Category: Oil & Gas

Legislature faces both peril, opportunity in 2019

Post author By Paul Gessing
Post date January 18, 2019

With New Mexico’s politics trending hard left, what is a fiscally conservative think tank that focuses on New Mexico’s still-shaky economic situation to do? Quite simply, there will be more to do than ever.

For starters, New Mexico’s $1.1 billion oil-generated surplus brings both opportunity and peril. The Rio Grande Foundation has long called for reform of our state’s broken and politically manipulated gross receipts tax. The surplus is an opportunity for legislators to reform a broken system in ways that make New Mexico’s tax structure economically competitive in ways that encourage businesses to stay in New Mexico. Of course, we’d love to see New Mexico households given tax relief as well, but given the political winds in Santa Fe, revenue-neutral reform is likely the best we can hope for.

While the massive growth of oil production in the Permian Basin has generated optimism about New Mexico’s future we all have a stake in spending that money wisely. It is worth noting here that oil markets are fickle. They rise and fall quickly. It is unwise to put “permanent” new government programs (or tax cuts) in place based on oil revenues.

On that note the Netflix deal is no reason to eliminate the $50 million film subsidy cap. Unlike most economic development programs the film subsidy is NOT a tax credit.

It is taxpayers’ money that reimburses film companies 25 percent of what it costs to film a movie and 30 percent for television shows.

The Netflix deal CAN be a big win for our state if the cap remains in place and payouts remain strictly controlled. The New Mexico Film Office’s own 2014 report showed that film subsidies returned just 43 percent of what was spent to state and local coffers.

While the Rio Grande Foundation has always opposed film subsidies, if Netflix makes New Mexico its film hub without digging further into taxpayers pockets, the industry could wind up being a winner for the state.

Eliminating the subsidy cap could cost taxpayers hundreds of millions of dollars annually and would make budgeting in the Legislature a real challenge due to volatile annual expenditures.

To reform government and create jobs the Legislature should use former Gov. Susana Martinez’s occupational licensure executive order as a guide for reducing unnecessary burdens on workers and consumers.

This is another bipartisan reform idea as the Obama Administration urged (and offered a road map) for states to enact reforms to make it easier for workers to get work without unnecessary and expensive government permission slips.

All provisions of the order should be considered for legislative approval, thus giving them a permanence that they currently lack, but the “consumer choice” concept is the most important. This innovative idea would allow a person to practice without a state license as long as his or her employer informed prospective customers of the lack of a license.

Finally, the issue of New Mexico’s utilities and how they are regulated and managed will be critical in 2019. PNM is looking to get out of the San Juan Generating Station. This despite the fact that a whopping $500 million in scrubbing technology was just invested in an effort to clean the plant’s emissions. Unfortunately, if San Juan Generating Station is mothballed it will come at the cost of the utility’s customers throughout New Mexico in the form of significant increases in utility rates.

If Gov. Michelle Lujan Grisham and the Legislature follow through on their pledge to raise the renewable mandate on PNM and other utilities to 50 percent by 2030, PNM will use that to justify the rate payers’ bailing them out for their “stranded costs.” This could cost anywhere from $150 million to $800 million (PNM is being cagey with the actual “stranded cost” number). Of course this doesn’t even include the job and tax revenue losses felt on the Navajo Reservation and other various school districts and taxing authorities in the Four Corners.

The San Juan College president estimates it will lose $2 million from the closing alone.

The “blue wave” of 2018 will have major impacts in New Mexico politics. With great power comes great responsibility.

Paul Gessing is the president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility. The views in this column are the author’s alone and do not reflect the view or opinions of New Mexico In Depth.

Economy Energy and Environment Notable News Oil & Gas Top Issues

Trump’s steel tariffs threaten American energy dominance

Post author By Paul Gessing
Post date December 24, 2018

U.S. crude oil production just surged to an all-time high of 11.3 million barrels per day. Natural gas production is also setting records. This energy bonanza is creating tens of thousands of new jobs and dramatically reducing Americans’ gasoline and utility bills while boosting New Mexico’s economy and making it the 3rd-biggest oil producer in the nation.

Unfortunately, the energy boom could soon collapse. Constructing new pipelines and wells is becoming prohibitively expensive due to the Trump administration’s tariffs on steel and aluminum. Without continued investment in energy infrastructure, America will never achieve energy independence.

It’s time for the administration to rescind these counterproductive taxes.

In March, President Trump imposed a 25 percent tariff on imported steel and 10 percent tariff on imported aluminum. The levies have hit American energy companies hard. A recent survey by the Dallas Federal Reserve found that two-thirds of energy firms are negatively affected by the tariffs on steel. That’s because steel makes up about 10 to 15 percent of the cost of an oil or gas well. And nearly 80 percent of pipes and other products used by oil and natural gas companies are made with highly customized imported steel that cannot be domestically sourced.

For example, the Houston-based Plains All American Pipeline, which handles five million barrels per day of crude oil and natural gas liquids, projects that the steel tariffs will raise the price of a new pipeline system from the Permian Basin region by $40 million.

The lack of pipeline capacity has made it harder for oil and natural gas to get out of the Permian and to other parts of the domestic market or to the Gulf Coast for processing or export.

At least the higher costs for energy companies have meant higher revenues for American steel and aluminum companies, right?

Actually, no. Plains All American sought out domestic suppliers, but “American mills either did not bid” or “submitted alternative specifications” that failed to meet standards, according to CEO Willie Chiang. In other words, the tariffs aren’t necessarily boosting revenues for domestic steel and aluminum companies.

In fact, some of the largest domestic producers of aluminum and steel, such as Nucor and U.S. Steel, have lost value in the stock market this year — a sure sign that the tariffs aren’t working as intended.

The tariffs aren’t just hurting companies — they’re bad news for regular Americans, who ultimately pay the increased metal costs in the form of higher energy prices. Rob

Thummel, managing director of energy-investment firm Tortoise, explains that oil and gas companies can only eat the higher metal costs for so long. Eventually, “those costs will have to be consumed…more than likely by the consumer.”

Workers are poised to suffer too. The oil and gas industry supports about 10.3 million jobs and contributes more than $1.3 trillion to the American economy. Making energy exploration and production more expensive means fewer new jobs.

The tariffs are even undermining national security by making America more reliant on foreign energy producers. The United States recently surpassed Russia as the world’s top oil producer. And we’ve led the world in natural gas production since 2009. But if it becomes prohibitively expensive to invest in new energy infrastructure, America will lose its dominant position atop the global oil and gas markets.

The Trump administration’s tariffs are backfiring. It’s time to rescind them and deliver much needed relief to American energy producers and consumers.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Economy Education Film Subsidies Notable News Oil & Gas Tax and Budget Taxes Top Issues

Following ‘blue tsunami,’ what’s next for NM’s free-market movement?

Post author By Paul Gessing
Post date November 19, 2018

COMMENTARY: The Rio Grande Foundation is a nonpartisan organization, but like so many other New Mexicans we followed the recent election closely and were surprised by the “blue tsunami” that hit our state.

As a policy-driven organization, we look forward, not back. That said, the utter devastation of the GOP and most fiscally-conservative candidates on Election Day will make the 2019 Legislature and beyond quite interesting. We have a number of questions that we don’t know the answers to, but we hope will frame the policy discussion as we move forward:

• The gross receipts tax is a job-killing mess. Candidate Michelle Lujan Grisham pledged to address it, starting with naming a bipartisan tax commission to look at it. Will she really make tax reform a priority and will she get enough Democrats in the Legislature to get involved, or will the whole thing devolve into a push for higher taxes?

• Lujan Grisham supported marijuana legalization, and the House is more progressive than ever. Is there enough support in the Senate to legalize recreational pot?

• Speaking of the Senate, will Senate Finance Committee Chairman John Arthur Smith be able to stymie efforts to tap the “permanent fund” for universal pre-K, or will there be a compromise or capitulation? Also, will the Senate in general and Smith in particular stand firm against what seems likely to be a raft of tax-and-spending proposals that have been bottled up by Gov. Susana Martinez for the past eight years?

• We know that K-12 spending will rise dramatically, but by how much? With Democrats in control of everything they have tremendous leeway to shape New Mexico’s education system. How will they spend that money, and will they be able to actually improve our state’s struggling K-12 system?

• With “progressives” running the show in the House and having already attempted to ban new charter schools, are New Mexico’s charter schools in danger?

• Will Republicans unite to oppose big-spending and taxing plans? The House GOP won’t be able to exert itself on many policies with a massive disadvantage and a “progressive” majority led by Speaker Brian Egolf, but Senate Republicans could influence policies with a reconstituted “cowboy coalition.”

• Will Democrats succeed in eliminating the $50 million cap on film subsidies and increasing the state’s “renewable” mandate to 50 percent from the current (as of 2020) 20 percent requirement? Is a $12 minimum wage inevitable? What economic impact will these policies have on the state economy?

• Finally, will New Mexico’s oil boom continue? The state has benefited greatly from the boom in oil production in the Permian Basin, which has been sustained by high oil prices. Since Oct. 1 the price per barrel has dropped from the mid-$70s to below $60. Future oil prices are hard to predict and even harder to base budget on.
Advertisement

Declining oil prices are not the only concern. Land Commissioner-elect Stephanie Garcia-Richard is the first New Mexico land commissioner to have expressed hostility toward the oil and gas industry that funds this state’s economy and her office. Will she fulfill her anti-industry campaign rhetoric (which included banning fracking) or will she be willing to work with the industry while also advancing the cause of “renewables” and protecting state lands?

New Mexico has always been a pretty “blue” state. Gov. Martinez took a lot of heat for the sorry state of New Mexico’s economy even while Democrats in the Legislature prevented her from adopting most of her policy reforms (like “right to work” and education reforms). With the Democrats in total control and presumably in control of the coming redistricting process, is New Mexico the newest blue state like California?

Or if Democrats mismanage the budget, raise too many taxes, and things generally go poorly for Gov.-elect Lujan Grisham, will the pendulum swing back toward New Mexico being a “purple” state once again? And, if so, will Republicans/Libertarians/moderates be able to formulate a coherent strategy to take advantage of that overreach?

Paul Gessing is the president of New Mexico’s Rio Grande Foundation, an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Economy Notable News Oil & Gas Tax and Budget Taxes Top Issues

NM needs to use oil and gas bonanza wisely

Post author By Paul Gessing
Post date May 29, 2018

The following appeared at NMPolitics.net on May 29, 2018.

COMMENTARY: New Mexico policymakers and citizens received some good economic news recently. Thanks to the much-maligned process known as fracking, oil production in the Permian Basin in Southeast New Mexico is booming.

New Mexico recently became the third-biggest oil producing state in the nation and is now producing more oil than it ever has before. This has all led to a $673 million boost in state revenues.

While the revenue picture has brightened significantly for state government, New Mexico’s overall economic picture remains troubled. The unemployment rate is still the second-highest in the nation at 5.6 percent. Perhaps even more troubling is the fact that we are one of just three states to have fewer jobs today than we did at the onset of the Great Recession a decade ago.

Given the political situation in Santa Fe, it seems likely that the oil and gas revenues will be squandered (or “invested” as the big-government lobby puts it) in more government programs. Gov. Susana Martinez, typically a fiscal conservative, has already allocated an additional $10 million to unproven pre-K programs. Should the Democrats take over all branches of government in January there will be many more spending proposals.

But New Mexico government already spends a lot. According to an analysis by the Oklahoma-based 1889 Institute, when adjusted for our (low) personal incomes, New Mexico state and local government spending is among the top 10 among US states in all categories measured! We are the highest in the nation in spending on higher education, welfare and corrections.

All of this spending has created or at least done little to alleviate our impoverished condition.

So, if more spending is not the answer, what is? There are two important ideas that must be considered as uses for this surplus: tax reform and pension reform.

Revenue-neutral reform of our gross receipts tax has been a bipartisan talking point for years. We know that our loophole-ridden GRT is a job-killing disaster. It disproportionately impacts both small businesses/entrepreneurs and low-income New Mexicans.

For years the Legislature has “kicked the can” on tax reform. And it is admittedly tougher to take a leap of faith that a reformed tax system will generate revenues similar to the previous tax system. With a large surplus in Santa Fe, it is time to stop kicking that can and reform New Mexico’s broken GRT once and for all.

The second issue of government employee pension reform is just as important, but less well-publicized. In late 2017 it was reported that despite changes enacted in 2013, PERA’s estimated unfunded liability – the gap between future retirement benefits owed and expected future assets on hand – has increased over the past four years to $4.8 billion from $4.6 billion.

Study after study (including a 2014 report by the Competitive Enterprise Institute) shows that New Mexico’s pension problems are among the worst in the nation. Worse, despite strong stock market gains in recent years, the situation is getting worse.

When the stock market hits the skids or a recession hits, New Mexico (and the government retirees relying on these pensions) will be in for a rude awakening. That’s why we need to do something right away — and the oil-generated surplus provides a great opportunity.

Michigan is one state that has completely shifted away from the defined benefit model (where retirees are “guaranteed” a return and taxpayers bear the costs) to a defined contribution model where government employees (like their colleagues in the private sector) must plan for their retirements. For the long-term economic benefit of our state, such a move must happen eventually. Traditional pension systems are based on funny math and misguided promises from politicians.

Having some extra money available to make the transition happen is very beneficial and could make the process a lot less painful than making the transition in more difficult times.

ART Economy Notable News Oil & Gas RailRunner Spaceport Tax and Budget Taxes Top Issues Transportation Videos

Gessing talks 2018 New Mexico Legislative session & what to do w/ Spaceport, RailRunner, & other government boondoggles

Post author By Paul Gessing
Post date January 12, 2018

Rio Grande Foundation president Paul Gessing recently sat down with KRWG’s Fred Martino. We discuss the Spaceport and ongoing issues there and then move on to talking about the 2018 Legislature and why voters should be so skeptical of government infrastructure projects.

Economy Notable News Oil & Gas Tax and Budget Taxes Top Issues

‘New Money’ won’t solve state’s problems

Post author By Paul Gessing
Post date January 12, 2018

Lawmakers, bureaucrats, and lobbyists are salivating over the nearly $200 million in “new money” Santa Fe is slated to receive during New Mexico’s next fiscal year.

But while the worst of our state’s fiscal crisis appears to be behind us, caution is called for — not euphoria.

According to analysts with the Legislative Finance Committee (LFC), New Mexico’s “recent rebound in revenues is based to a significant degree on the recovery of the oil and gas industry, which is highly volatile.” The price of a barrel of West Texas Intermediate could continue to climb, soaring into the $60-$80 range, but it could tumble back under $30 — where it was as recently as February 2016. The OPEC-Russia agreement to limit supply may not hold, and countries beyond the reach of the cartel and Vladimir Putin continue to ramp up production. The U.S. fracking revolution, offshore development in Brazil, growing investment in Arctic oil, and Mexico’s decision to deregulate its energy sector are just four factors that will boost supply. Gambling on a consistently high petroleum price as a solution to budget deficits is a sucker’s bet.

Corporate welfare poses an additional risk to fiscal health. Perks for pols’ favored companies/industries are, at best, ineffective, but they’re also an impediment to sound budgeting. LFC analysts have warned that substantial “potential exists for unforeseen increases in the cost of tax expenditures to state revenues. In recent years, several tax expenditures had larger fiscal impacts than initially estimated, significantly contributing to revenue estimating error. In some cases, the revenue impacts exceeded initial estimates by up to an order of magnitude, requiring changes in statute to curb the impact.”

The Wall Street Journal recently reported that the nation’s “economy is running at its full potential for the first time in a decade.” Unemployment (outside New Mexico) has cratered, the stock market is surging, housing is strong, consumer confidence is high, and inflation is low. But the good times might not last. The “Trump bump” has not outlawed recessions, and with such a woefully underdeveloped private sector, New Mexico’s fortunes are tied to how the U.S. economy performs. A stock-market collapse, trade conflicts, or a foreign-policy crisis could halt, or even reverse, the national economy’s expansion.

Recession or not, to the extent that New Mexico is experiencing any job growth at all — the state still has fewer jobs now than it did in February 2008 — lower-paying positions are replacing lucrative employment. The manufacturing sector is offering fewer opportunities, as is the IT industry. Leisure-and-hospitality jobs are predicted to keep growing, as are positions — often low-paid — in healthcare/social assistance.

On the spending side, because New Mexico refuses to address the impacts of the state’s government-incentivized social pathologies, pressure is relentless for more “education” and “human services” expenditures. The burden of Medicaid expansion will only intensify, with nearly half the state’s residents now on the welfare program. The Children, Youth and Families Department wants a 10 percent increase for the next fiscal year. Despite abundant evidence that greater spending is not tied to improved achievement, teacher unions and naïve “for the children” lobbyists will be pushing hard for huge boosts to government schools’ revenue streams. And let’s not forget “infrastructure.” The New Mexico Rail Runner Express needs a jaw-dropping $50 million to comply with a federal safety mandate and “Spaceport America” is seeking new subsidies for a doomed-to-fail quest to finally make itself financially self-sustaining.

As the LFC has documented, $605.3 million worth of “solvency legislation” — “sweeps,” tobacco-settlement funds, tax tweaks, deferred payments, and capital-outlay adjustments — was needed to balance the books in fiscal 2017. It’s good that such desperate tricks are no longer needed.

But the Land of Enchantment is hardly “in the money,” and it shouldn’t behave as if it is. The budget reserve is still inadequate, positive revenue trends are by no means guaranteed to last, and economic-development-oriented tax reform remains long overdue. Lawmakers and the governor should avoid the temptation to put spending back on autopilot. Prudence, not elation, should guide state fiscal policy in 2018.

D. Dowd Muska (dmuska@riograndefoundation.org) is research director for the Rio Grande Foundation, an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on the principles of limited government, economic freedom and individual responsibility.

Economy Energy and Environment Local Government Oil & Gas Top Issues

Oil and gas ordinance: another important battle in Sandoval County

Post author By Paul Gessing
Post date November 9, 2017

Las Cruces lurched to the left recently, but Sandoval County is attempting to break out of the economic malaise that has infected so much of New Mexico. The “right to work” ordinance which is moving towards final passage is one such effort, but another ordinance has been simultaneously working its way through the County’s legislative process: the Sandoval Oil and Gas Ordinance.

We at the Rio Grande Foundation are urging residents of Sandoval County to either show up to the Commission on Thursday, November 16 or send commissioners a note in support of the Stoddard draft, un-amended, for final passage.

The meeting will be packed, so get there early!

Sandoval County Administration Building
1500 Idalia Road
Bernalillo, NM 87004
CLICK TO Send Your Email!

Or Call Commissioners:

District 1: Commissioner Dr. James F. Holden-Rhodes
505-235-5628

District 2: Commissioner Jay Block
505-252-6218

District 3: Commissioner Don Chapman
505-414-6247

District 4: Commissioner David Heil
505-252-6085

District 5: Commissioner Kenneth Eichwald
505-252-7412

-The Stoddard draft reflects the input of 1 ½ years of public input and Planning & Zoning and County professional staff work to help the Planning & Zoning Commissioners and County Commissioners sift through an enormous amount of information, focused now on meaningful added regulatory burden on industry.

-Industry is already regulated by 1,000’s pages of Federal and State regulations and scores of agencies which include the NM Oil Conservation Division, the EPA, the BLM, DOH (Health), DOI (Interior), DOT (Transportation), DOE (Energy), OSHA (Occupational Safety & Health Admin.), FERC (Fed. Energy Regulatory Commission.) just to name a few;

-Every expressed public concern has been addressed in the Stoddard draft by professional county staff either by inclusion, modification or deletion if duplicative or unnecessary.

-Every question and concern has been addressed in many public hearings and an intensive Commission workshop, attended by and answered by experts in every aspect of engineering, operations, health, safety, environment, water quality, public interest.

-The Constitutional authority and the technical expertise for oil & gas regulation in NM resides with the NM Oil Conservation Division, their staff of engineers, geologists, geophysicists and other scientists who know and understand oil well designs, drilling and operations. They evaluate, permit and supervise the responsible operations throughout our state.

-Industry contributes ~1/3 of all annual revenues to the New Mexico state budget. This includes 1/3 of all school funding annually, amounting to about $47 million in Sandoval County, $33.5 million of that going to Rio Rancho schools.

Economy Energy and Environment Notable News Oil & Gas Top Issues

Sens. Udall and Heinrich Join Anti-Free Speech “Web of Denial” #webofdenial

Post author By Paul Gessing
Post date July 12, 2016

ALBUQUERQUE — Yesterday on the floor of the US Senate, New Mexico’s senators and several of their colleagues attacked the free speech rights of free market and conservative organizations. Heinrich, Udall, and their Senate colleagues believe that the “science is settled” on climate change and are attempting to intimidate, shut down, and ultimately criminalize those making arguments against using the full force of government to solve the supposed “climate crisis.”

Said Rio Grande Foundation president Paul Gessing of the Senators’ efforts, “We at the Rio Grande Foundation (and many of the organizations attacked by the Senators) simply oppose massive government programs to address the supposed threat of ‘climate change.’ We have repeatedly pointed out that US carbon emissions have dropped in recent years due to market forces such as the boom in fracking and natural gas production. Command-and-control government solutions are unnecessary especially when the market is working.”

Notably, the free market Cato Institute (the Rio Grande Foundation has hosted Cato’s climate expert Pat Michaels) accepts the so-called “consensus” on global warming. A statement on Cato’s website reads, in part:

Global warming is indeed real, and human activity has been a contributor since 1975. But global warming is also a very complicated and difficult issue that can provoke very unwise policy in response to political pressure.

“Nonetheless,” noted Gessing, “The Cato Institute was among the organizations specifically criticized by the left-wing group of anti-speech US senators. For Heinrich, Udall, and their colleagues it’s not about the science; it’s about imposing a political agenda of massively-expanded government regulation and increased taxes”

In concluding, Gessing noted, “Sens. Udall and Heinrich represent one of America’s most energy-dependent and energy-rich states. One-third of New Mexico’s budget is directly supported by oil and gas while The Land of Enchantment is also a leading producer of coal and has in the past been a leading source of uranium. Carbon-free nuclear is unfortunately not among the ‘solutions’ under consideration by the mainstream climate-change lobby. They’d rather attack their opponents’ free speech rights instead.”

Economy Energy and Environment Oil & Gas Top Issues

Restricting oil imports a dangerous proposal for U.S.

Post author By Paul Gessing
Post date June 23, 2016

Hydraulic fracturing drilling rig in the Permian Basin in West Texas. The Permian Basin is in the northwestern part of Texas and the southeastern part of New Mexico. Oil has been recovered for decades in the area. The fracking industry recently revived production and the area is experiencing a new oil boom.

The price of oil impacts New Mexico’s economy in a big way. Oil prices that once hovered at $110 per barrel dropped as low as $27 earlier this year, and now hover around $50. That’s lower than we’ve grown accustomed to, but it is hardly a crisis – and certainly doesn’t appear to be an early-1980s-style bust.

Lower prices have hurt New Mexico producers, but consumers nationwide have benefited from lower prices at the pump.

Unfortunately, at a time of increased skepticism of free trade, a small group of oil and gas producers here in New Mexico is calling for government-enforced limits on oil imports. A forum calling for quotas was held on June 14 in Farmington at the San Juan College School of Energy. Several leaders in the industry, including Daniel Fine, associate director of the New Mexico Center for Energy Policy at New Mexico Institute of Mining and Technology, are supportive.

But restricting oil imports is a very dangerous proposal for many reasons, both economic and political.

It is worth noting that the cause of falling oil and gas prices is the result of supply and demand forces. The boom in fracking led to massive growth in domestic production, which ultimately drove prices down. However, fracking is only profitable at $65-$70 a barrel, so prices lower than that are a challenge for many New Mexico producers. That’s the free market at work.

Despite hostility toward trade from the likes of Donald Trump, Hillary Clinton, and Bernie Sanders, the free exchange of goods and services benefits us all. This is true whether you are “trading” a few dollars for a latte at your corner coffee shop or whether oil is being imported (or exported) to where it can be sold for the most money.

We’ve just been through this battle, on the issue of the federal government’s crude-export ban, which Congress repealed earlier this year. The policy was instituted in the 1970s in the wake of government-induced shortages caused by price controls. Back then, elected officials simply couldn’t foresee a future in which the U.S. had ample enough supplies to export crude oil.

Quotas today would be a similarly shortsighted policy. An industry that so often faces government regulation – and opposition to its very existence – is setting itself up for future problems by running to the political class for protection from market forces.

In a Clinton presidency, there is little chance of quotas. Trump, who is unfamiliar with the oil-and-gas industry and is skeptical of free trade, might be sympathetic. He might also target oil-producing Middle Eastern countries and Mexico. But a system of quotas will do so at the expense of the American economy and some of our greatest allies.

According to the Energy Information Administration, the U.S. gets 40 percent of our imported oil from Canada. Politically troubled Venezuela is responsible for another 9 percent, and just 16 percent of imported oil comes from the entire Persian Gulf including Saudi Arabia. Another 8 percent comes from Mexico.

Canada is our largest trading partner and Mexico is 3^rd (China is 2^nd). Trade goes both ways. If the federal government imposes tariffs or quotas on imports, the impacted country is sure to do the same. This will hurt American exporters directly. But, should the quotas be “successful” in raising the price of oil, it will hurt domestic consumers at the pump as well. The industries that consume oil and natural gas (think trucking and airlines, for starters) will also suffer, and their customers will face higher costs.

The oil patch is experiencing a painful adjustment. But government protectionism is not the solution. Such policies will harm the economy and our ability to lead on global trade issues. The downturn in oil and gas is just another reason for New Mexico’s leaders to reform the state’s long-struggling economy. Turning, yet again, to Washington is not the solution.

Economy Energy and Environment Oil & Gas

Putting Oil/Gas Off-Limits Bad Move for Wrong Reasons

Post author By Paul Gessing
Post date April 12, 2016

Given the challenges facing New Mexico’s economy — and with the price of gasoline on the rebound — we at the Rio Grande Foundation expressed our view that the citizens and political leadership in Sandoval County should have given SandRidge Energy a fair hearing over their desire to drill an exploratory well in the county. Unfortunately, that did not happen and SandRidge left.

Now, out-of-state environmental groups including Food and Water Watch, the Sierra Club, and Environment New Mexico are pushing a complete moratorium (five years in duration) on oil and gas drilling within Sandoval County. These groups are philosophically opposed to the traditional sources of energy that fund one-third of New Mexico’s budget. There are no unusual issues with drilling for oil and gas in this part of Sandoval County, rather there is a political opportunity to capitalize on fear of the unknown to advance their anti-energy agenda.

It is time for the citizens of Sandoval County to push back against any such ban and support jobs and economic opportunities for their friends and neighbors.

The oil and gas industries in Sandoval County alone generated $25.8 million (according to 2013 data from the New Mexico Tax Research Institute). That’s the production value alone, not including the so-called “multipliers” and other follow-on impacts.

The anti-frackers nearly hyperventilate in opposing the use of “hydraulic fracturing” in order to access new sources of oil and gas, but must rely on fear and ignorance to generate public opposition.

The Obama Environmental Protection Agency has repeatedly found “fracking” to be safe. Indeed, the process has been in use since the 1940s. If it was a flawed or dangerous process, there would have been large numbers of serious issues by now.

A three-year study by the University of Cincinnati determined hydraulic fracturing, or “fracking,” has no effect on groundwater. Unfortunately, when asked if the university planned to publicize the results, Dr. Amy Townsend-Small, an assistant professor at the University of Cincinnati Department of Geology and the leader of the study, said there were no plans to do so.

Said Townsend-Small of the University’s decision, “I’m sad to say this, but some of our funders, the groups that had given us funding in the past, were a little disappointed in our results. They feel that fracking is scary and so they were hoping this data could lead to a reason to ban it.”

The science doesn’t support a ban on fracking, but neither does the law.

A January 2015 federal district court decision found Mora County’s ban on oil and gas drilling to be illegal. It is likely that a similar fate would befall a ban enacted in Sandoval County. The legal wrangling alone could cost the county millions of dollars.

Of course, economic losses would only grow if those already doing business in the county decided to take a “wait and see” approach toward engaging in further drilling in the county.

Jobs in New Mexico’s oil and gas industries are some of the best “working-class” jobs in New Mexico.

Our state continues to struggle with job creation and an exodus of young people. It is unbelievable that the majority of citizens in Sandoval County would prefer to see young people — their kids and grandkids — leave New Mexico rather than allow for an industry that New Mexico relies upon to be shunned for no good reason.

Sandoval County is unique — within the Albuquerque metro area — to have significant oil and gas deposits. Putting them off-limits would be a bad move made for the wrong reasons.

Paul Gessing is president of New Mexico’s Rio Grande Foundation, an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility