Lance Wilbanks was looking forward to a rebirth for his trucking company, which saw its business hauling drilling rigs across southeastern New Mexico drop from around two dozen a month to just a handful during the pandemic.But with President Biden moving Wednesday to halt new oil and gas leasing on federal land, Mr. Wilbanks is worried that the bounceback might never come.
The freeze is “a gut punch to follow up the worst year we’ve had since the early 2000s,” he said, noting that he has already had to cut down from 300 to 100 employees over the past year. “I expected there to be changes, but to move this fast, I didn’t expect it at all,” he added.
Mr. Biden’s action, the start of a sweeping plan to tackle climate change, has raised concerns across New Mexico, where local officials, state representatives and businesses dependent on oil and gas are trying to size up the impact for an industry that made up roughly a third of the state’s general fund revenue last year.
The reaction in the state of 2.1 million, which Mr. Biden won with 54% of the vote in November, shows the potential pitfalls the president faces in seeking to promote cleaner energy and phase out fossil fuels, which continue to be significant economic engines in parts of the U.S. A long-lasting freeze on new leasing would curb royalties and revenue New Mexico uses to pay for schools, Medicaid and public safety, and could move lawmakers to consider drastic options to address lost funding, such as cutting spending or drawing from state reserves, officials and regional economists said.
“It could be a devastating blow to our budget,” said Democratic State Rep. Patricia Lundstrom, chair of the state house’s appropriations and finance committee. “We’re not a wealthy state. We have to stretch every dollar.”
Drillers have delivered a windfall to New Mexico in recent years as U.S. frackers migrated to the Permian Basin, the most active current U.S. oil field, which straddles New Mexico and Texas. That has brought more drilling rigs, workers, restaurants and hotels to parts of New Mexico such as Eddy and Lea counties, and has nearly tripled the state’s oil output from January 2016 to March 2020 just before the pandemic.Artesia Mayor Raye Miller said nearly everything in his city of about 12,300 was tied to the success of the oil-and-gas industry. Artesia was already hurting from the pandemic. Now, just when there was hope oil would rebound, Mr. Miller said he worried that suspending leasing would force some people to leave southeastern New Mexico to find work.
“This basically takes a large chunk of our state out of future development,” Mr. Miller said. “We believe that our community will shrink if these actions become a permanent decision.”
Almost a quarter of U.S. oil production came from federal lands and waters in fiscal 2019, according to the Interior Department. For New Mexico, the figure is more than 50%, economists said. About a third of the $2.8 billion from oil and gas in the state’s general fund last year came from drilling operations on federal land, according to the New Mexico Oil and Gas Association.