The New Mexico legislative session ended Saturday at noon with some wins and some losses for the oil and gas industry.
As the state’s data shows production soaring to a record 250 million barrels in 2018 thanks to increased oil production in southeastern New Mexico, lawmakers sent a record high $7 billion budget to the governor’s desk this session. Spending priorities from this surplus included education, where spending is up in direct response to a 2018 court ruling that found the Land of Enchantment is failing to provide students with a quality education.
Industry representatives breathed a sigh of relief as the bill imposing a four-year moratorium on fracking failed, as did the effort to raise royalty rates on oil and gas production on some state trust lands.
The Energy Transition Act – which moves the state to carbon-free energy generation by 2050 – passed, as did new rules outlining penalties imposed on oil and gas operators who violate state law. Senate Bill 186 would have amended the state Oil and Gas Act to give the Oil Conservation Division (OCD) authority to impose penalties on violators directly rather than working through the court system. Since the bill went through a lengthy negotiation process, the measures were added as “friendly amendments” to House Bill 546 on wastewater management, allowing a vote on a combined bill. Fines are reduced from $15,000 per day for each violation to $2,500 and from $25,000 per day for noncompliance to $10,000. The accumulated cap is lowered from $500,000 to $200,000 with OCD required to file suit for any violation over that cap. To reduce the use of fresh water, the bill clarifies the producers’ options to reuse water.
House Bill 6 was passed and calls for combined tax reports and deductions for foreign source dividends. The Senate amendments removed personal income tax increases and reduced capital gains from 50 percent to 40 percent, while increasing motor vehicle excise tax from 3.5 percent to four percent with the surplus going to the general fund for two years and then the road fund.
With considerable opposition, the measure to tap into the Land Grant Permanent Fund (LGPF) for expansion of early childhood education in the state failed. The LGPF is one of the largest education endowments in the country, funded with revenue from leases and royalties produced by non-renewable natural resources, primarily oil and gas, and other income.
Legislators also failed to increase the state’s gas tax or to allow municipalities in oil and gas producing areas the ability to impose a five percent tenancy tax on long-term renters. The measure legalizing marijuana through state-run stores also failed, but the governor has promised this issue will be on her agenda for 2020.
Legislators did raise the statewide minimum wage to $12 by 2023 while barring counties from enforcing local “right-to-work” ordinances. The so-called State National Environmental Policy Act (NEPA) failed as did the bill that called for royalty payments on vented and flared gas.
For questions regarding New Mexico and PESA’s activities in the state, please contact PESA Vice President Government Affairs Tim Tarpley.