New Mexico considers oil drilling restrictions which would reduce output and revenue
New Mexico is the second largest oil producer in the U.S. A leading economist released this week a study about potential drilling restrictions. The study showed that they could affect up to 5,4% of the future crude production and cost billions in revenue.
The study evaluated the setback proposals that were made during the legislative session of 2024, which would limit how close operators could drill to certain environmental and structural areas. These setbacks are designed to protect the public against oil and gas pollution.
The topic was complex and needed more time for evaluation and analysis than what we provided in the session. Ismael T. Torres, Chief Economist at New Mexico Legislative Finance Committee said that this presentation was intended to give the committee a deeper analysis.
He added that it was too early to tell what setbacks, if any would be proposed during the next session.
According to Torres, the setbacks analyzed in the report will take place in 2026. They would affect 15 % of the new wells that are drilled in the state.
This would be equivalent to approximately 12.5 million barrels in oil production lost the first year and 35 million barrels around the beginning of 2030.
By 2034, the production value lost will reach a peak of $4.5 billion per year.
New Mexico is home to a portion of the Permian Shale field that crosses over into Texas. According to the latest data from the U.S. Energy Information Administration, the state produced around 2.04 million barrels of oil per day in the month of July.
According to the report, more than half the wells affected are located on private land. A quarter are in Lea County, which is one of the fastest growing oil-producing counties of the United States.
Missi Currier is the chief executive of the New Mexico Oil & Gas Association. She said that a statewide setback wouldn't increase the mitigation of human health impacts from oil and natural gas production. But it would harm the development of oil and natural gas resources, and ultimately the State of New Mexico.
The report was delivered to the Legislative Finance Committee of the State on Tuesday.
The report's setbacks would prohibit operators from drilling within 2250 feet (686m) of residential, educational, health, or correctional facilities, and stop drilling 650ft from streams, lakes ponds wetlands or irrigation infrastructure.
This would restrict activity to within 300 feet of any other surface water.
"The costs to human health and natural resources would far exceed any revenue that the state might lose," said Charlie Barrett. Barrett is an environmentalist and thermographer with the environmental group Earthworks in New Mexico.
He added that "setbacks are crucial to protect communities, schools, and businesses." (Reporting and editing by Matthew Lewis in New York, Georgina McCartney from New York)
(source: Reuters)
