Commission’s Reversal of Gas Drilling Decision Could Jeopardize Funding for New Mexico Schools

January 8, 2019

Last month, the New Mexico Oil Conservation Commission updated a rule to allow for up to eight producing wells on every 320 acres in the Blanco-Mesaverde field in northwest New Mexico. Despite dramatic advances in technology, the rule hadn’t been updated in nearly two decades.

But today, the Oil Conservation Commission reversed course, putting the update on hold and announcing a new hearing in May. The decision could also jeopardize critical revenue for schools and infrastructure in New Mexico.

The so-called “pool rule” update could have a major economic impact in New Mexico. According to an analysis by New Mexicans for Economic Prosperity, Farmington Chamber of Commerce and Four Corners Economic Development, the updated rule could lead to more than $29.2 million in additional revenue for the state.

In addition to the loss of revenue, today’s decision by the Oil Conservation Commission to hold yet another hearing on the already approved rule update could also create avoidable regulatory uncertainty – ultimately jeopardizing the millions of dollars in tax revenue that would improve our schools, infrastructure and public safety services.

Opponents of the update say that it would lead to thousands of new wells being drilled in the area. Simple economics demonstrate this is not likely, as NM4EP outlined previously:

“… assuming an average horizontal well cost of $4 million, drilling 7,500 new wells would require $30 billion in new investment in the region. To put it charitably, that’s unlikely to happen, although communities in northwest New Mexico would likely welcome tens of billions of dollars in new investment, particularly the new jobs it would create.”

Contrary to the #DoubleDrilling hash tag that anti-energy groups have been using on social media, the update would effectively lift outdated restrictions on re-completing existing wells, which would allow companies in many cases to increase production without drilling new wells. Any new wells would still go through the same extensive application and review process including environmental, air quality, groundwater, or archaeological studies that are already required.

Oil and gas production has driven our state’s budget surplus to a record high of $1.1 billion. Increasing production in the Blanco-Mesaverde field is an opportunity to continue New Mexico’s economic growth and generate additional funding for investments in our schools and infrastructure, and in a part of the state that is in need of additional economic development.