Education and environmentalists warn of instability in oil and gas revenues – Source New Mexico | Directory Mayhem

The oil and gas industry is thriving in New Mexico, resulting in significant funding for the state and public education. But the industry is in a boom-and-bust cycle, and education and environmentalists say officials need to find ways to diversify those revenues lest the state and its schools suffer in bust years.

Oil and gas typically generates over $2 billion for the state and accounts for 25 to 30 percent of New Mexico’s General Fund, the state said Legislative Finance Committee. There are public schools draw most of their funding. Oil and gas money also goes to the Land Grant Permanent Fund, another source of income for public education.

The push to tap NM’s Land Grant Permanent Fund for education

Public schools typically receive over $1.4 billion from industry, according to a 2021 New Mexico Oil and Gas Association report

Higher education also benefits from these resource industries, which according to the report generated over $262 million for institutions across the state in 2021. The UNM campuses alone received more than $100 million.

Oil and gas has been a talking point with the general election just a month away, particularly within the governor race. Amber Wallin, executive director of New Mexico Voices for Children, said education funding issues extend beyond a single election and require officials and New Mexicans to think about how best to build up future generations.

“We have massive needs in our country and in our schools, in our families that really have to solve generational problems. These are not campaign problems to solve,” Wallin said.

When the oil and gas industry isn’t doing well, education is underfunded, Wallin said, and there’s a general reluctance to invest in schools because of unstable revenues.

“So what we really need to see,” she said, “is long-term, consistent, and significant investment in our classrooms, in our kids, and in our teachers, to really see those educational outcomes really improve.”

Boom. But then broke.

The state is heavily dependent on what Wallin called a “volatile source of revenue.”

Cyclically, there are big years with big demand and rising prices – as the state now sees – leading to low years of overproduction. Economist Kelly O’Donnell said these slumps are just as serious as the booms for the state and should be watched, especially given that state obligations such as public education depend so heavily on these revenues.

O’Donnell has worked for state and federal governments in public finance around natural resources. She said while the state’s successful oil and gas spells have benefits — like New Mexicans paying lower taxes — the state can’t really control the industry. Factors like the war in Ukraine, like that Organization of Petroleum Exporting Countries OPEC regulates fossil fuels and prices, and even the weather can affect the industry’s success for better or for worse, she said.

“We rely on it for public education, for health care and for public safety — all of those things that we really can’t afford to be insecure about,” O’Donnell said.

The state has been trying to stabilize revenue but needs to continue diversifying funding, O’Donnell said. One way the state has attempted to control funding is through the General Fund’s reserves, which serve as a safeguard against revenue shortfalls, he said Legislative Finance Committee. If there is excess oil and gas revenue, some of it goes to reserves. In 2021, school tax will be levied on oil and gas companies generated $335 million for the stabilization reserve.

During the last legislature, the legislature approved a record budget due to a billion-dollar surplus in oil and gas revenues. And Rep. Christine Chandler (D-Los Alamos) said The Legislature could approve a few billion dollars more in federal funding in the next session, with two-thirds of those projected revenues coming from oil and gas.

Still, she stressed the need to generate other revenue.

A costly climate crisis

Jeremy Nichols is Program Director for Climate and Energy at WildEarth Guardians. He said the industry costs the state more than meets the eye, and not just in money. He pointed out the negative impact on the land and the health of the people of New Mexico. The ozone pollution generated alone leads to smog and can trigger health problems that could send people to the hospital.

“These costs are being borne by New Mexicans and not by the oil and gas industry, not by oil and gas companies,” Nichols said. “And unfortunately, that cost is not factored into the assessment of whether the oil and gas industry is truly delivering for the state of New Mexico.”

Oil and gas companies are also exacerbating the climate crisis, Nichols said. Production in the state, he added, causes large carbon dioxide and methane leaks. And when it’s shipped out of the state and burned and consumed, it contributes greatly to pollution and global warming, he said.

“They are the ones who are fueling the crisis,” Nichols said. “You’re fueling the problem.”

After the biggest wildfire in state history roared through northern New Mexico this summer amid a historic southwestern drought, Wallin said the state needs to take a serious look at its own contributions to climate change — which is worsening and multiplying Forest fires — and how New Mexico generates revenue.

North NM voters weigh disaster relief and officials’ stance on climate change

O’Donnell said she suspects global warming will eventually force the state to shut down oil and gas. “I think the consequences of climate change are really going to require a rethink of how we power the US,” she said.

Oil and gas will not last forever

Oil and gas are finite resources. According to that Millennium Alliance for Humanity and the Biosphere Stanford will run out of oil in 30 years and gas in 40 years, although there are still about 50 years’ worth of reserves that have already been produced, given current consumption rates.

Because of this limited supply, diversification is required, O’Donnell said.

“While this election will not affect oil and gas production in New Mexico, it is really important to be prepared for a future with less oil and gas,” O’Donnell said.

The transition away from fossil fuels won’t happen overnight, Wallin said, but it has to happen nonetheless.

“This is critical not only to the financial stability of our state and the stability and adequacy of funding for education, but also because we know that the oil and gas industry will not last forever,” Wallin said.

But given how thriving the industry is right now, some disagree with weaning from it. One argument against limiting oil and gas production in New Mexico is that it will harm schools in the short term. Catherine Brijalba, a sixth-grade teacher in Lea County, said in one op ed in Santa Fe, New Mexico, that without oil and gas revenue, schools would lose significant financial resources and their students’ parents would lose their jobs.

But Wallin said there are other ways the state can raise money for public education. For example, she said, a more stable form of revenue could result from ensuring wealthy individuals pay their fair share of taxes. O’Donnell suggested that renewable energy production could also generate money and jobs for the state.

Source NM spoke to University of New Mexico students at their main campus about their thoughts on oil and gas funding in higher education, and many were unsure how to replace the $100 million at UNM.

A tuition-free college isn’t free if it’s funded by oil and gas

David McCreath, an art student applying to graduate school at UNM, said the state should phase out the use of fossil fuels. reduce fret subsidies would mean that oil and gas could cost more for everyone and reduce consumption overall.

But it’s difficult, he said, because the US is so dependent on it, from driving cars to funding education, like at UNM.

“It’s a public university. It should be affordable and accessible to everyone,” McCreath said. “$100 million isn’t nothing.”

Math major Raul Martinez said free education is more important to him than reducing oil and gas production at the end of the day.

But newcomer Chloe Dugan said UNM should either not accept that money or use it to emphasize indigenous voices who third leading Ethnicity at university, because of damage and disruption by industry on tribal lands.

She said it’s a good idea to switch to renewable energy sources, but the state should be careful because, just like oil and gas companies, these companies are “hungry for money.”

Gov. Michelle Lujan Grisham and Public Lands Commissioner Stephanie Garcia Richard are at least making progress on using renewable energy sources and protecting the land, O’Donnell said.

“If these two were re-elected, there would be more emphasis on responsible land stewardship than their opponents are likely to have,” she said.

Still, she said, “No one is ever going to change the amount of money we receive in oil and gas revenues.”

Leave a Comment