is our American energy advantage. It didn’t happen overnight, and it can’t be sustained without the right policies from Washington.”
More: $450 million Permian Basin merger announced between Battalion Oil and Fury Resources
New Mexico Gov. Michelle Lujan Grisham, herself an ardent supporter of tougher environmental rules, voiced support for the EPA’s latest regulations during the United Nations Climate Change Conference last month in Dubai.
She touted New Mexico’s rules as laying the groundwork for federal action to address the purported damage oil and gas was causing to the environment.
“New Mexico embarked on drafting our oil and gas rules at a time when the United States’ climate leadership was lagging. Thanks to President Biden and his administration, we are once again leading,” Lujan Grisham said in as the rules were announced in December.
“We are proud to have laid the foundation for this national rule, which will not only reduce emissions, but spur innovation and economic development across the country.”
Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on the social media platform X.
The governor sets the agenda for the session, including for the budget, so here is what they are looking at so far.
SANTA FE, N.M. — As the regular session of the New Mexico Legislature is set to begin Jan. 20, lawmakers have already filed dozens of bills.
Bills include prohibiting book bans at public libraries and protections against AI, specifically the distribution of sensitive and “Deepfake” images
Juvenile justice reform is, again, a hot topic. House Bill 25 would allow access to someone’s juvenile records during a background check if they’re trying to buy a gun.
Gov. Michelle Lujan Grisham sets the agenda and puts forth the proposed budget lawmakers will address during the session. The governor is calling for lawmakers to take up an $11.3 billion budget for the 2027 fiscal year, which is up 4.6% from current spending levels.
Where would that money go? More than $600 million would go to universal free child care. Meanwhile, more than $200 million would go to health care and to protect against federal funding cuts.
There is also $65 million for statewide affordable housing initiatives and $19 million for public safety.
After years of failure to land a “big fish” business for New Mexico’s economy (or effectively use the oil and gas revenues to grow the economy) Gov. Michelle Lujan Grisham with the help of her Economic Development Secretary Rob Black have lured no fewer than three large data centers to New Mexico. These data centers are being built to serve the booming world of Artificial Intelligence (AI), and they will have profound impacts on New Mexico.
It is our view that having these data centers locate in New Mexico is better than having them locate elsewhere. While we have many differences of opinion with this governor, we are pleased to see her get serious about growing and diversifying New Mexico’s oil-dependent economy albeit quite late in her second term.
Sadly, the governor and legislature have chosen not to use broad based economic reforms like deregulation or tax cuts to improve New Mexico’s competitiveness. But, with the failure of her “preferred” economic development “wins” like Maxeon and Ebon solar both of which the governor announced a few years ago, but haven’t panned out, the focus on a more realistic strategy is welcome and long overdue.
Currently, three new data centers are slated to be built in New Mexico:
- Oracle’s Project Jupiter in Santa Teresa with an investment of $165 billion.
- Project Zenith slated to be built in Roswell amounts to a $11.7 billion investment.
- New Era Energy & Digital, Inc. While the overall investment is unclear, the energy requirement is the largest of the three at 7 gigawatts (that’s seven times the power used by the City of San Francisco).
What is a data center? Basically, they are the real-world computing infrastructure that makes up the Internet. The rise of AI requires vast new computing power. It is critical that these facilities have uninterrupted electricity.
That electricity is going to be largely generated by traditional sources like natural gas and possibly nuclear. That contravenes New Mexico’s Energy Transition Act of 2019 which was adopted by this Gov. and many of the legislators still in office. Under the Act electrical power emissions are supposed to be eliminated in a few years.
With the amount of money being invested in these facilities and the simple fact that wind and solar and other “renewable” energy sources aren’t going to get the job done. In 2025 the Legislature passed and MLG signed HB 93 which allows for the creation of “microgrids” that won’t tax the grid and make our electricity more expensive, but the ETA will have to be amended or ignored to provide enough electricity for these data centers. There’s no other option.
New Mexicans have every right to wonder why powerful friends of the governor can set up their own natural gas microgrids while the rest of us face rising costs and decreased reliability from so-called “renewables.” Don’t get me wrong, having these data centers come to New Mexico is an economic boon.
But it comes tempered with massive subsidies including a 30-year property tax exemption and up to $165 billion in industrial revenue bonds. New Mexico is ideally suited as a destination for these data centers with its favorable climate and lack of natural disasters like hurricanes, tornadoes, and floods. We shouldn’t be giving away such massive subsidies.
Welcoming the data center boom to New Mexico better than rejecting them and pushing them to locate in other states. There is no way to avoid CO2 emissions whether they happen here or somewhere else. But, there are questions about both the electricity demand and subsidies that must be addressed as New Mexico’s data center boom begins.
What will the Legislature, radical environmental groups, and future governors of our state do to hinder (or help) bring these data centers to our State? That is an open question that depends heavily on upcoming statewide elections. It is important that New Mexicans understand and appreciate these complicated issues.
Paul Gessing is president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility
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