For the political left, the oil and gas business has long served as a foil. The industry is huge, mechanically complex, and mysterious to outsiders. It sometimes blunders with messy consequence. It therefore remains a bright target for political opportunism.
This will not change. But chronic unpopularity has a new dimension. In energy politics nowadays, hope regularly emerges for an early end to production and use of oil and gas. Politicians expressing the ambition apparently think the US economy can be purged of affordable energy at no cost—or at least at cost confined to the industry they yearn to punish.
They’re wrong on all counts.
Misguided bills
State legislators in Colorado and New Mexico demonstrate the misguidedness.
The Colorado Senate Transportation and Energy Committee on Mar. 5 opened hearings on a bill that would discourage oil and gas drilling and production in much of the state. Sponsors say Senate Bill 19-181 “enhances local governments’ ability to protect public health, safety, and welfare and the environment by clarifying, reinforcing, and establishing their regulatory authority over the surface impacts of oil and gas development.” Essentially, it enables small groups of activists to block work at the local level, likely along the urban Front Range near Denver.
The legislation is clear in its antagonism. It explicitly subordinates resource development to environmental protection in regulatory decision-making. It specifies that only one of the Colorado Oil and Gas Conservation Commission’s nine members can have oil and gas experience. And, among other measures, it changes the state’s forced-pooling law in ways certain to discourage the practice and thus to limit drilling and future production, along with governmental receipts from severance and ad valorem taxes.
SB 19-181 might not be passed. Or it might be passed in less egregious form. But it appeared only days before hearings began, forcing the industry and its supporters to rush damage control. This happened only 4 months after voters defeated setback requirements repellent to drilling and reflects the persistent readiness of some Colorado politicians to jeopardize a vital part of their state’s economy (OGJ, Nov. 19, 2018, p. 18).
In New Mexico, Senate Bill 459 aims to suspend hydraulic fracturing of oil and gas wells for 4 years. It’s supposed to provide time to study the health, safety, and environmental effects of the completion method, about which pressure groups insist too little is known. And it adds reporting requirements for when hydraulic fracturing resumes—if it does.
SB 459 comes while the New Mexican oil and gas industry is booming, thanks to hydraulic fracturing of horizontal wells. Oil production jumped to 703,000 b/d last November from 419,000 b/d in November 2017. Direct revenues to the state from the oil and gas industry account for 35% of estimated general fund revenue for fiscal 2019, according to an analysis of the bill by the Legislative Finance Committee (LFC). “Substantial changes to how this industry operates in New Mexico—such as a temporary ban on hydraulic fracturing—would cause severe revenue losses,” the analysis says. The LFC estimates total state revenue losses of $471.4 million in fiscal 2020, rising to $1.0772 billion in 2023. Losses to local governments from diminished gross receipts and ad valorem taxes would grow from $34.8 million in 2020 to $122.5 million in 2023.
Carrying the load
State and local governments facing losses such as those must cut services, raises taxes elsewhere, or defer action with budget deficits. Through some combination of these options, New Mexican residents, directly or otherwise, sooner or later, will carry the economic load.
Sponsors of SB 459 and SB 19-181, like politicians who try to strangle resource development anywhere, want constituents to think their crackdowns hurt only oil companies. Once again, they’re politically crafty but economically wrong.
If these measures become law, residents of New Mexico and Colorado will bear the cost. Someone must after oil and gas companies move jobs, rigs, and incomes to Oklahoma and Texas.
