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Republican lawmakers gave credit to the oil and gas industry for a projected boost in revenue to New Mexico and called for legislators to support growth in fossil fuel development in the upcoming 2020 Legislative Session commencing in January.

The Legislative Finance Committee (LFC) last week announced revised projections to state revenue in that showed about $8.8 billion projected for Fiscal Year 2023 an about $1 billion increase from previous budget figures.

The August report showed projected revenue grew in the last three fiscal years, at about $8.05 billion in FY 2021 compared to the February forecast of about $7.2 billion and up to $8.1 billion in FY 2022 compared with about $7.5 billion predicted previously.

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Supporters of the oil and gas industry in the New Mexico Senate argued that funding increases from federal relief dollars amid the COVID-19 pandemic were a temporary boon, while support of extraction could mean a continued boon for the states bottom line.

While extraction saw one of the highest declines in matched gross receipts tax (mgrt) returns between FY 2020 and 2021, at about 32 percent, the LFC report showed the extraction sector still brought in about $4.5 billion in mgrt.

Matched gross receipts tax conveys the amount taxes and economic activity resulting from the industry.

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The report asserted the increase in oil and gas revenue could mean a boost to public services like childcare.

Strong recovery in the oil and gas markets are pushing severance tax and federal royalty collections well above their five-year averages, resulting in large transfers to the newly created early childhood trust fund, the report read.

New Mexico Sen. Pat Woods (R-7) who represents Curry, Quay and Union counties in eastern New Mexico, an area known for energy development, commended the industrys contributions in the face of cuts brought on by the pandemic.

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Amid the pandemic and downturn in the oil and gas markets, when the price per barrel of oil plummeted to less than $0 per barrel for the first time in history, a $2 billion budget surplus many credited the industry with generating became a $400 million deficit in the states budget.

Lawmakers subsequently convened a special session to rebalance the budget, and the market recovered to the mid-$60 range in recent months, meaning state revenue recouped instep.

Woods worried Democrats could seek to excessively spend the revenue.

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What we see here is our state battling adversity despite the roadblocks of the past year, Woods said. Though I am encouraged about these new projections, I am concerned about how these excess revenue dollars will be spent.

Though oil and gas will continue to fuel New Mexicos economy, the infusion of cash from the federal government is only temporary. It is up to us as stewards of the peoples money to invest in the infrastructure that will put our state on the path to recovery and long-term success.

Sen. Crystal Diamond (R-35), who represents Dona Ana, Hidalgo, Luna and Sierra counties in southwestern New Mexico said she was concerned Democrats in Santa Fe would continue to support initiatives aimed at moving the state away from heavy oil and gas production.

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She pointed to support from her colleagues across the aisle for a temporary pause on federal oil and gas leasing enacted by President Joe Biden upon taking office in January, as particularly troubling.

Bidens halt on new federal leases was recently blocked by a federal judge in Louisiana and the federal Department of the Interior this week announced plans to resume onshore leasing.

About half of New Mexicos oil and gas production occurs on federal land, and Diamond said a reduction in such activities could devastate the states economy.

It was disheartening to see Democratic legislators push for the demise of our energy industry when they supported the Presidents ban on oil and gas leases earlier this year, Diamond said. This massive influx of revenue is proof that Republican pushback was effective, and I trust it will remind my fellow lawmakers just how important this industry is to our state.

Until we get serious about job growth, diversifying our economy, and supporting small businesses, our states success will continue to rely heavily on our hard working friends in oil and gas country.

But the LFC report warned that New Mexicos continue reliance on oil and gas revenue could subject the state to drastic up and downturns in the commodity industry and shifts toward tougher regulations imposed on the industry.

New Mexicos dependence on the energy sector makes oil market volatility one of the largest, most significant risks to the forecast on the upside and the downside, the report read.

"Any changes to the regulatory environment for oil and gas production will affect New Mexico, since over half of the states oil and gas production occurs on federal lands and most of the remaining half occurs on state lands.

Adrian Hedden can be reached at 575-618-7631, achedden@currentargus.com or @AdrianHedden on Twitter.

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New Mexico Republicans credit oil and gas for revenue boost, report warns of volatility - Carlsbad Current Argus