New Mexico plays a vital role in American energy production, providing a substantial amount of oil and gas from a comparatively smaller population than its neighbor, the number one oil-producing state, Texas. Accounting for an astounding 13.3% of all U.S. crude oil production in 2022, and increasing to an even 14% in 2023, due to further innovation in fracking, New Mexico consistently plays a key role in American oil and gas production holding about 13% of proved crude oil reserves in the U.S. In addition to playing such an important role in the American crude oil market, New Mexico also is in the top ten gas-producing states accounting for 7% of U.S. natural gas withdrawals and proved natural gas reserves. Furthermore, New Mexico also has approximately 3% of U.S. recoverable coal reserves, although only accounts for 1% of national production.
Production and heavy regulation constantly are at odds due to the state having a predominantly left-leaning legislature while having to rely on oil and gas production for 25% – 30% of the state’s general fund. This has made industry and government relations difficult, especially compared to their neighbor Texas, where the balance between private and public influence is far more balanced. Fossil fuel production plays an important role in both the overall health of the American economy, but also, for the over 2 million residents of New Mexico, many of whom rely on fossil fuels for their energy at home, their jobs, and their communities’ well-being.
Sharing the Permian Basin
The Permian Basin is the largest producing oil field in the United States, encompassing an area 250 miles wide and 300 miles long in mostly west Texas and southeast New Mexico. Four counties in New Mexico are a part of the Permian, including Chaves, Roosevelt, Lea, and Eddy – there are 66 total counties in the Permian Basin with the remainder being located in Texas.
Of the four New Mexican counties in the Permian Basin, Lea, and Eddy account for not only the majority of production within New Mexico, but in 2023, they were responsible for 29% of all Permian Basin crude oil production in the first quarter of that year. Additionally, with 40% of total U.S. crude oil production coming from the Permian Basin, the importance of continued exploration of the region, and innovation within the industry to extract more crude oil, cannot be understated both for economic and geopolitical reasons.
San Juan Basin
Located mostly in the Northwest corner of New Mexico, with smaller parts spilling into Southwest Colorado, the San Juan Basin produces 67% of New Mexican natural gas, and, although it has been on the rise, the Basin produces a mere 5% of the state’s crude oil. Not getting nearly as much notoriety as the Permian Basin, the San Juan Basin still plays an important role in the New Mexican economy, and in the fulfillment of American energy needs. The New Mexican portion of the San Juan Basin encompasses the four counties of McKinley, Rio Arriba, San Juan, and Sandoval.
In addition to significant reserves of natural gas and some oil, the majority of New Mexico’s recoverable coal reserves are in the San Juan Basin – there are some, but not as much in the Raton Basin. Not only is the San Juan Basin the largest coal-producing region in New Mexico, but it is the only area currently actively being mined. The coal mined in the San Juan Basin remains mostly at home where it is used for power generation in the state, or, for power generation in parts of Arizona whom New Mexico shares a border with.
Revenues and Regulation
As a major producer of oil and gas, fossil fuels are a critical economic driver of the New Mexican economy for both the state’s GDP and the employment of thousands of residents. The state generates significant revenues from oil and gas in a variety of ways, including severance, a tax put on the extraction of non-renewable natural resources, gross receipts, corporate and personal income taxes, and royalties. New Mexico generally receives 4$ billion in direct revenue from the oil and gas industry, and the combination of direct and indirect revenue regularly accounts for 25% to 30% of the state’s general fund. Additionally, revenues from the production of oil and gas directly contribute to the state’s early childhood care and education funds.
Oversight of oil and gas extraction and transportation is done by both state and federal agencies and the control of the oversight depends on whether or not the land is federal, state, or private property. Any drilling and production activities on New Mexico State Trust Lands or private property are regulated primarily by the New Mexico Oil Conservation Division. In contrast, if production takes place on federal land, regulation comes primarily from the U.S. Bureau of Land Management and or the U.S. Forest Service.
New Mexico’s Energy Export Markets
Mexico’s proximity to New Mexico and Texas has helped establish it as one of America’s top export markets. For example, in 2023, Mexico received the most exported petroleum products from the U.S., such as gasoline, diesel, and propane, which is highly beneficial to both parties due to the ease and relatively low cost of transportation, and because Mexico has an outdated refinery system that cannot keep up with output demand. Furthermore, Mexico imports a significant amount of natural gas annually, primarily through pipelines, which accounted for 13% of all energy exports from the U.S. to Mexico in 2023.
However, production in New Mexico and its export market are currently under threat from multiple political campaigns. Although efforts by organizations such as Greenpeace to stop production in the Permian seem unrealistic, their campaigns should not be underestimated as they potentially present a major obstacle to growth in the region. Greenpeace’s revenue for the fiscal year 2022 was $32,508,926. The organization has a long track record of using those resources to block energy development in the U.S. and around the world. Greenpeace has placed pressure on both the U.S. and Mexico to “defuse” Permian production and has led political efforts to block energy infrastructure that is necessary to facilitate trade between the U.S. and Mexico. Eliminating the Permian Basin as an oil producer, as well as restricting the construction of pipelines to transport oil along with natural gas, would have catastrophic consequences for both the American and Mexican economies.
Conclusion
By regularly providing the second largest amount of oil to the American economy, 14% in 2023, and standing in the top 10 natural gas-producing states, New Mexico plays a significant role in American energy production. Residents of New Mexico use revenues generated from oil and gas production to fund a significant portion of the public budget and include important funds for early childcare and education. Aggressive overregulation and the prevention of production by environmental groups stand to impact not only national production but also the overall well-being of the New Mexican economy, economic relations with Mexico, and the global oil and gas market.