Climate changing for New Mexico’s oil and gas industry

Speaking at an oil and gas conference in Santa Fe last week, a panel of state lawmakers expressed sympathy and appreciation for fossil fuel producers, but they also conveyed New Mexico’s political landscape was changing and the industry must adapt.

A clear signal of that change was when state Reps. Patty Lundstrom, D-Gallup, and Kelly Fajardo, R-Los Lunas, offered lobbying advice.

Both women emphasized the importance of bringing a concise and coherent request to lawmakers and their staffers, who all are unpaid and have limited time to respond to a hodgepodge of questions and concerns.

The state has a long history of not paying its legislators who, in turn, often are understaffed. What’s different is an industry that has been so highly esteemed because of the massive revenue it provides the state now having to improve its lobbying efforts.

“Absolutely. I would say so, yes,” Lundstrom said of the trend during a phone interview.

Many newer lawmakers are younger, care more about climate change and are better informed about it, which means they’ll ask tougher questions, Lundstrom said. “They’re not willing to say, ‘Give ’em a pass.’ ”

This reflects the unfamiliar territory the industry finds itself in as the changing climate causes an extended drought, lower river flows and shortened growing seasons, prompting environmentalists to push for reduced greenhouse gas emissions and voters to make climate a higher priority when electing political leaders.

Industry officials acknowledge a need to curb the release of methane — a potent greenhouse gas — and other toxic chemicals. They also agree a transition from fossil fuels to renewable energy is inevitable, but they believe the change should be gradual and take many years, even decades.

In the foreseeable future, oil and gas will remain in high demand and continue to be an important part of New Mexico’s economy while the industry works to become cleaner to counter climate change, said Leland Gould, interim executive director of the New Mexico Oil and Gas Association.

“There’s no doubt that the future of our industry is lower carbon and lower emissions,” Gould said. “But I know our members in New Mexico can play a big role in meeting the growing demands all over the world and continue to lower emissions.”

One environmental advocate said conservationists are taking advantage of the current political climate to push harder for stronger protections for the climate and public health.

“I think there is a moment right now where these climate and clean air issues are coming to the fore,” said Jon Goldstein, state policy director for the Environmental Defense Fund. “It has a lot to do with the public at large’s understanding of just how serious these problems are becoming.”

Increased regulation and production

State, federal and international reports forecasting the impacts of climate change are alarming. The consensus among climate scientists is that greenhouse gases, which trap heat in the atmosphere, must be slashed to head off the most disastrous effects.

The dire predictions have led to environmental advocates pressing for swifter measures such as government funding for renewable energy systems, incentives for switching to electric vehicles and more stringent rules on oil and gas operations.

A new generation of lawmakers at both the state and federal levels espouse everything from the Green New Deal to anti-fracking bills to carbon-cutting goals.

Gov. Michelle Lujan Grisham, a Democrat, issued an executive order in 2019 calling for the state to cut greenhouse gases by 45 percent by 2030.

In March, the state adopted methane regulations that restrict venting and flaring of natural gas to emergencies. Operators also are required to capture 98 percent of their methane by the end of 2026.

Meanwhile, the state Environment Department is proposing new rules for the fossil fuel industry to curtail ground-level ozone, a toxic gas that can cause respiratory problems. And the U.S. Environmental Protection Agency is expected to announce tougher methane rules in the coming weeks.

Gould said in the past two decades the industry has constantly faced new regulations, and this is just the latest.

His association has worked with state regulators on rules that reduce methane and ozone emissions but aren’t too cumbersome, he said. At the same time, the group works to shore up the industry, which puts about $2.8 billion a year into the state’s budget.

“I believe New Mexico is capable of doing both,” Gould said. “It is not an either-or.”

Many of the association’s oil and gas producers have outlined plans to decrease carbon emissions and develop new technologies that are more efficient and less polluting, he said.

The public should know petroleum production is cleaner and more environmentally sound than it has ever been, he said. “And progress continues on that every day.”

Five years ago, during a market slump, New Mexico’s oil production fell to 150 million barrels a year and has since rebounded to more than 370 million — a record output that puts the state second only to Texas, according to U.S. Energy Information Administration data.

“The remarkable growth we have seen in that time has enabled an unprecedented economic expansion for the state,” New Mexico Oil and Gas Association spokesman Robert McEntyre said. “We think that’s something we should take advantage of as we move into the low carbon future.”

The industry enjoyed more relaxed oversight under Republican Gov. Susana Martinez, who cut regulatory agencies’ budgets and staffing.

Is the industry waiting for the next Republican governor to roll back Lujan Grisham’s more stringent regulations? McEntyre said that’s not the plan. The group has worked with both political parties throughout its history with the aim of establishing reasonable, flexible regulations, he said.

“However, we fundamentally disagree with extreme approaches and rhetoric some groups employ to influence policy,” McEntyre said. “It has been difficult to find common ground with those who oppose our existence altogether or advocate for policies that would effectively dismantle oil and natural gas in New Mexico.”

Goldstein said it’s simplistic to cast activists as extremists for seeking more stringent regulations and a swifter transition to greener energy than the industry desires.

“Whenever you paint with as broad a brush as that, you’re going to gloss over a lot of differences of opinion,” Goldstein said.

Long, slow transition

During last week’s conference, a panel member, Republican state Sen. Steven Neville of Aztec, noted the U.S. has more than 270 million vehicles, and almost all of them use traditional fuels.

“I don’t see the oil and gas industry going away in the next 10 years,” Neville said. “That’s what some of our environmental friends in the Legislature are trying to propose. That’s not going to happen. Those cars and trucks and so forth are going to last a lot longer than 10 years.”

A Saudi Arabian study projects an increase in oil demand in the next 15 years, he said.

An economist said the sheer number of gas-powered vehicles combined with the state’s record-level production and rising oil prices are creating a healthy short-term outlook.

“In the short run, things look pretty good for the industry,” said Jim Peach, a New Mexico State University economics professor emeritus.

But major manufacturers such as GM, Ford, Volkswagen and Toyota are ramping up production of electric cars, Peach said. “In a few years, that’s going to affect demand.”

Peach said he’s not surprised some industry leaders are grumbling about tougher regulations and feeling under attack.

They felt under siege 20 years ago when the state began requiring operators to line the pits that hold contaminated wastewater to keep them from leaking into the ground, he said. Some operators threatened to move to Texas, but they didn’t, he added.

State Sen. George Muñoz, D-Gallup, said more liberal, forward-thinking Democrats have unseated some of the entrenched old guard. These younger progressives are stauncher about environmental oversight, which is good until they overlook the costs, he said.

“I think it’s changed for the better,” said Muñoz, who also sat on the conference panel. “I’m all for leaving the world a better place. While I agree with a lot of their stuff, when you struggle to fund stuff, it becomes an issue.”

These lawmakers need to be practical and consider how much New Mexico still depends on oil and gas revenues and federal funding, Muñoz said. He noted long-term planning is required to even partially phase out such an embedded industry.

Lundstrom said too much focus is put on oil and gas when discussing energy transition, but entire supply chains will have to change if the state shifts to a different energy source.

For instance, hydrogen-powered cars will need completely different engines and infrastructure, and workers will need new skill sets to repair them.

Lujan Grisham discussed a plan at the oil and gas conference to jumpstart production of hydrogen fuel, which emits less carbon dioxide than fossil fuels. The selling point to executives was that natural gas — which they could supply — would be used to separate the hydrogen from water.

Gould said in the interview he needs to know more about the specifics of the plan, but he thinks natural gas is the most efficient way to produce hydrogen.

Environmentalists oppose this method because it emits more methane than burning natural gas for heating. They also say hydrogen, if used to drive turbines at electric plants, produces nitrogen oxide, a pollutant that helps form ground-level ozone.

Camilla Feibelman, director of the Sierra Club’s Rio Grande Chapter, said this is swapping one form of pollution for another and merely offers the industry a way to rescue its infrastructure as the world moves to renewable energy.

“This isn’t [about] getting to a little better,” Feibelman said. “This is getting to transformationally saving the future for our kids.”

Gould indicated he sees hydrogen as complementing rather than replacing fossil fuel. Again, he said, it doesn’t have to be one or the other.

Peach said there’s no denying the industry funnels colossal sums into state coffers, but he noted there’s a growing chorus of people who want to end the state’s reliance on these revenues tied to a volatile market with booms and busts. They instead want more stable revenue sources, which can be cultivated by diversifying the economy.

Still, weaning the state off its oil dependency will be a Herculean task, Lundstrom said, and it must be done gradually over a lengthy period to avoid displacing workers.