New Mexico's Leasing Concerns Should Concern Us All

Mark Green
Posted March 18, 2021

It’s not surprising that New Mexico’s governor, both U.S. senators and other elected officials are concerned with the Biden administration’s halt in new federal natural gas and oil leasing. In 2020, New Mexico was the nation’s No. 3 crude oil producer and No. 8 natural gas producer, and the administration’s policy could affect billions of dollars in state revenues and thousands of jobs.

Gov. Michelle Lujan Grisham, a Democrat, penned a letter to President Biden earlier this week cautioning that potential lost revenues as a result of the policy could mean significant hardship for her state. New Mexico receives more than 40% of its total revenue – nearly $4 billion annually – from taxes and royalties paid by the natural gas and oil industry. Lujan Grisham to the president:

“Financial losses of that magnitude could have real impacts on our ability to achieve major goals like universal access to early childhood education.”

U.S. Sens. Martin Heinrich and Ben Ray Lujan, also Democrats, were more direct in a letter to National Climate Advisor Gina McCarthy:

“[A]n indefinite suspension would have significant impacts on our workforce and state funding for education and creates unnecessary uncertainty for New Mexico's state and local tax revenues. We oppose an indefinite federal ban on oil and gas leasing, and we urge the administration to complete its review and resume responsible leasing as soon as possible.”

At issue is the administration’s decision to pause new natural gas and oil leasing on federal lands and waters. During her confirmation hearing to be the Interior Department secretary, Deb Haaland said she didn’t believe the pause would be permanent:

“This is a pause to review the … the federal fossil fuel program. I know that there are still thousands of leases and thousands of permits that are moving forward. … I don’t believe that it is a permanent ban.”

We’ll see whether that proves to be true. Even so, New Mexico officials are concerned. All Americans should be, as well.

An API analysis projected that a permanent ban on federal leasing and development would have significant impacts including: cumulative $700 billion decline in U.S. GDP through 2030, 1 million jobs lost by 2022 and increased imports of foreign oil. New Mexico could lose more than 62,000 jobs over the next two years, the analysis found.

U.S. energy security would be affected. For example, while the U.S. became a petroleum net exporter on an annual basis in 2020 for the first time since 1958, our nation reverted to being a petroleum net importer in February and over the past three consecutive weeks, according to the U.S. Energy Information Administration (EIA).  In fact, EIA currently projects the U.S. will be a petroleum net importer for 2021.

Increased oil imports means increased dependence on others for energy. Decreased self-sufficiency would undermine U.S. energy and global leadership, affecting the way America pursues foreign policy goals.

It would increase U.S. consumer vulnerability to the effects of geopolitical events on global energy supply. Indeed, as API Chief Economist Dean Foreman points out in this post, unforeseen global events are reminders that domestic oil production is critically important to U.S. security.

It’ll be interesting to see if and how the administration responds to New Mexico. Other states, including Wyoming, are likewise challenging the administration’s leasing policy.

Federal oil production, onshore and offshore, accounted for more than a fifth of U.S. oil production in 2019. This is no time to be flirting with a policy that could put that production at risk.